##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 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, 2003


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 or 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 28, 2003 was $142 million, based on a closing
price of $13.52 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 8, 2004, the number of shares of the registrants common stock
outstanding was 11,067,798 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the Companys definitive proxy statement for
the 2004 Annual Meeting of Shareholders of the registrant is incorporated
herein by reference in Part III 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                                                                             
|                                                                                | ITEM 2. Properties                                                                           
|                                                                                | ITEM 3. Legal Proceedings                                                                    
|                                                                                | ITEM 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                                                        
|                                                                                | ITEM 5. Market for Registrants Common Equity and Related Stockholder Matters                
|                                                                                | ITEM 6. Selected Financial Data                                                              
|                                                                                | ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                | ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk                          
|                                                                                | ITEM 8. Financial Statements and Supplementary Data                                          
|                                                                                | ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|                                                                                | ITEM 9A. Controls and Procedures                                                             
|PART III                                                                       
|                                                                                | ITEM 10. Directors and Executive Officers of the Registrant                                  
|                                                                                | ITEM 11. Executive Compensation                                                              
|                                                                                | ITEM 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                                                | ITEM 13. Certain Relationships and Related Transactions                                      
|                                                                                | ITEM 14. Principal Accountant Fees and Services                                              
|PART IV                                                                        
|                                                                                | ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|INDEPENDENT AUDITORS REPORT                                                   
|SIGNATURES                                                                     
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                     
|INDEPENDENT AUDITORS REPORT                                                   
|CONSOLIDATED STATEMENTS OF OPERATIONS                                          
|CONSOLIDATED BALANCE SHEETS                                                    
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                          
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                     
|EX-4.5 4TH AMENDMENT DATED 10/31/03                                            
|EX-10.3 DEFERRED COMPENSATION PLAN                                             
|EX-10.4 OFFICERS DEFERRED COMPENSATION PLAN                                    
|EX-10.6 AMENDMENTS ADOPTED 5/2/97                                              
|EX-10.8 OPTIONS GRANTED PRIOR TO 2001 TO OFFICERS                              
|EX-10.12 OPTIONS GRANTED 1992 STOCK INCENTIVE PLAN                             
|EX-10.16 INDEMNIFICATION AGMT B/T CO & DIRECTORS                               
|EX-10.17 INDEMNIFICATION AGMT B/T CO & OFFICERS                                
|EX-10.18 SPLIT DOLLAR INSURANCE PLAN                                           
|EX-10.20 LETTER DATED 7/24/2002                                                
|EX-14 CODE OF ETHICS                                                           
|EX-21.1 SUBSIDIARIES OF THE REGISTRANT                                         
|EX-23.1 INDEPENDENT AUDITORS' CONSENT                                          
|EX-23.2 INDEPENDENT AUDITORS' CONSENT                                          
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO                                   
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO                                   
|EX-32 SECTION 906 CERTIFICATION OF THE CEO/CFO                                 
|EX-99.1 INDEPENDENT AUDITORS REPORT                                            



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Part I.




ITEM 1.  Business

GENERAL

SUMMARY

EMS Technologies, Inc. (the
Company or EMS) 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 five reportable business segments: Space &
Technology, LXE, EMS Wireless, SATCOM and SatNet. 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 to broader markets for highly
advanced technologies developed for niche markets in space and defense.

1. Space & Technology



| |  | This segment manufactures custom-designed, highly engineered hardware for
use in space electronics (both commercial and defense satellite
applications), and aerospace (both commercial and defense electronics
applications). Orders in this segment typically involve long-term
contracts with development and production schedules that can extend a
year or more, and most revenues are recognized under
percentage-completion accounting. The Space & Technology segments
products are sold primarily to space and defense prime contractors or
commercial communications systems integrators rather than end-users. The
Space & Technology segment accounted for 19%, 22% and 17% of consolidated
net sales in 2003, 2002 and 2001, respectively.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | A major source of business is the defense electronics market. Orders in
this market remained strong in 2003, with defense sales exceeding the
prior year. The Company believes that applications for secure
communications, surveillance, and electronic counter-measures will
continue to offer opportunities that are well-suited to the Companys unique
technology base and its considerable experience on such programs.                                                                                                                                                                                                                                                                                                                           
|
| |  | In the third quarter of 2003, EMS announced that its Board of Directors
had approved a formal plan to seek to sell the Companys commercial space
operations located in Montreal. As a result, all of the activities,
operations and financial results of the Montreal commercial space
business, which had been included in the Space & Technology segment in
prior years, were moved to discontinued operations for all periods
presented in the Companys consolidated financial statements.                                                                                                                                                                                                                                                         

2. LXE



| |  | The LXE business is conducted through a wholly owned subsidiary, LXE
Inc., and manufactures wireless mobile computers and 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 container yard. 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 39%, 37% and 43% of consolidated net sales in 2003, 2002 and 2001,
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 20%, 20% and 22% of consolidated net
sales in 2003, 2002 and 2001, 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, high-speed data systems
for military applications, 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 17%, 14% and 11% of consolidated net sales in 2003, 2002
and 2001, respectively.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. SatNet



| |  | In mid-2002, the EMS Satellite Networks (SatNet) division was formed
as a result of the Companys strategic emphasis on the development of
broadband technologies for use in high-data-rate, high-capacity satellite
communication systems. This segment focuses on high speed, two-way
Internet via satellite hubs and terminals that use the DVB-RCS open
standard pioneered by EMS. 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. The SatNet segment accounted for 5%, 6% and
6% of consolidated net sales in 2003, 2002 and 2001, respectively.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6. Discontinued Operations



| |  | 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, commercial and civil  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.
In the third quarter of 2003, EMS announced that its Board of Directors
had approved a formal plan to sell this business. As a result, all of the activities,
operations and financial results of the Montreal commercial/civil space
business were moved to discontinued operations for all periods presented.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Space & Technology/Montreal business 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 marketed and manufactured by this business
comprise the following lines: space systems, antenna products and
electronic products for space.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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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 microwave components and subsystems over a period of more than
30 years. 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 avoid interference from the ground. This segment also produced the first all-electronic switch matrix to provide
flexible interconnectivity between microwave uplink and downlink channels in
communication satellites.

The core technologies of the Space & Technology segment are directly applicable
to a range of current defense applications, including line-of-sight communications,
radar, signal intelligence and electronic countermeasure systems. These
applications are generally referred to as information dominance. Further,
the Space & Technology segment has produced highly-engineered antenna,
signal-management, and signal processing hardware that are used in numerous
mission-critical weapon systems.

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 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 technologies (such as
bar-coding and RFID).

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 simpler, less expensive, 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.
The initial SATCOM products

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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 current 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 and variants to provide both voice and data connections with
speeds up to 256 kbps, (2) Global Area Network (GAN) satellite data terminal
products, which allow access to corporate networks and the Internet from
anywhere in the world, either at the standard ISDN speed of 64 kbps, or at
speeds of up to 128 kbps, using the Inmarsat satellite network, (3) 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 (4) a maritime high-speed terminal for
digital communications at sea over the Inmarsat network. SATCOM has also made initiatives with software
products used for incident management for search-and-rescue applications with
customers around the world.

EMSs SatNet division originated from the Space & Technology segment, which had
been studying the implementation of multimedia satellite systems since 1993.
In 1994, EMS was commissioned to study the feasibility of developing new
satellite system architectures built upon the existing DVB broadcast standard.
The intent of the study was to pave the way for two-way satellite Internet
access through a central satellite ground hub gateway. This study led to the
development by EMS and satellite operators of a satellite return channel
concept based on multi-
frequency TDMA and a set of scheduling algorithms
designed for the emerging multimedia environment. The resulting DVB Return
Channel System (DVB-RCS) air interface standard was
adopted by European Telecommunication Standards Institute in 2000.
In 2002, EMS created the SatNet group, initially within its Space & Technology segment to
focus on this new business opportunity.

SatNet has now deployed more than 30 systems in Europe, North America and Asia.
SatNet supplied Societe Europeene des Satellites (SES)  the worlds largest
satellite service provider, with its Broadband Interactive Return Link Sub
System (RLSS), which has subsequently been included as part of the SatLynx
joint venture with Gilat, SES and Alcatel. SatNet has also signed an agreement
with Alcatel Space, to integrate EMS RLSSs into systems being marketed and
delivered worldwide.

SatNet has now developed its fourth
generation satellite interactive user terminal.
The first generation was deployed in 2000 with EMSs first demonstration hub in
Europe. EMS is now offering an enterprise model (Series 2000), and a
professional model (Series 3000). Both the Series 2000 and the Series 3000 are
available in various transmit/receive frequency bands (e.g. Ku/Ku, Ka/Ku, etc).
As a result of enhanced design and improved manufacturing techniques, these
new terminals have a significantly lower cost than those from earlier
generations, which has enabled EMS to offer
terminals at lower prices than most legacy VSAT offerings.

MARKETS AND PRODUCTS

Space & Technology Markets

The Company believes that its Space & Technology business will be able to make
significant contributions in defense systems of national importance, such as
secure satellite communications, secure intelligence and imagery collection
satellites, advanced electronic warfare, radar, and secure line-of-sight
communications. These systems are applied across

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space, airborne, terrestrial and naval domains. Many such systems are being
newly developed or significantly upgraded as part of the U.S. Department of
Defense transformational communications and information dominance initiatives. European defense ministries are also pursuing significant new and
upgraded systems.

EMSs base of technologies, including ferrite ceramics for microwave 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 programs for
communication, sensing and surveillance.

The Companys products are incorporated in a number of
significant weapon and defense systems such as the F/A-22 (air dominance fighter), B-2
(stealth bomber), Phalanx (Close-in Weapon System), Advanced EHF (military
communication satellites), Special Operations Forces Aircraft (Suite of
Integrated RF Counter-Measures Subsystems), Skynet 5 (United Kingdom military
communication satellites), and Predator Unmanned Aerial Vehicle (observation
and attack aircraft).

Additionally, EMS products are also used in a selection of technology-based
commercial/civil ventures such as LiveTV (direct broadcast television reception
on commercial aircraft), XM Radio (direct broadcast radio in North America),
COSMO (Italian imagery satellites), and SARLupe (German imagery satellites).

Space & Technology Products

Through its Space &
Technology segment, the Company designs and manufactures innovative microwave products for space
and defense applications. This segments products comprise three main lines:



| | 1. |  | Ferrite components,       
| | -- |  | --------------------------
|
| | 2. |  | Electronic subsystems, and
|
| | 3. |  | Antenna subsystems.       

- Ferrite 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 XM Radio, DirecTV, ENVISAT, CloudSAT, Anik F2,
TDRSS, MILSTAR/AEHF, F-14, F-16 and B-2.

- Electronic Subsystems

The Companys electronic subsystems are an integral part of many
space systems. These subsystems control the microwave communications signals
processed in satellites and spacecraft, and include switch networks,
beam-forming networks, auto-track modulators, and solid-state power amplifiers.
The Companys microwave subsystems have been utilized in Intelsat, Telstar, DSCS, MILSTAR/AEHF and ACTS.

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This segment 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 Suite of Integrated RF
Countermeasures, (SIRFC). In addition, this segment has developed and
manufactures the radar illuminator subsystems that provide directed radar
energy used to assist the tracking and control of land-based rocket systems.

- Antenna Subsystems

The Companys aeronautical antenna subsystems are used in a variety of
commercial and military aircraft. The multi-channel commercial aircraft video
system, which is now deployed with airlines based in New York and Denver,
combines the Companys antennas with electronics and small flat-panel video
screens installed in each seat back. The aeronautical antenna subsystems used
in, the USAF F/A-22 air dominance fighter combine the Companys antenna
with modem and signal processing equipment on-board the aircraft to enable an
intra-flight datalink capability between aircraft. The antenna
subsystems in unmanned aerial
vehicles combine the Companys antenna with modem and signal processing
equipment on board the aircraft to enable satellite communication links and/or
line-of-sight datalinks.

The Space & Technology segment is also developing terrestrial antenna
subsystems for ground vehicles. The antenna subsystems are combined with modem
and signal processing equipment on board ground vehicles such as HUMVEEs and
tanks, to enable various functions such as satellite communications,
line-of-sight communications, and combat identification while on the move.

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,
wireless LAN systems were developed for operation using proprietary narrow-band
UHF radios at 450 or 900 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 IEEE 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 barcode
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

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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 several 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.

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. Recent handheld product introductions include
the Windows® CE-based MX5 and MX6, both designed for extremely demanding
environmental conditions in the warehouse and in the terminal yard. The VX
series of vehicle-mounted computers feature even better environmental
specifications and ruggedization, and includes a Pentium-class model that
supports the Windows® 2000, XP and .Net 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 IEEE 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.

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- 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 barcode 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 the infrastructure build-out has slowed from its peak in about
the year 2000. The demand for wireless communications 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
hardwired 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, most service providers have installed 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.

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 among 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 line of repeaters and
other wireless signal distribution products.

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- Dual Polarization Antenna Products

The Companys DualPol antenna utilizes 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 benefits the
service provider in obtaining site approvals, and lowers 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 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 line of custom site solutions consisting of the micro
version of the AcCELLerator in an aesthetically pleasing mounting fixture
(most often used 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 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

The 2001 acquisition of a small manufacturer of repeaters and other wireless
signal distribution products provided two new product lines from which we are
starting to see growth. The first product line enables carriers to extend
indoor RF coverage through the use of indoor repeaters and fiber-optic-based RF
distribution systems. One example of this is our new Link2Cell product, which
provides an easy and economical means to provide wireless coverage in small,
borderline coverage areas. Customers simply plug it in and experience improved
coverage.

The Company has continued to see an increase in the demand for indoor RF coverage
solutions. The expanded data services now offered by the wireless carriers
require a higher RF signal strength to maintain quality service. This higher
signal strength requirement coupled with the inherent signal losses associated
within buildings and other structures require that an RF distribution system be
used to maintain service quality. In many cases a RF indoor repeater drives
the RF distribution systems.

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The second product line helps carriers extend their coverage in rural areas or
uneven terrain through the use of outdoor repeaters. Rural areas are typically
characterized by a low call density and inconsistent signal strength. In these
situations, it is not cost effective for the wireless carrier to install a new
base station to increase the coverage footprint. A cost-effective solution
for the wireless carrier is to use outdoor repeaters to expand its coverage
footprint.

Repeater products can also provide
other cost efficiencies. A typical base station uses an expensive T1
data line to transfer the telephone calls from the base station back
into the hardwire network for all call routing backhaul service. The Company has introduced DataNex, a wireless backhaul
solution that will utilize a portion of the unused PCS frequency
spectrum that the wireless carrier already owns for backhaul
services, thereby eliminating the expense of installing and
maintaining a T1 connection to the base station. This product has undergone
several successful trials and is gaining market acceptance.

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-128 high speed data products has positioned EMS
as a market leader for this application, 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 contracts with Rockwell Collins,
Honeywell and Bombardier - the industrys largest users of general aviation
communications equipment. In addition, the Company supplies over 90% of all
Inmarsat Airborne High Speed Data systems used by the U.S. Military.

The Company has also pursued opportunities in the land mobile market. The
Company offers two types of satellite terminals; satellite packet data
terminals and GAN terminals. The GAN (global area network) satellite data terminal products allow
access to corporate networks and the Internet from anywhere in the world,
either at the standard ISDN speed of 64 kbps, or at speeds of up to 128 kbps,
using the Inmarsat satellite system. More recently, the Company has been successful
in deploying its land-based high speed data products into the U.S. and certain
European military organizations. These systems have been particularly useful in
supplying data communications to mobile command posts. Packet data
terminals are used in functions such 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 satellite packet data terminals (PDT-100) 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.

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SATCOM Products

The Companys SATCOM line of
products includes 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 high-end corporate jet market.

The Company has also developed a steerable antenna system designed to provide
live television to a private 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 provided by Honeywell for delivery of live video service to aircraft.

- Aeronautical Terminals

EMS has an aeronautical product, called the HSD-128, that provides aircraft
operators with high-speed data capability using the Inmarsat Aeronautical
Swift64 and Mobile Packet Data Services. These services will support data rates
of up to 64 kbps per channel (which the HSD-128s multi-channel capability
increases to 128 kbps), a considerable advance on other service offerings
currently available in the market. These services are heavily used by military
and other governmental command aircraft as well as corporate aircraft. One
example is our Viper II terminal, which can handle 16 simultaneous STU-III
calls, multi-media video/voice/data applications. The roll-on/roll-off
capability of the Viper II enables this communications platform to be used
while flying enroute and at the command post on the ground. These services
also 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 developed further
capability in its new products and can now provide data rates to 256 kbps.

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- GAN (global area network)
Terminals

With
its STORM global area network portable satellite terminal EMS customers can work and keep in touch
from remote locations, far from telephone networks, and access corporate
networks, manage vital communications for disaster relief and peacekeeping,
send up-to-the-minute broadcast quality audio, pictures and video clips for
on-air transmission and quickly establish secure communications channels in
government and defense applications. Depending on configuration, customers can
utilize up to 256 kbps data rates while on the move. The Company has also 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. In 2003, the Company
launched new land mobile products, marketed under the names Cyclone
and Thunder, to provide mobile
broadband communications capabilities, largely intended for the public
safety and military markets.

- Satellite Packet Data 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.

- 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 allows for more effective
coordination of rescue efforts.

SatNet Markets

SatNet offers ground segment equipment for the satellite broadband
communications market in the broadcast and fixed services sector. Within this
market, SatNet targets operators of high-speed, two-way, multimedia access
networks. These operators range in size and scope from niche satellite service
providers providing voice-over-IP telephony services to developing countries,
to incumbent telecommunications companies offering satellite overlay high-speed
Internet services to complement their existing terrestrial networks. SatNet has
also become increasingly involved in national projects in many countries to
provide high speed satellite Internet connections for distance education and
health services. SatNet targets these customers primarily through integrators
and resellers, although SatNet also maintains a small direct sales force for
unique opportunities.

SatNet Products

The Company designs and manufactures ground segment equipment for the satellite
broadband communications market. SatNet has two principal product lines 
DVB-RCS hubs and terminals.

 DVB-RCS hubs

SatNet offers hub products ranging from stand-alone Return Link Sub-Systems
(RLSSs) that

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are sold to integrators or operators wishing to integrate into an existing
one-way platform, to complete gateways. These hubs can economically support
network sizes ranging from less than one hundred terminals to substantially
more then ten thousand terminals.

 DVB-RCS terminals

SatNet is currently marketing two
families of DVB-RCS terminals - the Series
2000 enterprise terminal, which is designed to support a full range of features
and performance, and the Series 3000 professional/SOHO terminal, which is
designed to minimize cost while maintaining DVB-RCS compliance and
performance.

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. This
is particularly true of the Space & Technology segment. 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 effort; this work can
include complex, pre-award 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 from continuing operations were $3.6 million in 2003,
$2.5 million in 2002 and $1.9 million in 2001.

The markets for space and defense electronics 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 and recent
developments. 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 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 and sales
representatives in approximately 35 countries.

Direct sales of LXE systems are performed by an internal sales support staff,
by 20 regional salespersons 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. SatNet sells through strategic partners such
as Alcatel,
as well as directly to service providers using an internal staff.

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BACKLOG

The backlog of consolidated orders related to continuing operations at December
31, 2003, was $83.2 million, compared with $85.4 million one year earlier. EMS
Wireless, LXE and many SATCOM and SATNET 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, 2003 was $50.1 million
compared with $49.4 million one year earlier.

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. 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 barcode
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 barcode 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.

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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,
(4) aeronautical SATCOM communications systems for voice, telephony and video
and (5) satellite networking equipment for two way broadband connectivity.
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 U.S. industrial concerns, such as Boeing Electron Dynamic
Devices, Inc., L3
Communications, Harris Corporation, Raytheon, M/A-Com, Hieco Corporation, and
Titan Corporation, as well as non-U.S. companies such as COMDEV of Canada, and
Chelton, Ltd of the U.K. 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
Technologies (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. In the SatNet market, the Company competes
with EB Nera, Newtec, ViaSat, Gilat and Hughes Network Systems.

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.

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, and product development activities. In 2003, 2002 and
2001, the Company spent $19.3 million, $20.4 million and $20.4 million,
respectively, on internally sponsored research and development and product
development activities.

EMPLOYEES

As of December 31, 2003, the Company and its subsidiaries employed
approximately 1,700 persons. Over 70% of the Companys employees are directly
involved in engineering or manufacturing activities.

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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, and this could also cause a
decline or slow growth in the future market value of our shares. 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 and revenues 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 level 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, including hearing aids and pacemakers. In
addition, lawsuits have been filed against participants in the wireless
industry alleging various

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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

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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.
Also, 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.

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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 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 $94
million in revenues for fiscal year 2003, or 37% 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 can 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.

Research incentives from the
Canadian government subject to financial and scientific audits could
be disallowed.

Research incentives from the Canadian
government are subject to financial and scientific audits by the
Canadian government concerning whether certain expenses qualify for
incentive programs. Historically, these audits have not resulted in
disallowances that had a material effect on the benefits recognized
in the financial statements. However, a significant level of
disallowances in the future could have an unfavorable effect on our
statement of operations.

Unfavorable currency exchange rate movements could result in foreign exchange
losses and cause our profitability to decline.

We have international operations, and we can use forward currency contracts to
reduce  but not entirely eliminate  the earnings risk from holding certain
assets and liabilities in different currencies. Furthermore, our SATCOM
division derives a major portion of its sales from agreements with U.S.
customers in U.S. dollars, and a stronger Canadian dollar would increase our
costs relative to our U.S. revenues and we are unlikely to recover
these increased costs through higher U.S. dollar prices due to
competitive conditions. As a result of these factors, our
financial results will continue to have an element of risk related to foreign
exchange.

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.

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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.

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
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.

Our violation of debt covenants on the Companys Canadian debt could require us
to obtain alternative financing on unfavorable terms.

For the last two quarters of 2003,
substantial third-quarter write-downs, related to the operations and
discontinuance of our Space & Technology/Montreal division,
caused our Canadian operations to fail to meet certain covenants contained in the credit agreement with the
Canadian bank that finances those operations. On each occasion, the
Canadian bank has waived our covenant violation. However, if the
Company has not sold its Space & Technology/Montreal
division, in future quarters the Companys Canadian operations will continue to fail
to meet the covenant requirements, and we cannot guarantee that we
will continue to receive bank waivers in the future. In the absence
of a waiver, the bank may require the debt to be repaid in its
entirety at any time. If that occurs, we may not be able to secure sufficient additional
credit or other financing from another lender, on terms similar to
these we now have.
This could increase our financing cost and could adversely affect our results
of operations and financial condition.

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. If our management and management systems fail to
meet these challenges our business and prospects will be adversely
affected.

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

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liabilities, or have amortization expenses and write-downs 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.

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:

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| | 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 70, 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 61, 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 served as Director
of the Company from 1995 to 2003.

William S. Jacobs, age 58, 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.

James S. Childress, age 59, 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 41, is a Vice President of the Company, and Senior
Vice President and General Manager of the Space & Technology/Atlanta Division.
He accepted this position upon joining the Company in January 2001. Formerly,
he was Director of Mobile SATCOM Systems

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for ViaSat, Inc., a California-based provider of advanced satellite
communications, defense electronics, and wireless signal-processing equipment.
Prior to his tenure at ViaSat, Mr. Grove contributed in management, marketing,
and system engineering roles for defense electronics applications at
Lockheed-Martin in Nashua, NH and TRW, Inc. in San Diego, CA.

Alan L. Haase, age 43, is Vice President of the Company, and Senior Vice
President and General Manager, Space & Technology/Montreal
(since 2003). Previously, he served as President
(2000-2003), Chief Executive Officer (2000-2003) and Chief Strategy Officer
(2002-2003) of SkyCross, Inc., a Melbourne, FL-based designer and manufacturer
of antennas and other RF equipment for wireless telecommunications products.
From 1998 until 2000, Mr. Haase was a senior officer at Andrew Corporation, a
major manufacturer of radio and microwave transmission equipment, serving as
Vice President of its Terrestrial Microwave Systems unit and also as Group
President  Communications Products.

T. Gerald Hickman, age 63, 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 63, 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 44, is a
Vice President of the Company, Senior Vice President and General
Manager for the SatNet division. 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 136,000 square feet of leased office space
(leases to expire in 2005, 2006 and 2009) 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 divisions
lease approximately 69,000 square feet of
office and manufacturing space, primarily for SATCOMs
operations, located in Ottawa, Ontario (lease expiring in 2007), and
30,000 square feet of office and
manufacturing space for SatNet operations located in Montreal (lease
expiring in 2009). The Companys assets held for sale include a
330,000 square-foot facility surrounded by 34 acres of
undeveloped land in a suburb of Montreal, which houses the
Space & Technology/Montreal division. One-fourth of this 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.

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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.S., 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.




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 5, 2004, there were approximately 500
shareholders of record, and the Company believes that there were approximately
3,500 beneficial shareholders, based upon broker requests for distribution of
Annual Meeting materials. The price range of the stock is shown below:

|               |  |                  |       |                  |  |      |       |     |  |  |       |  |  |  |       | 
|-------------- |  | ---------------- | ----- | ---------------- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|               |  | 2003 Price Range |       | 2002 Price Range
|               |  |                  |       |                 
|               |  | High             |       | Low              |  | High |       | Low
|               |  |                  |       |                  |  |      |       |    
|First Quarter  |  | $                | 18.39 |                  |  |      | 11.30 |     |  |  | 22.65 |  |  |  | 14.77 | 
|Second Quarter |  |                  | 15.03 |                  |  |      | 10.00 |     |  |  | 25.60 |  |  |  | 17.10 | 
|Third Quarter  |  |                  | 19.24 |                  |  |      | 12.96 |     |  |  | 22.65 |  |  |  | 10.02 | 
|Fourth Quarter |  |                  | 22.64 |                  |  |      | 16.86 |     |  |  | 17.36 |  |  |  | 10.30 | 

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.

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ITEM 6. Selected Financial Data

|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |       |      | 
|--------------------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ------- | ----------------------- | ----- | ---- | ------- | ------ | ----- | ---- | ------- | ------ | ---- |  | ------- | ----- | ---- |  | ------- | ----- | ---- | 
|                                                    |                                                                |                              |         | Years ended December 31
|(in thousands, except                               |                                                                |                             
|earnings per share)                                 |                                                                | 2003                         |         | 2002                    |       | 2001 |         | 2000   |       | 1999
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |     
|Net sales                                           |                                                                | $                            | 256,213 |                         |       |      | 235,771 |        |       |      | 201,391 |        |      |  | 186,800 |       |      |  | 147,815 |      
|Cost of sales                                       |                                                                |                              | 163,744 |                         |       |      | 151,172 |        |       |      | 132,153 |        |      |  | 122,161 |       |      |  | 94,306  |      
|Selling, general and
administrative expenses        |                                                                |                              | 57,851  |                         |       |      | 51,374  |        |       |      | 43,962  |        |      |  | 39,413  |       |      |  | 35,947  |      
|Research and development expenses                   |                                                                |                              | 19,278  |                         |       |      | 20,372  |        |       |      | 20,435  |        |      |  | 14,682  |       |      |  | 14,424  |      
|Contract reserve adjustment                         |                                                                |                              |        |                         |       |      | (3,500  | )      |       |      | 3,500   |        |      |  |        |       |      |  |        |      
|Write-down of NetSat 28 assets                      |                                                                |                              |        |                         |       |      |        |        |       |      |        |        |      |  | 2,891   |       |      |  |        |      
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Operating income                                               |                              |         | 15,340                  |       |      |         | 16,353 |       |      |         | 1,341  |      |  |         | 7,653 |      |  |         | 3,138 |     
|Non-operating income (expense)                      |                                                                |                              | 360     |                         |       |      | (58     | )      |       |      | 565     |        |      |  | 173     |       |      |  | 1,881   |      
|Foreign exchange (loss) gain                        |                                                                |                              | (446    | )                       |       |      | 390     |        |       |      | (14     | )      |      |  |        |       |      |  |        |      
|Interest expense                                    |                                                                |                              | (2,147  | )                       |       |      | (2,329  | )      |       |      | (3,488  | )      |      |  | (3,450  | )     |      |  | (2,522  | )    
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Earnings (loss) from continuing
operations before income taxes |                              |         | 13,107                  |       |      |         | 14,356 |       |      |         | (1,596 | )    |  |         | 4,376 |      |  |         | 2,497 |     
|Income tax (expense) benefit                        |                                                                |                              | (4,237  | )                       |       |      | (4,699  | )      |       |      | 1,641   |        |      |  | (984    | )     |      |  | (923    | )    
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Earnings from continuing
operations before accounting
change   |                              |         | 8,870                   |       |      |         | 9,657  |       |      |         | 45     |      |  |         | 3,392 |      |  |         | 1,574 |     
|Discontinued operations:                            |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Gain/(loss) from discontinued
operations                       |                              |         | (50,614                 | )     |      |         | (1,596 | )     |      |         | 5,643  |      |  |         | 1,418 |      |  |         | 4,255 |     
|                                                    | Income tax benefit (expense)                                   |                              |         | 4,352                   |       |      |         | 526    |       |      |         | (821   | )    |  |         | (319  | )    |  |         | (989  | )   
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Earnings (loss) before accounting
change                       |                              |         | (37,392                 | )     |      |         | 8,587  |       |      |         | 4,867  |      |  |         | 4,491 |      |  |         | 4,840 |     
|Cumulative effect of change in
accounting principle |                                                                |                              |        |                         |       |      |        |        |       |      | (351    | )      |      |  |        |       |      |  |        |      
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Net earnings (loss)                                            |                              | $       | (37,392                 | )     |      |         | 8,587  |       |      |         | 4,516  |      |  |         | 4,491 |      |  |         | 4,840 |     
|                                                    |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|Earnings (loss) per share:                          |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Basic:                                                         |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |       |     
|                                                    |                                                                | From continuing operations   |         | $                       | 0.83  |      |         |        | 0.91  |      |         |        | 0.01 |  |         |       | 0.39 |  |         |       | 0.18 | 
|                                                    |                                                                | From discontinued operations |         |                         | (4.32 | )    |         |        | (0.10 | )    |         |        | 0.51 |  |         |       | 0.12 |  |         |       | 0.38 | 
|                                                    |                                                                | Net earnings (loss)          |         |                         | (3.49 | )    |         |        | 0.81  |      |         |        | 0.48 |  |         |       | 0.51 |  |         |       | 0.56 | 
|                                                    | Diluted:                                                       |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |       |     
|                                                    |                                                                | From continuing operations   |         | $                       | 0.82  |      |         |        | 0.90  |      |         |        | 0.01 |  |         |       | 0.38 |  |         |       | 0.18 | 
|                                                    |                                                                | From discontinued operations |         |                         | (4.29 | )    |         |        | (0.10 | )    |         |        | 0.50 |  |         |       | 0.12 |  |         |       | 0.37 | 
|                                                    |                                                                | Net earnings (loss)          |         |                         | (3.47 | )    |         |        | 0.80  |      |         |        | 0.47 |  |         |       | 0.50 |  |         |       | 0.55 | 
|Weighted average number of shares:                  |                                                                |                              |         |                         |       |      |         |        |       |      |         |        |      |  |         |       |      |  |         |      
|                                                    | Common                                                         |                              |         | 10,702                  |       |      |         | 10,561 |       |      |         | 9,464  |      |  |         | 8,766 |      |  |         | 8,703 |     
|                                                    | Common and dilutive common
equivalent                          |                              |         | 10,785                  |       |      |         | 10,731 |       |      |         | 9,563  |      |  |         | 8,912 |      |  |         | 8,775 |     

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|                                                     |  |                   |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         | 
|---------------------------------------------------- |  | ----------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                                     |  | As of December 31
|                                                     |  |                  
|                                                     |  | 2003              |         | 2002 |  | 2001 |         | 2000 |  | 1999
|                                                     |  |                   |         |      |  |      |         |      |  |     
|Working capital related
to continuing operations (1) |  | $                 | 46,123  |      |  |      | 44,419  |      |  |      | 51,789  |  |  |  | 44,388  |  |  |  | 49,643  | 
|Total assets                                         |  |                   | 228,549 |      |  |      | 256,303 |      |  |      | 236,816 |  |  |  | 216,113 |  |  |  | 189,828 | 
|Long-term debt (excluding
current installments)      |  |                   | 15,537  |      |  |      | 18,759  |      |  |      | 30,739  |  |  |  | 36,591  |  |  |  | 30,572  | 
|Stockholders equity                                 |  |                   | 120,042 |      |  |      | 145,985 |      |  |      | 132,321 |  |  |  | 111,429 |  |  |  | 105,815 | 

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



|(1) |  | Working capital for the Company including discontinued operations
was as follows (in thousands): $45,201, $67,405, $67,541, $54,590 and
$51,449 for 2003, 2002, 2001, 2000 and 1999, respectively.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 7. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations

Overview:

We design, manufacture and market products that are important in many kinds of
wireless communications. We focus on the needs of the mobile information user,
with an increasing emphasis on broadband applications for high-data-rate,
high-capacity wireless communications.

Following is a summary of significant factors affecting the Company in 2003:

For continuing operations:



| |  |  | Sales grew overall from the previous year, with our LXE and SATCOM
divisions setting new sales records. LXE benefited from favorable
European market conditions and currency exchange rates. SATCOM took
advantage of new opportunities for its products in U.S. defense
applications.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Our Space & Technology and EMS Wireless divisions remained
profitable, although sales did not grow substantially. Our only
unprofitable performer was the start-up SatNet division.                                                                                                   

For discontinued operations:



| |  |  | We announced a formal plan to dispose of our Space &
Technology/Montreal division, and we sold our healthcare product line.
We accounted for these divisions as discontinued operations.                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The results reflected approximately $34 million (pre-tax) of losses
from additional costs and reserve provisions for legacy commercial
space programs, additional costs of downsizing the Montreal operation.

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| |  |  | We also recorded a $13.5 million (pre-tax) loss to write down the
assets held for sale to their estimated fair value, and a $2.9 million
loss related to the sale of our healthcare product line.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the U.S., which often requires the
judgment of management in the selection and application of certain accounting
principles and methods. We consider that the following accounting policies are
critical to understanding our financial statements, because these policies
require significant judgment, and as a result, actual future financial results
may be different from expectations.

Revenue recognition on long-term contracts

Revenue recognition for fixed-price, long-term contracts in the Space &
Technology/Atlanta and SATCOM segments, as well as the Space &
Technology/Montreal operations currently held for sale, 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 (percentage completion accounting). The determination 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. As of December 31, 2003 the Company
had recognized a cumulative total of $18.6 million in revenues under percentage
completion accounting, but which revenues were unbilled as of that date due
to the billing milestones specified in the respective customer
contracts.

During
2003, two large contracts in discontinued operations that were accounted for under
percentage completion accounting experienced technical and supplier
difficulties, resulting in increases to the estimated cost at
completion totaling over $8 million. The Company has provided
reserves for identified risks that could cause cost increases in the
future. These contracts are technically challenging, and there is a
risk that further unforeseen difficulties could cause increases to
the cost at completion that exceed the Companys provisions,
resulting in further losses associated with these contracts.

Accounting for government research incentives

Our accrual of research incentives from the Canadian government is a critical
accounting policy involving management estimates for our Montreal-based
operations. 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, 2003, total incentives earned
were approximately $2.2 million, compared with $6.2 million for the year ended
December 31, 2002. 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 operations.

Evaluation of long-lived assets for impairment

All long-lived assets on the balance sheet are periodically reviewed for
impairment. To test recoverability, we estimate the cash flows expected to
result from the long-lived assets under several different scenarios, including the potential sale of assets, as well as
continuing to hold the assets under several different kinds of business
conditions. No long-lived assets classified as held and used were determined
to be impaired as of December 31, 2003.

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In the third quarter of 2003, the assets related to the Space &
Technology/Montreal division and the healthcare product line were reclassified
from assets held and used to assets held for sale. As a result, these
business components were accounted for as discontinued operations, and the net
assets held for sale were written down to their estimated fair values upon
disposal. In November 2003, the sale of the healthcare product line was
completed. The loss on the sale of the healthcare product line was
approximately $2.9 million, and the fair value write down for the assets
associated with the Space & Technology/Montreal division was $13.5 million,
with an approximately $3.5 million U.S. income tax benefit related to these
losses. The fair value of the Space &Technology/Montreal division upon disposal
was estimated in Canadian dollars using an expected present value technique and a discount
rate of 20%. The resulting fair value was converted to U.S. dollars
using the December 31, 2003 foreign currency rate. A 2% change in the discount rate would cause
a change in the valuation of approximately $1.5 million.

Our less-than-5% equity investment in a limited partnership, SkyBridge LLP was
included in the assets reclassified to assets held for sale. The objective of
this investment, which was initially acquired in connection with the Companys
acquisition of the Space & Technology/Montreal operations in 1999, is to enable
the Space & Technology/Montreal division to participate as a
hardware provider in the development and
implementation by SkyBridge of a satellite network to provide high-data-rate wireless
services.

Establishment of reserves for deferred income tax assets

It is managements current expectation that our Canadian operations will earn more than
enough research-related tax benefits each year to offset any future 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 $33 million at December
31, 2003), because they are unlikely to be realized. However, this reserve may
be reduced - resulting in an income tax benefit to a future statement of
operations - if (1) our profitability in Canada increases, which would increase
the tax liability incurred in future years, or (2) the level of our qualified
research in Canada decreases, which would lower the tax benefits earned in
future years.

Results of Operations

Most revenues were derived from commercial and international markets (87% in
2003, 81% in 2002 and 88% in 2001), 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 $256 million in 2003, compared with $236
million in 2002 and $201 million in 2001. For 2003 compared with 2002, the
most significant growth occurred in the LXE and SATCOM segments. For LXE, the
increase in sales was due to favorable European market conditions and
currency exchange rates, as well as the introduction of new products
and a new partner and service plans. For the SATCOM segment, the increase in sales was
mainly due to higher unit sales of aeronautical and land mobile terminals for
new U.S. defense applications.

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For 2002 compared with 2001, the most significant growth 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).

Net Sales and Operating Income by Segment

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

|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |        |        |        |         | 
|------------------------ | --------------------------------- | ------------------------------------- | -------- | ------- | ------ | ----------------------- | ------- | ------ | ------ | ----- | ------- | ------ | ------ | ------ | ------- | 
|                         |                                   |                                       |          |         |        | Years ended December 31
|                         |                                   |                                       |          |         |        |                        
|                         |                                   |                                       |          |         |        | 2003                    |         | 2002   |        | 2001 
|                         |                                   |                                       |          |         |        |                         |         |        |        |      
|Net sales:               |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|                         | Space & Technology                |                                       | $        | 49,381  |        |                         |         | 54,210 |        |       |         | 37,658 |       
|                         |                                   | Less sales to discontinued operations |          |         | (1,819 | )                       |         |        | (1,431 | )     |         |        | (2,495 | )     
|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|                         | Space & Technology external sales |                                       |          | 47,562  |        |                         |         | 52,779 |        |       |         | 35,163 |       
|                         | LXE                               |                                       |          | 101,075 |        |                         |         | 88,229 |        |       |         | 85,914 |       
|                         | EMS Wireless                      |                                       |          | 51,381  |        |                         |         | 48,001 |        |       |         | 45,122 |       
|                         | SATCOM                            |                                       |          | 44,736  |        |                         |         | 32,724 |        |       |         | 21,600 |       
|                         | SatNet                            |                                       |          | 12,572  |        |                         |         | 14,153 |        |       |         | 12,568 |       
|                         | Other                             |                                       |          | (1,113  | )      |                         |         | (115   | )      |       |         | 1,024  |       
|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|                         |                                   |                                       |          | Total   |        | $                       | 256,213 |        |        |       | 235,771 |        |        |        | 201,391 | 
|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|Operating income (loss): |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|                         | Space & Technology                |                                       | $        | 3,915   |        |                         |         | 5,010  |        |       |         | (4,992 | )     
|                         | Contract reserve adjustment       |                                       |          |        |        |                         |         | 3,500  |        |       |         | (3,500 | )     
|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|                         |                                   |                                       | Subtotal |         |        | 3,915                   |         |        |        | 8,510 |         |        |        | (8,492 | )      
|                         | LXE                               |                                       |          | 6,966   |        |                         |         | 4,797  |        |       |         | 5,398  |       
|                         | EMS Wireless                      |                                       |          | 2,529   |        |                         |         | 2,432  |        |       |         | 2,188  |       
|                         | SATCOM                            |                                       |          | 5,026   |        |                         |         | 3,962  |        |       |         | 2,965  |       
|                         | SatNet                            |                                       |          | (2,100  | )      |                         |         | (1,824 | )      |       |         | 61     |       
|                         | Other                             |                                       |          | (996    | )      |                         |         | (1,524 | )      |       |         | (779   | )     
|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |       
|                         |                                   |                                       |          | Total   |        | $                       | 15,340  |        |        |       | 16,353  |        |        |        | 1,341   | 
|                         |                                   |                                       |          |         |        |                         |         |        |        |       |         |       

Space & Technology:Orders for long-term defense contracts increased
substantially in 2001, 2002, and 2003 with the result that defense-related
revenues and profits grew over this period. However, overall segment sales
decreased from 2002 to 2003 due to lower non-defense orders.

LXE:Net sales for the LXE segment increased from 2001 to 2002 and again in
2003 due to the introduction of new rugged computers for logistics
and new partner and service programs as well as
favorable European market conditions and currency exchange rates. Revenues from
North and South America also increased in 2003 compared with 2002.

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EMS Wireless:The 2002 results compared favorably with 2001 despite uncertainty
in the telecommunications market; management believes this improvement was due
to the 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. Net sales continued to increase in 2003 due to greater
unit sales of repeater products. Antenna sales were down for the full year in
2003 compared with 2002 due to a lower level of rollout activity by our
customers; however, the Company has increased antenna sales in the latter part
of 2003 through the introduction of new products and through our approved
vendor status for major wireless carriers.

SATCOM:Most of SATCOMs sales over the three years ended December 31, 2003
have been for installation on corporate jets and on military command
aircraft. Management believes that SATCOM is
the leading supplier of advanced aeronautical communications products
in the corporate jet market. In 2001, SATCOMs profits were reduced by additional costs to develop
new products, including a high-speed 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). The increase in sales in 2003 was
due to the continued growth of unit sales of high-speed data aeronautical
terminals and land-mobile portable terminals.

Sales of aeronautical terminals, especially in the earlier part of 2003,
benefited from demand for enhanced mobile communications capabilities for
senior U.S. military commanders. We expect that our corporate jet revenues will
significantly slow in 2004, but SATCOMs overall revenues should continue to
grow based on defense and security opportunities for our emergency
management and
land-mobile products.

SatNet: This segment is our start-up venture providing DVB-RCS-standard hubs
and terminals for broadband communications via satellite. Sales increased from
2001 to 2002 due to the introduction of enhanced hub and terminal products.
SatNet sales decreased in 2003 compared with 2002 primarily due to lower unit
sales of terminals. However, there was an increase in sales of hubs in 2003,
and we believe that there is considerable potential for future terminal sales
as our customers use their hubs to roll out broadband services to new markets.

Cost of Sales

Cost of sales, as a percentage of consolidated net sales, was 64% in 2003, 64%
in 2002 and 66% in 2001. In 2003, improved margins on newer SatNet products
helped offset the effect of a stronger Canadian dollar on the costs associated
with the Canada-based SATCOM segment. The cost-of-sales percentage decreased in
2002 compared with 2001, because of a more favorable mix of contracts in the
Space & Technology division.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A), as a percentage of
consolidated net sales, remained relatively stable at 23% in 2003, 22% in 2002
and 22% in 2001. 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
the recent sales growth, especially in SATCOM, LXE and SatNet.

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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. The decrease in 2003 compared to 2002 was due to reductions in
internally funded R&D as development was completed on high-speed aeronautical
terminals for SATCOM and on certain repeater products for EMS Wireless. The
overall level of R&D effort was materially unchanged in 2002 compared with
2001.

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. We had worked to develop the crucial antenna technology for systems
that provide multi-channel, live television to commercial airline flights.
However, the rollout by our customer  a television system joint venture  was
proceeding much slower than expected, as the airline industry faced difficult
economic conditions. As a result of the considerable uncertainties at the end
of 2001 about the timing of the airline industrys recovery and adoption of our
technology, we concluded that sales under the contract were unlikely to develop
at the previously expected rate. We decided to seek a settlement of the
contract with our customer, including possible use of the contracts provisions
for dispute resolution, and accrued the reserve.

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
this 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 benefit to the statement of
operations in the fourth quarter of 2002.

Non-Operating Income

The non-operating gains in 2003 and 2001 resulted from sales of capital assets.

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.
We use foreign currency denominated forward contracts to hedge our exposure to
fluctuations in foreign currency exchange rates.

Most of our Canadian operations contracts are in U.S. dollars, and foreign
exchange gains result from a stronger U.S. dollar against the Canadian dollar.
Our Canadian operations also do a significant amount of business in the United
Kingdom, and foreign exchange gains result from a stronger Canadian dollar
against the British pound.

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 hardware from the parent for
resale in Europe. A weaker U.S. dollar against the Euro usually results in
foreign exchange gains.

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The Company enters into forward currency contracts to reduce the level of gains
and losses from changes in foreign currency exchange rates. Net of the effect
of these forward contracts, the Company reported a net foreign currency loss in
2003 of $446,000, which was mainly the result of a weaker U.S. dollar against
the Canadian dollar. In 2002, the net foreign currency gain of $390,000
resulted primarily from a period during the year when the U.S. dollar
strengthened against the Canadian dollar. Foreign currency losses of $14,000 in
2001 were the result of various changes in the U.S. dollar against both the
Canadian dollar and the Euro.

Interest Expense

Interest expense decreased to $2.1 million in 2003 from $2.3 million in 2002
and $3.5 million in 2001. The decrease in 2002 and 2003 from 2001 was due to
decreased debt levels that resulted from positive cash flow and lower interest
rates.

Income Tax (Expense) Benefit

The main 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 2003 and in 2002, we earned
most of our taxable income in the U.S. and other locations, and the
consolidated effective income tax rate was 32%. 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
2004, we expect the effective income tax rate to be similar to the rate
reported in 2003.

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 net liability for all derivatives totaling $1,135,000, of which
$352,000 ($351,000 after income taxes) was charged to the statement of
operations 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 ($375,000) and
to the other comprehensive income component of stockholders equity ($408,000).

Liquidity and Capital Resources

During 2003, net cash provided by continuing operating activities was $16.3
million, compared with $16.3 million in 2002 and $2.5 million in 2001. The Company purchased $8.1
million in fixed assets during 2003. The Company received $800,000 from the
sale of its healthcare operations and $959,000 from the sale of other
investments. In addition, the Company received $3.8 million from the exercise
of stock options primarily during the second half of the year.

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During 2003, the net repayment of long-term debt was $2.3 million. Balances due
under revolving credit arrangements were essentially unchanged.

During 2003, net cash used by discontinued operations was $9.9 million,
primarily related to the Companys Space & Technology/Montreal space operations, which is
currently held for sale.

At December 31, 2003, the Company had $9.3 million available for borrowing
under its U.S. revolving credit agreement and $2.0 million available for
borrowing under its Canadian revolving credit agreement. At December 31, 2003,
the Company was either in compliance with or had received a bank waiver of
compliance relating to all covenants. During 2003, the Company amended its U.S. credit
agreement to extend the term to August 2004, and to give the lender a security
interest in certain U.S. based assets.

The Company also amended the Canadian credit agreement by increasing the total
amount available to $35.9 million, with $18.6 million available under a
revolving credit agreement payable on demand, $3.8 million under a term
installment loan maturing in 2005, and the remainder of the facility for
letters of credit. The facility has no specific maturity date, but is reviewed
annually. The Company has agreed to apply the proceeds from the potential sale
of its Space & Technology/Montreal division to revolving debt under this
agreement. Subsequent to December 31, 2003, the Company further amended its Canadian
credit agreement, including pricing, as a condition of obtaining a
covenant waiver; at current
borrowing levels, the annual cost of this facility would increase by
approximately $250,000.

Furthermore, upon determination of
whether or not a sale of the Space & Technology/Montreal
division will occur, the Company expects to enter into negotiations
to refinance or restructure its existing U.S. and Canadian credit
agreements.

The Company expects that capital expenditures in 2004 will range from $9
million to $11 million. These expenditures will be used primarily to purchase
equipment that increases or enhances capacity and productivity.

The cash flow from continuing operations during 2003 improved the Companys
cash position and 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 public or private 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.

Following is a summary of the Companys material contractual cash commitments as of December
31, 2003 (in

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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 |                                    | $     | 52,396                 |        |  |           | 37,557    |           |  |       | 1,940 |       |  |  | 2,304 |       |         |  | 10,595 |       
|Capital lease obligations                |                                    |       | 1,197                  |        |  |           | 499       |           |  |       | 698   |       |  |  |      |       |         |  |       |       
|Operating lease obligations              |                                    |       | 12,834                 |        |  |           | 3,305     |           |  |       | 5,816 |       |  |  | 3,363 |       |         |  | 350    |       
|Foreign currency forward contracts, net  |                                    |       | 98                     |        |  |           | 98        |           |  |       |      |       |  |  |      |       |         |  |       |       
|                                         |                                    |       |                        |        |  |           |           |           |  |       |       |       |  |  |       |       |         |  |        |       
|                                         | Total contractual cash obligations |       | $                      | 66,525 |  |           |           | 41,459    |  |       |       | 8,454 |  |  |       | 5,667 |         |  |        | 10,945 | 
|                                         |                                    |       |                        |        |  |           |           |           |  |       |       |       |  |  |       |       |         |  |        |       

Following is a summary of the Companys material other commercial commitments as of December
31, 2003 (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 |  | $                                          | 8,244 |        |  |           | 5,791 |           |  |       | 2,453 |  |  |  |  |         |  |  |  | 

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:



| |  |  | uncertainties related to identifying a purchaser of the Space & Technology/Montreal division, as well as
external market conditions and internal priorities and constraints that could effect a purchasers willingness
and ability to complete the transaction on terms and timing expected
by the Company (in the event a suitable purchaser is not identified,
the Space & Technology/Montreal operations would, during
2004, be reclassified back into continuing operations, and prior-year
financial statements would be restated to reflect that status);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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, and on the gross margin on products manufactured outside the U.S. but sold mainly to
U.S. customers;                                                                                                                                                                                                                                                                                                                          
|
| |  |  | 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                                                                                                                                                                                                                                                                                                                                                                               

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| |   |  | 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;                                  
|
| |  |  | the demand growth 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.                                     

Additional information concerning
these and other potential risk factors is included in Item 1 of
this Annual Report on Form 10-K.

Effect of New Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board (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 also 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. Adoption did not
have a material impact on the consolidated financial statements of the Company.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. FIN 46(R) was issued in December 2003. 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. The Company does not have any
variable internet entities and therefore does not believe that there
will be a material impact on the Companys consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, to address
decisions reached by the Derivatives Implementation Group, developments in
other Board projects that address financial instruments,

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and implementation issues related to the definition of a derivative. This
statement is effective for contracts entered into or modified after June 30,
2003, and for hedging relationships designated after June 30, 2003.
This standard did not have a material impact on the consolidated financial
statements of the Company.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
established standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity, and
imposes certain additional disclosure requirements. The provisions of SFAS No.
150 are generally effective for all financial instruments entered into or
modified after May 31, 2003, and are otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. This standard did not have
a material impact on the consolidated financial statements of the Company.




ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk

At December 31, 2003, the Company had the following market risk sensitive
instruments (in thousands):

|                                                                                                                                                                                     |  |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ------ | 
|Revolving credit loan with a U.S. bank, $10,000 maturing in
August 2004, the remainder payable upon demand, interest
payable quarterly at a variable rate (4.09% at the end of 2003) |  | $ | 16,100 | 
|Revolving credit loan with a bank in Canada, no specific maturity
but subject to annual review, interest payable monthly at a
variable rate (6.5% at the end of 2003)                |  |   | 16,522 | 
|Term installment loan with a bank in Canada, maturing in
December 2005, principal and interest payable quarterly at a
variable rate (6.5% at the end of 2003)                        |  |   | 2,437  | 
|Revolving credit loan with a bank in the United Kingdom,
maturing in April 2004, interest payable monthly at a variable
rate (4.75% at the end of 2003)                              |  |   | 1,611  | 
|                                                                                                                                                                                     |  |   |        | 
|Total market-sensitive debt                                                                                                                                                          |  | $ | 36,670 | 
|                                                                                                                                                                                     |  |   |        | 

At December 31, 2003, the Company also had intercompany accounts that eliminate
in consolidation but that are considered market risk sensitive instruments.

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Short-term due to/(from) parent, payable/(receivable) by foreign subsidiaries
in the following countries and arising from purchase of the parents products
for sale in Europe, Canada and Australia and from cash advances to the parent
at December 31, 2003 are:

|               |                                |                |                    |   |                      |   |   |       | 
|-------------- | ------------------------------ | -------------- | ------------------ | - | -------------------- | - | - | ----- | 
|               |                                |                | Exchange Rate      |   |                      |   |  
|               |                                |                | ($U.S. per unit of |   | $U.S. in thousands  
|               |                                |                | Local Currency)    |   | (Reporting Currency)
|               |                                |                |                    |   |                     
|Belgium        |                                | 1.2579 /Euro   |                    | $ | 225                  |  
|Germany        |                                | 1.2579 /Euro   |                    |   | 442                  |  
|France         |                                | 1.2579 /Euro   |                    |   | 285                  |  
|Australia      |                                | 0.7529 /Dollar |                    |   | 884                  |  
|Italy          |                                | 1.2579 /Euro   |                    |   | 647                  |  
|Netherlands    |                                | 1.2579 /Euro   |                    |   | 261                  |  
|Sweden         |                                | 0.1389 /Krona  |                    |   | 154                  |  
|United Kingdom |                                | 1.786 /Pound   |                    |   | (24                  | )
|Singapore      |                                | 0.5889 /Dollar |                    |   | 82                   |  
|Canada         |                                | 0.7738 /Dollar |                    |   | 1,633                |  
|               |                                |                |                    |   |                      |   |   |      
|               | Total short-term due to parent |                |                    |   |                      |   | $ | 4,589 | 
|               |                                |                |                    |   |                      |   |   |      

At December 31, 2003, 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 |  |             |  |          |        |         |  |         |     |   |    | 
|Continuing Operations:                      |  |             |  |          |        |         |  |         |     |   |    | 
|Euros (sell for U.S. dollars)               |  | 1,300 Euros |  |          | 1.2334 |         |  | $       | (32 | )
|U.S. dollars (sell for Canadian dollars)    |  | 6,000 USD   |  |          | 1.3280 |         |  |         | 130 |  
|                                            |  |             |  |          |        |         |  |         |     |   |    | 
|                                            |  |             |  |          |        |         |  |         |     | $ | 98 | 
|                                            |  |             |  |          |        |         |  |         |     |   |    | 
|Discontinued Operations:                    |  |             |  |          |        |         |  |         |     |   |    | 
|Euros (sell for Canadian dollars)           |  | 3,000 Euros |  |          | 1.6160 |         |  | $       | (32 | )
|British pounds (sell for Canadian dollars)  |  | 3,670 GBP   |  |          | 2.3132 |         |  |         | 37  |  
|                                            |  |             |  |          |        |         |  |         |     |   |    | 
|                                            |  |             |  |          |        |         |  |         |     | $ | 5  | 
|                                            |  |             |  |          |        |         |  |         |     |   |    | 

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

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ITEM 8. Financial Statements and Supplementary Data

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




ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.




ITEM 9A. 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
as of the end of the period covered by this 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.

During the three months ended December 31, 2003, there was no change in our
internal control over financial reporting (as defined in Rule 13a  15(f) under
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

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 III




ITEM 10. Directors and Executive Officers of the Registrant

The information concerning directors and the Audit Committee financial
experts called for by this Item will be contained in the Companys definitive
Proxy Statement for its 2004 Annual Meeting of Shareholders and is
incorporated herein by reference.

We have a written Code of Business
Ethics and Conduct that applies to our directors and to all of our
employees, including our chief executive and chief financial
officers. Our Code of Business Ethics and Conduct has been
distributed to all employees, is available free of charge on our
website at www.ems-t.com, under the link for Investor
Relations, and is included as Exhibit 14 to this Report.

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 will be contained in the Companys
definitive Proxy Statement for its 2004 Annual Meeting of Shareholders and is
incorporated herein by reference.

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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, 2003:

|                                                           |       |                     |                      |                     |                      |                         |                           |       |  |  |         |         | 
|---------------------------------------------------------- | ----- | ------------------- | -------------------- | ------------------- | -------------------- | ----------------------- | ------------------------- | ----- |  |  | ------- | ------- | 
|                                                           |       |                     |                      |                     |                      |                         | (c)                      
|                                                           |       |                     | (a)                  |                     |                      |                         | Number of securities     
|                                                           |       |                     | Number of securities |                     | (b)                  |                         | remaining available for  
|                                                           |       |                     | to be issued upon    |                     | Weighted average     |                         | future issuance under    
|                                                           |       |                     | exercise of          |                     | exercise price of    |                         | equity compensation plans
|                                                           |       |                     | outstanding options, |                     | outstanding options, |                         | (excluding securities    
|Plan Category                                              |       | warrants and rights |                      | warrants and rights |                      | reflected in column(a))
|                                                           |       |                     |                      |                     |                      |                        
|Equity compensation
plans approved by
security holders     |       |                     | 1,048,938            |                     |                      | $                       | 16.43                     |       |  |  | 195,337 |        
|Equity compensation
plans not approved
by security holders |       |                     | 689,100              |                     |                      | $                       | 17.50                     |       |  |  | 77,800  |        
|                                                           |       |                     |                      |                     |                      |                         |                           |       |  |  |         |        
|                                                           | Total |                     |                      | 1,738,038           |                      |                         | $                         | 16.85 |  |  |         | 273,137 | 
|                                                           |       |                     |                      |                     |                      |                         |                           |       |  |  |         |        

All other information called for by
this Item will be contained in the Companys
definitive Proxy Statement for its 2004 Annual Meeting of Shareholders and is
incorporated herein by reference.




ITEM 13. Certain Relationships and Related Transactions

The information called for by this
Item will be contained in the Companys
definitive Proxy Statement for its 2004 Annual Meeting of Shareholders and is
incorporated herein by reference.




ITEM 14. Principal Accountant Fees and Services

Information on the Audit Committees pre-approval policy for audit services, and
information on the principal accountants fees and services
called for by this Item will be contained in the
Companys definitive Proxy Statement for its 2004 Annual Meeting of
Shareholders and is incorporated herein by reference.




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, 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, 2003,
2002 and 2001

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

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INDEPENDENT AUDITORS REPORT

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

Under date of March 5, 2004, we reported on the consolidated balance sheets of
EMS Technologies, Inc. and subsidiaries (the Company) as of December 31, 2003
and 2002, and the related consolidated statements of operations, stockholders
equity and comprehensive income (loss), and cash flows for each of the years in
the three-year period ended December 31, 2003, as contained in this annual
report on Form 10-K for the year 2003. 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
Schedule II  Valuation and Qualifying Accounts for
each of the years in the three-year period ended
December 31, 2003. 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
March 5, 2004

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

|                                             |  |            |        |            |  |                                              |        |       |  |         |      |       |  |         |   |  |  |  |        | 
|-------------------------------------------- |  | ---------- | ------ | ---------- |  | -------------------------------------------- | ------ | ----- |  | ------- | ---- | ----- |  | ------- | - |  |  |  | ------ | 
|                                             |  |            |        |            |  | Years ended December 31, 2003, 2002 and 2001
|                                             |  |            |        |            |  |                                             
|                                             |  |            |        |            |  | Additions                                    |        |       |  |         |      |       |  |         |   |  |  | 
|                                             |  | Balance at |        | charged to |  |                                              |        |       |  |         |      |       |  | Balance
|                                             |  | beginning  |        | costs and  |  |                                              |        |       |  |         |      |       |  | at end 
|Classification                               |  | of year    |        | expenses   |  | Deductions                                   |        | Other |  | of year
|                                             |  |            |        |            |  |                                              |        |       |  |        
|Allowance for Doubtful Accounts:             |  |            |        |            |  |                                              |        |       |  |         |      |       |  |         |   |  |  |  |        | 
|2001                                         |  | $          | 810    |            |  |                                              | 62     |       |  |         | (2   | )     |  |         |  |  |  |  | 870    | 
|2002                                         |  |            | 870    |            |  |                                              | 411    |       |  |         | (174 | ) (a) |  |         |  |  |  |  | 1,107  | 
|2003                                         |  |            | 1,107  |            |  |                                              | 902    |       |  |         | (472 | ) (a) |  |         |   |  |  |  | 1,537  | 
|Reserve for Inventory:                       |  |            |        |            |  |                                              |        |       |  |         |      |       |  |         |   |  |  |  |        | 
|2001                                         |  | $          | 1,115  |            |  |                                              | 382    |       |  |         |     |       |  |         |  |  |  |  | 1,497  | 
|2002                                         |  |            | 1,497  |            |  |                                              | 540    |       |  |         | (502 | ) (b) |  |         |  |  |  |  | 1,535  | 
|2003                                         |  |            | 1,535  |            |  |                                              | 2,174  |       |  |         | (643 | ) (b) |  |         |  |  |  |  | 3,096  | 
|Valuation Allowance for Deferred Tax Assets: |  |            |        |            |  |                                              |        |       |  |         |      |       |  |         |   |  |  |  |        | 
|2001                                         |  | $          | 5,784  |            |  |                                              | 3,147  | (c)   |  |         |     |       |  |         |  |  |  |  | 8,931  | 
|2002                                         |  |            | 8,931  |            |  |                                              | 1,967  | (c)   |  |         |     |       |  |         |  |  |  |  | 10,898 | 
|2003                                         |  |            | 10,898 |            |  |                                              | 15,585 | (c)   |  |         |     |       |  |         |  |  |  |  | 26,483 | 

(a)  Deductions represent receivables that were charged off to the allowance
during the year, most of which related to EMS Wireless and LXE 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 inventory held by the LXE
segment.

(c)  The 2003, 2002 and 2001 increases in the valuation allowance 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 2003, 2002 or 2001 statements of operations.

(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 3.2 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).

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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).

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).

4.5 Fourth Amendment dated as of October 31, 2003, to Second Amended and
Restated Loan Agreement, dated November 9, 1998, between the Company and
SunTrust Bank, Atlanta.*

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. Deferred Compensation Plan for Non-Employee
Directors, effective October 1, 2003.*

10.4 EMS Technologies, Inc.
Officers Deferred Compensation Plan, effective
November 13, 2003.*

10.5 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).

10.6 Amendments adopted May 2, 1997, to the EMS Technologies, Inc. 1992
Stock Incentive Plan.*

10.7 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).

10.8 Form of Stock Option Agreement evidencing options granted prior to 2001
to executive officers under the EMS Technologies, Inc. 1997 Stock Incentive
Plan.*

10.9 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).

10.10 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).

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10.11 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).

10.12 Form of Stock Option Agreement evidencing options granted to executive
officers under EMS Technologies, Inc. 1992 Stock Incentive Plan.*

10.13 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).

10.14 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).

10.15 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).

10.16 Form of Indemnification
Agreement between the Company and each of its directors*

10.17 Form of Indemnification Agreement between the Company and, each of Don T.
Scartz and William S. Jacobs. *

10.18 Split-Dollar Insurance Plan, dated as of June 29, 1988 between the
Company and Don T. Scartz.*

10.19 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).

10.20 Letter, dated July 24, 2002, 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.*

14 EMS
Technologies, Inc. Code of
Business Ethics and Conduct, as revised February 6, 2004. *

21.1 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 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 and 333-87160, each on Form
S-3.*

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*

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32   Certification of the Companys Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.*

99.1 Ernst & Young LLP Independent Auditors Report.*

*     Filed herewith

(b)  Reports on Form 8-K.

The following reports on Form 8-K were filed by the Company during the quarter
ended December 31, 2003.



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | October 28,
2003, reporting under Item 12, Results of Operations
and Financial Condition.




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: 3/15/04
|                                      |  |              
|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. Hansen
Alfred G. Hansen |  | President and Chief Executive Officer,
and Director (Principal Executive
Officer)                             |  | 3/15/04
|   
|/s/ |  | Don T. Scartz
Don T. Scartz       |  | Executive Vice President,
Chief Financial Officer, and Treasurer
(Principal Financial and Accounting
Officer) |  | 3/15/04
|   
|/s/ |  | Hermann Buerger
Hermann Buerger   |  | Director                                                                                                      |  | 3/15/04
|   
|/s/ |  | Robert P. Crozer
Robert P. Crozer |  | Director                                                                                                      |  | 3/15/04

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|    |  |                                             |  |                                 |  |        
|--- |  | ------------------------------------------- |  | ------------------------------- |  | -------
|    |  | Signature                                   |  | Title                           |  | Date   
|   
|/s/ |  | John P. Frazee, Jr.
John P. Frazee, Jr.     |  | Director                        |  | 3/15/04
|   
|/s/ |  | John R. Kreick
John R. Kreick               |  | Director                        |  | 3/15/04
|   
|/s/ |  | John B. Mowell
John B. Mowell               |  | Director, Chairman of the Board |  | 3/15/04
|   
|/s/ |  | Norman E. Thagard
Norman E. Thagard         |  | Director                        |  | 3/15/04
|   
|/s/ |  | John L. Woodward, Jr.
John L. Woodward, Jr. |  | Director                        |  | 3/15/04

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                               |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                                               |  | Page
|Independent Auditors Report                                                                                                   |  |      | 48 | 
|Consolidated Statements of Operations 
Years ended December 31, 2003, 2002 and 2001                                           |  |      | 49 | 
|Consolidated Balance Sheets 
December 31, 2003 and 2002                                                                       |  |      | 50 | 
|Consolidated Statements of Cash Flows 
Years ended December 31, 2003, 2002 and 2001                                           |  |      | 52 | 
|Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) 
Years ended December 31, 2003, 2002 and 2001 |  |      | 54 | 
|Notes to Consolidated Financial
Statements                                                                                     |  |      | 55 | 

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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, 2003 and
2002, and the related consolidated statements of operations, stockholders
equity and comprehensive income (loss), and cash flows for each of the years in
the three-year period ended December 31, 2003. 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 34% and 35%, and total revenues
constituting 27%, 36% and 40% in 2003, 2002 and 2001, 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, 2003 and 2002, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 6 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
March 5, 2004

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EMS TECHNOLOGIES, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except net earnings per share)


|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |       |        |  
|------------------------------------------------------------- | --------------------------------------------------- | -------------------------------------------------------------- | ------- | ----------------------- | ------- | ---- | ------- | ------ | ------ | - | ------- | ----- | ------ | -
|                                                              |                                                     |                                                                |         | Years ended December 31
|                                                              |                                                     |                                                                |         |                        
|                                                              |                                                     |                                                                |         | 2003                    |         | 2002 |         | 2001  
|                                                              |                                                     |                                                                |         |                         |         |      |         |       
|Net sales (note 12)                                           |                                                     | $                                                              | 256,213 |                         |         |      | 235,771 |        |        |   | 201,391 |      
|Cost of sales                                                 |                                                     |                                                                | 163,744 |                         |         |      | 151,172 |        |        |   | 132,153 |      
|Selling, general and administrative expenses                  |                                                     |                                                                | 57,851  |                         |         |      | 51,374  |        |        |   | 43,962  |      
|Research and development expenses                             |                                                     |                                                                | 19,278  |                         |         |      | 20,372  |        |        |   | 20,435  |      
|Contract reserve adjustment (note 14)                         |                                                     |                                                                |        |                         |         |      | (3,500  | )      |        |   | 3,500   |      
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Operating income                                               |         |                         | 15,340  |      |         |        | 16,353 |   |         |       | 1,341  |  
|Non-operating income (expense)                                |                                                     |                                                                | 360     |                         |         |      | (58     | )      |        |   | 565     |      
|Foreign exchange (loss) gain                                  |                                                     |                                                                | (446    | )                       |         |      | 390     |        |        |   | (14     | )    
|Interest expense                                              |                                                     |                                                                | (2,147  | )                       |         |      | (2,329  | )      |        |   | (3,488  | )    
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Earnings (loss) from continuing
operations before income taxes |         |                         | 13,107  |      |         |        | 14,356 |   |         |       | (1,596 | )
|Income tax (expense) benefit (note 9)                         |                                                     |                                                                | (4,237  | )                       |         |      | (4,699  | )      |        |   | 1,641   |      
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Earnings from continuing operations                            |         |                         | 8,870   |      |         |        | 9,657  |   |         |       | 45     |  
|Discontinued operations (note 2):                             |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Gain (loss) from discontinued operations                       |         |                         | (50,614 | )    |         |        | (1,596 | ) |         |       | 5,643  |  
|                                                              |                                                     | Income
tax benefit (expense)                                   |         |                         | 4,352   |      |         |        | 526    |   |         |       | (821   | )
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Earnings
(loss) from discontinued operations                   |         |                         | (46,262 | )    |         |        | (1,070 | ) |         |       | 4,822  |  
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Earnings (loss) before accounting change                       |         |                         | (37,392 | )    |         |        | 8,587  |   |         |       | 4,867  |  
|Cumulative effect of change in accounting
principle (note 13) |                                                     |                                                                |        |                         |         |      |        |        |        |   | (351    | )    
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Net earnings (loss)                                            |         | $                       | (37,392 | )    |         |        | 8,587  |   |         |       | 4,516  |  
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|Net earnings (loss) per share (note 8):                       |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              | Basic:                                              |                                                                |         |                         |         |      |         |        |        |   |         |       |       
|                                                              | Earnings from continuing operations                 |                                                                | $       | 0.83                    |         |      |         | 0.91   |        |   |         | 0.01  |       
|                                                              | Earnings (loss) from discontinued operations        |                                                                |         | (4.32                   | )       |      |         | (0.10  | )      |   |         | 0.51  |       
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              | Earnings (loss) before accounting change            |                                                                |         | (3.49                   | )       |      |         | 0.81   |        |   |         | 0.52  |       
|                                                              | Cumulative effect of change in accounting
principle |                                                                |         |                        |         |      |         |       |        |   |         | (0.04 | )     
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Net earnings (loss)                                            |         | $                       | (3.49   | )    |         |        | 0.81   |   |         |       | 0.48   |  
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              | Diluted:                                            |                                                                |         |                         |         |      |         |        |        |   |         |       |       
|                                                              | Earnings from continuing operations                 |                                                                | $       | 0.82                    |         |      |         | 0.90   |        |   |         | 0.01  |       
|                                                              | Earnings (loss) from discontinued operations        |                                                                |         | (4.29                   | )       |      |         | (0.10  | )      |   |         | 0.50  |       
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              | Earnings (loss) before accounting change            |                                                                |         | (3.47                   | )       |      |         | 0.80   |        |   |         | 0.51  |       
|                                                              | Cumulative effect of change in accounting
principle |                                                                |         |                        |         |      |         |       |        |   |         | (0.04 | )     
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              |                                                     | Net earnings (loss)                                            |         | $                       | (3.47   | )    |         |        | 0.80   |   |         |       | 0.47   |  
|                                                              |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|Weighted average number of shares (note 8):                   |                                                     |                                                                |         |                         |         |      |         |        |        |   |         |      
|                                                              | Common                                              |                                                                |         | 10,702                  |         |      |         | 10,561 |        |   |         | 9,464 |       
|                                                              | Common and dilutive common equivalent               |                                                                |         | 10,785                  |         |      |         | 10,731 |        |   |         | 9,563 |       

See accompanying notes to consolidated financial statements.

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EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                               |                                                    |                                   |         |             |         |      |         |        |         | 
|---------------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------- | ------- | ----------- | ------- | ---- | ------- | ------ | ------- | 
|                                                                                               |                                                    |                                   |         | December 31
|                                                                                               |                                                    |                                   |         |            
|                                                                                               |                                                    |                                   |         | 2003        |         | 2002
|                                                                                               |                                                    |                                   |         |             |         |     
|ASSETS                                                                                         |                                                    |                                   |         |             |         |      |         |       
|Current assets:                                                                                |                                                    |                                   |         |             |         |      |         |       
|                                                                                               | Cash and cash equivalents (note 11)                |                                   | $       | 14,180      |         |      |         | 12,430 |        
|                                                                                               | Trade accounts receivable, net (notes 4, 7 and 11) |                                   |         | 71,431      |         |      |         | 71,583 |        
|                                                                                               | Inventories (notes 5 and 7)                        |                                   |         | 33,509      |         |      |         | 30,006 |        
|                                                                                               | Deferred income taxes (note 9)                     |                                   |         | 2,208       |         |      |         | 1,693  |        
|                                                                                               | Assets held for sale (note 2)                      |                                   |         | 40,059      |         |      |         | 77,866 |        
|                                                                                               |                                                    |                                   |         |             |         |      |         |       
|                                                                                               |                                                    | Total current assets              |         |             | 161,387 |      |         |        | 193,578 | 
|                                                                                               |                                                    |                                   |         |             |         |      |         |       
|Property, plant and equipment (note 7):                                                        |                                                    |                                   |         |             |         |      |         |       
|                                                                                               | Land                                               |                                   |         | 2,174       |         |      |         | 1,988  |        
|                                                                                               | Buildings and leasehold improvements               |                                   |         | 15,000      |         |      |         | 14,835 |        
|                                                                                               | Machinery and equipment                            |                                   |         | 73,474      |         |      |         | 64,985 |        
|                                                                                               | Furniture and fixtures                             |                                   |         | 7,318       |         |      |         | 6,554  |        
|                                                                                               |                                                    |                                   |         |             |         |      |         |       
|                                                                                               |                                                    |                                   | 97,966  |             |         |      | 88,362  |       
|                                                                                               | Less accumulated depreciation and amortization     |                                   |         | 59,485      |         |      |         | 51,905 |        
|                                                                                               |                                                    |                                   |         |             |         |      |         |       
|                                                                                               |                                                    | Net property, plant and equipment |         |             | 38,481  |      |         |        | 36,457  | 
|                                                                                               |                                                    |                                   |         |             |         |      |         |       
|Deferred income taxes, net  non-current (note 9)                                              |                                                    |                                   | 2,679   |             |         |      | 1,780   |       
|Intangible assets, net of accumulated amortization
of $1,533 in 2003 and $743 in 2002 (note 6) |                                                    |                                   | 3,121   |             |         |      | 3,499   |       
|Goodwill, net of accumulated amortization
of $4,984 in 2003 and 2002 (note 6)                  |                                                    |                                   | 13,526  |             |         |      | 13,526  |       
|Other assets                                                                                   |                                                    |                                   | 9,355   |             |         |      | 7,463   |       
|                                                                                               |                                                    |                                   |         |             |         |      |         |       
|                                                                                               |                                                    | $                                 | 228,549 |             |         |      | 256,303 |       
|                                                                                               |                                                    |                                   |         |             |         |      |         |       

See accompanying notes to consolidated financial statements.

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EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS,continued
(in thousands, except share data)

|                                                                |                                                                                                                                         |                            |         |             |         |      |         |        |         | 
|--------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------- | ------- | ---- | ------- | ------ | ------- | 
|                                                                |                                                                                                                                         |                            |         | December 31
|                                                                |                                                                                                                                         |                            |         |            
|                                                                |                                                                                                                                         |                            |         | 2003        |         | 2002
|                                                                |                                                                                                                                         |                            |         |             |         |     
|LIABILITIES AND STOCKHOLDERS EQUITY                            |                                                                                                                                         |                            |         |             |         |      |         |       
|Current liabilities:                                            |                                                                                                                                         |                            |         |             |         |      |         |       
|                                                                | Current installments of long-term debt (notes 7 and 11)                                                                                 |                            | $       | 38,056      |         |      |         | 33,783 |        
|                                                                | Accounts payable (note 11)                                                                                                              |                            |         | 18,812      |         |      |         | 21,021 |        
|                                                                | Accrued compensation costs                                                                                                              |                            |         | 7,823       |         |      |         | 7,117  |        
|                                                                | Accrued retirement costs (note 10)                                                                                                      |                            |         | 2,637       |         |      |         | 2,511  |        
|                                                                | Deferred service revenue                                                                                                                |                            |         | 4,730       |         |      |         | 4,108  |        
|                                                                | Liabilities related to assets held for sale (note 2)                                                                                    |                            |         | 17,765      |         |      |         | 20,266 |        
|                                                                | Other current liabilities                                                                                                               |                            |         | 3,147       |         |      |         | 2,753  |        
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       
|                                                                |                                                                                                                                         | Total current liabilities  |         |             | 92,970  |      |         |        | 91,559  | 
|Long-term debt, excluding current installments (notes 7
and 11) |                                                                                                                                         |                            | 15,537  |             |         |      | 18,759  |       
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       
|                                                                |                                                                                                                                         | Total liabilities          |         |             | 108,507 |      |         |        | 110,318 | 
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       
|Stockholders equity (note 8):                                  |                                                                                                                                         |                            |         |             |         |      |         |       
|                                                                | 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
10,926,000 in 2003 and 10,658,000 in 2002 |                            |         | 1,093       |         |      |         | 1,066  |        
|                                                                | Additional paid-in capital                                                                                                              |                            |         | 64,988      |         |      |         | 60,867 |        
|                                                                | Accumulated other comprehensive income (loss) -
foreign currency translation adjustment                                                 |                            |         | 1,480       |         |      |         | (5,821 | )      
|                                                                | Retained earnings                                                                                                                       |                            |         | 52,481      |         |      |         | 89,873 |        
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       
|                                                                |                                                                                                                                         | Total stockholders equity |         |             | 120,042 |      |         |        | 145,985 | 
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       
|Commitments and contingencies (notes 3, 7, 13 and 15)           |                                                                                                                                         | $                          | 228,549 |             |         |      | 256,303 |       
|                                                                |                                                                                                                                         |                            |         |             |         |      |         |       

See accompanying notes to consolidated financial statements.

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EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |         |        |        |         |  
|------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------- | ------ | ----------------------- | ------ | ------ | ----- | ------ | ------ | ------- | ------ | ------ | ------- | -
|                                                  |                                                                                            |                                                 |                                                                |                                           |        | Years ended December 31
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                        
|                                                  |                                                                                            |                                                 |                                                                |                                           |        | 2003                    |        | 2002   |       | 2001  
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |       
|Cash flows from operating activities:             |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  | Net earnings (loss)                                                                        |                                                 | $                                                              | (37,392                                   | )      |                         |        | 8,587  |       |        |        | 4,516   |       
|                                                  | Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities: |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |         |       
|                                                  |                                                                                            | Depreciation
and other intangibles amortization |                                                                |                                           | 8,692  |                         |        |        | 8,208 |        |        |         | 8,279  |       
|                                                  |                                                                                            | Goodwill amortization                           |                                                                |                                           |       |                         |        |        |      |        |        |         | 650    |       
|                                                  |                                                                                            | Deferred income taxes                           |                                                                |                                           | (1,414 | )                       |        |        | 1,780 |        |        |         | (2,209 | )     
|                                                  |                                                                                            | Gain on sale of assets                          |                                                                |                                           | (659   | )                       |        |        |      |        |        |         |       |       
|                                                  |                                                                                            | Loss (income) from discontinued operations      |                                                                |                                           | 46,262 |                         |        |        | 1,070 |        |        |         | (4,822 | )     
|                                                  |                                                                                            | Changes in operating assets and liabilities:    |                                                                |                                           |        |                         |        |        |       |        |        |         |        |       
|                                                  |                                                                                            |                                                 | Trade accounts receivable                                      |                                           |        | 4,190                   |        |        |       | (5,163 | )      |         |        | (4,236 | )      
|                                                  |                                                                                            |                                                 | Inventories                                                    |                                           |        | (999                    | )      |        |       | 2,729  |        |         |        | (1,944 | )      
|                                                  |                                                                                            |                                                 | Accounts payable                                               |                                           |        | (3,739                  | )      |        |       | (1,224 | )      |         |        | 1,992  |        
|                                                  |                                                                                            |                                                 | Income taxes payable                                           |                                           |        | 1,044                   |        |        |       | 2,272  |        |         |        | (75    | )      
|                                                  |                                                                                            |                                                 | Accrued costs, deferred revenue,
and other current liabilities |                                           |        | 1,667                   |        |        |       | 1,098  |        |         |        | 2,998  |        
|                                                  |                                                                                            |                                                 | Other                                                          |                                           |        | (1,319                  | )      |        |       | (3,086 | )      |         |        | (2,697 | )      
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  |                                                                                            |                                                 |                                                                | Net cash provided by operating activities |        |                         | 16,333 |        |       |        | 16,271 |         |        |        | 2,452   |  
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|Cash flows from investing activities:             |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  | Purchase of property, plant and equipment                                                  |                                                 |                                                                | (8,084                                    | )      |                         |        | (8,557 | )     |        |        | (7,781  | )     
|                                                  | Payments for asset acquisitions                                                            |                                                 |                                                                |                                          |        |                         |        | (300   | )     |        |        | (3,516  | )     
|                                                  | Sale of assets                                                                             |                                                 |                                                                | 1,759                                     |        |                         |        |       |       |        |        |        |       
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  |                                                                                            |                                                 |                                                                | Net cash used in investing activities     |        |                         | (6,325 | )      |       |        | (8,857 | )       |        |        | (11,297 | )
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|Cash flows from financing activities:             |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  | Net increase (decrease) in revolving debt                                                  |                                                 |                                                                | (68                                       | )      |                         |        | 1,465  |       |        |        | (18,223 | )     
|                                                  | Proceeds from new term debt                                                                |                                                 |                                                                |                                          |        |                         |        | 2,446  |       |        |        | 17,604  |       
|                                                  | Repayment of term debt                                                                     |                                                 |                                                                | (2,321                                    | )      |                         |        | (5,065 | )     |        |        | (1,759  | )     
|                                                  | Net proceeds from private stock offering                                                   |                                                 |                                                                |                                          |        |                         |        |       |       |        |        | 17,619  |       
|                                                  | Proceeds from exercise of stock options,
net of withholding taxes paid                     |                                                 |                                                                | 3,765                                     |        |                         |        | 1,533  |       |        |        | 256     |       
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  |                                                                                            |                                                 |                                                                | Net cash provided by financing activities |        |                         | 1,376  |        |       |        | 379    |         |        |        | 15,497  |  
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|Cash used by discontinued operations              |                                                                                            |                                                 | (9,929                                                         | )                                         |        |                         | (6,779 | )      |       |        | (644   | )      
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  |                                                                                            |                                                 |                                                                | Net change in cash and cash equivalents   |        |                         | 1,455  |        |       |        | 1,014  |         |        |        | 6,008   |  
|Effect of exchange rates on cash                  |                                                                                            |                                                 | 295                                                            |                                           |        |                         | (361   | )      |       |        | 176    |        
|Cash and cash equivalents at January 1            |                                                                                            |                                                 | 12,430                                                         |                                           |        |                         | 11,777 |        |       |        | 5,593  |        
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|Cash and cash equivalents at December 31          |                                                                                            | $                                               | 14,180                                                         |                                           |        |                         | 12,430 |        |       |        | 11,777 |        
|                                                  |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|Supplemental disclosure of cash flow information: |                                                                                            |                                                 |                                                                |                                           |        |                         |        |        |       |        |        |        
|                                                  | Cash paid for interest                                                                     |                                                 | $                                                              | 3,386                                     |        |                         |        | 3,520  |       |        |        | 5,163   |       
|                                                  | Cash paid for income taxes                                                                 |                                                 |                                                                | 2,043                                     |        |                         |        | 535    |       |        |        | 361     |       

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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.

See accompanying notes to consolidated financial statements.

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EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
(in thousands)

|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  |        |        |   |  |       |         |   |  |  |         |  
|------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---------- |  | ------- | ----- | ------- |  | -------- | ------ | -------- |  | ------ | ------- | ------- |  | ------ | ------ | - |  | ----- | ------- | - |  |  | ------- | -
|                                                                          |  | Three years ended December 31, 2003
|                                                                          |  |                                    
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  | Accum- |        |   |  |       |         |   |  | 
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  | ulated |        |   |  |       |         |   |  | 
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  | other  |        |   |  |       |         |   |  | 
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  | Annual |         | compre- |  |        |        |   |  | Total
|                                                                          |  | Common Stock                        |        | Additional |  | compre- |       | hensive |  |          |        |          |  | stock-
|                                                                          |  |                                     |        | paid-in    |  | hensive |       | income  |  | Retained |        | holders
|                                                                          |  | Shares                              |        | Amount     |  | capital |       | income  |  | (loss)   |        | earnings |  | equity
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |       
|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 9) |  |                                     |       |            |  |         |      |         |  |          | 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 3)                                  |  |                                     | 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 9) |  |                                     |       |            |  |         |      |         |  |          | 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 3)                                  |  |                                     | 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 |  
|Net loss                                                                  |  |                                     |       |            |  |         |      |         |  |          |       |          |  |        | (37,392 | )       |  |        |       |   |  |       | (37,392 | ) |  |  | (37,392 | )
|Income tax benefit from exercise of non-
qualified stock options (note 9) |  |                                     |       |            |  |         |      |         |  |          | 383    |          |  |        |        |         |  |        |       |   |  |       |        |   |  |  | 383     |  
|Exercise of common stock options                                          |  |                                     | 356    |            |  |         | 36    |         |  |          | 5,474  |          |  |        |        |         |  |        |       |   |  |       |        |   |  |  | 5,510   |  
|Redemption of shares upon exercise of
common stock options                |  |                                     | (86    | )          |  |         | (9    | )       |  |          | (1,703 | )        |  |        |        |         |  |        |       |   |  |       |        |   |  |  | (1,712  | )
|Foreign currency translation adjustment gain                              |  |                                     |       |            |  |         |      |         |  |          |       |          |  |        | 7,301   |         |  |        | 7,301  |   |  |       |        |   |  |  | 7,301   |  
|Repurchases of stock                                                      |  |                                     | (2     | )          |  |         |       |         |  |          | (33    | )        |  |        |        |         |  |        |       |   |  |       |        |   |  |  | (33     | )
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  |        |        |   |  |       |         |   |  |  |         |  
|Comprehensive loss for 2003                                               |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        | (30,091 | )       |  |        |        |   |  |       |         |   |  |  |         |  
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  |        |        |   |  |       |         |   |  |  |         |  
|Balance December 31, 2003                                                 |  |                                     | 10,926 |            |  | $       | 1,093 |         |  |          | 64,988 |          |  |        |         |         |  |        | 1,480  |   |  |       | 52,481  |   |  |  | 120,042 |  
|                                                                          |  |                                     |        |            |  |         |       |         |  |          |        |          |  |        |         |         |  |        |        |   |  |       |         |   |  |  |         |  

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001

(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 amounts in the statements of operations and the statements of cash flows
in 2002 and 2001 were reclassified to conform to classifications adopted in
2003. Certain balance sheet amounts in 2002 were reclassified to conform with
classifications adopted in 2003. 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, EMS Wireless and SatNet, 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 advance 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 underlying research efforts primarily apply to development of
technological capabilities for specific business opportunities.

 Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Cash equivalents as
of December 31 included investments of $5,318,000 in 2003 and $7,434,000 in
2002 in U.S. Government Securities, money market instruments

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and interest-bearing deposits each
purchased with an
initial on remaining term of less than three months.

 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.

 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 carry forwards.
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.

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 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 valued at fair value at the date of acquisition. In
accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, 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 2000. 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.

 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 (loss) per
share if the Company had applied the fair value method to measure stock-based
compensation (in thousands, except net earnings per share):

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|                                |                                                                                              |  |   |         |   |      |  |        |   |  |  |        |   | 
|------------------------------- | -------------------------------------------------------------------------------------------- |  | - | ------- | - | ---- |  | ------ | - |  |  | ------ | - | 
|                                |                                                                                              |  |   | 2003    |   | 2002 |  | 2001  
|                                |                                                                                              |  |   |         |   |      |  |       
|Net earnings (loss):            |                                                                                              |  |   |         |   |      |  |        |   |  |  |       
|                                | As reported                                                                                  |  | $ | (37,392 | ) |      |  | 8,587  |   |  |  | 4,516  |  
|                                | Stock-based employee compensation expense determined under the fair value method, net of tax |  |   | (3,061  | ) |      |  | (3,299 | ) |  |  | (2,344 | )
|                                |                                                                                              |  |   |         |   |      |  |        |   |  |  |       
|                                | Pro forma                                                                                    |  | $ | (40,453 | ) |      |  | 5,288  |   |  |  | 2,172  |  
|                                |                                                                                              |  |   |         |   |      |  |        |   |  |  |       
|Basic net earnings per share:   |                                                                                              |  |   |         |   |      |  |        |   |  |  |       
|                                | As reported                                                                                  |  | $ | (3.49   | ) |      |  | 0.81   |   |  |  | 0.48   |  
|                                | Pro forma                                                                                    |  |   | (3.78   | ) |      |  | 0.50   |   |  |  | 0.23   |  
|Diluted net earnings per share: |                                                                                              |  |   |         |   |      |  |        |   |  |  |       
|                                | As reported                                                                                  |  |   | (3.47   | ) |      |  | 0.80   |   |  |  | 0.47   |  
|                                | Pro forma                                                                                    |  |   | (3.75   | ) |      |  | 0.49   |   |  |  | 0.23   |  

 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 and on work performed in the
U.S. for Canadian subsidiaries.

 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).

 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.

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 and are accounted for at fair value. None of the Companys
derivative instruments were designated as hedges in 2003 or 2002.

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(2) Discontinued Operations

In the third quarter of 2003, EMS announced that its Board of Directors had
approved a formal plan to sell the Companys commercial space
operations located in
Montreal. During the fourth quarter of 2003, the Company completed the sale of
its healthcare product line. As a result, these business components were
accounted for as discontinued operations, and the net assets held for sale were
written down to their estimated fair value upon disposal. The loss on the sale
of the healthcare product line was approximately $2.9 million,
and the write down to fair value for the assets associated with the Space & Technology/Montreal
division was $13.5 million, with an approximately $3.5 million U.S. income tax
benefit related to these losses. The fair value of the Space &
Technology/Montreal division upon disposal was estimated in Canadian dollars
using an expected present value technique and a discount rate of 20%. The resulting fair value
was converted to U.S. dollars using
the December 31, 2003 foreign currency rate. A
2% change in the discount rate would cause a change in the valuation of
approximately $1.5 million.



| |  | The results of these discontinued operations for 2003, 2002 and 2001 were as
follows (in thousands):
| |  | ----------------------------------------------------------------------------------------------------

|                                    |                     |   |         |         |      |  |        |        |   |  |        |       | 
|----------------------------------- | ------------------- | - | ------- | ------- | ---- |  | ------ | ------ | - |  | ------ | ----- | 
|                                    |                     |   | 2003    |         | 2002 |  | 2001  
|                                    |                     |   |         |         |      |  |       
|Net sales                           |                     | $ | 26,454  |         |      |  | 74,663 |        |   |  | 89,695 |      
|Expense                             |                     |   | 60,641  |         |      |  | 76,259 |        |   |  | 84,052 |      
|Loss on sale of assets              |                     |   | 2,927   |         |      |  |       |        |   |  |       |      
|Estimated
loss on disposal          |                     |   | 13,500  |         |      |  |       |        |   |  |       |      
|                                    |                     |   |         |         |      |  |        |        |   |  |        |      
|Earnings (loss) before income taxes |                     |   | (50,614 | )       |      |  | (1,596 | )      |   |  | 5,643  |      
|Income tax benefit (expense)        |                     |   | 4,352   |         |      |  | 526    |        |   |  | (821   | )    
|                                    |                     |   |         |         |      |  |        |        |   |  |        |      
|                                    | Net earnings (loss) |   | $       | (46,262 | )    |  |        | (1,070 | ) |  |        | 4,822 | 
|                                    |                     |   |         |         |      |  |        |        |   |  |        |      



| |  | The table below presents the components of the balance sheet accounts
classified as current assets and liabilities related to assets held for sale
as of December 31, 2003 and 2002 (in thousands):
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   |                            |   |        |        |      |  |        |        | 
|---------------------------------- | -------------------------- | - | ------ | ------ | ---- |  | ------ | ------ | 
|                                   |                            |   | 2003   |        | 2002
|                                   |                            |   |        |        |     
|Accounts receivable, net           |                            | $ | 9,646  |        |      |  | 30,245 |       
|Inventories                        |                            |   | 4,722  |        |      |  | 10,997 |       
|Investments                        |                            |   | 4,409  |        |      |  | 17,909 |       
|Property,
plant and equipment, net |                            |   | 16,743 |        |      |  | 14,951 |       
|Accrued pension assets             |                            |   | 3,245  |        |      |  | 2,740  |       
|Other assets                       |                            |   | 1,294  |        |      |  | 1,024  |       
|                                   |                            |   |        |        |      |  |        |       
|                                   | Total assets held for sale |   | $      | 40,059 |      |  |        | 77,866 | 
|                                   |                            |   |        |        |      |  |        |       
|Accounts payable                   |                            | $ | 10,984 |        |      |  | 14,712 |       

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|                            |                                                   |  |       |        |  |      |       |        |  | 
|--------------------------- | ------------------------------------------------- |  | ----- | ------ |  | ---- | ----- | ------ |  | 
|                            |                                                   |  |       | 2003   |  | 2002
|                            |                                                   |  |       |        |  |     
|Long term debt              |                                                   |  | 2,573 |        |  |      | 2,146 |       
|Post retirement obligations |                                                   |  | 3,709 |        |  |      | 2,767 |       
|Other current liabilities   |                                                   |  | 499   |        |  |      | 641   |       
|                            |                                                   |  |       |        |  |      |       |       
|                            | Total liabilities related to assets held for sale |  | $     | 17,765 |  |      |       | 20,266 | 
|                            |                                                   |  |       |        |  |      |       |       

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(3)  ACQUISITIONS

The Companys acquisitions have been 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.

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 through December 31, 2003.

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 stock.
The maximum total contingent consideration payable under the purchase agreement
is $7 million if these sales reach $20 million and $25 million for the 12-month
measurement periods ending in 2003 and 2004, respectively. In 2002, a cash
payment of approximately $300,000 was paid due to the acquired product line
achieving sales targets in its first year, which increased goodwill to $3.5
million.

In November 2000, the Company acquired (through its subsidiary EMS Technologies
Canada,

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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.

The final cash payment of approximately $400,000, which was contingent upon the
DSSI principals remaining employed with the Company, was paid in December 2002.
Generally accepted accounting principles required that the contingent payment
be accounted for as compensation expense and not as part of the asset purchase
price.

The Company made its final cash payment of $3.5 million in 2001 relating to the
deferred portion of the purchase price, for its acquisition of the Space
Systems and Products Division of Spar Aerospace Limited and Spar Holdings, Inc.

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(4)  TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable at December 31, 2003 and 2002 included the following
(in thousands):

|                                            |                                |   |        |        |      |  |        |        | 
|------------------------------------------- | ------------------------------ | - | ------ | ------ | ---- |  | ------ | ------ | 
|                                            |                                |   | 2003   |        | 2002
|                                            |                                |   |        |        |     
|Amounts billed                              |                                | $ | 58,146 |        |      |  | 51,738 |       
|Unbilled revenues under long-term contracts |                                |   | 18,610 |        |      |  | 23,328 |       
|Customer advanced payments                  |                                |   | (3,788 | )      |      |  | (2,376 | )     
|Allowance for doubtful accounts             |                                |   | (1,537 | )      |      |  | (1,107 | )     
|                                            |                                |   |        |        |      |  |        |       
|                                            | Trade accounts receivable, net |   | $      | 71,431 |      |  |        | 71,583 | 
|                                            |                                |   |        |        |      |  |        |       

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(5) INVENTORIES Inventories at December 31, 2003 and 2002 included the following (in
thousands): 2003
    
    2002Parts and materials
    
    $
    22,139
    
    
    
    20,131Work in process
    
    
    5,306
    
    
    
    4,344Finished goods
    
    
    6,064
    
    
    
    5,531Inventories
    
    $
    33,509
    
    
    
    30,006
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(6) GOODWILL & OTHER INTANGIBLES Goodwill: In July 2001, the Financial Accounting Standards Board (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 are no longer amortized but instead 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 $13.5 million of
unamortized goodwill that was subject to the transition provisions of SFAS No.
142. At June 30, 2002, the Company 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 is no longer subject to amortization. Following is a summary of the Companys net earnings and net earnings per share
for the year ended December 31, 2001, on a pro forma basis
without goodwill amortization (in thousands,
except per share data): 2001Net earnings
    
    $
    4,516Add goodwill amortization
    
    
    650Adjusted net earnings
    
    $
    5,166Net earnings per share:Basic:Net earnings per share
    
    $
    0.48Add goodwill amortization
    
    
    0.07Adjusted net earnings per share
    
    $
    0.55Net earnings per share:Diluted:Net earnings per share
    
    $
    0.47Add goodwill amortization
    
    
    0.07Adjusted net earnings per share
    
    $
    0.54
 Other Intangibles: In April 2002, the Company acquired Ottercom Ltd., and recorded an intangible
asset of $3.1 million on the balance sheet. As of December 31, 2003 the net
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was $2.7 million based on the year-end foreign currency exchange rate.  This intangible will be amortized over an estimated useful life of 6
years. Amortization expense relating to this intangible asset was $500,000 in 2003, and $375,000 in
2002 with amortization expense of $634,000 expected for
each of the next four years, and $157,000 thereafter. In November 2000, the Company acquired DSSI, and recorded an intangible asset
of $900,000 on the balance sheet. As of December 31, 2003 the net amount of
this intangible asset was $428,000 based on the year-end foreign currency
exchange rate. This intangible is amortized over an estimated useful life of 5
years. Amortization expense relating to this intangible asset was $290,000 in 2003, $172,000 in 2002, and $196,000 in
2001 with amortization expense of
approximately $223,000 expected in 2004 and $205,000 expected in 2005. 66 of 86




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(7) LONG-TERM DEBT The following is a summary of long-term debt at December 31, 2003 and 2002 (in
thousands): 2003
    
    2002Revolving credit loan with a U.S. bank, secured by the accounts
receivable and inventory of the Company, maturing
in August 2004,
interest payable quarterly at a variable interest rate (4.09% at the
end of 2003 and 4.04% at the end of 2002)
    
    $
    16,100
    
    
    
    20,000Promissory note, secured by a first mortgage on the Companys
headquarters facility, maturing in 2016, principal and interest
payable in equal monthly installments of $103,975 with a fixed
interest rate of 8.0%
    
    
    9,878
    
    
    
    10,351Revolving credit loan with a bank, secured by the assets of
EMS Technologies Canada, Ltd., no specific maturity, but
subject to annual review, interest payable monthly at a
variable interest rate (6.5% at the end of 2003 and 5.75% at the
end of 2002)
    
    
    16,522
    
    
    
    9,853Term loan with an insurance company, secured by a U.S.
building, maturing in February 2014, principal and interest
payable in equal monthly installments of $67,832 with a fixed
interest rate of 7.1%
    
    
    5,848
    
    
    
    6,234Term installment loan with a bank in Canada, maturing in
December 2005, principal and interest payable quarterly
at a variable interest rate (6.5% at the end of 2003 and
6.0% at the end of 2002)
    
    
    2,437
    
    
    
    2,659Capital 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%
    
    
    1,197
    
    
    
    1,861Revolving credit loan with a bank in the United Kingdom,
maturing in April 2004, interest payable monthly at a variable
rate (4.75% at the end of 2003 and 6.0% at the end of 2002)
    
    
    1,611
    
    
    
    1,584Total long-term debt
    
    
    53,593
    
    
    
    52,542Less current installments of long-term debt
    
    
    38,056
    
    
    
    33,783Long-term debt, excluding current installments
    
    $
    15,537
    
    
    
    18,759
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In October 2003, the terms of the U.S. revolving credit agreement were
extended from November 2003 to August 2004. The bank also obtained a security
interest in the inventory and accounts receivable of the Company. As of
December 31, 2003, $10 million borrowed under the U.S. revolving credit
agreement is due August 2004, with no principal payments required until
maturity. The remaining $6.1 million of outstanding borrowings are due on
demand. 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  .50% 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, 2003 was approximately $112 million, as
compared with the reported consolidated net worth of approximately $120
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, 2003, the Company
was in compliance with these covenants. In February 2003, the Company amended its credit facility with a bank in
Canada. As a result, the total Canadian credit facility was increased to $35.9
million, with $18.6 million available under a revolving credit agreement
payable on demand, $3.8 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 has no
specific maturity date, but is subject to review annually. The term loan
expires in December 2005. The Company has agreed to apply the proceeds from the
planned sale of its Space & Technology/Montreal division to revolving debt
under this agreement. Furthermore, upon determination of whether or
not a sale of the Space &
Technology/Montreal division will occur, the Company expects to enter into
negotiations to refinance or restructure its U.S. and
Canadian credit agreements. 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, 2003 was approximately $31.9
million, as compared with the reported net worth of approximately $7.3 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. Subsequent to December 31, 2003, the
Company further amended
its Canadian credit agreement, including pricing, as a condition in
obtaining the quarterly  waiver. At
current borrowing levels, the annual cost of this facility would increase by
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Following is a summary of the combined principal maturities of all long-term
debt (in thousands):

2004
    
    
    
    
    
    $
    38,0562005
    
    
    
    
    
    
    1,2852006
    
    
    
    
    
    
    1,3532007
    
    
    
    
    
    
    1,1082008
    
    
    
    
    
    
    1,196Thereafter
    
    
    
    
    
    
    10,595Total principal maturities
    
    $
    53,593


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):

2004
    
    $
    5652005
    
    
    4082006
    
    
    3312007
    
    
    2008
    
    
    Total capital lease payments
    
    
    1,304Less: Interest payments
    
    
    (107
    )Capitalized lease obligation
    
    $
    1,197


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(8) 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, 2003, options for a total of approximately 1,280,000 shares of stock
were exercisable, and there were approximately 273,000 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, 2003, 2002 and 2001 (shares in thousands): Weighted AverageExercise PriceShares
    
    Per ShareOptions outstanding at December 31, 2000
    
    
    1,689
    
    
    $
    15.64Granted
    
    
    393
    
    
    
    15.75Canceled or expired
    
    
    (186
    )
    
    
    17.64Exercised
    
    
    (95
    )
    
    
    10.83Options outstanding at December 31, 2001
    
    
    1,801
    
    
    
    15.71Granted
    
    
    410
    
    
    
    20.88Canceled or expired
    
    
    (209
    )
    
    
    17.77Exercised
    
    
    (214
    )
    
    
    11.28Options outstanding at December 31, 2002
    
    
    1,788
    
    
    
    17.19Granted
    
    
    318
    
    
    
    14.24Canceled or expired
    
    
    (356
    )
    
    
    15.49Exercised
    
    
    (12
    )
    
    
    18.46Options outstanding at December 31, 2003
    
    
    1,738
    
    
    $
    16.85
 The weighted average fair value of options granted in 2003, 2002 and 2001 was
$10.58, $13.91 and $8.03, 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 2003, 2.8% in 2002 and 3.7% in 2001, terms from four to eight
years, expected volatility of 68% in 2003, 68% in 2002 and 64% in 2001, and no
expected dividend yield. 70 of 86




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Following is a summary of options outstanding at December 31, 2003 (shares in
thousands): Outstanding
    
    
    
    
    
    ExercisableWeighted
    
    Weighted Average
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Average Price
    
    Remaining Years In
    
    
    
    
    
    Average PriceExercise Prices
    
    Shares
    
    Per Share
    
    Contractual Life
    
    Shares
    
    Per Share$ 11.63 - 13.90
    
    
    393
    
    
    $
    12.38
    
    
    
    4.2
    
    
    
    283
    
    
    $
    12.0814.00 - 14.94
    
    
    231
    
    
    
    14.16
    
    
    
    6.2
    
    
    
    84
    
    
    
    14.0415.10 - 15.81
    
    
    303
    
    
    
    15.45
    
    
    
    2.2
    
    
    
    272
    
    
    
    15.4216.08 - 17.88
    
    
    232
    
    
    
    16.93
    
    
    
    3.0
    
    
    
    216
    
    
    
    16.9618.00 - 19.90
    
    
    258
    
    
    
    18.96
    
    
    
    3.4
    
    
    
    199
    
    
    
    18.9720.19 - 27.63
    
    
    321
    
    
    
    23.84
    
    
    
    4.2
    
    
    
    226
    
    
    
    23.85$  11.63 - 27.63
    
    
    1,738
    
    
    $
    16.85
    
    
    
    3.8
    
    
    
    1,280
    
    
    $
    16.89
 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, 2003, 2002 and 2001, summarized as follows (shares in
thousands): 2003
    
    2002
    
    2001Dilutive stock options, included in earnings
per share calculations:Shares
    
    
    1,367
    
    
    
    437
    
    
    
    1,159Average price per share
    
    $
    15.10
    
    
    
    12.61
    
    
    
    13.59Anti-dilutive stock options, excluded from
earnings per share calculations:Shares
    
    
    371
    
    
    
    1,351
    
    
    
    642Average price per share
    
    $
    23.31
    
    
    
    18.67
    
    
    
    19.53
 Following is a reconciliation of the denominator for basic and diluted earnings
per share calculations for the years ended December 31, 2003, 2002 and 2001
(shares in thousands): 2003
    
    2002
    
    2001Basic earnings per share denominator
    
    
    10,702
    
    
    
    10,561
    
    
    
    9,464Common equivalent shares from dilutive stock options
    
    
    83
    
    
    
    170
    
    
    
    99Diluted earnings per share denominator
    
    
    10,785
    
    
    
    10,731
    
    
    
    9,563
 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
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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 2003,
2002 and 2001 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. 72 of 86




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(9) INCOME TAXES Total income tax (expense) benefit for continuing operations provided for in
the Companys consolidated financial statements consists of the following for
the years ended December 31, 2003, 2002 and 2001 (in thousands): 2003
    
    2002
    
    2001Consolidated income tax (expense) benefit
    
    $
    (4,237
    )
    
    
    (4,699
    )
    
    
    1,641Income tax benefit resulting from exercise of stock
options credited to stockholders equity
    
    
    383
    
    
    
    651
    
    
    
    160Total
    
    $
    (3,854
    )
    
    
    (4,048
    )
    
    
    1,801
 The components of income tax (expense) benefit for continuing operations
for the years ended December 31, 2003, 2002 and 2001 were (in thousands): 2003
    
    2002
    
    2001Current:Federal
    
    $
    (3,005
    )
    
    
    (2,197
    )
    
    
    622State
    
    
    (465
    )
    
    
    (363
    )
    
    
    58Foreign
    
    
    (1,848
    )
    
    
    (397
    )
    
    
    (1,117
    )Total
    
    
    (5,318
    )
    
    
    (2,957
    )
    
    
    (437
    )Deferred:Federal
    
    
    532
    
    
    
    (1,554
    )
    
    
    1,256State
    
    
    90
    
    
    
    (127
    )
    
    
    237Foreign
    
    
    459
    
    
    
    (61
    )
    
    
    585Total
    
    
    1,081
    
    
    
    (1,742
    )
    
    
    2,078Total income tax (expense) benefit
    
    $
    (4,237
    )
    
    
    (4,699
    )
    
    
    1,641
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Income tax (expense) benefit for continuing operations differed as follows
from the amounts computed by applying the U.S. federal income tax rate of 34%
to earnings (loss) from continuing operations before income taxes for the years ended December 31, 2003, 2002 and
2001 (in thousands): 2003
    
    2002
    
    2001Computed expected income tax (expense) benefit
    
    $
    (4,456
    )
    
    
    (4,881
    )
    
    
    543Tax credits from research activities
    
    
    101
    
    
    
    44
    
    
    
    164State income taxes, net of federal income tax effect
    
    
    (248
    )
    
    
    (323
    )
    
    
    195Difference in effective foreign tax rates
    
    
    415
    
    
    
    900
    
    
    
    617Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    (214
    )Other
    
    
    (49
    )
    
    
    (439
    )
    
    
    336Income tax (expense) benefit
    
    $
    (4,237
    )
    
    
    (4,699
    )
    
    
    1,641
 In
the years 2003, 2002 and 2001, income tax (expense) benefit for continuing
operations is net of tax benefits, totaling $80,000, $355,000 and $408,000,
respectively, recognized from foreign net operating loss carry forwards. The Company expects to retain all deferred tax assets and liabilities after
disposal of assets held for sale. The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2003 and 2002 are presented below (in thousands): 2003
    
    2002Deferred tax assets:Accounts receivable
    
    $
    711
    
    
    
    172Inventories
    
    
    1,161
    
    
    
    540Accrued compensation costs
    
    
    710
    
    
    
    675Accrued warranty costs
    
    
    619
    
    
    
    454Accrued post-retirement benefits
    
    
    1,188
    
    
    
    872Foreign research expense and tax credit carry forward
    
    
    33,302
    
    
    
    16,552Foreign net operating loss carry forward
    
    
    2,358
    
    
    
    2,086Gain on sales to foreign subsidiaries
    
    
    247
    
    
    
    306Credit for corporate minimum tax
    
    
    306
    
    
    
    347Other
    
    
    189
    
    
    
    57Total gross deferred tax assets
    
    
    40,791
    
    
    
    22,061Valuation allowance
    
    
    (26,483
    )
    
    
    (10,898
    )Net deferred tax assets
    
    
    14,308
    
    
    
    11,163
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Deferred tax liabilities:Property, plant and equipment
    
    
    8,099
    
    
    
    6,572Net gain from foreign transactions and remeasurement
    
    
    283
    
    
    
    283Pension asset
    
    
    1,039
    
    
    
    835Total gross deferred tax liabilities
    
    
    9,421
    
    
    
    7,690Net deferred tax assets
    
    $
    4,887
    
    
    
    3,473
 The U.S. continuing operations are consolidated for federal income tax
purposes. These U.S. continuing operations had earnings before income taxes of
$8,162,000 in 2003, $10,467,000 in 2002 and a combined loss before income taxes
of $5,035,000 in 2001. The continuing combined foreign operations reported
earnings before income taxes of $4,945,000, $3,889,000, and $3,439,000 in 2003,
2002 and 2001, respectively. The Companys net deferred tax assets at December 31, 2003 include $2,358,000
related to a cumulative $7,762,000 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. 75 of 86




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(10) 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 employees) 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 $2.6 million for 2003, $2.5
million for 2002 and $2.0 million for 2001. The Company sponsors qualified retirement savings plans in the U.S., Canada and
the United Kingdom, in which the Company matches a portion of each eligible
employees contributions. The Companys matching contributions to these plans
were $1.5 million in 2003, $1.3 million in 2002 and $839,000 in 2001. 76 of 86




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(11) FAIR VALUE OF FINANCIAL INSTRUMENTS The following summarizes certain information regarding the fair value of the
Companys financial instruments at December 31, 2003 and 2002: 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, 2003 and 2002 of $5.8
million and $6.2 million, respectively. The other mortgage has an 8.0% rate and
a carrying amount at December 31, 2003 and 2002 of $9.9 million and $10.4
million, respectively. The carrying amounts of the mortgages approximate fair
value, based on current market rates at which the Company could borrow funds
with similar remaining maturities. 77 of 86




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(12) BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION The Company is organized into five reportable segments: Space & Technology,
LXE, EMS Wireless, SATCOM and SatNet. 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 network (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. The SatNet segment manufactures ground segment equipment for the satellite
broadband communications market. The manufacturing cycle for a hub is generally
several weeks and terminals are manufactured on a shorter cycle. Revenues are
recognized upon shipment of hardware. Hardware is marketed to operators of
high-speed, two-way, multimedia access networks. 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 312003
    
    2002
    
    2001Net sales:Space & Technology
    
    $
    49,381
    
    
    
    54,210
    
    
    
    37,658Less sales to discontinued operations
    
    
    (1,819
    )
    
    
    (1,431
    )
    
    
    (2,495
    )Space & Technology external sales
    
    
    47,562
    
    
    
    52,779
    
    
    
    35,163
 78 of 86




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Years ended December 312003
    
    2002
    
    2001LXE
    
    
    101,075
    
    
    
    88,229
    
    
    
    85,914EMS Wireless
    
    
    51,381
    
    
    
    48,001
    
    
    
    45,122SATCOM
    
    
    44,736
    
    
    
    32,724
    
    
    
    21,600SatNet
    
    
    12,572
    
    
    
    14,153
    
    
    
    12,568Other
    
    
    (1,113
    )
    
    
    (115
    )
    
    
    1,024Total
    
    $
    256,213
    
    
    
    235,771
    
    
    
    201,391Operating income (loss):Space & Technology
    
    $
    3,915
    
    
    
    5,010
    
    
    
    (4,992
    )Contract reserve adjustment
    
    
    
    
    
    
    3,500
    
    
    
    (3,500
    )Subtotal
    
    
    3,915
    
    
    
    8,510
    
    
    
    (8,492
    )LXE
    
    
    6,966
    
    
    
    4,797
    
    
    
    5,398EMS Wireless
    
    
    2,529
    
    
    
    2,432
    
    
    
    2,188SATCOM
    
    
    5,026
    
    
    
    3,962
    
    
    
    2,965SatNet
    
    
    (2,100
    )
    
    
    (1,824
    )
    
    
    61Other
    
    
    (1,054
    )
    
    
    (256
    )
    
    
    (762
    )Corporate
    
    
    58
    
    
    
    (1,268
    )
    
    
    (17
    )Total
    
    $
    15,340
    
    
    
    16,353
    
    
    
    1,341Non-operating income (expense), net of
foreign exchange gain (loss)Space & Technology
    
    $
    1
    
    
    
    
    
    
    
    2LXE
    
    
    270
    
    
    
    246
    
    
    
    197EMS Wireless
    
    
    459
    
    
    
    311
    
    
    
    (328
    )SATCOM
    
    
    (627
    )
    
    
    12
    
    
    
    454SatNet
    
    
    (301
    )
    
    
    19
    
    
    
    18Other
    
    
    409
    
    
    
    
    
    
    
    Corporate
    
    
    (297
    )
    
    
    (256
    )
    
    
    208Total
    
    $
    (86
    )
    
    
    332
    
    
    
    551Interest expense:Space & Technology
    
    $
    (417
    )
    
    
    (688
    )
    
    
    (963
    )LXE
    
    
    (430
    )
    
    
    (428
    )
    
    
    (469
    )EMS Wireless
    
    
    (389
    )
    
    
    (262
    )
    
    
    (353
    )SATCOM
    
    
    (87
    )
    
    
    (64
    )
    
    
    (304
    )SatNet
    
    
    (224
    )
    
    
    (83
    )
    
    
    (81
    )Corporate
    
    
    (600
    )
    
    
    (804
    )
    
    
    (1,318
    )Total
    
    $
    (2,147
    )
    
    
    (2,329
    )
    
    
    (3,488
    )Income tax (expense) benefit:Space & Technology
    
    $
    (1,331
    )
    
    
    (1,639
    )
    
    
    2,284
 79 of 86




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Years ended December 312003
    
    2002
    
    2001Contract reserve adjustment
    
    
    
    
    
    
    (1,330
    )
    
    
    1,330Subtotal
    
    
    (1,331
    )
    
    
    (2,969
    )
    
    
    3,614LXE
    
    
    (2,587
    )
    
    
    (1,778
    )
    
    
    (1,938
    )EMS Wireless
    
    
    (987
    )
    
    
    (943
    )
    
    
    (574
    )SATCOM
    
    
    (547
    )
    
    
    (505
    )
    
    
    (389
    )SatNet
    
    
    394
    
    
    
    3
    
    
    
    Other
    
    
    244
    
    
    
    97
    
    
    
    290Corporate
    
    
    577
    
    
    
    1,396
    
    
    
    638Total
    
    $
    (4,237
    )
    
    
    (4,699
    )
    
    
    1,641Net earnings (loss):Space & Technology
    
    $
    2,168
    
    
    
    4,853
    
    
    
    (5,839
    )LXE
    
    
    4,219
    
    
    
    2,837
    
    
    
    3,188EMS Wireless
    
    
    1,612
    
    
    
    1,538
    
    
    
    933SATCOM
    
    
    3,765
    
    
    
    3,405
    
    
    
    2,726SatNet
    
    
    (2,231
    )
    
    
    (1,885
    )
    
    
    (2
    )Other
    
    
    (401
    )
    
    
    (159
    )
    
    
    (472
    )Corporate, including change in accounting
principle
    
    
    (262
    )
    
    
    (932
    )
    
    
    (840
    )Earnings (loss) from continuing operations
    
    
    8,870
    
    
    
    9,657
    
    
    
    (306
    )Discontinued operations, net
    
    
    (46,262
    )
    
    
    (1,070
    )
    
    
    4,822Total
    
    $
    (37,392
    )
    
    
    8,587
    
    
    
    4,516Capital expenditures:Space & Technology
    
    $
    1,965
    
    
    
    3,218
    
    
    
    2,020LXE
    
    
    1,449
    
    
    
    1,256
    
    
    
    1,598EMS Wireless
    
    
    890
    
    
    
    534
    
    
    
    1,592SATCOM
    
    
    1,788
    
    
    
    2,076
    
    
    
    831SatNet
    
    
    1,127
    
    
    
    1,252
    
    
    
    1,350Corporate
    
    
    865
    
    
    
    221
    
    
    
    390Total
    
    $
    8,084
    
    
    
    8,557
    
    
    
    7,781Depreciation and amortization:Space & Technology
    
    $
    2,630
    
    
    
    2,713
    
    
    
    2,700LXE
    
    
    2,551
    
    
    
    2,630
    
    
    
    4,003
 80 of 86




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Years ended December 312003
    
    2002
    
    2001EMS Wireless
    
    
    930
    
    
    
    837
    
    
    
    941SATCOM
    
    
    1,697
    
    
    
    1,245
    
    
    
    695SatNet
    
    
    604
    
    
    
    574
    
    
    
    255Other
    
    
    15
    
    
    
    
    
    
    
    Corporate
    
    
    265
    
    
    
    209
    
    
    
    335Total
    
    $
    8,692
    
    
    
    8,208
    
    
    
    8,929
 As of December 312003
    
    2002Assets:Space & Technology
    
    $
    40,157
    
    
    
    48,304LXE
    
    
    66,081
    
    
    
    67,152EMS Wireless
    
    
    25,353
    
    
    
    21,277SATCOM
    
    
    26,543
    
    
    
    23,049SatNet
    
    
    14,827
    
    
    
    9,615Other
    
    
    1,164
    
    
    
    2,631Assets held for sale
    
    
    40,059
    
    
    
    77,866Corporate
    
    
    14,365
    
    
    
    6,409Total
    
    $
    228,549
    
    
    
    256,303Goodwill:LXE
    
    $
    9,982
    
    
    
    9,982EMS Wireless
    
    
    3,544
    
    
    
    3,544Total
    
    $
    13,526
    
    
    
    13,526
 81 of 86




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Following is a summary of enterprise-wide information (in thousands): Years ended December 312003
    
    2002
    
    2001Net sales to customers in the following countries:United States
    
    $
    162,275
    
    
    
    165,400
    
    
    
    128,614United Kingdom
    
    
    16,905
    
    
    
    11,245
    
    
    
    9,493Canada
    
    
    10,215
    
    
    
    8,181
    
    
    
    11,889France
    
    
    12,563
    
    
    
    6,330
    
    
    
    11,385Other foreign countries
    
    
    54,255
    
    
    
    44,615
    
    
    
    40,010Total
    
    $
    256,213
    
    
    
    235,771
    
    
    
    201,391
 As of December 312003
    
    2002Long-lived assets located in the following countries:United States
    
    $
    48,996
    
    
    
    45,905Canada
    
    
    15,863
    
    
    
    14,702Other foreign countries
    
    
    2,303
    
    
    
    2,118Total
    
    $
    67,162
    
    
    
    62,725
 No customer accounted for more than 10% of consolidated net sales in 2003, 2002
or 2001. 82 of 86




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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 operations 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, 2003, the Companys net value of all derivatives was an asset
of $108,000. The derivative activity as reported in the Companys financial
statements for the years ended December 31 was (in thousands): 2003
    
    2002
    
    2001Net liability for derivatives at January 1
    
    $
    (248
    )
    
    
    (18
    )
    
    
    (461
    )Changes in statements of operations:Sales:Gain (loss) in value of embedded derivatives
    
    
    2
    
    
    
    19
    
    
    
    (11
    )Foreign exchange gain (loss):Gain in value of ineffective portion of derivative
instruments that qualify as hedging instruments
    
    
    
    
    
    
    
    
    
    
    3Gain (loss) in value of derivative instruments that
do not qualify as hedging instruments
    
    
    787
    
    
    
    (496
    )
    
    
    (8
    )Matured foreign exchange contracts
    
    
    (433
    )
    
    
    247
    
    
    
    1Net statements of operations gain (loss)
from changes in value of derivative
instruments
    
    
    356
    
    
    
    (230
    )
    
    
    (15
    )Other comprehensive income:Matured foreign exchange contracts
    
    
    
    
    
    
    
    
    
    
    374Gain in value of highly effective hedging instruments
    
    
    
    
    
    
    
    
    
    
    84Net other comprehensive income
    
    
    
    
    
    
    
    
    
    
    458Net asset (liability) for derivatives at December 31
    
    $
    108
    
    
    
    (248
    )
    
    
    (18
    )
 The Company recognized no gains or losses 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, 2003 will expire by the end of
December 2004. The table below summarizes, by major currency, the notional amounts of foreign
currency forward contracts in U.S. dollars at December 31, 2003. 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
    
    SellCanadian dollar
    
    $
    6,000
    
    
    
    Euro
    
    
    
    
    
    
    1,603Total
    
    $
    6,000
    
    
    
    1,603
 The fair market value of these foreign exchange contracts was a net liability
of $98,000 at December 31, 2003. 83 of 86




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(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, and expected 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 the Company decided to seek a settlement of the contract
with the customer, including possible use of the contracts provisions for
dispute resolution, and accrued the reserve. 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. 84 of 86




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(15) 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 related to the Companys continuing operations
are $3,305,000 in 2004, $3,137,000 in 2005, $2,679,000 in 2006, $2,137,000 in
2007, $1,226,000 in 2008 and $350,000 thereafter. Minimum annual lease payments
under such leases related to the Companys discontinued operations are $675,000
in 2004, $399,000 in 2005, $333,000 in 2006, $59,000 in 2007, $4,000 in 2008
and $0 thereafter. The Company also has short-term leases for regional sales offices, equipment
and automobiles. Total rent expense under all operating leases was
approximately $5,134,000, $5,074,000 and $4,622,000 in 2003, 2002 and 2001,
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 through its SatNet division is required to pay royalties
based on total sales of 60,000 broadband terminals. The royalty fee
is calculated at a fixed amount based on units sold in the year. The
Company periodically enters into agreements with customers and
suppliers that include limited intellectual property indemnification
obligations that are customary in the industry. These guarantees
generally require the Company to compensate the other party for
certain damages and costs incurred as a result of third-party
intellectual property claims arising from these transactions. The
nature of the intellectual property indemnification obligations
prevent the Company from making a reasonable estimate of the maximum
potential amount for which it could be obligated. During 2003, two large contracts in
discontinued operations that were
accounted for under percentage-completion accounting experienced
technical and supplier difficulties, resulting in increases to the
estimated cost at completion totaling over $8 million. The
Company has provided reserves for identified risks that could cause
cost increases in the future. These contracts are technically
challenging, and there is a risk that further unforeseen difficulties
could cause increases to the cost at completion that exceed the
Companys provisions, resulting in further losses associated
with these contracts. 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. 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 years ended December 31 (in
thousands): Balance at December 31, 2001
    
    $
    1,042Accruals for warranties issued during the period
    
    
    1,514Settlements made during the period
    
    
    (1,190
    )Balance at December 31, 2002
    
    $
    1,366Accruals for warranties issued during the period
    
    
    1,178Settlements made during the period
    
    
    (567
    )Balance at December 31, 2003
    
    $
    1,977
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(16) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Following is a summary of interim financial information for the years ended
December 31, 2003 and 2002 (in thousands, except net earnings per share): 2003 Quarters endedMarch 29
    
    June 28
    
    September 27
    
    December 31Net sales
    
    $
    55,749
    
    
    
    66,059
    
    
    
    61,534
    
    
    
    72,871Operating income
    
    
    3,078
    
    
    
    4,778
    
    
    
    3,384
    
    
    
    4,100Earnings from continuing
operations
    
    
    1,686
    
    
    
    2,488
    
    
    
    1,932
    
    
    
    2,764Loss from discontinued operations
    
    
    (1,664
    )
    
    
    (16,558
    )
    
    
    (22,523
    )
    
    
    (5,517
    )Net earnings
(loss)
    
    
    22
    
    
    
    (14,070
    )
    
    
    (20,591
    )
    
    
    (2,753
    )Net earnings
(loss) per share:Basic:Continuing operations
    
    
    0.16
    
    
    
    0.23
    
    
    
    0.18
    
    
    
    0.26Discontinued operations
    
    
    (0.16
    )
    
    
    (1.55
    )
    
    
    (2.11
    )
    
    
    (0.52
    )Net earnings
(loss)
    
    
    
    
    
    
    (1.32
    )
    
    
    (1.93
    )
    
    
    (0.26
    )Diluted:Continuing operations
    
    
    0.16
    
    
    
    0.23
    
    
    
    0.18
    
    
    
    0.25Discontinued operations
    
    
    (0.16
    )
    
    
    (1.55
    )
    
    
    (2.09
    )
    
    
    (0.50
    )Net earnings
(loss)
    
    
    
    
    
    
    (1.32
    )
    
    
    (1.91
    )
    
    
    (0.25
    )
 2002 Quarters endedMarch 30
    
    June 29
    
    September 28
    
    December 31Net sales
    
    $
    53,156
    
    
    
    61,326
    
    
    
    56,521
    
    
    
    64,768Operating income
    
    
    2,452
    
    
    
    3,489
    
    
    
    3,506
    
    
    
    6,906Earnings from continuing
operations
    
    
    674
    
    
    
    2,289
    
    
    
    2,722
    
    
    
    3,972Loss from discontinued operations
    
    
    1,438
    
    
    
    202
    
    
    
    (756
    )
    
    
    (1,954
    )Net earnings
    
    
    2,112
    
    
    
    2,491
    
    
    
    1,966
    
    
    
    2,018Net earnings per share:Basic:Continuing operations
    
    
    0.06
    
    
    
    0.22
    
    
    
    0.26
    
    
    
    0.37Discontinued operations
    
    
    0.14
    
    
    
    0.02
    
    
    
    (0.08
    )
    
    
    (0.18
    )Net earnings
    
    
    0.20
    
    
    
    0.24
    
    
    
    0.18
    
    
    
    0.19Diluted:Continuing operations
    
    
    0.06
    
    
    
    0.21
    
    
    
    0.25
    
    
    
    0.37Discontinued operations
    
    
    0.14
    
    
    
    0.02
    
    
    
    (0.07
    )
    
    
    (0.18
    )Net earnings
    
    
    0.20
    
    
    
    0.23
    
    
    
    0.18
    
    
    
    0.19
 
    
    Quarterly information has been restated to reflect the impact
of moving our Space & Technology/Montreal space operations and our healthcare
product line to discontinued operations.
    
    Operating income in the fourth quarter of 2002 included a
reversal of the $3.5 million contract reserve adjustment for
a long-term supply contract to the commercial airline
industry.
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