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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, 2005
 Commission File #0-6072
 EMS TECHNOLOGIES, INC.
 
  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)
 
 o þ
 o þ
 þ o
 o þ
  o þ o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE
  AVAILABLE INFORMATION
 www.ems-t.com




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TABLE OF CONTENTS  Part I.ITEM 1. Business.ITEM 1A. Risk FactorsITEM 1B. Unresolved Staff CommentsITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. Submission of Matters to a Vote of Security HoldersPART IIITEM 5. Market for Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Equity SecuritiesITEM 6. Selected Financial DataITEM 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 7A. Quantitative and Qualitative Disclosures about Market RiskITEM 8. Financial Statements and Supplementary DataITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureITEM 9A. Controls and ProceduresITEM 9B. Other Information.PART IIIITEM 10. Directors and Executive Officers of the RegistrantITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
MattersITEM 13. Certain Relationships and Related TransactionsITEM 14. Principal Accountant Fees and ServicesPART IVITEM 15. Exhibits, Financial Statement SchedulesSIGNATURESEX-4.8 AMENDMENT N0.2 TO U.S. REVOLVING CREDIT AGREEMENTEX-4.18 AMENDMENT NO.2 TO CANADIAN REVOLVING CREDIT AGREEMENTEX-4.19 AMENDMENT NO.3 TO CANADIAN REVOLVING CREDIT AGREEMENTEX-4.20 CONSENT AND AMENDMENT AGREEMENT / CANADIAN REVOLVING CREDIT AGREEMENTEX-10.1 EMPLOYMENT LETTER / ALFRED G. HANSENEX-10.10 FORM OF STOCK OPTION AGREEMENT / EXECUTIVE OFFICERSEX-10.11 FORM OF STOCK OPTION AGREEMENT / OUTSIDE DIRECTORS (NEW)EX-10.12 FORM OF STOCK OPTION AGREEMENT / OUTSIDE DIRECTORS (CONTINUING)EX-10.15 EMS TECHNOLOGIES 2000 STOCK INCENTIVE PLANEX-10.16 FORM OF STOCK OPTION AGREEMENTEX-10.17 FORM OF STOCK OPTION AGREEMENTEX-10.22 COMPENSATION ARRANGEMENTS WITH EXECUTIVE OFFICERSEX-23.1 CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRMEX-23.2 CONSENT OF INDEPENDENT AUDITORSEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO    Table of Contents  FORWARD-LOOKING STATEMENTS
  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, and5.
    
    statements about the Companys plans for product developments or market initiatives.
  
 Part I.
 
 ITEM 1. Business
 Overview
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Competitive Strengths
 Technological Leadership
  Commitment to Research and Development
  Technological Synergies
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Strong Customer Relationships
  Diverse Global Customer Base
  Strong Manufacturing Capabilities
  Our Markets and Products
   Business Unit
    
    Primary Operations
    
    Percentage of Net Sales2005
    
    2004
    
    2003Defense & Space Systems
    
    Highly engineered
hardware for
satellites and
defense electronics
applications
(primarily defense)
    
    
    16.6
    %
    
    
    20.2
    %
    
    
    19.5
    %LXE
    
    Rugged mobile
computers and
related equipment
for wireless data
collection
(predominantly
commercial)
    
    
    39.7
    
    
    
    45.3
    
    
    
    41.4SATCOM
    
    Satellite
communications
antennas and
terminals for
aircraft and
ground-based
vehicles (majority
commercial)
    
    
    16.6
    
    
    
    16.1
    
    
    
    18.3EMS Wireless
    
    Base station
antennas and signal
repeaters for
PCS/cellular
systems
(commercial)
    
    
    27.1
    
    
    
    18.4
    
    
    
    21.1
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Defense & Space Systems
   Products
    
    Key Features/Benefits
    
    Selected Applications
    
    ProgramsSpace Solutions
    
    Microwave subsystems
capable of
high-frequency, low
noise, high-power
and fast switching,
facilitating
jam-resistant,
secure mobile
communications and
surveillance
    
    Direct broadcast television
(incl. HDTV)
Direct broadcast radio
Earth Observation/ Environmental
sensing
High-rate communications
    
    DirecTV
XMRadio, SIRIUS
NPOESS, SARLupe, COSMO,
other
AEHF, ANIK, Intelsat,
Skynet5, Inmarsat,
TSAT, otherAirborne and
Terrestrial
Solutions
    
    Antenna and
microwave subsystems
supporting satellite
communications,
radar, signal
intelligence,
electronic warfare
and line-of-sight
communications
    
    Airborne (Commercial)
Airborne (Military)
Naval
Terrestrial
Smart Weapons
    
    JetBlue, Frontier,
WestJet, Virgin Blue
Airlines
F/A-22, ALQ-211, F-16,
B2, CV-22, other
NMT, Phalanx
WIN-T, other
JCM, otherStandard Products &
Engineering
Services
    
    Ferrite components
controlling
microwave signals
Positioners to
precisely point
optical sensors and
microwave antennas
Services for the
maintenance,
operation, and
upgrade of precision
tracking systems
    
    Electronic Warfare
Direct broadcast television/radio
Earth observation satellites
Precision tracking
    
    B2, F-14
DirecTV, Astra,
XMRadio, SIRIUS
CloudSat, SARLupe, other
Trident II, NASA
Shuttle Return to
Flight, Sea Launch, LLC
 LXE
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Ò Ò
   Products
    
    Key Features/Benefits
    
    Selected Applications
    
    CustomersHand-Held Computers
    
    Small, lightweight
and rugged,
providing true
mobility
    
    Warehousing, Logistics
    
    Consumer product manufacturers, Third-party logistics
providers,
Retailers,
Container Port
OperatorsVehicle-Mounted
Computers
    
    Heavier-duty design
for use on
forklifts, cranes,
and other material
handling vehiclesWireless Networks
    
    Communications link
between mobile
computers and local
network, primarily
based on 802.11
standardHost connectivity
software; accessory
products;
maintenance
services
    
    Industry-standard
connectivity to
various host
computers; enhanced
system
functionality;
extended service on
either a contract or
pay-as-you-go basis
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SATCOM
      Products
    
    Key Features/Benefits
    
    Selected Applications
    
    CustomersAeronautical Antennas
    
    Mechanically-steered
antennas connected
to an aircrafts
navigational system,
steerable antenna
systems for live
television from
broadcast satellites
    
    High-end corporate
jets, private jets,
military
helicopters,
military transport
and surveillance
    
    Gulfstream,
Bombardier, Honeywell, DassaultAeronautical Terminals
    
    Provide aircraft
operators with
high-speed data
(broadband)
capability
    
    Corporate aircraft,
government and
military aircraft,
air transport
    
    Corporate aircraft
modification
centers, U.S.
Department of
Defense,
Northrup-Grumman,
L3, Boeing,
Rockwell-Collins,
Honeywell, Thales
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Products
    
    Key Features/Benefits
    
    Selected Applications
    
    CustomersInmarsat High-Speed
Data Terminals
    
    Worldwide access to
corporate networks
and the Internet
using the Inmarsat
satellite system
    
    Military transport,
Peacekeeping, Media
    
    U.S. Army, Canadian
Department of
National Defense,
CNNSatellite Packet Data
Terminals
    
    Two-way messaging
and location
information in North
America, Mexico and
Central America
    
    Transportation,
Public Safety,
Workforce
Automation, Oil and
Gas Remote
Monitoring and
Control
    
    Long-Haul Trucking
CompaniesEmergency Management
Products
    
    Hardware and
software features
for Search and
Rescue (SAR) systems
    
    Rescue and Mission
Control Centers
    
    Over 18 Governments
Worldwide
 EMS Wireless
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Products
    
    Key Features/Benefits
    
    Selected Applications
    
    CustomersDual Polarization Antenna
    
    Functionality of
three vertically
polarized antennas
in one device.
Compact
configuration, less
expensive investment
    
    PCS/Cellular towers
    
    PCS/Cellular CarriersRemotely Controlled
Electronic Downtilt Dual
Polarization Antennas
    
    Dual polarization
antennas with which
carriers can adjust
the shape and size
of cell site
coverage from the
base of the tower or
a central office
    
    PCS/Cellular towers
    
    PCS/Cellular CarriersVertical Polarization
Antenna
    
    Lower-cost polarized
antenna. Apply
beam-shaping
techniques of
amplitude and phase
weighting
    
    Rural or Initial
Urban Systems
    
    PCS/Cellular CarriersRepeaters/Signal
Distribution Products
    
    Extend RF coverage
either indoors or
into rural or uneven
terrain locations
    
    Indoor and
Rural/Remote RF
Coverage Extension
    
    PCS/Cellular
Carriers and
Integrators
  Sales and Marketing
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Research, Development and Intellectual Property
    Backlog
  Manufacturing
  
    
    to perform those functions for which we have special capabilities and that are most
critical to quality and timely performance,
    
    to equip ourselves with the modern tools we need to perform our manufacturing functions
efficiently,
    
    to use outside sources for functions requiring special skills that we do not have, or
that do not offer attractive returns on internal investment in people and equipment, and
    
    to continually seek ways to further improve the cost-effectiveness and time-to-market of
our manufacturing operations.
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Materials
     Competition
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Employees
  Government Regulation
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EXECUTIVE OFFICERS OF THE REGISTRANT
  Alfred G. Hansen
 Don T. Scartz
 Timothy C. Reis, age 48,
 Gary B. Shell, age 51,
 Jay R. Grove
 James S. Childress
 Neilson A. Mackay
 T. Gerald Hickman
 ***********************
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ITEM 1A. Risk Factors
 We believe the risks and uncertainties described below are the most significant risks we face. If
any of the following risks actually materialize, our business could be harmed. Additional risks and
uncertainties not presently known to us, or that we currently consider immaterial, may also impair
our operations or results. In all of those cases, the trading price of our common stock could
decline, and investors could lose all or part of their investments.
 Risks Related to Our Business
  Decisions by our customers about the timing and scope of major programs can have a significant
effect on our net sales and earnings
  If our commercial customers fail to find adequate funding for major potential programs, or our
government customers do not receive necessary funding approvals, our net sales would decline.
  If we cannot continue to rapidly develop, manufacture and market innovative products and services
that meet customer requirements for performance and reliability, we may incur development costs
that we cannot recover and our net sales and earnings will suffer.
  Competing technology could be superior to ours, and could cause customer orders and net sales to
decline.
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Our competitors marketing and pricing strategies could make their products more attractive than
ours. This could cause reductions in customer orders or company profits.
  Slow public acceptance of new communications systems could limit purchases by our customers.
  We may encounter technical problems or contractual uncertainties, which can cause delays, added
costs, lost sales, and liability to customers.
    Our transitions to new product offerings can be costly and disruptive, and could adversely affect
our net sales or profitability.
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Our products may inadvertently infringe third party patents, which could create substantial
liability to our customers or the third-party patent owners.
  If our customers are combined through merger or acquisition, their combined purchases of our
products may decline or they may increase their price concession demands, adversely affecting our
net sales or earnings.
  We may not be successful in protecting our intellectual property.
  For
the year ended December 31, 2005, we identified two material
weaknesses and several significant deficiencies in our internal
control over financial reporting. If we fail to maintain effective internal control over financial
reporting, we may not be able to provide timely and accurate financial statements. This could cause
investors to lose confidence in our reported financial results and have a negative effect on the
trading price of our securities.
  Our success depends on our ability to attract and retain a highly skilled workforce.
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The future success of our business strategies and operations could depend on effective succession
plans as senior management members reach retirement.
  We depend on highly skilled suppliers, who may become unavailable or fail to achieve desired levels
of technical performance.
  Changes in regulations that limit the availability of radio frequency licenses or otherwise result
in increased expenses could cause our net sales or earnings to decline.
  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.
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Export controls on space technology restrict our ability to hold technical discussions with foreign
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.
  Economic or political conditions in other countries could cause our net sales or earnings to
decline.
  Our net sales of wireless communications could be affected by public health concerns.
  Unfavorable currency exchange rate movements could result in foreign exchange losses and cause our
earnings to decline.
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Our net sales in certain markets depend on the availability and performance of other companies with
which we have marketing relationships.
  Customer orders in backlog may not result in sales.
  Our products typically carry warranties, and the costs to us to repair or replace defective
products could exceed the amounts we have experienced historically.
  Changes in our consolidated effective income tax rate and the related effect on our results can be
difficult to predict.
  Our business and revenue growth could be limited by our inability to obtain additional financing.
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We may not effectively manage possible future growth, which could result in reduced earnings.
  We may make acquisitions and investments that could adversely affect our business.
  Risks Related to our Common Stock
  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 is likely to decline.
  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.
  
    
    actual or anticipated operating results,
    
    the limited average trading volume and public float for our stock, which means that
orders from a relatively few investors can significantly impact the price of our
stock, independently of our operating results,
    
    announcements of technological innovations, new products or new contracts by us,
our customers, our competitors or our customers competitors,
    
    government regulatory action,
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
    
    developments with respect to wireless and satellite communications, and
    
    general market conditions.
  Future sales of our common stock may cause our stock price to decline.
  Provisions in our governing documents and law could prevent or delay a change of control not
supported by our Board of Directors.
  
    
    allow our shareholders the right to acquire common stock from us at
discounted prices in the event a person acquires 20% or more of our common
stock or announces an attempt to do so without our Board of Directors
prior consent;
    
    authorize the issuance of up to 10,000,000 shares of blank check
preferred stock by our Board of Directors without shareholder approval,
which stock could have terms that could discourage or thwart a takeover
attempt;
    
    limit who may call a special meeting of shareholders;
    
    require unanimous written consent for shareholder action without a meeting;
    
    establish advance notice requirements for nominations for election to the
Board of Directors or for proposing matters that can be acted upon at
shareholder meetings;
    
    adopt the fair price requirements and rules regarding business
combinations with interested shareholders set forth in Article 11, Parts 2
and 3 of the Georgia Business Corporation Code; and
    
    require approval by the holders of at least 75% of the outstanding common
stock to amend any of the foregoing provisions.
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ITEM 1B. Unresolved Staff Comments.
  
 ITEM 2. Properties
     
 ITEM 3. Legal Proceedings
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
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PART II
 
 ITEM 5. Market for Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
  2005 Price Range
    
    
    2004 Price RangeHigh
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    17.13
    
    
    
    12.48
    
    
    $
    26.31
    
    
    
    16.47Second Quarter
    
    
    16.68
    
    
    
    10.75
    
    
    
    23.25
    
    
    
    17.50Third Quarter
    
    
    18.90
    
    
    
    14.52
    
    
    
    19.81
    
    
    
    13.84Fourth Quarter
    
    
    18.50
    
    
    
    15.09
    
    
    
    18.59
    
    
    
    14.86
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ITEM 6. Selected Financial Data
 (in thousands, except
    
    Years ended December 31earnings (loss) per share)
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Net sales
    
    $
    310,033
    
    
    
    246,518
    
    
    
    243,854
    
    
    
    221,749
    
    
    
    188,823Cost of sales
    
    
    209,808
    
    
    
    159,597
    
    
    
    156,828
    
    
    
    141,651
    
    
    
    125,287Selling, general and administrative
expenses
    
    
    66,597
    
    
    
    58,907
    
    
    
    55,283
    
    
    
    49,033
    
    
    
    41,826Research and development expenses
    
    
    15,893
    
    
    
    16,482
    
    
    
    15,853
    
    
    
    16,589
    
    
    
    17,460Contract reserve adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,500
    )
    
    
    3,500Operating income
    
    
    17,735
    
    
    
    11,532
    
    
    
    15,890
    
    
    
    17,976
    
    
    
    750Non-operating income (expense)
    
    
    587
    
    
    
    1,085
    
    
    
    450
    
    
    
    (67
    )
    
    
    604Foreign exchange (loss) gain
    
    
    (145
    )
    
    
    (205
    )
    
    
    (235
    )
    
    
    357
    
    
    
    (71
    )Interest expense
    
    
    (4,018
    )
    
    
    (2,296
    )
    
    
    (1,923
    )
    
    
    (2,246
    )
    
    
    (3,407
    )Earnings (loss) from continuing operations
before income taxes
    
    
    14,159
    
    
    
    10,116
    
    
    
    14,182
    
    
    
    16,020
    
    
    
    (2,124
    )Income tax (expense) benefit
    
    
    (4,736
    )
    
    
    (2,823
    )
    
    
    (3,964
    )
    
    
    (4,592
    )
    
    
    1,728Earnings (loss) from continuing operations
before accounting change
    
    
    9,423
    
    
    
    7,293
    
    
    
    10,218
    
    
    
    11,428
    
    
    
    (396
    )Discontinued operations:Gain/(loss) from discontinued operations
    
    
    (20,910
    )
    
    
    (7,928
    )
    
    
    (51,689
    )
    
    
    (3,260
    )
    
    
    6,171Income tax benefit (expense)
    
    
    44
    
    
    
    827
    
    
    
    4,079
    
    
    
    419
    
    
    
    (908
    )Earnings (loss) before accounting change
    
    
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )
    
    
    8,587
    
    
    
    4,867Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351
    )Net earnings (loss)
    
    $
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )
    
    
    8,587
    
    
    
    4,516Earnings (loss) per share:Basic:From continuing operations
    
    $
    0.84
    
    
    
    0.66
    
    
    
    0.95
    
    
    
    1.08
    
    
    
    (0.04
    )From discontinued operations
    
    
    (1.86
    )
    
    
    (0.64
    )
    
    
    (4.44
    )
    
    
    (0.27
    )
    
    
    0.56Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )Net earnings (loss)
    
    $
    (1.02
    )
    
    
    0.02
    
    
    
    (3.49
    )
    
    
    0.81
    
    
    
    0.48Diluted:From continuing operations
    
    $
    0.84
    
    
    
    0.65
    
    
    
    0.95
    
    
    
    1.06
    
    
    
    (0.04
    )From discontinued operations
    
    
    (1.86
    )
    
    
    (0.63
    )
    
    
    (4.42
    )
    
    
    (0.26
    )
    
    
    0.56Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )Net earnings (loss)
    
    $
    (1.02
    )
    
    
    0.02
    
    
    
    (3.47
    )
    
    
    0.80
    
    
    
    0.48Weighted average number of shares:Common
    
    
    11,179
    
    
    
    11,094
    
    
    
    10,702
    
    
    
    10,561
    
    
    
    9,464Common and dilutive common equivalent
    
    
    11,225
    
    
    
    11,237
    
    
    
    10,785
    
    
    
    10,731
    
    
    
    9,464
 As of December 312005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Working capital related to continuing operations
    
    $
    79,336
    
    
    
    82,438
    
    
    
    38,250
    
    
    
    41,120
    
    
    
    44,372Total assets
    
    
    219,460
    
    
    
    255,078
    
    
    
    228,549
    
    
    
    256,304
    
    
    
    236,818Long-term debt, including current installments
    
    
    43,408
    
    
    
    61,454
    
    
    
    53,569
    
    
    
    52,444
    
    
    
    51,611Shareholders equity
    
    
    113,656
    
    
    
    126,021
    
    
    
    120,042
    
    
    
    145,985
    
    
    
    132,321
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ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    Defense & Space Systems- Highly engineered hardware for satellites and defense
electronics applications;
    
    LXE- Rugged mobile computer terminals and other equipment for wireless local area
networks;
    
    SATCOM- Satellite communications antennas and terminals for aircraft and ground-based
vehicles, other portable satellite terminals, and satellite ground stations for search and
rescue operations;
    
    EMS Wireless- Base station antennas and signal repeaters for PCS/cellular systems.
    For continuing operations:
 
    
    Net sales reached an all-time high of $310.0 million from continuing operations in 2005.
This was mainly due to record sales recorded at our EMS Wireless and SATCOM divisions, and
from continued sales growth at our LXE division.
    
    Strong operating income was recorded by each of the four divisions in 2005, and in
total for continuing operations, was 54% over those reported in 2004.
 For discontinued operations:
 
    
    On November 28, 2005, the Company completed the sale of the assets and operating
liabilities of its Space & Technology/Montreal division to MacDonald, Dettwiler and
Associates, Ltd. of Vancouver, B.C. (MDA).
    
    On March 9, 2006, the Company completed the sale of the assets and operating liabilities of
its SatNet division to Advanced Microwave Technologies, Inc (Advantech).
    
    2005 included impairment charges of $6.2 million for our SatNet division and $10.0
million for our Space & Technology/Montreal division. They were recorded to reflect the
revised estimate of the fair value, less cost to sell, of these divisions. The loss
recorded for our discontinued operations also reflected cost increases on certain long-term
contracts at our Space & Technology/Montreal (S&T/Montreal) division, lower than expected
net sales by our SatNet division, and increases in reported costs for both of these
Canadian-based operations as a result of a weaker U.S. dollar versus the Canadian dollar.
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Description of Net Sales, Costs and Expenses
 Net sales
   Cost of sales
     Selling, general and administrative expenses
  Research and development expenses
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Non-operating income, net
  Foreign exchange gains and losses
   Interest expense
  Income tax expense
  Discontinued operations
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Results of Operations
 Years Ended December 312005
    
    
    2004
    
    
    2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    67.7
    
    
    
    64.7
    
    
    
    64.3Selling, general and administrative expenses
    
    
    21.5
    
    
    
    23.9
    
    
    
    22.7Research and development expenses
    
    
    5.1
    
    
    
    6.7
    
    
    
    6.5Operating income
    
    
    5.7
    
    
    
    4.7
    
    
    
    6.5Non-operating income
    
    
    0.2
    
    
    
    0.4
    
    
    
    0.2Foreign exchange loss
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Interest expense
    
    
    (1.3
    )
    
    
    (0.9
    )
    
    
    (0.8
    )Earnings from continuing operations before
income taxes
    
    
    4.6
    
    
    
    4.1
    
    
    
    5.8Income tax expense
    
    
    (1.6
    )
    
    
    (1.1
    )
    
    
    (1.6
    )Earnings from continuing operations
    
    
    3.0
    
    
    
    3.0
    
    
    
    4.2Discontinued operations:Loss from discontinued operations before
income taxes
    
    
    (6.7
    )
    
    
    (3.2
    )
    
    
    (21.2
    )Income tax benefit
    
    
    
    
    
    
    0.3
    
    
    
    1.7Loss from discontinued operations
    
    
    (6.7
    )
    
    
    (2.9
    )
    
    
    (19.5
    )Net earnings (loss)
    
    
    (3.7
    )%
    
    
    0.1
    %
    
    
    (15.3
    )%
 Years ended December 31, 2005 and 2004:
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Years ended December 31, 2004 and 2003:
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Net Sales, Cost of sales, and Operating Income (Loss) by Segment
  Years ended December 31(in thousands, except percentages)
    
    2005
    
    
    2004
    
    
    2003Net sales:Defense & Space Systems
    
    $
    51,394
    
    
    
    49,815
    
    
    
    47,562LXE
    
    
    123,140
    
    
    
    111,575
    
    
    
    101,075SATCOM
    
    
    51,353
    
    
    
    39,693
    
    
    
    44,736EMS Wireless
    
    
    84,146
    
    
    
    45,418
    
    
    
    51,381Other
    
    
    
    
    
    
    17
    
    
    
    (900
    )Total
    
    $
    310,033
    
    
    
    246,518
    
    
    
    243,854Cost of sales percentage:Defense & Space Systems
    
    
    80.0
    %
    
    
    79.0
    %
    
    
    78.6
    %LXE
    
    
    60.3
    
    
    
    60.0
    
    
    
    59.9SATCOM
    
    
    60.3
    
    
    
    60.0
    
    
    
    58.2EMS Wireless
    
    
    75.9
    
    
    
    66.0
    
    
    
    63.8Total
    
    
    67.7
    
    
    
    64.7
    
    
    
    64.3Operating income (loss):Defense & Space Systems
    
    $
    3,191
    
    
    
    2,614
    
    
    
    3,402LXE
    
    
    7,520
    
    
    
    7,262
    
    
    
    6,966SATCOM
    
    
    3,524
    
    
    
    1,713
    
    
    
    5,026EMS Wireless
    
    
    4,302
    
    
    
    (720
    )
    
    
    2,529Corporate and other
    
    
    (802
    )
    
    
    663
    
    
    
    (2,033
    )Total
    
    $
    17,735
    
    
    
    11,532
    
    
    
    15,890
 Defense & Space Systems:
  LXE: ®
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SATCOM:
   EMS Wireless:
  Discontinued Operations:
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Liquidity and Capital Resources
         Off-Balance Sheet Arrangements
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Commitments and Contractual Obligations
  Payments due by periodLess than
    
    
    
    
    
    
    
    
    
    
    After 5Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    yearsContinuing Operations:Long-term debt, excluding capital lease
obligations
    
    $
    43,070
    
    
    
    6,505
    
    
    
    25,969
    
    
    
    2,680
    
    
    
    7,916Interest on outstanding long-term debt (1)
    
    
    6,293
    
    
    
    1,366
    
    
    
    1,822
    
    
    
    1,443
    
    
    
    1,662Capital lease obligations
    
    
    344
    
    
    
    326
    
    
    
    18
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    8,925
    
    
    
    3,422
    
    
    
    5,333
    
    
    
    168
    
    
    
    2Deferred compensation agreements
    
    
    308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    308Agreement
to acquire satellite service sub-license
    
    
    8,000
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    4,000Purchase commitments (2)
    
    
    29,655
    
    
    
    29,520
    
    
    
    5
    
    
    
    130
    
    
    
    Discontinued Operations:Operating lease obligations
    
    $
    2,207
    
    
    
    638
    
    
    
    1,249
    
    
    
    317
    
    
    
    3Purchase commitments
    
    
    731
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    


|    |  |                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Reflects the repayment of the Companys revolving loan balance from the proceeds of its
stock offering in February 2006, and the related reduction in variable interest rate. See
Note 16 to the Companys consolidated financial statements.                                               
|   
|(2) |  | Purchase commitments primarily represent existing commitments under purchase orders or
contracts to purchase inventory and raw materials for our products. Most of these purchase
orders and contracts can be terminated for a fee that is either fixed or based on when
termination occurs.

Critical Accounting Policies


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Revenue recognition on long-term contracts
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Accounting for government research incentives
  Inventory valuation
  Evaluation of long-lived assets for impairment
     Establishment of reserves for deferred income tax assets
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Risk Factors and Forward-Looking Statements
  
    
    economic conditions in the U.S. and abroad and their effect on capital spending
in the Companys principal markets;
    
    difficulty predicting the timing of receipt of major customer orders, and the
effect of customer timing decisions on the Companys quarterly results;
    
    successful completion of technological development programs by the Company and
the effects of technology that may be developed by, and patent rights that may be held or
obtained by, competitors;
    
    the ability of the Company to obtain patent licenses, with satisfactory license
rights and royalty rates, from owners of RFID-related patents that the Company concludes
are valid and would otherwise be infringed by Company products;
    
    U.S. defense budget pressures on near-term spending priorities;
    
    uncertainties inherent in the process of converting contract awards into firm
contractual orders in the future;
    
    volatility of foreign exchange rates relative to the U.S. dollar and their
effect on purchasing power by international customers, and the cost structure of the
Companys non-U.S. operations, as well as the potential for realizing foreign exchange
gains and losses associated with non-U.S. assets or liabilities held by the Company;
    
    successful resolution of technical problems, proposed scope changes, or
proposed funding changes that may be encountered on contracts;
    
    changes in the Companys consolidated effective income tax rate caused by the
extent to which actual taxable earnings in the U.S., Canada and other taxing jurisdictions
may vary from expected taxable earnings;
    
    successful transition of products from development stages to an efficient
manufacturing environment;
    
    changes in the rate at which the Companys products are returned for repair or
replacement under warranty;
    
    customer response to new products and services, and general conditions in the
Companys target markets (such as logistics, PCS/cellular telephony and space-based
communications);
    
    the success of certain of the Companys customers in marketing our line of
high-speed commercial airline communications products as a complimentary offering with
their own lines of avionics products;
    
    the availability of financing for satellite data communications systems and for
expansion of terrestrial PCS/cellular phone systems;
    
    the extent to which terrestrial systems reduce market opportunities for
space-based broadband communications systems by providing extensive broadband Internet
access on a dependable and economical basis;
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
    
    development of successful working relationships with local business and
government personnel in connection with distribution and manufacture of products in foreign
countries;
    
    the demand growth for various mobile and high-speed data communications
services, and the possible effect of public health concerns about alleged health risks of
radio frequency emissions;
    
    the Companys ability to attract and retain qualified personnel, particularly
those with key technical skills;
    
    the availability of sufficient additional credit or other financing, on
acceptable terms, to support any large acquisitions that we believe would contribute to our
growth and profitability;
    
    the ability to negotiate successfully with potential acquisition candidates,
finance acquisitions, or effectively integrate the acquired businesses, products or
technologies into the Companys existing businesses and products;
    
    the availability, capabilities and performance of suppliers of basic materials,
electronic components and sophisticated subsystems on which the Company must rely in order
to perform according to contract requirements, or to introduce new products on the desired
schedule;
    
    the effects of consolidation in the telecommunications service provider
industry, including effects on the numbers of suppliers used by the Companys customers,
the overall demand by such customers for the Companys products, and the possibility that
such customers may demand greater price concessions; and
    
    uncertainties associated with U.S. export controls and the export license
process, which restrict the Companys ability to hold technical discussions with customers,
suppliers and internal engineering resources and can reduce the Companys ability to obtain
sales from foreign customers or to perform contracts with the desired level of efficiency
or profitability.
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Effect of New Accounting Pronouncements
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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
  Revolving credit loan with U.S. and Canadian banks, maturing in
December 2007, interest payable quarterly at a variable rate
(8.62% at December 31,
2005)
    
    $
    26,804Revolving credit loan with a bank in the United Kingdom,
maturing in April 2006, interest payable monthly at a variable
rate (5.50% at December 31, 2005)
    
    
    1,632Total market-sensitive debt
    
    $
    28,436
   Exchange Rate
    
    
    $U.S.($U.S. per unit of
    
    
    in thousandslocal currency)
    
    
    (reporting currency)Canada
    
    0.8577 /Dollar
    
    $
    1,951Belgium
    
    1.1840 /Euro
    
    
    1,727France
    
    1.1840 /Euro
    
    
    1,261Australia
    
    0.7337 /Dollar
    
    
    1,260Germany
    
    1.1840 /Euro
    
    
    611United Kingdom
    
    1.7185 /Pound
    
    
    303Italy
    
    1.1840 /Euro
    
    
    228Netherlands
    
    1.1840 /Euro
    
    
    120Singapore
    
    0.6013 /Dollar
    
    
    49Sweden
    
    0.1258 /Krona
    
    
    18Total short-term due to parent
    
    
    
    
    
    $
    7,528
  Average
    
    
    ($U.S.)Notional
    
    
    Contract
    
    
    FairAmount
    
    
    Rate
    
    
    ValueForeign currency forward contractsContinuing Operations:Euros (sell for U.S. dollars)
    
    2,600 Euros
    
    
    1.1738
    
    
    $
    (5
    )U.S. dollars (sell for Canadian dollars)
    
    9,500 USD
    
    
    1.1610
    
    
    
    11Australian dollars (sell for U.S. dollars)
    
    1,200 AUD
    
    
    0.7203
    
    
    
    2British pounds (sell for U.S. dollars)
    
    140 GBP
    
    
    1.7129
    
    
    
    1$
    9
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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
 (a)  Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
   (b)  Managements Annual Report on Internal Control Over Financial Reporting
    (a)
    The Company did not maintain adequate company
level controls. Specifically, the Companys policies and
procedures did not provide for sufficiently detailed supervisory
review controls with respect to the accounting functions at the
Companys operating divisions. This deficiency resulted in
errors in the Companys preliminary 2005 consolidated financial
statements, and more than a remote likelihood that a material
misstatement would not be prevented or detected in the Companys
annual or interim financial statements.(b)
    The Companys policies and procedures did
not provide for a sufficiently detailed review regarding analysis of
sales agreements and related documentation in accounting for
assets/liabilities held for salediscontinued operations. This
deficiency resulted in a material overstatement of the charge for
asset impairment related to certain assets held for sale in the
Companys preliminary 2005 consolidated financial statements.  (c) 
Changes in Internal Control Over Financial Reporting
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(d)  Report of Independent Registered Public Accounting Firm
 
      (a)
    
    The Company did not maintain adequate company level controls.
Specifically, the Companys policies and procedures did not
provide for sufficiently detailed supervisory review controls with
respect to the accounting functions at the Companys operating
divisions. This deficiency resulted in errors in the Companys
preliminary 2005 consolidated financial statements, and more than a
remote likelihood that a material misstatement would not be prevented
or detected in the Companys annual or interim financial
statements.(b)
    
    The Companys policies and procedures did not provide
for a sufficiently detailed review regarding analysis of sales
agreements and related documentation in accounting for
assets/liabilities held for sale - discontinued operations. This
deficiency resulted in a material overstatement of the charge for
asset impairment related to certain assets held for sale in the
Companys preliminary 2005 consolidated financial statements.
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KPMG LLP 
 
 ITEM 9B. Other Information.
  
 PART III
 
 ITEM 10. Directors and Executive Officers of the Registrant
  www.ems-t.com
  
 ITEM 11. Executive Compensation
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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  (c)(a)
    
    
    
    
    
    
    Number of securitiesNumber of securities
    
    
    (b)
    
    
    remaining available forto be issued upon
    
    
    Weighted average
    
    
    future issuance underexercise of
    
    
    exercise price of
    
    
    equity compensation plansoutstanding options,
    
    
    outstanding options,
    
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column(a))Equity compensation plans approved
by security holders
    
    
    762,438
    
    
    $
    17.94
    
    
    
    517,151Equity compensation plans not
approved by security holders
    
    
    465,300
    
    
    
    18.44
    
    
    
    128,762Total
    
    
    1,227,738
    
    
    $
    18.13
    
    
    
    645,913
  
 ITEM 13. Certain Relationships and Related Transactions
  
 ITEM 14. Principal Accountant Fees and Services
  
 PART IV
 
 ITEM 15. Exhibits, Financial Statement Schedules
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Directors of
EMS Technologies Canada, Ltd.
   Ottawa, CanadaJanuary 6, 2006
    
    Ernst & Young LLPChartered Accountants
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Years ended December 31, 2005, 2004 and 2003AdditionsBalance at
    
    charged to
    
    
    
    
    
    
    
    
    
    Balancebeginning
    
    costs and
    
    
    
    
    
    
    
    
    
    at endClassification
    
    of year
    
    expenses
    
    Deductions
    
    Other
    
    of yearAllowance for Doubtful Accounts:2003
    
    $
    1,107
    
    
    
    887
    
    
    
    (472
    ) (a)
    
    
    
    
    
    
    1,5222004
    
    
    1,522
    
    
    
    455
    
    
    
    (971
    ) (a)
    
    
    
    
    
    
    1,0062005
    
    
    1,006
    
    
    
    649
    
    
    
    (878
    ) (a)
    
    
    
    
    
    
    777Valuation Allowance for Deferred Tax Assets:2003
    
    $
    10,898
    
    
    
    18,850
    (b)
    
    
    
    
    
    
    
    
    
    
    29,7482004
    
    
    29,748
    
    
    
    7,087
    (b)
    
    
    
    
    
    
    
    
    
    
    36,8352005
    
    
    36,835
    
    
    
    10,134
    (b)
    
    
    
    
    
    
    
    
    
    
    46,969Valuation Allowance for Assets Held for Sale:2003
    
    $
    
    
    
    
    13,500
    (c)
    
    
    
    
    
    
    
    
    
    
    13,5002004
    
    
    13,500
    
    
    
    1,700
    (c)
    
    
    
    
    
    
    
    
    
    
    15,2002005
    
    
    15,200
    
    
    
    16,200
    (c)
    
    
    (25,200
    ) (d)
    
    
    
    
    
    
    6,200
 
 
 
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SIGNATURES
  EMS TECHNOLOGIES, INC.By: /s/ Alfred G. Hansen
    
    Date: 3/31/06President and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Alfred G. Hansen
    
    President and Chief Executive
Officer, and Director (Principal
Executive
    
    3/31/06Alfred G. Hansen
    
    Officer)/s/ Don T. Scartz
    
    Executive Vice President, Chief
Financial Officer, and
Treasurer (Principal
    
    3/31/06Don T. Scartz
    
    Financial Officer)/s/ Gary B. Shell
    
    Vice President, Finance
    
    3/31/06Gary B. Shell
    
    (Principal Accounting Officer)/s/ Hermann Buerger
    
    Director
    
    3/31/06Hermann Buerger/s/ John R. Kreick
    
    Director
    
    3/31/06John R. Kreick/s/ John B. Mowell
    
    Director, Chairman of the Board
    
    3/31/06John B. Mowell/s/ Norman E. Thagard
    
    Director
    
    3/31/06Norman E. Thagard/s/ John L. Woodward, Jr.
    
    Director
    
    3/31/06John L. Woodward, Jr.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReports of Independent Registered Public Accounting Firm
    
    
    52Consolidated Statements of Operations  Years ended December 31, 2005, 2004 and 2003
    
    
    54Consolidated Balance Sheets  December 31, 2005 and 2004
    
    
    55Consolidated Statements of Cash Flows  Years ended December 31, 2005, 2004 and 2003
    
    
    57Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) 
Years ended December 31, 2005, 2004 and 2003
    
    
    58Notes to Consolidated Financial Statements
    
    
    59
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Ottawa, Canada,
    
    Ernst & Young LLPFebruary 6, 2004 (except with respect
    
    Chartered Accountantsto notes 3(b) and 21, which are as atJanuary 6, 2006)
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EMS
TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years ended December 312005
    
    
    2004
    
    
    2003Net sales (note 12)
    
    $
    310,033
    
    
    
    246,518
    
    
    
    243,854Cost of sales
    
    
    209,808
    
    
    
    159,597
    
    
    
    156,828Selling, general and administrative expenses
    
    
    66,597
    
    
    
    58,907
    
    
    
    55,283Research and development expenses
    
    
    15,893
    
    
    
    16,482
    
    
    
    15,853Operating income
    
    
    17,735
    
    
    
    11,532
    
    
    
    15,890Non-operating income
    
    
    587
    
    
    
    1,085
    
    
    
    450Foreign exchange loss
    
    
    (145
    )
    
    
    (205
    )
    
    
    (235
    )Interest expense
    
    
    (4,018
    )
    
    
    (2,296
    )
    
    
    (1,923
    )Earnings from continuing operations before income taxes
    
    
    14,159
    
    
    
    10,116
    
    
    
    14,182Income tax expense (note 9)
    
    
    (4,736
    )
    
    
    (2,823
    )
    
    
    (3,964
    )Earnings from continuing operations
    
    
    9,423
    
    
    
    7,293
    
    
    
    10,218Discontinued operations (note 2):Loss from discontinued operations before income taxes
    
    
    (20,910
    )
    
    
    (7,928
    )
    
    
    (51,689
    )Income tax benefit
    
    
    44
    
    
    
    827
    
    
    
    4,079Loss from discontinued operations
    
    
    (20,866
    )
    
    
    (7,101
    )
    
    
    (47,610
    )Net earnings (loss)
    
    $
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )Net earnings (loss) per share (note 8):Basic:Earnings from continuing operations
    
    $
    0.84
    
    
    
    0.66
    
    
    
    0.95Loss from discontinued operations
    
    
    (1.86
    )
    
    
    (0.64
    )
    
    
    (4.44
    )Net earnings (loss)
    
    $
    (1.02
    )
    
    
    0.02
    
    
    
    (3.49
    )Diluted:Earnings from continuing operations
    
    $
    0.84
    
    
    
    0.65
    
    
    
    0.95Loss from discontinued operations
    
    
    (1.86
    )
    
    
    (0.63
    )
    
    
    (4.42
    )Net earnings (loss)
    
    $
    (1.02
    )
    
    
    0.02
    
    
    
    (3.47
    )Weighted average number of shares (note 8):Common
    
    
    11,179
    
    
    
    11,094
    
    
    
    10,702Common and dilutive common equivalent
    
    
    11,225
    
    
    
    11,237
    
    
    
    10,785
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EMS
TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 December 312005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,978
    
    
    
    14,553Restricted cash
    
    
    2,620
    
    
    
    4,715Trade accounts receivable, net (note 4)
    
    
    92,973
    
    
    
    75,370Inventories (note 5)
    
    
    34,673
    
    
    
    33,408Deferred income taxes, net (note 9)
    
    
    1,433
    
    
    
    1,362Assets held for sale (note 2)
    
    
    6,732
    
    
    
    64,710Total current assets
    
    
    151,409
    
    
    
    194,118Property, plant and equipment:Land
    
    
    1,150
    
    
    
    1,150Buildings and leasehold improvements
    
    
    15,242
    
    
    
    15,166Machinery and equipment
    
    
    76,342
    
    
    
    70,160Furniture and fixtures
    
    
    8,511
    
    
    
    8,061101,245
    
    
    
    94,537Less accumulated depreciation and amortization
    
    
    66,965
    
    
    
    63,068Net property, plant and equipment
    
    
    34,280
    
    
    
    31,469Deferred income taxes, net  non-current (note 9)
    
    
    3,634
    
    
    
    4,604Intangible assets, net of
accumulated amortization of $3,954 in 2005 and $2,568 in 2004 (note 6)
    
    
    3,298
    
    
    
    3,990Goodwill
    
    
    13,526
    
    
    
    13,526Other assets
    
    
    13,313
    
    
    
    7,371$
    219,460
    
    
    
    255,078
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##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS,
 December 312005
    
    
    2004LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current installments of long-term debt (note 7)
    
    $
    6,825
    
    
    
    3,462Accounts payable
    
    
    34,089
    
    
    
    23,840Income taxes payable
    
    
    1,866
    
    
    
    1,726Accrued compensation costs
    
    
    9,402
    
    
    
    6,232Accrued retirement costs (note 10)
    
    
    2,603
    
    
    
    2,453Deferred service revenue
    
    
    5,755
    
    
    
    5,214Liabilities related to assets held for sale (note 2)
    
    
    2,130
    
    
    
    24,095Other current liabilities
    
    
    4,801
    
    
    
    4,043Total current liabilities
    
    
    67,471
    
    
    
    71,065Long-term debt, excluding current installments (note 7)
    
    
    36,583
    
    
    
    57,992Other liabilities
    
    
    1,750
    
    
    
    Total liabilities
    
    
    105,804
    
    
    
    129,057Shareholders 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 11,343,000 in 2005 and 11,164,000 in 2004
    
    
    1,134
    
    
    
    1,116Additional paid-in capital
    
    
    71,389
    
    
    
    69,058Accumulated other comprehensive income (loss)  foreign currency translation adjustment
    
    
    (97
    )
    
    
    3,174Retained earnings
    
    
    41,230
    
    
    
    52,673Total shareholders equity
    
    
    113,656
    
    
    
    126,021Commitments and contingencies (notes 2, 7, 13, 14, 15, and 16)$
    219,460
    
    
    
    255,078
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##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years ended December 312005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net earnings (loss)
    
    $
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:Depreciation and other intangibles amortization
    
    
    9,742
    
    
    
    8,158
    
    
    
    8,097Deferred income taxes
    
    
    899
    
    
    
    (1,079
    )
    
    
    (1,414
    )Loss (gain) on sale of assets
    
    
    394
    
    
    
    (1,082
    )
    
    
    (659
    )Loss from discontinued operations
    
    
    20,866
    
    
    
    7,101
    
    
    
    47,610Changes in operating assets and liabilities, net of effects of acquisition:Trade accounts receivable
    
    
    (19,187
    )
    
    
    (8,837
    )
    
    
    9,782Inventories
    
    
    (1,122
    )
    
    
    (2,012
    )
    
    
    (670
    )Accounts payable
    
    
    8,206
    
    
    
    5,442
    
    
    
    (3,144
    )Income taxes payable
    
    
    14
    
    
    
    4,580
    
    
    
    (2,175
    )Accrued costs, deferred revenue, and other current liabilities
    
    
    4,416
    
    
    
    (1,275
    )
    
    
    1,561Other
    
    
    14
    
    
    
    803
    
    
    
    (2,989
    )Net cash provided by operating activities in continuing operations
    
    
    12,799
    
    
    
    11,991
    
    
    
    18,607Net cash used in operating activities in discontinued operations
(Revised  Note 1)
    
    
    (7,539
    )
    
    
    (9,220
    )
    
    
    (17,370
    )Net cash provided by operating activities
    
    
    5,260
    
    
    
    2,771
    
    
    
    1,237Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (10,029
    )
    
    
    (5,320
    )
    
    
    (7,153
    )Payments for asset acquisitions
    
    
    (275
    )
    
    
    (1,754
    )
    
    
    Proceeds from sale of assets
    
    
    21,931
    
    
    
    2,846
    
    
    
    1,759Net cash provided by (used in) investing activities in continuing
operations
    
    
    11,627
    
    
    
    (4,228
    )
    
    
    (5,394
    )Net cash used in investing activities in discontinued operations (Revised  Note 1)
    
    
    (782
    )
    
    
    (2,448
    )
    
    
    (1,724
    )Net cash provided by (used in) investing activities
    
    
    10,845
    
    
    
    (6,676
    )
    
    
    (7,118
    )Cash flows from financing activities:Net increase (decrease) in revolving debt
    
    
    (16,882
    )
    
    
    8,991
    
    
    
    (68
    )Repayment of term debt
    
    
    (1,342
    )
    
    
    (3,667
    )
    
    
    (2,321
    )(Increase) decrease in restricted cash
    
    
    2,095
    
    
    
    (4,715
    )
    
    
    Deferred financing costs paid
    
    
    (98
    )
    
    
    (1,063
    )
    
    
    Proceeds from exercise of stock options, net of withholding taxes paid
    
    
    1,966
    
    
    
    3,709
    
    
    
    3,765Net cash provided by (used in) financing activities
    
    
    (14,261
    )
    
    
    3,255
    
    
    
    1,376Net change in cash and cash equivalents
    
    
    1,844
    
    
    
    (650
    )
    
    
    (4,505
    )Effect of exchange rates on cash and cash equivalents
    
    
    (3,419
    )
    
    
    1,023
    
    
    
    6,255Cash and cash equivalents at January 1
    
    
    14,553
    
    
    
    14,180
    
    
    
    12,430Cash and cash equivalents at December 31
    
    $
    12,978
    
    
    
    14,553
    
    
    
    14,180Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    4,869
    
    
    
    3,657
    
    
    
    3,386Cash paid for income taxes
    
    
    2,661
    
    
    
    562
    
    
    
    2,043
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##### Table of Contents



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
 Three years ended December 31, 2005Accum-ulatedotherCompre-
    
    
    compre-
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Additional
    
    
    hensive
    
    
    hensive
    
    
    
    
    
    
    Share-paid-in
    
    
    income
    
    
    income
    
    
    Retained
    
    
    holdersShares
    
    
    Amount
    
    
    capital
    
    
    (loss)
    
    
    (loss)
    
    
    earnings
    
    
    equityBalance December 31, 2002
    
    
    10,658
    
    
    $
    1,066
    
    
    
    60,867
    
    
    
    
    
    
    
    (5,821
    )
    
    
    89,873
    
    
    
    145,985Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,392
    )
    
    
    
    
    
    
    (37,392
    )
    
    
    (37,392
    )Income tax benefit from
exercise of non-qualified
stock options (note 9)
    
    
    
    
    
    
    
    
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    383Exercise of common stock options
    
    
    356
    
    
    
    36
    
    
    
    5,474
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,510Redemption of shares upon
exercise of common stock
options
    
    
    (86
    )
    
    
    (9
    )
    
    
    (1,703
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,712
    )Foreign currency translation
adjustment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,301
    
    
    
    7,301
    
    
    
    
    
    
    
    7,301Repurchases 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
    
    
    
    120,042Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    192
    
    
    
    192Income tax benefit from
exercise of non-qualified
stock options (note 9)
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384Exercise of common stock options
    
    
    255
    
    
    
    25
    
    
    
    4,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,108Redemption of shares upon
exercise of common stock
options
    
    
    (15
    )
    
    
    (2
    )
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (334
    )Foreign currency translation
adjustment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,694
    
    
    
    1,694
    
    
    
    
    
    
    
    1,694Repurchases of stock
    
    
    (2
    )
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )Other
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Comprehensive income for 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,886Balance December 31, 2004
    
    
    11,164
    
    
    
    1,116
    
    
    
    69,058
    
    
    


    
    
    
    
    3,174
    
    
    
    52,673
    
    
    
    126,021Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,443
    )
    
    
    
    
    
    
    (11,443
    )
    
    
    (11,443
    )Income tax benefit from
exercise of non-qualified
stock options (note 9)
    
    
    
    
    
    
    
    
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    383Exercise of common stock options
    
    
    221
    
    
    
    22
    
    
    
    2,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,664Redemption of shares upon
exercise of common stock
options
    
    
    (42
    )
    
    
    (4
    )
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (695
    )Repurchases of stock
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Foreign currency translation
adjustment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,971
    
    
    
    1,971
    
    
    
    
    
    
    
    1,971Reclassification due to sale of
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,242
    )
    
    
    (5,242
    )
    
    
    
    
    
    
    (5,242
    )Comprehensive loss for 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,714
    )Balance December 31, 2005
    
    
    11,343
    
    
    $
    1,134
    
    
    
    71,389
    
    
    
    
    
    
    
    (97
    )
    
    
    41,230
    
    
    
    113,656
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
            59 of 81




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##### Table of Contents



Buildings
    
    20 to 40 yearsMachinery and equipment
    
    3 to 8 yearsFurniture and fixtures
    
    10 years
    60 of 81




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##### Table of Contents



61 of 81




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Net earnings (loss):As reported
    
    $
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )Stock-based employee compensation expense
determined under the fair
value method, net of tax
    
    
    (947
    )
    
    
    (2,137
    )
    
    
    (3,061
    )Pro forma
    
    $
    (12,390
    )
    
    
    (1,945
    )
    
    
    (40,453
    )Basic net earnings (loss) per share:As reported
    
    $
    (1.02
    )
    
    
    0.02
    
    
    
    (3.49
    )Pro forma
    
    
    (1.11
    )
    
    
    (0.18
    )
    
    
    (3.78
    )Diluted net earnings (loss) per share:As reported
    
    $
    (1.02
    )
    
    
    0.02
    
    
    
    (3.47
    )Pro forma
    
    
    (1.10
    )
    
    
    (0.17
    )
    
    
    (3.75
    )
         62 of 81




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##### Table of Contents



Effect of New Accounting Pronouncements
     63 of 81




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##### Table of Contents



Liability
    
    
    Costs incurred
    
    
    Costs
    
    
    Adjustments
    
    
    Liabilityat
    
    
    and expensed
    
    
    paid
    
    
    in
    
    
    atDec 31, 2004
    
    
    in 2005
    
    
    in 2005
    
    
    2005
    
    
    Dec 31, 2005Termination benefits
    
    
    
    
    
    $
    1,230
    
    
    
    183
    
    
    
    
    
    
    
    1,047Other associated costs
    
    
    
    
    
    
    1,016
    
    
    
    855
    
    
    
    
    
    
    
    161Total
    
    
    
    
    
    $
    2,246
    
    
    
    1,038
    
    
    
    
    
    
    
    1,208
    64 of 81




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Net sales
    
    $
    59,780
    
    
    
    65,786
    
    
    
    38,813Expenses
    
    
    64,490
    
    
    
    72,014
    
    
    
    74,075Loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    2,927Estimated loss on disposal
    
    
    16,200
    
    
    
    1,700
    
    
    
    13,500Loss before income taxes
    
    
    (20,910
    )
    
    
    (7,928
    )
    
    
    (51,689
    )Income tax benefit
    
    
    44
    
    
    
    827
    
    
    
    4,079Loss from discontinued operations
    
    $
    (20,866
    )
    
    
    (7,101
    )
    
    
    (47,610
    )
  2005
    
    
    2004Trade accounts receivable, net
    
    $
    3,417
    
    
    
    18,879Inventories
    
    
    3,035
    
    
    
    8,022Investments
    
    
    
    
    
    
    2,709Property, plant and equipment, net
    
    
    
    
    
    
    24,298Non-current accounts receivable, net
    
    
    
    
    
    
    6,516Accrued pension assets
    
    
    
    
    
    
    3,255Other assets
    
    
    280
    
    
    
    1,031Total assets held for sale
    
    $
    6,732
    
    
    
    64,710Accounts payable
    
    $
    1,587
    
    
    
    15,185Long term debt
    
    
    
    
    
    
    2,783Post-retirement obligations
    
    
    
    
    
    
    4,481Other current liabilities
    
    
    543
    
    
    
    1,646Total liabilities related to assets held for sale
    
    $
    2,130
    
    
    
    24,095
 65 of  81




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##### Table of Contents



2005
    
    
    2004Amounts billed
    
    $
    71,662
    
    
    
    57,010Unbilled revenues under long-term contracts (1)
    
    
    25,086
    
    
    
    21,241Customer advanced payments
    
    
    (2,998
    )
    
    
    (1,875
    )Allowance for doubtful accounts
    
    
    (777
    )
    
    
    (1,006
    )Trade accounts receivable, net
    
    $
    92,973
    
    
    
    75,370
 
 (1)
    
    Unbilled net sales under long-term contracts are usually billed and collected within one year.   2005
    
    
    2004Parts and materials
    
    $
    23,020
    
    
    
    23,789Work in process
    
    
    2,783
    
    
    
    3,605Finished goods
    
    
    8,870
    
    
    
    6,014Inventories
    
    $
    34,673
    
    
    
    33,408
    66 of  81




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##### Table of Contents



2005
    
    
    2004Revolving credit loans with U.S. and
Canadian financial institutions, secured by
substantially all the assets of the Company,
except for certain real estate that secures
existing mortgages and other permitted liens,
maturing in December 2007, interest payable
quarterly at a variable rate (8.62% at the end
of 2005 and 6.66% at the end of 2004)
    
    $
    26,804
    
    
    
    43,417Promissory 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%
    
    
    8,889
    
    
    
    9,404Term 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%
    
    
    4,995
    
    
    
    5,438Capital lease agreements, secured by machinery
and equipment, computer hardware, software and
peripherals, with various terms through 2008,
due in quarterly installments with implicit
interest rates of 3.0% to 13.0%
    
    
    338
    
    
    
    772Financing agreements, related to installation
of computer hardware and peripherals and
implementation of software, maturing in April
2007, principal and interest payable in equal
quarterly installments of $155,000 with an
average fixed interest rate of 5.79%
    
    
    750
    
    
    
    687Revolving credit loan with a bank in the
United Kingdom, maturing in April 2006,
interest payable monthly at a variable rate
(5.50% at the end of 2005 and 5.75% at the end
of 2004)
    
    
    1,632
    
    
    
    1,736Total long-term debt
    
    
    43,408
    
    
    
    61,454Less current installments of long-term debt
    
    
    6,825
    
    
    
    3,462Long-term debt, excluding current installments
    
    $
    36,583
    
    
    
    57,992
    67 of  81




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##### Table of Contents



2006
    
    $
    6,8252007
    
    
    24,7852008
    
    
    1,2022009
    
    
    1,2892010
    
    
    1,391Thereafter
    
    
    7,916Total principal maturities
    
    $
    43,408
   2006
    
    $
    3262007
    
    
    122008
    
    
    6Total capital lease payments
    
    
    344Less: Interest payments
    
    
    (6
    )Capital lease obligations
    
    $
    338
   68 of  81




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##### Table of Contents



Weighted AverageExercise PriceShares
    
    
    Per ShareOptions 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
    
    
    
    16.85Granted
    
    
    218
    
    
    
    20.07Canceled or expired
    
    
    (135
    )
    
    
    20.72Exercised
    
    
    (255
    )
    
    
    16.13Options outstanding at December 31, 2004
    
    
    1,566
    
    
    
    17.08Granted
    
    
    72
    
    
    
    14.81Canceled or expired
    
    
    (189
    )
    
    
    15.30Exercised
    
    
    (221
    )
    
    
    12.06Options outstanding at December 31, 2005
    
    
    1,228
    
    
    $
    18.13
   Outstanding
    
    
    
    
    
    ExercisableWeighted
    
    Weighted Average
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Average
    
    Remaining Years In
    
    
    
    
    
    AverageExercise Prices
    
    Shares
    
    Per Share
    
    Contractual Life
    
    Shares
    
    Per Share$

11.63
- 13.90
    
    
    149
    
    
    $
    13.03
    
    
    
    6.0
    
    
    
    122
    
    
    $
    12.9814.00 - 14.94
    
    
    153
    
    
    
    14.23
    
    
    
    6.6
    
    
    
    141
    
    
    
    14.2315.25 - 15.81
    
    
    98
    
    
    
    15.64
    
    
    
    5.2
    
    
    
    44
    
    
    
    15.7116.08 - 17.88
    
    
    196
    
    
    
    16.97
    
    
    
    1.1
    
    
    
    196
    
    
    
    16.9718.00 - 18.99
    
    
    251
    
    
    
    18.67
    
    
    
    3.9
    
    
    
    223
    
    
    
    18.6419.04 - 22.75
    
    
    173
    
    
    
    21.09
    
    
    
    5.9
    
    
    
    120
    
    
    
    20.8223.50 - 23.88
    
    
    208
    
    
    
    23.80
    
    
    
    3.6
    
    
    
    205
    
    
    
    23.8011.63 - 23.88
    
    
    1,228
    
    
    
    18.13
    
    
    
    4.4
    
    
    
    1,051
    
    
    
    18.21
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2005
    
    2004
    
    2003Dilutive stock options, included in earnings (loss)
per share calculations:Shares
    
    
    437
    
    
    
    761
    
    
    
    1,367Average price per share
    
    $
    14.32
    
    
    
    13.64
    
    
    
    15.10Anti-dilutive stock options, excluded from earnings (loss)
per share calculations:Shares
    
    
    791
    
    
    
    805
    
    
    
    371Average price per share
    
    $
    20.24
    
    
    
    20.34
    
    
    
    23.31
  2005
    
    
    2004
    
    
    2003Basic earnings (loss) per share denominator
    
    
    11,179
    
    
    
    11,094
    
    
    
    10,702Common equivalent shares from dilutive stock options
    
    
    46
    
    
    
    143
    
    
    
    83Diluted earnings (loss) per share denominator
    
    
    11,225
    
    
    
    11,237
    
    
    
    10,785
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2005
    
    
    2004
    
    
    2003Income tax expense, continuing operations
    
    $
    (4,736
    )
    
    
    (2,823
    )
    
    
    (3,964
    )Income tax benefit, discontinued operations
    
    
    44
    
    
    
    827
    
    
    
    4,079Income tax benefit resulting from exercise of stock
options credited to stockholders equity
    
    
    383
    
    
    
    384
    
    
    
    383Total
    
    $
    (4,309
    )
    
    
    (1,612
    )
    
    
    498
  2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    (3,711
    )
    
    
    (2,562
    )
    
    
    (2,407
    )State
    
    
    (629
    )
    
    
    (359
    )
    
    
    (396
    )Foreign
    
    
    503
    
    
    
    (981
    )
    
    
    (2,242
    )Total
    
    
    (3,837
    )
    
    
    (3,902
    )
    
    
    (5,045
    )Deferred:Federal
    
    
    (29
    )
    
    
    1,068
    
    
    
    532State
    
    
    164
    
    
    
    52
    
    
    
    90Foreign
    
    
    (1,034
    )
    
    
    (41
    )
    
    
    459Total
    
    
    (899
    )
    
    
    1,079
    
    
    
    1,081Total income tax expense
    
    $
    (4,736
    )
    
    
    (2,823
    )
    
    
    (3,964
    )
  2005
    
    
    2004
    
    
    2003Computed expected income tax expense
    
    $
    (4,814
    )
    
    
    (3,440
    )
    
    
    (4,822
    )Reduction (increase) in income tax:State income taxes, net of federal income tax effect
    
    
    (276
    )
    
    
    (159
    )
    
    
    (36
    )Tax credits from research activities
    
    
    79
    
    
    
    105
    
    
    
    101Difference in effective foreign tax rates
    
    
    990
    
    
    
    669
    
    
    
    942Net increase to valuation allowance for deferred tax assets
    
    
    (797
    )
    
    
    
    
    
    
    Other
    
    
    82
    
    
    
    2
    
    
    
    (149
    )Income tax expense
    
    $
    (4,736
    )
    
    
    (2,823
    )
    
    
    (3,964
    )
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2005
    
    
    2004Deferred tax assets:Accounts receivable
    
    $
    214
    
    
    
    252Inventories
    
    
    1,544
    
    
    
    1,690Accrued compensation costs
    
    
    834
    
    
    
    731Gain on sales to foreign subsidiaries
    
    
    232
    
    
    
    182Accrued warranty costs
    
    
    1,669
    
    
    
    1,025Accrued post-retirement benefits
    
    
    
    
    
    
    1,445Foreign research expense and tax credit carry forward
    
    
    48,136
    
    
    
    40,843Foreign net operating loss carry forward
    
    
    1,798
    
    
    
    2,034Investment
    
    
    3,265
    
    
    
    3,265Credit for corporate minimum tax
    
    
    
    
    
    
    306Research and development credit carry forward
    
    
    
    
    
    
    900Intellectual property
    
    
    218
    
    
    
    250Other
    
    
    365
    
    
    
    285Total gross deferred tax assets
    
    
    58,275
    
    
    
    53,208Valuation allowance
    
    
    (46,969
    )
    
    
    (36,835
    )Net deferred tax assets
    
    
    11,306
    
    
    
    16,373Deferred tax liabilities:Property, plant and equipment
    
    
    6,174
    
    
    
    9,056Pension asset
    
    
    
    
    
    
    1,048Customer holdbacks receivable
    
    
    65
    
    
    
    303Total gross deferred tax liabilities
    
    
    6,239
    
    
    
    10,407Net deferred tax assets
    
    $
    5,067
    
    
    
    5,966
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Years ended December 312005
    
    
    2004
    
    
    2003Net sales:Defense & Space Systems
    
    $
    51,394
    
    
    
    50,063
    
    
    
    49,381Less sales to discontinued operations
    
    
    
    
    
    
    (248
    )
    
    
    (1,819
    )Defense & Space Systems external sales
    
    
    51,394
    
    
    
    49,815
    
    
    
    47,562LXE
    
    
    123,140
    
    
    
    111,575
    
    
    
    101,075SATCOM
    
    
    51,353
    
    
    
    39,693
    
    
    
    44,736EMS Wireless
    
    
    84,146
    
    
    
    45,418
    
    
    
    51,381Other
    
    
    
    
    
    
    17
    
    
    
    (900
    )Total
    
    $
    310,033
    
    
    
    246,518
    
    
    
    243,854Operating income (loss):Defense & Space Systems
    
    $
    3,191
    
    
    
    2,614
    
    
    
    3,402LXE
    
    
    7,520
    
    
    
    7,262
    
    
    
    6,966SATCOM
    
    
    3,524
    
    
    
    1,713
    
    
    
    5,026EMS Wireless
    
    
    4,302
    
    
    
    (720
    )
    
    
    2,529Other
    
    
    
    
    
    
    (110
    )
    
    
    (1,054
    )Corporate
    
    
    (802
    )
    
    
    773
    
    
    
    (979
    )Total
    
    $
    17,735
    
    
    
    11,532
    
    
    
    15,890Non-operating income (expense), net of foreign exchange gain (loss):Defense & Space Systems
    
    $
    (4
    )
    
    
    (1
    )
    
    
    1LXE
    
    
    148
    
    
    
    89
    
    
    
    270SATCOM
    
    
    (203
    )
    
    
    (171
    )
    
    
    (627
    )EMS Wireless
    
    
    142
    
    
    
    (18
    )
    
    
    459Other
    
    
    
    
    
    
    873
    
    
    
    409Corporate
    
    
    359
    
    
    
    108
    
    
    
    (297
    )Total
    
    $
    442
    
    
    
    880
    
    
    
    215Interest expense:Defense & Space Systems
    
    $
    (372
    )
    
    
    (450
    )
    
    
    (417
    )LXE
    
    
    (474
    )
    
    
    (439
    )
    
    
    (430
    )SATCOM
    
    
    (264
    )
    
    
    (93
    )
    
    
    (87
    )EMS Wireless
    
    
    (714
    )
    
    
    (505
    )
    
    
    (389
    )Corporate
    
    
    (2,194
    )
    
    
    (809
    )
    
    
    (600
    )Total
    
    $
    (4,018
    )
    
    
    (2,296
    )
    
    
    (1,923
    )Income tax (expense) benefit:Defense & Space Systems
    
    $
    (1,070
    )
    
    
    (824
    )
    
    
    (1,169
    )LXE
    
    
    (2,734
    )
    
    
    (2,626
    )
    
    
    (2,587
    )SATCOM
    
    
    443
    
    
    
    326
    
    
    
    (562
    )EMS Wireless
    
    
    (1,417
    )
    
    
    473
    
    
    
    (987
    )Other
    
    
    (239
    )
    
    
    (435
    )
    
    
    65Corporate
    
    
    281
    
    
    
    263
    
    
    
    1,276Total
    
    $
    (4,736
    )
    
    
    (2,823
    )
    
    
    (3,964
    )
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Years ended December 312005
    
    
    2004
    
    
    2003Net earnings (loss):Defense & Space Systems
    
    $
    1,745
    
    
    
    1,339
    
    
    
    1,817LXE
    
    
    4,460
    
    
    
    4,286
    
    
    
    4,219SATCOM
    
    
    3,500
    
    
    
    1,775
    
    
    
    3,750EMS Wireless
    
    
    2,313
    
    
    
    (770
    )
    
    
    1,612Other
    
    
    (239
    )
    
    
    328
    
    
    
    (580
    )Corporate
    
    
    (2,356
    )
    
    
    335
    
    
    
    (600
    )Earnings from continuing operations
    
    
    9,423
    
    
    
    7,293
    
    
    
    10,218Discontinued operations, net
    
    
    (20,866
    )
    
    
    (7,101
    )
    
    
    (47,610
    )Total
    
    $
    (11,443
    )
    
    
    192
    
    
    
    (37,392
    )Capital expenditures:Defense & Space Systems
    
    $
    2,735
    
    
    
    1,278
    
    
    
    1,965LXE
    
    
    2,243
    
    
    
    2,677
    
    
    
    1,449SATCOM
    
    
    2,743
    
    
    
    353
    
    
    
    1,788EMS Wireless
    
    
    927
    
    
    
    317
    
    
    
    890Corporate
    
    
    1,381
    
    
    
    713
    
    
    
    865Total
    
    $
    10,029
    
    
    
    5,338
    
    
    
    6,957Depreciation and amortization:Defense & Space Systems
    
    $
    2,631
    
    
    
    2,599
    
    
    
    2,630LXE
    
    
    2,419
    
    
    
    2,150
    
    
    
    2,551SATCOM
    
    
    2,832
    
    
    
    1,961
    
    
    
    1,697EMS Wireless
    
    
    819
    
    
    
    863
    
    
    
    930Other
    
    
    
    
    
    
    4
    
    
    
    15Corporate
    
    
    1,041
    
    
    
    581
    
    
    
    265Total
    
    $
    9,742
    
    
    
    8,158
    
    
    
    8,088
 As of December 312005
    
    
    2004Assets:Defense & Space Systems
    
    $
    41,321
    
    
    
    42,067LXE
    
    
    71,759
    
    
    
    70,450SATCOM
    
    
    43,996
    
    
    
    35,774EMS Wireless
    
    
    42,452
    
    
    
    27,884Other
    
    
    8,395
    
    
    
    6,688Assets held for sale
    
    
    6,732
    
    
    
    64,710Corporate
    
    
    4,805
    
    
    
    7,505Total
    
    $
    219,460
    
    
    
    255,078Goodwill:LXE
    
    $
    9,982
    
    
    
    9,982EMS Wireless
    
    
    3,544
    
    
    
    3,544Total
    
    $
    13,526
    
    
    
    13,526
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Years ended December 312005
    
    
    2004
    
    
    2003Net sales to customers in the following countries:United States
    
    $
    229,289
    
    
    
    158,341
    
    
    
    157,946United Kingdom
    
    
    14,171
    
    
    
    16,292
    
    
    
    16,327Other foreign countries
    
    
    66,573
    
    
    
    71,885
    
    
    
    69,582Total
    
    $
    310,033
    
    
    
    246,518
    
    
    
    243,855
 As of December 312005
    
    
    2004Long-lived assets are located in the following countries:United States
    
    $
    27,522
    
    
    
    26,599Canada
    
    
    8,508
    
    
    
    7,482Other foreign countries
    
    
    1,548
    
    
    
    1,378Total
    
    $
    37,578
    
    
    
    35,459
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2005
    
    
    2004
    
    
    2003Net asset (liability) for derivatives at January 1
    
    $
    (128
    )
    
    
    99
    
    
    
    (253
    )Changes in consolidated statements of operations:Sales:Loss in value of embedded derivatives
    
    
    (13
    )
    
    
    (3
    )
    
    
    (2
    )Foreign exchange gain (loss):Gain in value of derivative instruments that do
not qualify as hedging instruments
    
    
    269
    
    
    
    124
    
    
    
    787Matured foreign exchange contracts
    
    
    (132
    )
    
    
    (348
    )
    
    
    (433
    )Net consolidated statements of operations gain
(loss) from changes in value of derivative
instruments
    
    
    124
    
    
    
    (227
    )
    
    
    352Net asset (liability) for derivatives at December 31
    
    $
    (4
    )
    
    
    (128
    )
    
    
    99
   NotionalAmountEuros (sell for U.S. dollars)
    
    2,600 EurosU.S. (sell for Canadian dollars)
    
    9,500 USDAustralian dollars (sell for U.S. dollars)
    
    1,200 AUDBritish pounds (sell for U.S. dollars)
    
    140 GBP
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YEARS
ENDED DECEMBER 312005
    
    
    2004
    
    
    2003Balance at beginning of the year
    
    $
    2,088
    
    
    
    1,826
    
    
    
    1,249Accruals for warranties issued during the year
    
    
    4,073
    
    
    
    2,528
    
    
    
    1,144Settlements made during the year
    
    
    (2,792
    )
    
    
    (2,266
    )
    
    
    (567
    )Balance at end of year
    
    $
    3,369
    
    
    
    2,088
    
    
    
    1,826
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2005 Quarters endedApril 2
    
    
    July 2
    
    
    October 1
    
    
    December 31Net sales
    
    $
    60,184
    
    
    
    81,559
    
    
    
    84,419
    
    
    
    83,871Operating income (loss)
    
    
    (231
    )
    
    
    6,961
    
    
    
    5,931
    
    
    
    5,074Earnings (loss) from
continuing operations
    
    
    (696
    )
    
    
    3,903
    
    
    
    3,304
    
    
    
    2,912Earnings (loss) from
discontinued operations
    
    
    392
    
    
    
    (9,551
    )
    
    
    (4,305
    )
    
    
    (7,402
    )Net loss
    
    
    (304
    )
    
    
    (5,648
    )
    
    
    (1,001
    )
    
    
    (4,490
    )Net earnings (loss) per share:Basic:Continuing operations
    
    $
    (0.06
    )
    
    
    0.35
    
    
    
    0.30
    
    
    
    0.26Discontinued operations
    
    
    0.03
    
    
    
    (0.86
    )
    
    
    (0.39
    )
    
    
    (0.66
    )Net loss
    
    $
    (0.03
    )
    
    
    (0.51
    )
    
    
    (0.09
    )
    
    
    (0.40
    )Diluted:Continuing operations
    
    $
    (0.06
    )
    
    
    0.35
    
    
    
    0.29
    
    
    
    0.26Discontinued operations
    
    
    0.03
    
    
    
    (0.85
    )
    
    
    (0.38
    )
    
    
    (0.66
    )Net loss
    
    $
    (0.03
    )
    
    
    (0.50
    )
    
    
    (0.09
    )
    
    
    (0.40
    )
 2004 Quarters endedApril 3
    
    
    July 3
    
    
    October 2
    
    
    December 31Net sales
    
    $
    60,026
    
    
    
    62,073
    
    
    
    57,634
    
    
    
    66,785Operating income
    
    
    2,410
    
    
    
    2,958
    
    
    
    1,806
    
    
    
    4,358Earnings from continuing operations
    
    
    2,071
    
    
    
    1,740
    
    
    
    1,012
    
    
    
    2,470Earnings (loss) from discontinued
operations
    
    
    147
    
    
    
    (1,962
    )
    
    
    (2,728
    )
    
    
    (2,558
    )Net earnings (loss)
    
    
    2,218
    
    
    
    (222
    )
    
    
    (1,716
    )
    
    
    (88
    )Net earnings (loss) per share:Basic:Continuing operations
    
    $
    0.19
    
    
    
    0.16
    
    
    
    0.09
    
    
    
    0.22Discontinued operations
    
    
    0.01
    
    
    
    (0.18
    )
    
    
    (0.24
    )
    
    
    (0.23
    )Net earnings (loss)
    
    $
    0.20
    
    
    
    (0.02
    )
    
    
    (0.15
    )
    
    
    (0.01
    )Diluted:Continuing operations
    
    $
    0.19
    
    
    
    0.15
    
    
    
    0.09
    
    
    
    0.22Discontinued operations
    
    
    0.01
    
    
    
    (0.17
    )
    
    
    (0.24
    )
    
    
    (0.23
    )Net earnings (loss)
    
    $
    0.20
    
    
    
    (0.02
    )
    
    
    (0.15
    )
    
    
    (0.01
    )
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