UNITED STATES

Form 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2004

Commission file number 0-6072

EMS TECHNOLOGIES, INC.

     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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ]

     The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on May 7, 2004:

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.

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

EMS Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)

See accompanying notes to interim consolidated financial statements.

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EMS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(in thousands)

See accompanying notes to interim consolidated financial statements.

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EMS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited), continued
(in thousands, except share data)

See accompanying notes to interim consolidated financial statements.

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EMS Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

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EMS Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
April 3, 2004 and March 29, 2003

1. Basis of Presentation

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”). In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain prior period financial statement balances have been reclassified to conform to the current period’s classification. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company has classified the revenues, expenses and related assets and liabilities of its Space & Technology/Montreal division, which are currently held for sale, as discontinued operations for all periods presented in the accompanying consolidated financial statements.

— 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.

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The Company has adopted SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” including the interim reporting requirements. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value method to measure stock-based compensation (in thousands, except net earnings per share):

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 are accounted for as discontinued operations, and the net assets held for sale were written down to their estimated fair value upon disposal. 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%. A 2% change in the discount rate would cause a change in the valuation of approximately $1.5 million.

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The results of these discontinued operations for the first quarter of 2004 and 2003 were as follows (in thousands):

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 April 3, 2004 and December 31, 2003 (in thousands):

3. 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 the approval,

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reporting and monitoring of derivative financial instrument activities. The Company does not enter into derivative financial instruments for trading or speculative purposes.

SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, requires the Company to recognize all derivatives on the consolidated balance sheet at fair value. Under SFAS No. 133, certain of the Company’s routine long-term contracts 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. Changes in the fair values of these embedded derivatives are included in current earnings.

For continuing operations, the derivative activity as reported in the Company’s consolidated financial statements during the first quarters ended 2004 and 2003 was (in thousands):

For discontinued operations, the net liability for derivatives at April 3, 2004 was $25,000 compared to a net asset of $784,000 at March 29, 2003.

All of the foreign currency contracts currently in place will expire by the end of 2004.

4. 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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The Company has granted stock options that are potentially dilutive to basic earnings per share, summarized as follows (shares in thousands):

For each earnings per share calculation reported for the first quarters of 2004 and 2003, the numerators were the same as reported in the consolidated statements of operations. Following is a reconciliation of the denominators for basic and diluted earnings per share calculations for the first quarters ended April 3, 2004 and March 29, 2003 (in thousands):

5. Comprehensive Income

Following is a summary of comprehensive income (in thousands):

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6. Trade Accounts Receivable

Trade accounts receivable include the following (in thousands):

7. Inventories

Inventories include the following (in thousands):

8. Interim Segment Disclosures

The Company has 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 income.

The Space & Technology segment manufactures custom-designed, highly engineered hardware for use in advanced communications, primarily for the defense market. Orders in this segment 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. As a result of the planned sale of the Space & Technology/Montreal division, the results of operations and all other financial information related to the Space & Technology/Montreal division is reported in discontinued operations. The Space & Technology segment reflects the results of operations and all other financial information related to the Space & Technology/Atlanta business.

The LXE segment manufactures rugged mobile computers and wireless local area network (“WLAN”) products for use throughout the supply chain. 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 combine their products and services with the Company’s hardware for delivery to end-users.

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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 generally 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 most orders is generally just a few days, and revenues are recognized upon shipment of hardware. The SATCOM segment also has orders that involve development and production schedules that can extend a year or more, and these revenues are recognized under percentage-of-completion long-term contract accounting. Hardware is marketed to third parties that combine 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.

Following is a summary of the Company’s interim segment data (in thousands):

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