EMS Technologies, Inc. (Nasdaq: ELMG) today reported first
quarter revenues of $92.3 million and net earnings of $2.3 million,
or $0.15 cents per share, on a non-GAAP reporting basis that
excludes acquisition-related charges. For the quarter, revenues
grew by 22 percent compared with Q1 2008. EBITDA excluding
acquisition-related charges (�Adjusted EBITDA�) was $8.0 million,
up 10 percent from the same period in 2008. These results included
a $5.0 million operating loss from the Company�s LXE mobile
logistics business, which was affected by a weak economy,
especially in North America. The acquisition-related charges
excluded from the non-GAAP results totaled $.35 per share,
primarily associated with the adoption of FASB Statement No. 141(R)
and a foreign currency exchange adjustment related to the funding
of the Satamatics acquisition. Including these acquisition-related
charges, the resulting net loss on a GAAP basis was $3.0 million
for the quarter, or $0.20 cents per share.
First quarter results were led by the Communications &
Tracking (formerly Satellite Communications) and Defense &
Space segments. Paul Domorski, president and chief executive
officer, commented, �During the first quarter, EMS benefited from
momentum in our in-flight connectivity markets and very strong
revenues in our defense business. As a result, both the
Communications & Tracking and the Defense & Space segments
achieved record profits for the first quarter. Our LXE mobile
logistics business struggled with the increasingly challenging
economic conditions affecting auto-identification markets
worldwide, and we took further actions to lower our cost base and
improve our efficiency.�
IFC Orders, SwiftBroadband Rollout Lead Communications &
Tracking Revenues
Communications & Tracking comprises all of the Company�s
aeronautical and asset tracking products, including EMS SATCOM and
our recently acquired product lines, EMS Formation, EMS Sky Connect
and EMS Satamatics. This segment accounted for approximately half
of EMS�s consolidated revenues in the quarter and generated $4.3
million of operating income, as well as $8.5 million of Adjusted
EBITDA for the quarter. It was another strong quarter for EMS
SATCOM products, and the newly-acquired product lines in the
Communications & Tracking segment performed exceptionally
well.
The Company�s in-flight connectivity opportunities are
expanding, with new contract awards in the first quarter for
connectivity and rugged data storage hardware by service providers
Aircell and LiveTV. Aircell relies on EMS for all of its wireless
access point and network server equipment, as it continues with
fleet-wide deployments of its GoGo� inflight Internet service to
several U.S. airlines. LiveTV selected EMS to provide rugged data
storage for up to 1,000 aircraft deploying LiveTV�s Kiteline
connectivity product.
In the business aviation market for SwiftBroadband and other
Inmarsat service, sales were robust for the CNX airborne network
router/accelerator product line, which complements the family of
voice and high-speed data terminals. In addition, shipments of
EMS�s latest Iridium-based product � the Mission Management Unit-2
(�MMU-2�) � began in the first quarter. The MMU-2 is the market�s
smallest and most fully-featured integrated dialer and
text-messaging terminal for the cockpit, allowing voice and text
communication to or from the aircraft.
Machine-to-Machine (�M2M�) is EMS�s newest satellite-based
application. EMS launched its ship-based Long-Range Identification
and Tracking (�LRIT�) system, which allows the shore-side to track
the position of a maritime vessel. LRIT complements EMS�s Ocean
Alert system, currently deployed on 5,000 ships worldwide,
equipping them with a distress alert that automatically transmits
every half hour.
�Demand for our aero communications and tracking systems is
resilient. The overall in-flight connectivity market for aircraft,
utilizing satellite or air-to-ground links, remains extremely
promising, with almost 40 airlines worldwide engaged in various
stages of IFC deployment. In addition, our M2M products for ships
are gaining in visibility with the increasing security threats to
shipping routes,� Domorski said.
Records for Revenues and Operating Income at Defense &
Space
EMS�s Defense & Space business experienced growth across the
markets for space, communications-on-the-move, and radar. Revenues
were up 74 percent versus Q1 2008, and operating income was an
all-time quarterly record of $3.0 million for this segment. Order
backlog was also a new record at $117.8 million. First-quarter
Adjusted EBITDA was $3.8 million.
Contributing to exceptional Q1 revenue performance was the
Company�s work on the B-2 Bomber�s new extremely high frequency
(EHF) satellite communications system. An international commercial
anti-jam project and two space programs also provided an important
contribution to Q1 revenues. New contract wins during the quarter
included radar applications, in which EMS has a heritage position
on several classified defense programs.
EMS continues to monitor the changing landscape for defense and
space priorities. Despite uncertainties about the longer-term
budgets of the U.S. Department of Defense, current analysis of
emerging defense budget opportunities appears to be quite positive
for the Company.
�The Defense & Space business is moving toward higher level
systems and production work. The B-2 program exemplifies the type
of multi-year production work that we are successfully pursuing,�
Domorski said.
Cost Improvements Made in LXE Mobile Logistics Business to
Cope With Market Dynamics
Revenues and earnings were far below earlier expectations in the
Company�s LXE mobile logistics business, which encountered
significant softening in the North American market late in the
first quarter. As a result, the Company expanded its restructuring
plan, resulting in a first quarter charge of $1.1 million; however,
this and other cost reduction efforts are expected to contribute
approximately $6 million in annualized savings.
During the quarter, the LXE business extended globally its
strategy to expand sales through distributors, reaching new channel
agreements for Latin America, Europe and Asia. The Company�s
initial moves into distribution sales last year were highly
complementary to the present direct sales efforts, adding new
customers for LXE products.
LXE recently received an order valued at more than $2 million
from Autovision, the leader for car inspection in France. The MX-7
handheld terminals will be used in 1,000 control centers throughout
France. Significant North American orders that had been expected in
Q1 were affected by customer delays, with a serious effect on the
first quarter results. The Company expects that many of these
orders are likely to close during 2009, but more specific timing is
unpredictable in the current economic conditions.
�In a tough quarter, the LXE business took steps to improve its
cost structure and enhance its products. An increased focus on the
indirect channel should expand this business�s opportunities,�
Domorski said.
Reiterating Guidance
Domorski concluded, �The increased adoption of Wi-Fi service on
major domestic fleets bodes well for EMS, as does the Company�s
favorable position on defense programs with significant potential
over the next several years. Although the market for satellite
communications on commercial, private and military aircraft has not
been completely immune from the effects of the economic downturn,
we also believe that this market will remain a superior
performer.
�Our various businesses give the Company multiple paths to
success. Our future results are not totally dependent on one
specific strategy. We believe the overall success of our
Communications & Tracking and Defense & Space segments will
help offset the current challenges faced by our LXE business, as it
executes its restructuring. As a result, we reiterate our recent
guidance that earnings for 2009 are expected to be in the range of
$1.35 - $1.65 per share, excluding acquisition-related
charges.�
Non-GAAP Financial Measures
The Company has presented its net earnings and earnings per
share on non-GAAP basis, excluding acquisition-related charges. The
Company believes that exclusion of these charges provides useful
information about the results of its ongoing activities that is
more comparable to results for prior fiscal periods and that is not
subject to volatility arising from the timing and cost of
acquisition activity.
These charges include typical services required to complete an
acquisition, such as legal advice, due diligence and asset
valuation, which are now required to be expensed under the
newly-effective accounting standard FASB Statement No. 141(R).
Another excluded item is an acquisition-related foreign exchange
adjustment associated with the funding of the Satamatics
transaction.
The Company does not expect additional significant acquisition
activity in 2009, but if there is further such activity, its GAAP
earnings would be reduced by the related acquisition costs. In
addition, FASB Statement No. 141(R) requires that the Company
record the earn-out liability on one of its recent acquisitions at
estimated fair value on a discounted basis; accretion of that
discounted liability, as well as any changes in its estimated fair
value, must be reflected in the income statement in future
quarters, which will affect GAAP earnings through 2010.
About EMS Technologies,
Inc.
EMS Technologies, Inc. (Nasdaq: ELMG) is a leading innovator in
the design, manufacture, and marketing of wireless communications
technologies addressing the enterprise mobility,
communications-on-the-move and in-flight connectivity markets for
both the commercial and government industries. EMS focuses on the
needs of the mobile information user and the increasing demand for
wireless broadband communications. EMS products and services enable
communications across a variety of coverage areas, ranging from
global, to regional, to within a single facility. EMS has three
operating segments:
- Communications & Tracking
supplies a broad array of terminals and antennas that enable
end-users in aircraft and other mobile platforms to communicate
over satellite and air-to-ground links; this segment (formerly
Satellite Communications) was renamed in 2009 to reflect recent
acquisitions and their highly complementary connectivity products,
including aeronautical wi-fi communications and data storage,
aeronautical voice and tracking, and satellite-based
machine-to-machine mobile communications;
- Defense & Space supplies
highly-engineered subsystems for defense electronics and
sophisticated satellite applications � from military
communications, radar, surveillance and countermeasures to
commercial high-definition television, satellite radio, and live TV
for innovative airlines; and
- LXE is a leading provider of
rugged terminals and wireless data networks used for logistics
applications such as distribution centers, warehouses and container
ports. LXE�s automatic identification and data capture products
serve mobile information users at over 7,500 sites worldwide.
For more information, visit EMS at www.ems-t.com.
There will be a conference
call at 9:30 AM Eastern time on Friday, May 1,2009 in which
the Company's management will discuss the financial results for the
first quarter of 2009. If you would like to participate in this
conference, please call 888-674-0222 (international
callers call 201-604-0498)
approximately 10 minutes before the call is scheduled to begin. A
taped replay of the conference call will also be available through
Friday, May 8, 2009 by dialing 888-346-3949 and entering: PIN
4505342#, selection 4, and confirmation 20090427199107#.
(international callers use 404-260-5385 and enter same
codes).
Statements contained in this press release regarding the
Company's expectations for its financial results for 2009, the
potential for various businesses and products, and the anticipated
results of the Company�s restructuring efforts in its LXE mobile
logistics business are forward-looking statements. Actual results
could differ from those statements as a result of a wide variety of
factors. Such factors include, but are not limited to�
- economic conditions in the U.S.
and abroad and their effect on capital spending in the Company's
principal markets;
- difficulty predicting the timing
of receipt of major customer orders, and the effect of customer
timing decisions on our 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;
- 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 currency
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 rates at which
our products are returned for repair or replacement under
warranty;
- customer response to new
products and services, and general conditions in our target markets
(such as logistics and space-based communications), and whether
these responses and conditions develop according to our
expectations;
- the success of certain of our
customers in marketing our line of high-speed commercial airline
communications products as a complementary offering with their own
lines of avionics products;
- the continued availability of
financing for aero-connectivity data communications systems;
- risk that the recent turmoil in
the credit markets may make it more difficult for some customers to
obtain financing and adversely affect their ability to pay, which
in turn could have an adverse impact on our business, operating
results, and financial condition;
- 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;
- the Company's ability to attract
and retain qualified senior management and other personnel,
particularly those with key technical skills;
- the increased potential for
asset impairment charges as unfavorable economic conditions might
affect the fair value of one or more of our business units;
- the potential effects of
Statement of Financial Accounting Standards No. 141(R), �Business
Combinations,� which requires, for acquisitions completed in 2009
and thereafter, that certain acquisition-related expenditures
should be accounted for as period expenses in the income statement,
and that the acquisition-date fair value will become the
measurement objective for all assets acquired and liabilities
assumed, resulting in potential unfavorable effects on the income
statement if there are subsequent changes in fair values of certain
assets and liabilities;
- the potential effects, on cash
and results of discontinued operations, of final resolution of
potential liabilities under warranties and representations made by
the Company, and obligations assumed by purchasers, in connection
with the Company�s dispositions of discontinued operations;
- 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; 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.
Further information concerning relevant factors and risks are
identified under the caption "Risk Factors" in the Company's Annual
Report on Form 10-K for the year ended December 31, 2008.
� � EMS Technologies, Inc. Consolidated Statements of Operations
(In millions, except per-share data) Unaudited � � � Q1 '09 Q1 '08
� Net sales $ 92.3 75.5 Cost of sales � 63.2 � 46.9 � Gross profit
29.1 28.6 Selling, general, & administrative 22.7 20.2 Research
& development 4.4 5.0 Acquisition-related charges � 3.9 � - �
Operating income (loss) (1.9 ) 3.4 Interest income & other 0.1
1.0 Interest expense (0.6 ) (0.4 ) Foreign exchange gain 0.8 0.1
Acquisition-related foreign exchange
adjustment
� (1.4 ) - � Earnings (loss) before taxes (3.0 ) 4.1 Income tax
benefit � - � 0.1 � Net earnings (loss) $ (3.0 ) 4.2 � Outstanding
shares 15.1 15.8 Earnings (loss) per share $ (0.20 ) 0.26 � � � �
Following is a reconciliation of our first quarter 2009 net
earnings (loss) and earnings (loss) per share to the non-GAAP
financial measures that exclude acquisition-related charges and an
acquisition-related foreign exchange adjustment: �
Netearnings(loss)
�
Earnings(loss)per share
�
� As reported $ (3.0 ) (0.20 ) Acquisition-related charges 3.9 0.26
Acquisition-related foreign exchange
adjustment
� 1.4 � 0.09 � As adjusted $ 2.3 � 0.15 � � � EMS Technologies,
Inc. Consolidated Condensed Balance Sheets (In millions) Unaudited
� � � � � � April 4
2009
� � � � Dec 31
2008
Assets Cash and cash equivalents $ 45.9 87.0 Trade accounts
receivable 68.9 65.8 Revenues in excess of billings
on long-term contracts
22.7 30.5 Inventories 46.8 35.7 Other current assets 17.6 13.8
Current assets 201.9 232.8 Net property, plant and equipment 45.5
40.6 Goodwill 84.7 31.4 Other assets
62.1
22.6 $ 394.2 327.4 � Liabilities and Shareholders' Equity Current
installments of long-term debt $ 1.3 1.3 Accounts payable 35.0 25.4
Other current liabilities 49.9 40.7 Current liabilities 86.2 67.4
Long-term debt, less current installments 42.8 9.3 Other
non-current liabilities 26.0 8.0 Shareholders' equity 239.2 242.7 $
394.2 327.4 � � EMS Technologies, Inc. Segment Data (In millions)
Unaudited � � � � � � � � � � � Quarters Ended April 4 March 29
2009 � 2008 �
Net sales Communications & Tracking $ 41.4
25.8 Defense & Space 26.9 15.5 LXE 24.0 � 34.2 � Total $ 92.3 �
75.5 � �
Operating income (loss) Communications &
Tracking $ 4.3 3.1 Defense & Space 3.0 0.5 LXE (5.0 ) 0.5
Corporate and Other (0.3 ) (0.7 ) Acquisition-related charges (3.9
) - � Total $ (1.9 ) 3.4 � �
Adjusted EBITDA Communications
& Tracking $ 8.5 4.7 Defense & Space 3.8 1.2 LXE (4.1 ) 1.4
Corporate and Other (0.2 ) - � Total $ 8.0 � 7.3 � �
Reconciliation of Non-GAAP Financial
Information
For the Quarter Ended April 4,
2009
Unaudited
This press release contains information regarding our net
earnings (loss) and earnings (loss) per share, excluding
acquisition-related charges and an acquisition-related foreign
exchange adjustment, and earnings before interest expense, income
taxes, depreciation and amortization and excluding the
acquisition-related charges and acquisition-related foreign
exchange adjustment (�Adjusted EBITDA�). The Company believes that
earnings that are based on these non-GAAP financial measures
provide useful information to investors, lenders and financial
analysts because�(i) these measures are more comparable with the
results for prior fiscal periods, and (ii) by excluding the
potential volatility related to the timing and extent of
non-operating activities, such as acquisitions or revisions of the
estimated value of post-closing earn-outs, such results provide a
useful means of evaluating the success of the Company's ongoing
operating activities. Also, the Company uses this information,
together with other appropriate metrics, to set goals for and
measure the performance of its operating businesses, to determine
management�s incentive compensation, and to assess the Company�s
compliance with debt covenants. Management further considers
Adjusted EBITDA an important indicator of operational strengths and
performance of its businesses. EBITDA measures are used
historically by investors, lenders and financial analysts to
estimate the value of a company, to make informed investment
decisions and evaluate performance. Management believes that
Adjusted EBITDA facilitates comparisons of our results of
operations with those of companies having different capital
structures. In addition, a measure similar to Adjusted EBITDA is a
component of our bank lending agreement, which requires certain
levels of Adjusted EBITDA to be achieved by the Company. This
information should not be considered in isolation or in lieu of the
Company�s operating and other financial information determined in
accordance with GAAP. In addition, because EBITDA and adjustments
to EBITDA are not determined consistently by all entities, Adjusted
EBITDA as presented may not be comparable to similarly titled
measures of other companies.
Following is a reconciliation of our first quarter 2009 net
earnings (loss) and earnings (loss) per share to the non-GAAP
financial measures that exclude acquisition-related charges and an
acquisition-related foreign exchange adjustment (in millions,
except per share data):
� � � � � � � �
Netearnings(loss)
�
Earnings(loss)per share
�
� As reported $ (3.0 ) (0.20 ) Acquisition-related charges 3.9 0.26
Acquisition-related foreign exchange adjustment � 1.4 � 0.09 � As
adjusted $ 2.3 � 0.15 � �
Following is a reconciliation of net earnings (loss) to Adjusted
EBITDA, by segment, for the three months ended April 4, 2009 and
March 29, 2008 (in millions):
� � � � � � � � � � � � � � �
C&T
D&S LXE
Corp andOther
Total Three Months Ended April 4, 2009
Net earnings (loss) $ 5.2 1.8 (3.2 ) (6.8 ) (3.0 ) Income tax
expense (benefit) - 1.1 (1.9 ) 0.8 - Interest expense - - 0.1 0.5
0.6 Depreciation and amortization 3.3 0.9 0.9 - 5.1
Acquisition-related charges - - - 3.9 3.9 Acquisition-related
foreign exchange adjustment � - - - � 1.4 � 1.4 � Adjusted EBITDA �
8.5 3.8 (4.1 ) (0.2 ) 8.0 � � �
Three Months Ended March 29,
2008 Net earnings (loss) 3.4 0.4 0.3 0.1 4.2 Income tax
expense (benefit) - 0.2 0.1 (0.4 ) (0.1 ) Interest expense - - 0.1
0.3 0.4 Depreciation and amortization � 1.3 0.6 0.9 � - � 2.8 �
Adjusted EBITDA � 4.7 1.2 1.4 � - � 7.3 �
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