UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended ~~April~~July 2, 2011

Commission file number 0-6072

EMS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Georgia		58-1035424
(State or other jurisdiction of incorporation or		(IRS Employer ID Number)
(State or other jurisdiction of incorporation or organization)		(IRS Employer ID Number)
organization)
660 Engineering Drive, Norcross, Georgia		30092
(Address of principal executive offices)		(Zip Code)

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

Registrant’s Telephone Number, Including Area Code: (770) 263-9200

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oþ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on ~~May~~August 65, 2011:

Class		Number of Shares
Common Stock, $.10 par value		15,340,186
Common Stock, $0.10 par value		15,551,048

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION		2
Item 1. Financial Statements		2
Consolidated Statements of Operations (unaudited)		2
Consolidated Balance Sheets (unaudited)		3
Consolidated Statements of Cash Flows (unaudited)		5
Notes to Consolidated Financial Statements (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1618
Item 3. Quantitative and Qualitative Disclosures about Market Risk		2733
Item 4. Controls and Procedures		3035
PART II — OTHER INFORMATION		3136
Item 1A. Risk Factors		3136
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3237
Item 6. Exhibits		3338
SIGNATURES		3439
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I

FINANCIAL INFORMATION


Item 1.		Financial Statements

EMS Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	April 2			April 3
	July 2			July 3			July 2			July 3
	2011			2010			2011			2010
Product net sales	$	7075,~~997~~567			6571,~~235~~879			146,563			138,080
Service net sales		1415,~~040~~472			1716,~~667~~598			29,513			33,299
Net sales		8591,~~037~~039			8288,~~902~~477			176,076			171,379
Product cost of sales		4653,~~746~~419			4348,~~777~~066			100,165			93,311
Service cost of sales		67,~~814~~828			98,~~505~~054			14,642			16,091
Cost of sales		5361,~~560~~247			5356,~~282~~120			114,807			109,402
Selling, general and administrative expenses		2223,~~234~~987			2122,~~674~~128			45,501			43,801
Research and development expenses		56,~~674~~921			54,~~421~~709			12,595			10,130
Impairment loss on goodwill related charges		—			384
Proxy contest and merger-related costs		6,114			—			6,834			—
Acquisition-related items		—			217
Impairment loss on goodwill related charges		—			—			—			384
Operating income		3,569			1,924
Acquisition-related items		—			346			—			563
Interest income		112			181
Operating (loss) income		(7,230	)		5,174			(3,661	)		7,099
Interest expense		(513	)		(477	)
Interest income		110			101			222			281
Foreign exchange loss, net		(179	)		(693	)
Interest expense		(557	)		(542	)		(1,070	)		(1,019	)
Earnings before income taxes		2,989			935
Foreign exchange (loss) gain, net		(104	)		244			(283	)		(449	)
Income tax expense		595			344
(Loss) earnings before income taxes		(7,781	)		4,977			(4,792	)		5,912
Net earnings	$	2,394			591
Income tax (benefit) expense		(1,337	)		1,109			(742	)		1,453
Net earnings per share:
Net (loss) earnings	$	(6,444	)		3,868			(4,050	)		4,459
Basic	$	0.16			0.04
Net (loss) earnings per share:
Diluted		0.16			0.04
Basic	$	(0.42	)		0.25			(0.27	)		0.29
Weighted-average number of common shares outstanding:
Diluted		(0.42	)		0.25			(0.27	)		0.29
Basic		15,230			15,179
Weighted-average number of common shares outstanding:
Diluted		15,356			15,206
Basic		15,304			15,191			15,267			15,185
Diluted		15,304			15,230			15,267			15,218

See accompanying notes to interim unaudited consolidated financial statements.

EMS Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(in thousands)

	April 2		December 31
	July 2		December 31
	2011		2010
ASSETS
Current assets:
Cash and cash equivalents	$	7172,~~504~~847		55,938
Trade accounts receivable, net of allowance for doubtful accounts of $1,171 in 2011 and $1,389 in 2010		64,358		68,691
Trade accounts receivable, net of allowance for doubtful accounts of $1,184 in 2011 and $1,389 in 2010		63,608		68,691
Costs and estimated earnings in excess of billings on long-term contracts		2124,~~191~~247		21,980
Inventories		4548,~~179~~731		41,649
Deferred income taxes		32,~~896~~317		3,891
Other current assets		8,~~669~~228		7,319
Total current assets		~~214~~219,~~797~~978		199,468
Property, plant and equipment:
Land		1,150		1,150
Buildings and leasehold improvements		19,~~319~~463		19,115
Machinery and equipment		~~121~~123,~~441~~086		117,855
Furniture and fixtures		1011,~~967~~019		10,850
Total property, plant and equipment		~~152~~154,~~877~~718		148,970
Less accumulated depreciation		~~104~~106,~~249~~370		100,587
Net property, plant and equipment		48,~~628~~348		48,383
Deferred income taxes		1112,~~850~~930		11,845
Goodwill		60,~~548~~554		60,474
Other intangible assets, net of accumulated amortization of $30,431 in 2011 and $28,079 in 2010		39,465		41,319
Other intangible assets, net of accumulated amortization of $32,510 in 2011 and $28,079 in 2010		37,682		41,319
Costs and estimated earnings in excess of billings on long-term contracts		108,~~169~~538		8,611
Other assets		2,898		2,844
Total assets	$	~~388~~390,~~355~~928		372,944

See accompanying notes to interim unaudited consolidated financial statements.

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

	April 2		December 31
	July 2		December 31
	2011		2010
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	1,~~530~~559		1,496
Accounts payable		3035,~~657~~135		24,979
Billings in excess of contract costs and estimated earnings on long-term contracts		86,~~767~~293		8,593
Accrued compensation and related costs		1113,~~923~~697		20,626
Deferred revenue		11,~~045~~130		10,897
Other current liabilities		78,~~768~~826		6,946
Total current liabilities		7176,~~690~~640		73,537
Long-term debt, excluding current installments		3840,~~011~~109		27,476
Deferred income taxes		31,~~748~~164		4,859
Other liabilities		11,~~106~~711		10,052
Total liabilities		~~124~~129,~~555~~624		115,924
Shareholders’ equity:
Preferred stock of $1.00 par value per share; Authorized 10,000 shares; none issued		—		—
Common stock of $0.10 par value per share; Authorized 75,000 shares; issued and outstanding 15,336 in 2011 and 15,311 in 2010		1,534		1,531
Common stock of $0.10 par value per share; Authorized 75,000 shares; issued and outstanding 15,514 in 2011 and 15,311 in 2010		1,551		1,531
Additional paid-in capital		~~138~~141,~~912~~727		138,138
Accumulated other comprehensive income — foreign currency translation adjustment		1314,~~507~~623		9,898
Retained earnings		~~109~~103,~~847~~403		107,453
Total shareholders’ equity		~~263~~261,~~800~~304		257,020
Commitments and contingencies
Total liabilities and shareholders’ equity	$	~~388~~390,~~355~~928		372,944

See accompanying notes to interim unaudited consolidated financial statements.

EMS Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended
	Six Months Ended
	April 2			April 3
	July 2			July 3
	2011			2010
Cash flows from operating activities:
Net earnings	$	2,394			591
Net (loss) earnings	$	(4,050	)		4,459
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		49,~~836~~861			59,~~040~~819
Deferred income taxes		(13,~~117~~191	)		—(119	)
Stock-based compensation expense		~~479~~992			~~400~~885
Change in fair value of contingent consideration liability		—			~~217~~304
Payment for acquisition of business under contingent consideration arrangement		(325	)		—
Excess tax benefits from stock-based compensation		(130	)		—
Changes in operating assets and liabilities, net of effects of acquisitions:
Payment for acquisition of business under contingent consideration arrangement		(325	)		(1,248	)
Trade accounts receivable		5,605			327
Changes in operating assets and liabilities:
Costs and estimated earnings in excess of billings on long-term contracts		(343	)		(1,276	)
Trade accounts receivable		6,742			(16,503	)
Billings in excess of costs and estimated earnings on long-term contracts		172			805
Costs and estimated earnings in excess of billings on long-term contracts		(1,708	)		(545	)
Inventories		(2,373	)		(1,691	)
Billings in excess of costs and estimated earnings on long-term contracts		(2,304	)		3,035
Accounts payable		4,834			1,741
Inventories		(6,407	)		(6,112	)
Income taxes		972			(467	)
Accounts payable		9,897			4,105
Accrued compensation and retirement costs		(8,939	)		501
Income taxes		1,596			316
Deferred revenue		840			2,043
Accrued compensation and retirement costs		(7,244	)		459
Other		(764	)		(652	)
Deferred revenue		1,413			3,287
Net cash provided by operating activities		6,271			7,579
Other		85			4,041
Net cash provided by operating activities in continuing operations		5,227			6,183
Net cash used in operating activities in discontinued operations		—			(8,810	)
Net cash provided by (used in) operating activities		5,227			(2,627	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(25,~~601~~726	)		(13,~~787~~820	)
Proceeds from sales of assets		11356			1824
Net cash used in investing activities		(25,~~590~~370	)		(13,~~769~~796	)
Cash flows from financing activities:
Net borrowings under revolving credit facility		1113,~~000~~500			~~500~~12,000
Repayment of other debt		(~~432~~804	)		(~~340~~687	)
Deferred financing costs paid		—			(28	)
Payment for acquisition of business under contingent consideration arrangement		(626	)		—(5,952	)
Payments for repurchase and retirement of common shares		(68121	)		—(51	)
Proceeds from exercises of stock options		366			—
Excess tax benefits from stock-based compensation		130			—
Net cash provided by financing activities		10,240			132
Proceeds from exercises of stock options		2,738			13
Effect of changes in exchange rates on cash and cash equivalents		1,645			607
Net cash provided by financing activities		14,817			5,295
Net change in cash and cash equivalents		15,566			6,549
Effect of changes in exchange rates on cash and cash equivalents		2,235			(1,241	)
Net change in cash and cash equivalents		16,909			(2,369	)
Cash and cash equivalents at beginning of period		55,938			47,174
Cash and cash equivalents at end of period	$	7172,~~504~~847			5344,~~723~~805

See accompanying notes to interim unaudited consolidated financial statements.

EMS Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~April~~July 2, 2011 and ~~April~~July 3, 2010

1. Basis of Presentation

EMS Technologies, Inc. (“EMS”) designs, manufactures and markets products of wireless connectivity solutions over satellite and terrestrial networks. EMS keeps people and systems connected, wherever they are — on land, at sea, in the air or in space. EMS’s products and services are focused on the needs of the mobile information user, enabling universal mobility, visibility and intelligence.

The consolidated financial statements include the accounts of EMS Technologies, Inc. and its subsidiaries, each of which is a wholly owned subsidiary of EMS (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. There are no other entities controlled by the Company, either directly or indirectly. Certain reclassifications have been made to the 2010 consolidated financial statements to conform to the 2011 presentation.

The accompanying unaudited consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and are based on the Securities and Exchange Commission’s (“SEC”) Regulation S-X and its instructions to Form 10-Q. They do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring items, necessary to present fairly the financial condition, results of operations and cash flows for the interim periods presented. We have performed an evaluation of subsequent events through the date the financial statements were issued. These interim consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

—• Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reporting of revenue and expenses and gains and losses during the period. Actual future results could differ materially from those estimates.

The nature of the Company’s customer arrangements to design, develop and manufacture technologically advanced products may involve uncertainty related to the costs to complete overall projects and the timing of completion of the critical phases of the projects, particularly when the projects involve novel approaches and solutions and/or require sophisticated subsystems supplied or cooperatively developed by third parties. The accounting for such arrangement requires significant judgment regarding the ultimate amount to be realized from a revenue contract or the amount of costs to be reimbursed by customers under funded development projects, and the overall costs to be incurred. The consolidated financial results include management’s estimates of these aspects of such arrangements. Potential penalties under customer arrangements are reflected in the financial statements based on management’s assessment of the likelihood and amount of any such penalty. That assessment often requires significant judgment by management. Under certain arrangements it is reasonably possible that customers’ claims, including penalty provisions that may be contained within the arrangements, could result in revised estimates of amounts that are materially different than management’s current estimates of amounts to be realized from a revenue contract, costs to be incurred or amounts to be reimbursed under funded development projects in the near term.

—• Recently Adopted Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance amending and clarifying requirements for fair value measurements and disclosures in the Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures About Fair Value Measurements. The new guidance requires disclosure of transfers in and out of Level 1 and Level 2 and a reconciliation of all activity in Level 3. The guidance also requires detailed disaggregation disclosure for each class of assets and liabilities in all levels, and disclosures about inputs and valuation techniques for Level 2 and Level 3. The guidance was effective for the Company in the first quarter of 2010 and the disclosure reconciliation of all activity in Level 3 was effective for the Company in the first quarter of 2011. The adoption of ASU 2010-06 did not have a material impact on the Company’s consolidated financial statements.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures under FASB Accounting Standards CodificationTM (“ASC”) Topic 805, Business Combinations, to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after January 1, 2011. The adoption of ASU 2010-29 did not have a material impact on the Company’s consolidated financial statements for the three months ended April 2, 2011.

In ~~October~~December ~~2009~~2010, the FASB issued ~~two~~ASU ~~accounting~~2010-29, ~~standards~~Disclosure ~~updates~~of ~~that~~Supplementary ~~change~~Pro ~~the~~Forma ~~requirements for~~Information ~~recognizing~~for ~~revenue~~Business ~~for~~Combinations. ~~revenue~~The ~~arrangements~~amendments ~~with~~in ~~multiple~~this ~~elements.~~update ~~Both~~specify ~~updates~~that ~~were~~if ~~adopted~~a ~~by the~~public ~~Company~~entity onpresents comparative ~~January 1,~~financial ~~2011~~statements, onthe aentity ~~prospective~~should ~~basis.~~disclose ~~The~~revenue ~~effect~~and earnings of ~~adoption~~the ~~was~~combined entity ~~not~~as ~~material~~though to the ~~consolidated~~business ~~financial~~combination(s) ~~statements~~that ~~for~~occurred during the ~~three~~current ~~months~~year ~~ended~~had ~~April 2,~~occurred ~~2011. The Company does~~as ~~not~~of ~~currently~~the ~~anticipate~~beginning ~~that~~of the ~~adoption~~comparable ~~will~~prior ~~have~~annual areporting ~~material~~period ~~effect~~only. onThe ~~the~~amendments ~~consolidated~~also expand ~~financial~~the ~~statements~~supplemental ~~for~~pro ~~the~~forma ~~year~~disclosures ~~ending~~under ~~December 31~~FASB Accounting Standards CodificationTM (“ASC”) Topic 805, ~~2011~~Business Combinations, ~~since~~to ~~historically~~include a description of the ~~Company~~nature ~~has~~and ~~not~~amount of ~~had~~material, ~~significant~~nonrecurring ~~aggregate~~pro ~~deferrals~~forma ofadjustments ~~revenue~~directly ~~related~~attributable to ~~multiple-element~~the ~~arrangements~~business ~~for which~~combination ~~revenue~~included ~~would~~in bethe ~~recognized~~reported ~~earlier~~pro ~~under~~forma ~~the~~revenue ~~new~~and ~~ASUs~~earnings. ~~However,~~The ~~the~~amendments ~~actual~~in ~~effect~~this onupdate ~~the~~are ~~consolidated~~effective ~~financial~~prospectively ~~statements~~for ~~will~~business ~~depend~~combinations onfor which the ~~specific~~acquisition ~~types~~date ofis ~~multiple-element~~on or after ~~arrangements~~January 1, ~~into~~2011. ~~which~~The ~~the~~adoption ~~Company~~of ~~enters~~ASU in2010-29 ~~the~~did ~~future~~not ~~and~~have ~~the~~a ~~terms~~material ~~and~~impact ~~conditions~~on ~~contained~~the Company’s ~~therein~~consolidated financial statements.

In October 2009 the FASB issued two accounting standards updates that change the requirements for recognizing revenue for revenue arrangements with multiple elements. Both updates were adopted by the Company on January 1, 2011, on a prospective basis. The effect of adoption was not material to the Company’s consolidated financial statements for the three and six months ended July 2, 2011. The Company does not currently anticipate that the adoption will have a material effect on the consolidated financial statements for the year ending December 31, 2011, since historically the Company has not had significant aggregate deferrals of revenue related to multiple-element arrangements for which revenue would be recognized earlier under the new ASUs. However, the actual effect on the consolidated financial statements will depend on the specific types of multiple-element arrangements into which the Company enters in the future and the terms and conditions contained therein.

ASU 2009-13, Revenue Recognition — Multiple-Deliverable Revenue Arrangements, amends the accounting for revenue arrangements with multiple deliverables. Among other things, ASU 2009-13:

•

Eliminates the requirement for objective evidence of fair value of an undelivered item for treatment of the delivered item as a separate unit of accounting;

•

Requires use of the relative selling price method for allocating total consideration to elements of the arrangement instead of the relative-fair-value method or the residual method;

•

Allows the use of an estimated selling price for any element within the arrangement to allocate consideration to individual elements when vendor-specific objective evidence or other third party evidence of selling price do not exist; and

•

Expands the required disclosures.

ASU 2009-14, Software — Certain Revenue Arrangements That Include Software Elements, amends the guidance for revenue arrangements that contain tangible products and software elements. ASU 2009-14 redefines the scope of arrangements that fall within software revenue recognition guidance by specifically excluding tangible products that contain software components that function together to deliver the essential functionality of the tangible product. Such tangible products excluded from the requirements of software revenue recognition requirements under ASU 2009-14 would follow the revenue recognition requirements for other revenue arrangements, including the new requirements for multiple-deliverable arrangements contained in ASU 2009-13.

In multiple-element revenue arrangements into which the Company enters or that are materially modified after adoption of the new standards updates on January 1, 2011, the Company recognizes revenue separately for each separate unit of accounting per the guidance contained in the new standards updates. To recognize revenue for an element that has been delivered when other elements within the arrangement have not been delivered, the delivered element must be determined to be a separate unit of accounting. For a delivered item to qualify as a separate unit of accounting, it must have standalone value apart from the undelivered item. For arrangements with tangible products that contain software components that function together to deliver the essential functionality of the tangible product, these same separation criteria apply. For arrangements that include software that is more than incidental and that does not function together with a tangible product, the Company must also have vendor-specific objective evidence of fair value of the undelivered item for the delivered item to be considered a separate unit of accounting. When a delivered item is considered to be a separate unit of accounting, the amount of revenue recognized upon delivery (assuming all other revenue recognition criteria are met) is generally an allocation of the arrangement consideration based on the relative selling price of the delivered item to the aggregate standalone selling prices of all deliverables. The amount of revenue to be recognized for a delivered item is limited to the amount of consideration that is not contingent upon delivery of the other elements within the revenue arrangement. When a delivered item is not considered a separate unit of accounting, revenue is deferred and generally recognized as the undelivered item qualifies for revenue recognition.

In multiple-element revenue arrangements into which the Company entered prior to January 1, 2011, the Company recognizes revenue separately for each separate unit of accounting per the guidance that existed prior to the new standards updates. To recognize revenue for an element that has been delivered when other elements within the arrangement have not been delivered, the delivered element must be determined to be a separate unit of accounting. For a delivered item to qualify as a separate unit of accounting, it must have standalone value apart from the undelivered item, and there must be objective evidence of the fair value of the undelivered item. For arrangements that include software that is more than incidental, the undelivered item must have vendor-specific objective evidence of fair value. When a delivered item is considered to be a separate unit of accounting, the amount of revenue recognized upon delivery (assuming all other revenue recognition criteria were met) is generally an allocation of the arrangement consideration based on the relative fair value of the delivered item to the aggregate fair value of all deliverables. If the Company ~~can~~cannot ~~not~~ determine the fair value of the delivered item, the residual method is used to determine the amount of the arrangement consideration to allocate to the delivered item. When a delivered item is not considered a separate unit of accounting, revenue is deferred and generally recognized as the undelivered item qualifies for revenue recognition.

The following describes the primary multiple-element revenue arrangements into which the Company generally enters and certain provisions relevant to the accounting under the new accounting standards updates:

•

Certain arrangements require that the Company design and develop technology products to specifications provided by the customer and manufacture and deliver the technology products. Such arrangements may also include services. These arrangements generally do not fall under the guidelines of the new accounting standards updates, but are accounted for in accordance with specific accounting guidance for construction-type and production-type contracts for which specifications are provided by the customer, generally following the percentage-of-completion method of accounting. If an arrangement includes post-contract support, revenue for the support services is generally recognized on the straight-line basis over the period of support.

•

Other customer arrangements include the delivery of a standard product and a related service contract that provides warranty and product maintenance over periods ranging from one to three years. Generally, the products are considered a separate unit of accounting, and revenue is recognized upon delivery. The service contracts are accounted for as separately priced extended warranty and product maintenance contracts and the revenue is deferred based on the stated contract price and recognized in income on a straight-line basis over the contract period.

•

The Company also enters arrangements under which the Company delivers a standard product and one or more services, such as, installation, training certification, airtime and support. Under certain of these arrangements, the product and certain services are considered a single unit of accounting since the product does not have standalone value without the related services. Under such arrangements the revenue is recognized for that combined unit of accounting when the revenue recognition criteria are met for the services. In other arrangements, the product does have standalone value without the service, in which case the revenue is recognized when the recognition criteria are met for that unit of accounting. The arrangement consideration is allocated to the units of accounting based on the relative selling prices of each element on a standalone basis. The standalone selling prices for each element are determined based on the best available information for each element of the arrangement. Many of the Company’s products and services are sold in standalone transactions, in which case the Company uses the selling prices in those standalone sales transactions to comparable customers for the standalone selling prices. Such standalone sales are considered vendor specific objective evidence of selling price. For products and services for which the Company has no, or limited, standalone sales transactions, the Company estimates standalone selling price using a combination of the limited standalone sales, price lists, cost plus margins, standalone sales of similar products and stated contract prices.

2.• ~~Goodwill~~Recently ~~and~~Issued ~~Other~~Accounting ~~Intangible~~Pronouncements ~~Assets~~Not Yet Adopted

~~The~~In ~~consolidated~~June 2011, ~~financial~~FASB ~~statements~~issued ~~include~~Accounting Standards Update No. 2011-05, Comprehensive Income: Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 amends existing guidance by allowing only two options for presenting the ~~identifiable~~components ~~intangible~~of ~~assets~~net earnings and ~~goodwill~~other comprehensive ~~resulting~~income: ~~from~~(1) in ~~acquisitions~~a ofsingle ~~businesses~~continuous ~~completed~~financial ~~prior~~statement, tostatement ~~2010.~~of ~~The~~comprehensive ~~following~~income ~~table~~or ~~presents~~(2) in ~~the~~two ~~changes~~separate inbut ~~the~~consecutive ~~carrying~~financial ~~amount~~statements, consisting of ~~goodwill~~an income statement followed by ~~reportable~~a separate ~~operating~~statement ~~segment~~of ~~during~~other comprehensive income. Also, items that are reclassified from other comprehensive income to net earnings must be presented on the ~~three~~face of the financial statements. ASU ~~months~~No. 2011-05 ~~ended~~requires ~~April~~retrospective application, and it is effective for fiscal years beginning after December 215, 2011. (The Company will adopt the provisions of ASU 2011-05 in ~~thousands):~~the first quarter of 2012, and is currently evaluating which presentation option for the components of net earnings and other comprehensive income will be used.

					Global
	Aviation		LXE		Tracking		Total
Balance as of December 31, 2010	$	35,108		1,937		23,429		60,474
Foreign currency translation adjustment		—		74		—		74
Balance as of April 2, 2011	$	35,108		2,011		23,429		60,548

2. Plan of Merger

~~The~~On June 13, 2011, the Company ~~had~~entered ~~$21~~into an agreement and plan of merger (the “Merger Agreement”) with Honeywell International Inc. (“Honeywell”), a Delaware corporation, and Egret Acquisition Corp., a Georgia corporation and a wholly-owned subsidiary of Honeywell (“Purchaser”). Under the terms of the Merger Agreement, Purchaser agreed to commence a tender offer (the “Offer”) to purchase all of the issued and outstanding shares of common stock, $0 ~~million~~.10 par value, of ~~accumulated~~the ~~impairment~~Company (the ~~losses~~“Shares”) ~~recorded~~at ona ~~LXE~~price of $33.00 per share (the “Offer Price”) in cash. Upon successful completion of the Offer, the Purchaser will merge with and into the Company (the “Merger”) and the Company will become a wholly owned subsidiary of Honeywell. At the effective time of the Merger, each remaining outstanding Share not tendered in the Offer and for which dissenter’s ~~goodwill~~rights ashave not been perfected will be converted into the right to receive cash in an amount equal to the Offer Price. All unvested stock options representing the right to purchase Shares will vest and become exercisable prior to the acceptance for purchase of Shares in the Offer. At the effective time of ~~April 2~~the Merger, each then outstanding option will be cancelled and will represent the right to receive an amount in cash equal to the excess, if any, of the Offer Price over the exercise price of such option. In addition, immediately prior to the time of the acceptance for purchase of Shares in the Offer, each share of restricted stock under the Company’s equity incentive plans that is outstanding shall become fully vested. The Company’s Board of Directors has unanimously approved the Merger Agreement and has recommended that shareholders tender their Shares into the Offer. EMS and Honeywell will continue to operate separately until the transaction closes. The Merger Agreement is subject to customary closing conditions and is expected to close in the third quarter of 2011.

The ~~following~~Offer ~~table~~commenced ~~presents~~on ~~the~~June 27, ~~gross~~2011 ~~carrying~~and ~~amounts~~is ~~and~~scheduled ~~accumulated~~to ~~amortization~~expire at 5:30 p.m., inNew ~~total~~York City time, on August 19, 2011, unless further extended or earlier terminated. Purchaser will accept and bypromptly ~~major~~pay ~~intangible~~for ~~asset~~each ~~class~~Share validly tendered, ~~for~~and not withdrawn, in accordance with the ~~Company~~terms of the Offer. The Purchaser’s ~~intangible~~obligation ~~assets~~to accept for payment and pay for all Shares validly tendered pursuant to the Offer is subject to ~~amortization~~(i) the ascondition that the number of ~~April 2,~~ ~~2011~~Shares validly tendered and ~~December 31~~not withdrawn represents at least a majority of the total number of Shares outstanding at the expiration of the Offer on a fully diluted basis, ~~2010~~and (ii) the satisfaction or waiver of other customary closing conditions as set forth in ~~thousands):~~the Merger Agreement, including the receipt of necessary regulatory approval.

	As of April 2, 2011
	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount
Developed technology	$	41,835		20,529		21,306
Customer relationships		19,287		5,392		13,895
Trade names and trademarks		6,334		2,188		4,146
Other		2,440		2,322		118
	$	69,896		30,431		39,465

The Company has granted to Purchaser an irrevocable option, which Purchaser, subject to certain conditions, may exercise after the consummation of the Offer (including any subsequent offering period), to purchase such number of newly additional Shares at the Offer Price from the Company such that, when added to the Shares already owned by Honeywell, Purchaser and their subsidiaries at the time of such exercise, constitutes one more Share than 90% of the total number of Shares outstanding on a fully diluted basis (the “Top-up Option”). The Top-Up Option is intended to expedite the timing of the completion of the Merger. If the Purchaser acquires more than 90% of the outstanding Shares in the Offer or through exercise of the Top-Up Option, it will complete the Merger through the “short form” procedures available under Georgia law, which would not require the Company to hold a meeting of its shareholders to vote on the adoption of the Merger Agreement. In the event that Purchaser does not hold at least 90% of the outstanding Shares following the consummation of the Offer and the exercise of the Top-Up Option, the Company must obtain the approval of its shareholders to consummate the Merger. In this event, the Merger agreement would require the Company to call and convene a shareholder meeting to obtain this approval, and Honeywell and Purchaser would vote all of the Shares owned by them (including Shares acquired pursuant of the Offer) in favor of the adoption of the Merger Agreement and the consummation of the Merger.

	As of December 31, 2010
	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount
Developed technology	$	41,525		19,039		22,486
Customer relationships		19,164		4,787		14,377
Trade names and trademarks		6,281		1,961		4,320
Other		2,428		2,292		136
	$	69,398		28,079		41,319

Amortization expense related to these intangible assets for the three months ended April 2, 2011 and for the three months ended April 3, 2010 was $2.0 million and $2.1 million, respectively. Amortization expense of approximately $1.0 million was included in cost of sales, $0.9 million was included in selling, general and administrative expenses, and $0.1 million was included in research and development expenses in the Company’s consolidated statements of operations for both the three months ended April 2, 2011 and April 3, 2010. Expected amortization expense for the remainder of 2011 and for each of the five succeeding years is as follows: 2011 — $5.7 million, 2012 — $8.0 million, 2013 — $7.4 million, 2014 — $3.9 million, 2015 — $3.7 million and 2016 — $3.5 million.

3Effective upon the consummation of the Offer, the Purchaser will be entitled to designate a number of directors, rounded up to the next whole number, on the Company’s Board of Directors equal to the product of (i) the total number of directors on the Company’s Board of Directors and (ii) the percentage that the number of Shares beneficially owned by Honeywell or Purchaser bears to the number of Shares then outstanding, but in no event less than a majority of the number of directors. However, ~~Fair~~Honeywell, ~~Value~~Purchaser ~~Measurements~~and the Company shall use their reasonable best efforts to ensure that after the consummation of the Offer, at least three independent directors currently serving on the Company’s Board of Directors shall continue to be on the Company’s Board of Directors until the effective time of the Merger. The Merger Agreement contains customary representations and warranties by the Company, Purchaser and Honeywell. The Merger Agreement also contains customary covenants and agreements, including with respect to the operation of the business of the Company and its subsidiaries between the signing of the Merger Agreement and the closing of the Merger, restrictions on the solicitation of alternative acquisition proposals by the Company, changing the Board’s recommendation to the transaction, entering into another acquisition transaction, governmental filings and approvals, and other matters.

The Merger Agreement contains certain termination rights for the Company, Purchaser and Honeywell, including in the event that the Company terminates the agreement in order to accept a superior proposal. In connection with the termination of the Merger Agreement under specified circumstances, including with respect to the Company’s entry into an agreement with respect to a superior proposal, the Company may be required to pay Honeywell a termination fee equal to $19.6 million. In addition, in the event of termination of the Merger Agreement relating to Honeywell’s failure to agree to certain required or requested actions in connection with obtaining antitrust clearance and subject to other specified conditions, Honeywell may be required to pay the Company a termination fee equal to $19.6 million. However, Honeywell has satisfied the competition law condition of the Merger Agreement so this is unlikely to occur.

The foregoing description of the Offer, Merger and Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to (i) the Merger Agreement, a copy of which is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 13, 2011 and incorporated herein by reference, and is included to provide investors with information regarding its terms, and (ii) the information contained in the Tender Offer Statement on Schedule TO filed by Purchaser on June 27, 2011, as amended from time to time, and the Solicitation/Recommendation Statement on Schedule 14D-9 filed by us with the SEC on June 27, 2011, as amended from time to time.

3. Goodwill and Other Intangible Assets

The consolidated financial statements include the identifiable intangible assets and goodwill resulting from acquisitions of businesses completed prior to 2010. The following table presents the changes in the carrying amount of goodwill by reportable operating segment during the six months ended July 2, 2011 (in thousands):


			Global
	LXE		Tracking		Aviation		Total
Balance as of December 31, 2010	$	1,937		23,429		35,108		60,474

Foreign currency translation adjustment		80		—		—		80


Balance as of July 2, 2011	$	2,017		23,429		35,108		60,554

The Company had $21.0 million of accumulated impairment losses recorded on LXE’s goodwill as of July 2, 2011.

The following table presents the gross carrying amounts and accumulated amortization, in total and by major intangible asset class, for the Company’s intangible assets subject to amortization as of July 2, 2011 and December 31, 2010 (in thousands):


	As of July 2, 2011
	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount

Developed technology	$	42,115		21,905		20,210
Customer relationships		19,305		5,941		13,364
Trade names and trademarks		6,332		2,318		4,014
Other		2,440		2,346		94


	$	70,192		32,510		37,682


	As of December 31, 2010
	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount

Developed technology	$	41,525		19,039		22,486
Customer relationships		19,164		4,787		14,377
Trade names and trademarks		6,281		1,961		4,320
Other		2,428		2,292		136


	$	69,398		28,079		41,319

Amortization expense related to these intangible assets for the three months and six months ended July 2, 2011 was $1.9 million and $3.9 million, respectively, and for the three months and six months ended July 3, 2010 was $2.1 million and $4.1 million, respectively. Expected amortization expense for the remainder of 2011 and for each of the five succeeding years is as follows: 2011 — $3.9 million, 2012 — $8.0 million, 2013 — $7.4 million, 2014 — $3.9 million, 2015 - $3.7 million and 2016 — $3.5 million.

Amortization expense for intangible assets and other items included in cost of sales, selling, general and administrative expense, and in research and development expenses for the three and six months ended July 2, 2011 and July 3, 2010 are summarized in the following table (in millions of dollars):


	Three Months Ended				Six Months Ended
	July 2		July 3		July 2		July 3
	2011		2010		2011		2010

Cost of sales	$	1.0		0.9		2.1		1.9
Selling, general and administrative		1.0		1.4		1.9		2.3
Research and development		0.1		0.1		0.1		0.1

Total amortization expense	$	2.1		2.4		4.1		4.3

4. Fair Value Measurements

The Company is required to disclose information about the estimated fair value of certain financial and non-financial assets and liabilities in accordance ASC Topic 820, Fair Value Measurements and Disclosures. This guidance indicates that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, this guidance establishes a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 — Observable inputs consisting of quoted prices in active markets;

•

Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•

Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short-term maturity of these instruments. Of the $71.5 million of cash and cash equivalents at July 2, 2011, $34.4 million was held in Canada, $17.4 million was held in the U.K. and $13.5 million was held in the Netherlands.

The Company uses derivative financial instruments, ~~primarily~~ in the form of foreign currency ~~forward~~ forward contracts (a single class of equity securities), in order to mitigate the risks associated with currency fluctuations on future fair values of foreign denominated assets and liabilities. The fair values of foreign currency contracts of $~~143~~24,000 net liability and $467,000 net ~~assets~~asset as of ~~April~~ July 2, 2011 and December 31, 2010, respectively, are based on quoted market prices for similar instruments using the income approach (a level 2 input) and are reflected at fair value in the consolidated balance sheets.

The Company has two fixed-rate mortgages and has borrowings under its revolving credit facility. One mortgage has an 8.0% rate and a carrying amount as of ~~April~~July 2, 2011 and December 31, 2010 of $5.42 million and $5.7 million, respectively. The other mortgage has a 7.1% rate and a carrying amount as of ~~April~~July 2, 2011 and December 31, 2010 of $2.10 million and $2.3 million, respectively. The Company’s outstanding borrowings under its revolving credit facility were $3234.05 million as of ~~April~~July 2, 2011. The estimated fair value of the Company’s total debt was $3840.59 million as of ~~April~~ July 2, 2011 and is based on quoted market prices for similar instruments (a level 2 input). Mortgage ~~debt~~ debt and borrowings under the Company’s credit facility are recorded in current and long-term debt on on the Company’s consolidated balance sheets, at the amount of unpaid principal.

Management believes that these assets and liabilities can be liquidated without restriction.

The Company had a contingent consideration liability for earn-out provisions resulting from an acquisition completed in 2009. The contingency has since been settled and the remaining liability of $0.9 million was paid in cash in the first quarter of 2011. The estimated fair value of this contingent consideration liability was determined by applying a form of the income approach (a level 3 input) based on the probability-weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the milestones. There was no change in the estimated fair value of this contingent consideration liability in the three months and six months ended ~~April~~July 2, 2011, nor in the three months ended July 3, 2010. The estimated fair value of this contingent consideration liability increased by $0.2 million in the three months ended ~~April~~July 3, 2010 and was included in acquisition-related items in the Company’s consolidated statement of operations.

~~4. Interim Segment Disclosures~~12

The Company is organized into four reportable segments: Aviation, Defense & Space (“D&S”), LXE and Global Tracking. The Company determines operating segments in accordance with the Company’s internal management structure, which is organized based on products and services that share distinct operating characteristics. Each segment is separately managed and is evaluated primarily upon operating income and earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”).

The Aviation segment designs and develops communications solutions through a broad array of terminals and antennas for the aeronautical market that enable end-users in aircraft to communicate over satellite and air-to-ground links. This segment also designs equipment to process data on board aircraft, including rugged data storage, cabin- wireless connectivity, and air-to-ground connectivity equipment. Aviation service revenue is generated mainly from product-related service contracts, extended warranty arrangements, and airtime services.

5. Interim Segment Disclosures

The Company is organized into four reportable segments: LXE, Global Tracking, Aviation, and Defense & Space (“D&S”). The Company determines operating segments in accordance with the Company’s internal management structure, which is organized based on products and services that share distinct operating characteristics. Each segment is separately managed and is evaluated primarily upon operating income and earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”).

The LXE segment manufactures mobile terminals and wireless data collection equipment for logistics management systems. LXE operates mainly in three target markets; the Americas market, which is comprised of North, South and Central America; the International market, which is comprised of all other geographic areas with the highest concentration in Europe; and direct sales to original equipment manufacturers (“OEM”). LXE’s service revenue is mainly generated from product-related repair contracts and extended warranty arrangements.

The Defense & Space segment manufactures custom-designed, highly engineered subsystems and provides design and development services on research projects for defense electronics and satellite applications. These applications include products from military communications, RADAR, surveillance and countermeasures to high-definition television, satellite radio, and live TV for commercial airlines. D&S’ service revenue is mainly generated from projects that are limited to design and development-related services, and from product-related service contracts.

The Global Tracking segment provides satellite-based machine-to-machine mobile communications equipment and services to track, monitor and control remote, mobile and fixed assets. Additionally, Global Tracking provides equipment for the Cospas-Sarsat search-and-rescue system and incident-management software for rescue coordination worldwide. Global Tracking service revenue is mainly generated from airtime service contracts.

The Aviation segment designs and develops communications solutions through a broad array of terminals and antennas for the aeronautical market that enable end-users in aircraft to communicate over satellite and air-to-ground links. This segment also designs equipment to process data on board aircraft, including rugged data storage, cabin-wireless connectivity, and air-to-ground connectivity equipment. Aviation service revenue is generated mainly from product-related service contracts, extended warranty arrangements, and airtime services.

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

	Three Months Ended						Six Months Ended
	April 2			April 3
	July 2			July 3			July 2			July 3
	2011			2010			2011			2010
Net sales:
Aviation	$	25,010			26,186
LXE	$	37,801			36,365			74,020			66,938
Defense & Space		14,072			16,534
Global Tracking		11,736			10,526			21,644			20,386
LXE		36,219			30,573
Less intercompany sales		(186	)		(510	)		(358	)		(761	)
Global Tracking		9,908			9,860
Global Tracking external sales		11,550			10,016			21,286			19,625
Less intercompany sales		(172	)		(251	)
Aviation		25,947			25,338			50,957			51,524
Global Tracking external sales		9,736			9,609
Defense & Space		15,741			16,758			29,813			33,292
Total	$	8591,~~037~~039		$	8288,~~902~~477			176,076			171,379
Operating income (loss):
Aviation	$	825			309
LXE	$	113			2,077			1,798			2,969
Defense & Space		432			918
Global Tracking		1,190			684			1,395			838
LXE		1,685			892
Aviation		(2,867	)		1,816			(2,042	)		2,125
Global Tracking		205			154
Defense & Space		292			1,694			724			2,612
Corporate & Other		~~422~~(5,958	)		(~~349~~1,097	)		(5,536	)		(1,445	)
Total	$	3(7,~~569~~230	)		15,~~924~~174			(3,661	)		7,099
Earnings (loss) from continuing operations before income taxes:
Aviation	$	802			(72	)
Defense & Space		432			922
LXE		1,657			783
Global Tracking		159			46
Corporate & Other		(61	)		(744	)
Total	$	2,989			935

	April 2		December 31
	2011		2010
Assets:
Aviation	$	150,414		149,834
Defense & Space		46,259		45,968
LXE		91,890		78,588
Global Tracking		79,384		80,103
Corporate & Other		20,408		18,451
Total	$	388,355		372,944
Concentration of net assets by geographic region:
United States	$	65,879		77,006
Canada		74,952		68,677
Europe		113,543		101,880
Other		9,426		9,457
Total	$	263,800		257,020

Sales to no individual customer exceeded 10% of our net sales during the three months ended April 2, 2011, or April 3, 2010.

5. Earnings Per Share

Following is a reconciliation of the denominators for basic and diluted earnings per share calculations (in thousands):

	Three Months Ended
	April 2		April 3
	2011		2010
Basic weighted-average number of common shares outstanding		15,230		15,179
Dilutive potential shares using the treasury share method		126		27
Diluted weighted-average number of common shares outstanding		15,356		15,206
Shares that were not included in computation of diluted earnings per share that could potentially dilute future basic earnings per share because their effect on the periods were antidilutive		660		1,081

6. Comprehensive Income

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

	Three Months Ended
	April 2		April 3
	2011		2010
Net earnings	$	2,394		591
Other comprehensive income:
Foreign currency translation adjustment		3,609		1,811
	$	6,003		2,402

7. Inventories

Inventories as of April 2, 2011 and December 31, 2010 include the following (in thousands):

	April 2		December 31
	2011		2010
Parts and materials	$	26,966		24,996
Work-in-process		7,602		6,127
Finished goods		10,611		10,526
	$	45,179		41,649

Costs included in inventories related to long-term programs or contracts are primarily for materials and work performed on programs awaiting funding, or on contracts not yet finalized. Such costs were $2.4 million as of April 2, 2011, and $1.0 million as of December 31, 2010.

8. Revolving Credit Facility

As of April 2, 2011, the Company had $32.0 million of borrowings outstanding under its revolving credit facility.

The Company has $2.9 million of standby letters of credit to satisfy performance guarantee requirements under certain customer contracts. While these obligations are not normally called, they could be called by the beneficiaries at any time before the expiration date should the Company fail to meet certain contractual requirements. After deducting outstanding letters of credit, as of April 2, 2011 the Company had $27.2 million available for borrowing in the U.S. and $12.9 million available for borrowing in Canada under the revolving credit agreement.

9. Warranty Liability

The warranty liability is periodically reviewed for adequacy and adjusted as necessary. Following is a summary of the activity for the periods presented related to the Company’s liability for limited warranties (in thousands):


	Three Months Ended						Six Months Ended
	July 2			July 3			July 2			July 3
	2011			2010			2011			2010
Earnings (loss) before income taxes:
LXE	$	169			2,050			1,826			2,833
Global Tracking		1,184			888			1,343			934
Aviation		(2,943	)		1,877			(2,141	)		1,805
Defense & Space		292			1,694			724			2,616
Corporate & Other		(6,483	)		(1,532	)		(6,544	)		(2,276	)

Total	$	(7,781	)		4,977			(4,792	)		5,912

	Three Months Ended
	April 2			April 3
	2011			2010
Balance at beginning of the period	$	4,205			4,085
Accruals for warranties issued during the period		955			762
Settlements made during the period		(736	)		(337	)
Balance at end of period	$	4,424			4,510

The expenses for Corporate & Other in the three and six months ended July 2, 2011 included professional fees, mainly related to the proxy contest initiated by one of our shareholders, the review of strategic alternatives, and the proposed merger with Honeywell, and $0.8 million of compensation expense related to an increase in the fair value of phantom stock awards granted the Company’s Directors, which together, was approximately $6.1 million and $6.8 million, respectively. These expenses were partially offset by costs allocated from Corporate and Other to our operating segments in those periods. We anticipate additional professional fees and transaction costs related to the merger in the third quarter of 2011.

10. Stock-Based and Other Compensation


	July 2		December 31
	2011		2010
Assets:
LXE	$	96,020		78,588
Global Tracking		81,638		80,103
Aviation		153,041		149,834
Defense & Space		41,477		45,968
Corporate & Other		18,752		18,451

Total	$	390,928		372,944


Concentration of net assets by geographic region:
United States	$	54,468		77,006
Canada		75,031		68,677
Europe		122,713		101,880
Other		9,092		9,457

Total	$	261,304		257,020

~~The~~Sales ~~Company has granted nonvested restricted stock and nonqualified stock options~~ to ~~key~~no ~~employees and~~individual ~~directors~~customer ~~under~~exceeded ~~several~~10% ~~stock award plans. The Company granted stock awards with an aggregate fair value~~ of ~~approximately~~our ~~$1.5 million~~net ~~and~~sales ~~$2.0 million~~ during the three months ~~ended April 2, 2011~~ and ~~the three months ended April 3, 2010, respectively. Stock based compensation is recognized~~six on a straight-line basis over the requisite service period for each separately vesting portion of an award as if the award was, in substance, multiple awards. The Company recognized expense in the three months ended ~~April~~July 2, 2011, ~~and~~or ~~April~~July 3, 2010 ~~of $0~~.~~5 million and $0.4 million, respectively,~~ ~~before income tax benefits, for all the Company’s stock plans.~~

During the three months ended April 2, 2011, the Company completed the payments to employees under incentive compensation plans for 2010, including discretionary amounts, and determined the amount to be contributed to the Company to the Retirement Benefit Plan (“RBP”) for 2010. The contribution into the RBT was made subsequent to April 2, 2011. The amount paid under all plans was $0.6 million less than the amounts accrued at December 31, 2010.

11. Income Taxes

The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. The rate is higher than it otherwise would be in both 2011 and 2010 since tax benefits for certain loss jurisdictions have not been recognized. In addition, the effective rate is higher in 2010 because the estimated rate used for U.S. taxable income was higher in 2010 since certain key provisions of the U.S. tax law, including the research and development credit, had not been extended to be in effect for tax year 2010 until the fourth quarter of 2010.

The Company is currently undergoing audits at the federal level in the U.S. for tax year 2009, in Canada for the years 2006 and 2007 and in Germany for the years 2006 through 2008. The Company expects the audits to be completed in the next twelve months. Any related unrecognized tax benefits could be adjusted based on the results of the audits. The Company cannot estimate the range of the change that is reasonably possible at this time.

12. Litigation

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

136. ~~Subsequent~~Earnings ~~Events~~Per Share

~~On April 19,~~Following ~~2011~~is ~~the Company issued~~ a ~~press~~reconciliation ~~release announcing that it has received inquiries from potentially interested acquirers and that its Board~~ of ~~Directors has determined to initiate a formal process to explore strategic alternatives. The formal process was commenced by~~ the ~~Company immediately~~denominators ~~following~~for ~~the~~basic ~~announcement~~ and isdiluted ~~continuing.~~earnings ~~The~~per ~~Company additionally announced in~~share ~~the~~calculations ~~press release that~~ (in ~~light of the decision to initiate a formal process, its Board of~~thousands): Directors has postponed the 2011 Annual Meeting of Shareholders from May 12, 2011 until June 30, 2011. There can be no assurance that the initiation of a formal process to pursue strategic alternatives will result in any sale transaction. In connection with the formal process, the Company will incur additional costs during 2011 related to this exploration of strategic alternatives.


	Three Months Ended				Six Months Ended
	July 2		July 3		July 2		July 3
	2011		2010		2011		2010

Basic weighted-average number of common shares outstanding		15,304		15,191		15,267		15,185
Dilutive potential shares using the treasury share method		—		39		—		33

Diluted weighted-average number of common shares outstanding		15,304		15,230		15,267		15,218


Shares that were not included in computation of diluted earnings per share that could potentially dilute future basic earnings per share because their effect on the periods were antidilutive		1,281		1,008		971		1,045

Basic earnings per share is the per-share allocation of income available to common shareholders 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 shareholders based on the weighted-average number of common shares actually outstanding plus all potential common share equivalents outstanding during the period, if dilutive. The Company uses the treasury stock method to determine diluted earnings per share. Potential dilutive shares were excluded from the computation of diluted net loss per share for the three and six months ended July 2, 2011 because the effect of their inclusion would have been anti-dilutive.

7. Comprehensive (Loss) Income

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


	Three Months Ended						Six Months Ended
	July 2			July 3			July 2			July 3
	2011			2010			2011			2010

Net (loss) earnings	$	(6,444	)		3,868			(4,050	)		4,459
Other comprehensive income (loss):
Foreign currency translation adjustment		1,116			(5,056	)		4,725			(3,245	)

	$	(5,328	)		(1,188	)		675			1,214

8. Inventories

Inventories as of July 2, 2011 and December 31, 2010 include the following (in thousands):


	July 2		December 31
	2011		2010

Parts and materials	$	30,942		24,996
Work-in-process		8,791		6,127
Finished goods		8,998		10,526

	$	48,731		41,649

Costs included in inventories related to long-term programs or contracts are primarily for materials and work performed on programs awaiting funding, or on contracts not yet finalized. Such costs were $4.1 million as of July 2, 2011, and $1.0 million as of December 31, 2010.

9. Revolving Credit Facility

As of July 2, 2011, the Company had $34.5 million of borrowings outstanding under its revolving credit facility.

The Company has $2.9 million of standby letters of credit to satisfy performance guarantee requirements under certain customer contracts. While these obligations are not normally called, they could be called by the beneficiaries at any time before the expiration date should the Company fail to meet certain contractual requirements. After deducting outstanding letters of credit, as of July 2, 2011 the Company had $24.7 million available for borrowing in the U.S. and $12.9 million available for borrowing in Canada under the revolving credit agreement.

10. Warranty Liability

The Company provides a limited warranty for a variety of its products. The specific terms and conditions of the warranties vary depending upon the specific products and markets. The Company records a liability at the time of sale for the estimated costs to be incurred under warranties, which is included in other current liabilities on the consolidated balance sheets. The amount of this liability is based upon historical, as well as expected, experience. The warranty liability is periodically reviewed for adequacy and adjusted as necessary. Following is a summary of the activity for the periods presented related to the Company’s liability for limited warranties (in thousands):


	Three Months Ended						Six Months Ended
	July 2			July 3			July 2			July 3
	2011			2010			2011			2010
Balance at beginning of the period	$	4,424			4,510			4,205			4,085
Accruals for warranties issued during the period		966			849			1,921			2,056
Settlements made during the period		(848	)		(835	)		(1,584	)		(1,617	)

Balance at end of period	$	4,542			4,524			4,542			4,524

11. Stock-Based and Other Compensation

The Company has granted nonvested restricted stock and nonqualified stock options to key employees and directors under several stock award plans. The Company granted stock awards with an aggregate fair value of approximately $2.9 million and $2.4 million during the first six months ended July 2, 2011 and July 3, 2010, respectively. Stock based compensation is recognized on a straight-line basis over the requisite service period for each separately vesting portion of an award as if the award was, in substance, multiple awards. The Company recognized expense of $0.5 million and $1.0 million in the three month and six month periods ended July 2, 2011, and $0.5 million and $0.9 million in three month and six month periods ended July 3, 2010, respectively, before income tax benefits, for all the Company’s stock plans.

On June 13, 2011, the Board of Directors approved an amendment to each of the Company’s stock incentive plans whereby upon a reorganization transaction, including a merger, consolidation, or acquisition in which the outstanding shares of the Company are converted into cash, all outstanding unvested stock options become fully vested and immediately exercisable at the commencement of a tender offer. All outstanding stock options not exercised as of the occurrence of a reorganization transaction shall be cancelled in exchange for payments of $33.00 in cash per option. If a reorganization transaction does not close, the options that were unvested prior to the commencement of a tender offer would again become unvested and vest over their stated vesting schedules. In addition, all unvested restricted stock awards granted under the Company’s stock incentive plans that are outstanding immediately prior to the time of acceptance of the tender offer by Honeywell will become fully vested and transferable upon the close of that tender offer as prescribed by the Merger Agreement.

12. Income Taxes

The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. The three- and six-month periods ended July 2, 2011 each reflect a net tax benefit from the loss before income taxes. The rate of the benefit is less than U.S. statutory rate since tax benefits for certain loss jurisdictions have not been recognized and certain merger-related costs may not be deductible for income tax purposes. The rate in both periods in 2010 is higher than it otherwise would have been since tax benefits for certain loss jurisdictions had not been recognized and the estimated rate used for U.S. taxable income was higher in 2010 since certain key provisions of the U.S. tax law, including the research and development credit, had not been extended to be in effect for tax year 2010 until the fourth quarter of 2010.

13. Litigation

On July 8, 2011, Victoria Shaev, filed a complaint (the “Shaev Complaint”) on behalf of herself and as a putative class action on behalf of the Company’s public shareholders against EMS, certain members of the Board of Directors (the “Individual Defendants”), certain members of management, Honeywell and Purchaser in the Superior Court of Fulton County of the State of Georgia. In the Shaev Complaint, plaintiff alleges, among other things, that the Individual Defendants breached their fiduciary duties in connection with the Offer and Merger by failing to engage in a fair sale process and by providing materially misleading and incomplete information regarding the transaction. The plaintiff also alleges that the Company, Parent and Purchaser have aided and abetted the alleged breach of fiduciary duties. The Shaev Complaint seeks judicial action, among other things, (i) declaring that the action is properly maintainable as a class action and certifying plaintiff as class representative and plaintiff’s counsel as class counsel, (ii) preliminary and permanently enjoining defendants from effectuating the transaction, (iii) declaring the transaction void and ordering rescission if the transaction is consummated, (iv) requiring disgorgement and imposing a constructive trust on all property and profits that the defendants receive as a result of their wrongful conduct, and (v) awarding damages, including rescissory damages, and reasonable fees and expenses. The Company and the other defendants believe the plaintiff’s allegations lack merit, and are contesting them vigorously.

The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

We are a leading provider of wireless connectivity solutions over satellite and terrestrial networks. We keep people and systems connected, wherever they are — on land, at sea, in the air or in space. Serving the aeronautical, asset-tracking, defense, and mobile computing industries, our products and services enable universal mobility, visibility and intelligence. Our operations include the following four reportable operating segments:

• Aviation — Designs and develops communications solutions through a broad array of terminals and antennas for the aeronautical market that enable end-users in aircraft and other mobile platforms to communicate over satellite and air-to-ground links. This segment also designs and builds aircraft cabin equipment to process data on board aircraft, including rugged data storage, cabin-wireless connectivity, and air-to-ground connectivity;

•

LXE — Provides rugged mobile terminals and wireless data networks used for logistics applications such as distribution centers, warehouses and container ports. LXE operates mainly in three markets: the Americas market, which is comprised of North, South and Central America; the International market, which is comprised of all other geographic areas, with the highest concentration in Europe; along with direct sales to original equipment manufacturers (“OEM”);

• ~~Defense~~Global &Tracking ~~Space~~— ~~(“D&S”)~~Provides —satellite-based ~~Supplies~~machine-to-machine ~~highly~~mobile ~~engineered~~communications ~~subsystems~~equipment ~~for~~and ~~defense~~services ~~electronics~~to track, monitor and ~~sophisticated~~control ~~satellite~~remote ~~applications~~assets, ~~from~~regardless ~~military~~of ~~communications~~whether they are fixed, ~~radar~~semi-fixed or mobile. Additionally, ~~surveillance~~Global ~~and~~Tracking ~~countermeasures~~provides toequipment ~~commercial~~for ~~high~~the Cospas-~~definition~~Sarsat ~~television,~~search-and-rescue ~~satellite~~system ~~radio,~~ and ~~live~~incident-management TVsoftware for ~~innovative~~rescue ~~airlines;~~coordination ~~and~~worldwide;

• ~~Global~~Aviation ~~Tracking~~ — ~~Provides~~Designs ~~satellite-based~~and ~~machine-to-machine~~develops ~~mobile~~ communications ~~equipment~~solutions ~~and~~through ~~services~~a tobroad ~~track,~~array ~~monitor~~of terminals and ~~control~~antennas ~~remote~~for ~~assets,~~the ~~regardless~~aeronautical ofmarket ~~whether~~that ~~they~~enable ~~are~~end-users ~~fixed,~~in ~~semi-fixed~~aircraft orand other mobile platforms to communicate over satellite and air-to-ground links. ~~Additionally,~~This ~~Global~~segment ~~Tracking~~also ~~provides~~designs and builds aircraft cabin equipment ~~for~~to ~~the~~process ~~Cospas-Sarsat~~data ~~search-and-rescue~~on ~~system~~board ~~and~~aircraft, ~~incident~~including rugged data storage, cabin-~~management~~wireless ~~software~~connectivity, ~~for~~and ~~rescue~~air-to-ground ~~coordination~~connectivity; ~~worldwide.~~and

~~Following~~• isDefense a& ~~summary~~Space of(“D&S”) ~~significant~~— ~~factors~~Supplies ~~affecting~~highly orengineered ~~related~~subsystems tofor ~~our~~defense ~~results~~electronics ofand ~~operations~~sophisticated ~~for the~~satellite ~~three~~applications ~~months~~from ~~ended~~military ~~April 2~~communications, ~~2011:~~ radar, surveillance and countermeasures to commercial high-definition television, satellite radio, and live TV for innovative airlines.

•Plan Consolidated net sales were $85.0 million in the three months ended April 2, 2011, up 2.6% from the same period in 2010, reflecting the second highest first quarter sales in our history. The increase in net sales was mainly driven by record first quarter sales achieved by our LXE division, reflecting the continued improvement in the overall logistics market and the positive effects of changes in its marketing strategy. Net sales from our D&S and Aviation segments were lower in the three months ended April 2, 2011 as compared to the same period in 2010 reflecting the slower recovery in the defense and aviation markets. Net sales from our Global Tracking segment were relatively unchanged from the prior year.Merger

•On ~~Our~~June 13, ~~net~~2011, ~~earnings~~the ~~for~~Company entered into an agreement and plan of merger (the ~~three~~“Merger ~~months~~Agreement”) with ~~ended~~Honeywell ~~April~~International 2Inc. (“Honeywell”), ~~2011~~a ~~were~~Delaware $2corporation, and Egret Acquisition Corp.4, ~~million~~a ~~compared~~Georgia ~~with~~corporation $0and a wholly-owned subsidiary of Honeywell (“Purchaser”).6 ~~million~~Under inthe terms of the ~~three~~Merger ~~months~~Agreement, ~~ended~~Purchaser ~~April~~agreed 3to commence a tender offer (the “Offer”) to purchase all of the issued and outstanding shares of common stock, ~~2010~~$0.10 ~~This~~par ~~improvement~~value, of the Company (the “Shares”) at a price of $133.800 ~~million~~per ~~was~~share ~~mainly~~(the ~~due~~“Offer toPrice”) anin ~~increase~~cash. inUpon ~~operating~~successful completion ~~income~~of inthe Offer, the ~~first~~Purchaser ~~quarter~~will ofmerge ~~2011~~with atand ~~LXE~~into the Company (the “Merger”) and ~~Aviation~~the Company will become a wholly owned subsidiary of $0Honeywell.8 ~~million~~At ~~and~~the ~~$0.5~~effective ~~million~~time of the Merger, each ~~respectively~~remaining outstanding Share not tendered in the Offer will be converted into a cash amount equal to the Offer Price. ~~Net~~All ~~earnings~~unvested stock options representing the right to purchase our common stock will vest and become exercisable prior to the acceptance for purchase of Shares in the ~~three~~Offer. ~~months~~At ~~ended~~the ~~April~~effective 3time of the Merger, ~~2010~~each ~~included~~then ~~acquisition~~outstanding option will be cancelled and will ~~impairment-related~~represent ~~charges~~the right to receive an amount in cash equal to the excess, if any, of ~~$0.6~~the ~~million~~Offer Price over the exercise price of such option. ~~Our~~In ~~net~~addition, ~~earnings~~at ~~also~~the ~~improved~~time inof the ~~three~~acceptance ~~months~~for purchase ~~ended~~of ~~April~~Shares 2in the Offer, ~~2011~~each ~~due~~share of restricted stock under the Company’s equity incentive plans that is outstanding shall become fully vested. The Company’s Board of Directors has unanimously approved the Merger Agreement and has recommended that shareholders tender their Shares into the Offer. EMS and Honeywell will continue to aoperate $0separately until the transaction closes.5 ~~million~~The ~~favorable~~Merger ~~change~~Agreement is subject to customary closing conditions and is expected to close in ~~foreign~~the ~~currency~~third ~~exchange~~quarter ~~gains~~of 2011. For further information on the Offer and ~~losses~~Merger, refer to Note 2 of our consolidated financial statements in this Quarterly Report.

1618

•The ~~MMI~~foregoing ~~Investments~~description of the Offer, ~~L.P.~~Merger and ~~certain~~Merger ofAgreement ~~its~~is ~~affiliates~~only ~~launched~~ a ~~proxy~~summary, ~~contest~~does ~~relating~~not purport to ~~our~~be ~~2011~~complete ~~Annual~~and ~~Meeting~~is ofqualified ~~Shareholders,~~in ~~and~~its ~~nominated~~entirety ~~their~~by ~~own~~reference ~~slate~~to of(i) the ~~four~~Merger ~~nominees~~Agreement, ~~for~~a copy ~~election~~of towhich ~~our~~is ~~board~~filed ofas ~~directors~~Exhibit 2.1 ~~The~~to ~~ongoing~~the ~~proxy~~Company’s ~~contest~~Current ~~could~~Report ~~adversely~~on ~~affect~~Form ~~our~~8-K ~~business.~~filed ~~During~~with the SEC ~~three~~on ~~months~~June 13, ~~ended~~2011 ~~April~~and 2,incorporated ~~2011~~herein weby ~~incurred~~reference, ~~$0.7~~and ~~million~~is ~~related~~included to ~~the~~provide ~~contested~~investors with ~~proxy;~~information ~~such~~regarding ~~costs~~its ~~are~~terms, ~~included~~and (ii) the information contained in ~~selling~~the Tender Offer Statement on Schedule TO filed by Purchaser on June 27, ~~general~~2011, as amended from time to time, and ~~administrative~~the Solicitation/Recommendation ~~expense~~Statement inon Schedule 14D-9 filed by us with the ~~consolidated~~SEC ~~statement~~on ofJune 27, ~~operations~~2011, as amended from time to time.

•Following ~~Certain~~is ofa ~~our~~summary ~~markets continue to see the unfavorable impact~~ of ~~the~~significant ~~economy,~~factors ~~and~~affecting ~~they~~or ~~are~~related ~~not immune~~ to ~~increasing~~our ~~pressures~~results ~~and~~of ~~risks.~~operations Wefor the ~~expect~~three ~~that we will continue to be faced with these economic pressures through 2011. The economy~~ and ~~other~~six ~~factors~~months ~~could~~ended ~~cause a decline in expected future cash flows for one or more of our business units~~July 2, ~~and it is reasonably possible that we may be required to recognize impairment losses related to goodwill or other long-lived assets.~~2011:

~~Recent~~• ~~Developments~~Consolidated ornet ~~Strategic~~sales ~~Alternatives~~ were $91.0 million and $176.1 million in the three and six months ended July 2, 2011, up approximately 3% from the same periods in 2010, reflecting the second highest second quarter and first six months sales in our history. The increase in net sales was mainly driven by record sales achieved by our LXE segment for both periods in 2011, reflecting the continued improvement in the overall logistics market and the positive effects of changes in its marketing strategy. Net sales also increased at Global Tracking primarily from an increase in shipments of tracking product to the security market in both periods of 2011. Net sales at our D&S segment were lower in the three and six months ended July 2, 2011 as compared to the same period in 2010 mainly due to a decrease in activity on certain development programs that were completed at the end of 2010. However, net sales were higher in the second quarter of 2011 by $1.7 million as compared with the first quarter of 2011 due to an acceleration in scheduled production activity for certain programs. Net sales at Aviation were comparable in both periods.

On• ~~April 11,~~Operating ~~2011~~results wefor ~~issued~~the asecond ~~press~~quarter ~~release announcing that we had received inquiries from potentially interested acquirers~~ and ~~that~~first ~~our~~six ~~board~~months of ~~directors~~2011 ~~has~~included ~~determined~~charges ~~to initiate~~of a$6.1 ~~formal~~million ~~process~~and ~~to explore strategic alternatives~~$6.8 Wemillion, ~~commenced~~respectively, ~~the~~for ~~formal process~~proxy ~~immediately~~contest ~~following the announcement~~ and ~~the~~merger ~~process~~related ~~is ongoing~~costs. WeThese ~~also announced~~costs inwere ~~the~~primarily ~~press~~for ~~release~~professional ~~that~~fees inrelated ~~light~~to of the ~~decision~~proxy tocontest ~~initiate~~initiated aby ~~formal~~one ~~process, our board~~ of ~~directors~~our ~~has postponed the 2011 Annual Meeting of Shareholders from May 12~~shareholders, ~~2011~~ ~~until~~professional ~~June 30,~~fees ~~2011.~~related ~~There~~to ~~can be no assurance that~~ the ~~initiation~~review of avarious ~~formal~~strategic ~~process will~~alternatives ~~result~~and incosts ~~any~~related ~~transaction leading~~ to athe ~~business~~proposed ~~combination~~merger orwith ~~other sale transaction~~Honeywell. ~~This~~ ~~formal~~We ~~process~~anticipate ~~could~~additional ~~also~~professional ~~adversely~~fees ~~affect~~related ~~our~~to ~~business~~the ~~and~~merger ~~result~~ in ~~additional costs~~the ~~during~~third quarter of 2011.

•

On a consolidated basis, we incurred losses of $6.4 million and $4.1 million for the three and six months ended July 2, 2011, respectively, despite positive net earnings reported by three of our four segments. The net losses were mainly due to approximately $6 million for proxy contest and merger related costs, a $2.2 million net loss recorded by our Aviation segment, and research and development costs and marketing expenses related to new product introductions that were included in the second quarter of 2011. New products were introduced by our LXE (the Thor^TM vehicle-mount computer and the Marathon^TM field computer), Aviation (the Aspire line of satellite communication equipment and the portable Airmail solutions) and Global Tracking (the OCC-600 operations control console for emergency management applications) segments.

•

Certain of our markets continue to see the unfavorable impact of the economy, and they are not immune to increasing pressures and risks. We expect that we will continue to be faced with these economic pressures at least through 2011. The economy and other factors could cause a decline in expected future cash flows for one or more of our business units, and it is reasonably possible that we may be required to recognize impairment losses related to goodwill or other long-lived assets.

Results of Operations

The following table sets forth items from the consolidated statements of operations as reported and as a percentage of net sales (or product net sales and service net sales for product cost of sales and service cost of sales, respectively) for each period (in thousands, except percentages):

	Three Months Ended										Six Months Ended
	April 2					April 3
	July 2					July 3					July 2					July 3
	2011					2010					2011					2010
Product net sales	$	7075,~~997~~567		83.50	%	$	6571,~~235~~879		7881.72	%	$	146,563		83.2	%	$	138,080		80.6	%
Service net sales		1415,~~040~~472		1617.50			1716,~~667~~598		2118.38			29,513		16.8			33,299		19.4
Net sales		8591,~~037~~039		100.0			8288,~~902~~477		100.0			176,076		100.0			171,379		100.0
Product cost of sales		4653,~~746~~419		6570.87			4348,~~777~~066		6766.19			100,165		68.3			93,311		67.6
Service cost of sales		67,~~814~~828		4850.56			98,~~505~~054		5348.85			14,642		49.6			16,091		48.3
Cost of sales		5361,~~560~~247		6367.03			5356,~~282~~120		6463.34			114,807		65.2			109,402		63.9
Selling, general and administrative expenses		2223,~~234~~987		26.13			2122,~~674~~128		2625.1			45,501		25.9			43,801		25.6
Research and development expenses		56,~~674~~921		6.7.6			54,~~421~~709		6.5.3			12,595		7.1			10,130		5.9
Impairment loss on goodwill related charges		—		—			384		0.5
Proxy contest and merger-related costs		6,114		6.7			—		—			6,834		3.9			—		—
Acquisition-related items		—		—			217		0.3
Impairment loss on goodwill related charges		—		—			—		—			—		—			384		0.2
Operating income		3,569		4.2			1,924		2.3
Acquisition-related items		—		—			346		0.4			—		—			563		0.3
Interest income		112		0.1			181		0.2
Operating (loss) income		(7,230	)	(7.9	)		5,174		5.8			(3,661	)	(2.1	)		7,099		4.1
Interest expense		(513	)	(0.6	)		(477	)	(0.6	)
Interest income		110		0.1			101		0.1			222		0.1			281		0.2
Foreign exchange loss, net		(179	)	(0.2	)		(693	)	(0.8	)
Interest expense		(557	)	(0.6	)		(542	)	(0.6	)		(1,070	)	(0.6	)		(1,019	)	(0.6	)
Earnings from continuing operations before income taxes		2,989		3.5			935		1.1
Foreign exchange(loss) gain, net		(104	)	(0.1	)		244		0.3			(283	)	(0.1	)		(449	)	(0.3	)
Income tax expense		595		0.7			344		0.4
(Loss) earnings before income taxes		(7,781	)	(8.5	)		4,977		5.6			(4,792	)	(2.7	)		5,912		3.4
Net earnings	$	2,394		2.8	%	$	591		0.7	%
Income tax (benefit) expense		(1,337	)	(1.4	)		1,109		1.2			(742	)	(0.4	)		1,453		0.8
Net (loss) earnings	$	(6,444	)	(7.1	)%	$	3,868		4.4	%	$	(4,050	)	(2.3	)%	$	4,459		2.6	%

~~Net~~Three ~~sales~~Months ~~increased~~ended ~~by 2.6% to $85.0~~July ~~million from $82.9 million in the three months ended April~~ 2, 2011 ~~compared with the same period in 2010. Higher net sales from our LXE segment were partially offset by lower net sales from our D&S~~ and ~~Aviation segments. Global Tracking’s net sales remained relatively unchanged from the prior year. LXE’s net sales in the three months ended April~~July 23, ~~2011 were $5.6 million higher than in the same period in~~ 2010~~, an increase of 18.5%, with~~: higher net sales in each of its three markets. Net sales were lower at D&S mainly due to a decrease in activity on design and development projects and a delay in orders expected to be received earlier in the first quarter of 2011. Net sales were lower at Aviation primarily due to a lower volume of net sales of in-cabin connectivity products in the three months ended April 2, 2011.

17Net sales increased by 2.9% to $91.0 million from $88.5 million in the three months ended July 2, 2011 compared with the same period in 2010. Higher net sales from our LXE, Global Tracking and Aviation segments were partially offset by lower net sales from our D&S segment. LXE reported record second quarter net sales in the three months ended July 2, 2011 which were $1.4 million higher than in the same period in 2010, due to a higher volume of terminal shipments and continued growth in demand for rugged handheld computer products to OEM partners. Net sales were higher at Global Tracking primarily as a result of higher shipments of tracking products to the security market and an increase in service revenue from support contracts generated by emergency management projects. Net sales were higher at Aviation mainly due to higher net sales from high-speed-data aeronautical products mainly to OEM partners which offset lower net sales of in-cabin connectivity products into the general aviation market. Net sales were lower at D&S mainly due to a decrease in activity on design and development projects and a slow-down in the volume of orders received in late 2010 and in 2011.

Product net sales increased by 5.1% to $75.6 million in the three months ended July 2, 2011 as compared with the same period in 2010. Each of our four segments contributed to the $3.7 million increase in product net sales in the three months ended July 2, 2011 with the most significant increases contributed by our LXE and D&S segments. LXE’s product shipments reached an all-time high for second quarter sales in 2011, and D&S had an increase in activity mainly on a significant commercial program to provide antenna products for airborne internet and cell phone service and on a space program to provide component parts for the Iridium NEXT constellation in the second quarter of 2011. Service net sales decreased by 6.8% to $15.5 million in the three months ending July 2, 2011 compared with the same period in 2010 mainly due to certain significant design and development projects at D&S that were included in net sales in the three months ended July 3, 2010 but have since concluded and were not included in its net sales in the three months ended July 2, 2011.

~~Product~~Overall ~~net~~cost of sales ~~increased~~as bya ~~8.8%~~percentage toof ~~$71.0 million~~consolidated net sales was higher in the ~~first~~ three months ended ofJuly 2, 2011 compared with the ~~first~~same ~~three~~period ~~months~~in of 2010. ~~This was primarily~~ due to a higher ~~number~~ cost-of-sales ~~terminals~~percentages ~~shipped~~reported by ~~LXE~~three of our four reportable operating segments. ~~Service~~Product ~~net~~cost of sales ~~decreased~~and byservice cost ~~20.5%~~of tosales, ~~$14.0 million~~as a percentage of their respective net sales, were higher in the ~~first~~ three months ended ofJuly 2, 2011 compared with the same ~~period~~periods inof 2010,. Our product cost-of-sales percentage was higher mainly due to ~~the~~a ~~conclusion~~less offavorable ~~certain~~product ~~design~~mix and ~~development~~ ~~projects~~lower labor utilization rates at D&S, and a less ~~lower~~favorable ~~volume~~product ofmix, ~~funded~~an ~~engineering~~increase ~~projects~~in atcontract ~~Aviation.~~costs ~~These decreases~~on incertain ~~service~~development ~~net~~programs, ~~sales~~and ~~were~~an unfavorable ~~partially~~effect ~~offset~~of bychanges anin ~~increase~~foreign incurrency ~~airtime~~exchange ~~revenue~~rates ~~mainly generated~~that ataffected our ~~Global~~reported international ~~Tracking~~costs ~~segment.~~at AsAviation ain ~~result,~~2011. ~~product~~Our ~~net~~service cost-of-sales ~~comprised~~percentage awas higher primarily ~~percentage~~as a result of ~~total~~higher ~~net~~discounts ~~sales~~on service contracts, and higher labor costs at LXE in ~~the~~2011, partially ~~first~~offset ~~three~~by ~~months~~a lower proportion of ~~2011~~service ~~compared~~revenues ~~with~~generated ~~the~~from ~~first~~our ~~three~~D&S segment, which ~~months~~has a higher service cost-of-sales ~~2010~~percentage than our other three reportable operating segments.

~~Overall~~Selling, ~~cost~~general ofand ~~sales~~administrative expenses as a percentage of consolidated net sales ~~was~~increased for ~~lower in~~ the three months ended ~~April~~ July 2, 2011 compared with ~~the~~ same period ofin 2010. ~~due~~Actual ~~to lower cost-of-sales percentages reported~~expenses increased by ~~two~~$1.9 million ofin ~~our~~2011 ~~four~~mainly ~~reportable~~from ~~operating~~higher ~~segments.~~commissions ~~Product cost of sales,~~ and ~~service~~other ~~cost~~selling ofexpenses ~~sales,~~resulting asfrom athe ~~percentage~~growth ofin ~~their respective~~ net sales ~~were~~at ~~both~~LXE, ~~lower~~an increase in ~~the~~marketing ~~first~~expenses ~~three~~related ~~months~~to ofnew ~~2011~~products ~~compared~~introductions ~~with~~in the ~~same~~second ~~period~~quarter ~~in 2010. The decrease in product cost~~ of ~~sales~~2011 asat aLXE ~~percentage of~~and ~~its~~Aviation, ~~respective~~an ~~net~~unfavorable ~~sales~~effect ~~was mainly due to a higher percentage~~ of foreign ~~net~~currency ~~sales~~exchange ~~generated~~rates byon ~~our~~ LXE ~~division,~~ ~~which~~and ~~had~~Aviation’s ainternational ~~lower~~expenses, ~~cost-of-sales~~and ~~percentage than our aggregate cost of sales percentage.~~higher ~~The~~depreciation ~~decrease~~expense inrelated ~~the service cost-of-sales percentage was mainly due~~ to athe ~~lower~~upgrade ~~proportion~~ of ~~service~~ ~~revenues~~LXE’s ~~generated~~enterprise ~~from~~reporting ~~our~~system ~~D&S~~in ~~segment, which has a higher service cost-of-sales percentage than our other three reportable operating segments~~2011.

~~Selling,~~Research ~~general~~ and ~~administrative~~development expenses aswere a$2.2 million ~~percentage~~higher ofin ~~consolidated net sales remained unchanged for~~ the three months ended ~~April~~July 2, 2011 than ~~compared~~in ~~with~~the ~~same~~comparable period in 2010. ~~Actual expenses increased by $0.6 million in 2011~~ mainly ~~from~~due ~~higher~~to ~~commissions~~additional ~~and other selling~~ expenses ~~resulting~~related ~~from~~to the ~~growth~~development of innew ~~net~~products ~~sales~~as atwell ~~LXE,~~as the unfavorable ~~effects~~effect of changes in foreign currency exchange rates on ~~LXE and Aviation’s international operations, and additional~~ ~~costs in 2011 associated with the proxy contest initiated by one of~~ our ~~shareholders.~~Canadian ~~These cost increases were partially offset by lower administrative support costs at Aviation, resulting from our integration efforts~~expenses.

~~Research~~Proxy contest and ~~development~~merger ~~expenses~~related ~~were~~costs included charges of $06.31 million ~~higher~~ in the ~~three~~second ~~months~~quarter ~~ended~~of 2011. ~~April 2,~~These ~~2011 than~~costs inwere primarily for professional fees related to the ~~comparable~~proxy ~~period~~contest ininitiated ~~2010~~by one ~~mainly~~of ~~due~~our shareholders, professional fees related to ~~additional~~the ~~expenses~~review of various acquisition alternatives and transaction costs related to the ~~development~~proposed merger with Honeywell. These costs also included $0.8 million of ~~new~~compensation ~~products~~expense asrelated ~~well~~to asan increase in the ~~unfavorable~~fair ~~effect~~value of ~~changes~~phantom stock inawards ~~foreign~~granted ~~currency~~the ~~exchange~~Company’s ~~rates~~Directors. onWe anticipate additional professional fees and ~~our~~transaction ~~Canadian~~costs ~~operations~~related to the merger in the third quarter of 2011.

~~The~~We recognized income tax benefit of $1.4 million in the three months ended ~~April~~July 2, 2011, ~~included~~equal ato 17% of the loss before income taxes, and income tax expense of $01.21 million ~~foreign~~in ~~exchange~~the ~~net~~three ~~loss~~months ended ~~related~~July 3, 2010, equal to 23% of earnings before income taxes. The Company’s effective income tax rate is generally less than the ~~conversion~~amounts computed by applying the U.S. federal income tax rate of ~~assets~~34% ~~and~~due ~~liabilities~~to ~~not~~a ~~denominated~~portion of earnings being earned in Canada, where the ~~functional~~Company’s ~~currency~~effective ~~and~~rate is much lower than the rate in the U.S. due to ~~changes~~research-related tax benefits. The rate of the benefit in 2011 is less than U.S. statutory rate since tax benefits for certain loss jurisdictions have not been recognized and certain merger-related costs may not be deductible for income tax purposes. The rate in 2010 is higher than it otherwise would have been since tax benefits for certain loss jurisdictions had not been recognized and the ~~fair~~estimated ~~value~~rate used for U.S. taxable income was higher in 2010 since certain key provisions of ~~forward~~the ~~contracts~~U.S. ~~used~~tax law, including the research and development credit, had not been extended to ~~hedge~~be ~~against~~in ~~currency~~effect ~~exposure~~for tax year 2010 until the fourth quarter of 2010.

WeSix ~~recognized~~Months ~~income tax expense of $0.6 million in the three months~~ ended ~~April~~July 2, 2011, ~~equal to 20% of earnings before income taxes,~~ and ~~$0.3~~July ~~million in the three months ended April~~ 3, 2010,: equal to 37% of earnings before income taxes. The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. The rate is higher than it otherwise would be in both 2011 and 2010 since tax benefits for certain loss jurisdictions have not been recognized. In addition, the effective rate in 2010 is higher because the estimated rate used for U.S. taxable income was higher in 2010 since certain key provisions of the U.S. tax law, including the research and development credit, had not been extended to be in effect for tax year 2010 until the fourth quarter of 2010.

18Net sales increased by 2.7% to $176.1 million from $171.4 million in the six months ended July 2, 2011 compared with the same period in 2010. Higher net sales from our LXE and Global Tracking segments were partially offset by lower net sales from our D&S and Aviation segments. LXE reported record net sales for the first six month period in the six months ended July 2, 2011 which were $7.1 million higher than in the same period in 2010 mainly due to a higher volume of terminal shipments and continued growth in demand for rugged handheld computer products to OEM in 2011. Net sales were higher at Global Tracking primarily a result of higher shipments of tracking products to the security market, an increase in service revenue from support contracts generated by emergency management projects, and higher airtime revenues in the first six months of 2011 as compared with the same period of 2010, mainly due an increase in the average revenue generated per terminal in 2011. Net sales were lower at D&S mainly due to a decrease in activity on design and development projects and a slow-down in the volume of orders received in late 2010 and in 2011. Net sales were lower at Aviation mainly due to a decrease in net sales of in-cabin connectivity products into the general aviation market as orders continue to fluctuate due to changes in the airline’s rollout schedule of connectivity, and from fewer funded engineering projects in the first six months of 2011 as compared with the same period in 2010, partially offset by higher net sales of high-speed-data aeronautical products as compared with the same period in 2010.

Product net sales increased by 6.1% to $146.6 million in the six months ended July 2, 2011 as compared with the same period in 2010. Each of our four segments contributed to the $8.5 million increase in product net sales in the six months ended July 2, 2011 with the most significant increases contributed by our LXE segment. LXE’s product shipments reached an all-time high for the first six-month period in 2011 reflecting growth in net sales in the Americas, International and OEM markets. Service net sales decreased by 11.4% to $29.5 million in the six months ending July 2, 2011 compared with the same period in 2010 mainly due to certain significant design and development projects at D&S that were included in net sales in the six months ended July 3, 2010 but have since concluded and were not included in its net sales in the six months ended July 2, 2011, higher discounts on service contracts as a result of competitive pricing pressures mainly in the international market, and a lower volume of funded engineering projects at Aviation in 2011.

Overall cost of sales as a percentage of consolidated net sales was higher in the six months ended July 2, 2011 compared with the same period in 2010 due to higher cost-of-sales percentages reported by each of our four reportable operating segments. Product cost of sales and service cost of sales, as a percentage of their respective net sales, were higher in the six months ended July 2, 2011 compared with the same period in 2010. Our product cost-of-sales percentage was higher mainly due to a less favorable product mix and lower labor utilization rates at D&S, and a less favorable product mix, an increase in contract costs on certain development programs, and an unfavorable effect of changes in foreign currency exchange rates that affected our reported international costs at Aviation in 2011. Our service cost-of-sales percentage was higher primarily as a result of higher discounts on service contracts, and higher labor costs at LXE in 2011, partially offset by a lower proportion of service revenues generated from our D&S segment, which has a higher service cost-of-sales percentage than our other three reportable operating segments.

Selling, general and administrative expenses as a percentage of consolidated net sales increased for the six months ended July 2, 2011 compared with same period in 2010. Actual expenses increased by $1.7 million in 2011 mainly from higher commissions and other selling expenses resulting from the growth in net sales at LXE, an increase in marketing expenses related to new product introductions in the second quarter of 2011 at LXE and Aviation, unfavorable effect of foreign currency exchange rates on LXE and Aviation’s international expenses, and higher depreciation expense related to the upgrade of LXE’s enterprise reporting system in 2011.

Research and development expenses were $2.5 million higher in the six months ended July 2, 2011 than in the comparable period of 2010 mainly due to additional expenses related to the development of new products as well as the unfavorable effect of changes in foreign currency exchange rates on our Canadian expenses.

Proxy contest and merger related costs included charges of $6.8 million in the first six months of 2011. These costs were primarily for professional fees related to the proxy contest initiated by one of our shareholders, professional fees related to the review of various acquisition alternatives and transaction costs related to the proposed merger with Honeywell. These costs also included $0.8 million of compensation expense related to an increase in the fair value of phantom stock awards granted the Company’s Directors. We anticipate additional professional fees and transaction costs related to the merger in the third quarter of 2011.

We recognized income tax benefit of 0.8 million in the six months ended July 2, 2011, equal to 16% of the loss before income taxes, and income tax expense of $1.5 million in the six months ended July 3, 2010, equal to 25% of earnings before income taxes. The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. The rate of the benefit in 2011 is less than U.S. statutory rate since tax benefits for certain loss jurisdictions have not been recognized and certain merger-related costs may not be deductible for income tax purposes. The rate in 2010 is higher than it otherwise would have been since tax benefits for certain loss jurisdictions had not been recognized and the estimated rate used for U.S. taxable income was higher in 2010 since certain key provisions of the U.S. tax law, including the research and development credit, had not been extended to be in effect for tax year 2010 until the fourth quarter of 2010.

Segment Analysis

Our segment net sales, cost of sales as a percentage of respective segment net sales, and segment operating income (loss) and Adjusted EBITDA were as follows (in thousands, except percentages):

	Three Months Ended							Percentage
														Percentage
	April 2			April 3				Increase
	Three Months Ended							Six Months Ended						Increase (Decrease)
	2011			2010			(Decrease)
	July 2			July 3				July 2			July 3			Three			Six
Net sales:
	2011			2010				2011			2010			Months			Months
Aviation	$	25,010			26,186				(4.5	)%
Net sales:
Defense & Space		14,072			16,534				(14.9	)
LXE	$	37,801			36,365				74,020			66,938			3.9	%		10.6
LXE		36,219			30,573				18.5
Global Tracking		11,736			10,526				21,644			20,386			11.5			6.2
Global Tracking		9,908			9,860				0.5
Less intercompany sales		(186	)		(510	)			(358	)		(761	)
Less intercompany sales		(172	)		(251	)
Global Tracking external sales		11,550			10,016				21,286			19,625
Global Tracking external sales		9,736			9,609
Aviation		25,947			25,338				50,957			51,524			2.4			(1.1	)
Total	$	85,037			82,902				2.6
Defense & Space		15,741			16,758				29,813			33,292			(6.1	)		(10.4	)
Cost of sales percentage:
Total	$	91,039			88,477				176,076			171,379			2.9			2.7
Aviation		64.8	%		67.2				(2.4	)
Cost of sales percentage:
Defense & Space		76.2			77.5				(1.3	)
LXE		62.4	%		59.7				61.6			59.1			2.7			2.5
LXE		60.9			58.3				2.6
Global Tracking		49.1			51.1				52.0			51.8			(2.0	)		0.2
Global Tracking		55.3			52.5				2.8
Aviation		73.1			62.7				69.0			65.0			10.4			4.0
Total		63.0			64.3				(1.3	)
Defense & Space		79.5			74.5				77.9			76.0			5.0			1.9
Operating income (loss):
Total		67.3			63.4				65.2			63.9			3.9			1.3
Aviation	$	825			309				167.0
Operating (loss) income:
Defense & Space		432			918				(52.9	)
LXE	$	113			2,077				1,798			2,969			(94.6	)		(39.4	)
LXE		1,685			892				88.9
Global Tracking		1,190			684				1,395			838			74.0			66.5
Global Tracking		205			154				33.1
Aviation		(2,867	)		1,816				(2,042	)		2,125				(2)			(2)
Corporate & Other		422			(349	)			(2)
Defense & Space		292			1,694				724			2,612			(82.8	)		(72.3	)
Total	$	3,569			1,924				85.5
Corporate & Other		(5,958	)		(1,097	)			(5,536	)		(1,445	)			(2)		283.1
Adjusted EBITDA (1)
Total	$	(7,230	)		5,174				(3,661	)		7,099			(239.7	)		(151.6	)
Aviation	$	2,769			2,159				28.3
Adjusted EBITDA (1)
Defense & Space		1,288			1,831				(29.7	)
LXE	$	1,398			3,076				4,112			4,783			(54.6	)		(14.0	)
LXE		2,714			1,707				59.0
Global Tracking		2,165			1,808				3,275			2,762			19.7			18.6
Global Tracking		1,110			955				16.2
Aviation		(810	)		3,713				1,959			5,872			(121.8	)		(66.6	)
Corporate & Other		1,656			801				106.7
Defense & Space		1,186			2,616				2,474			4,447			(54.7	)		(44.4	)
Total	$	9,537			7,453				28.0
Corporate & Other		490			(84	)			2,145			718				(2)		198.7
Total	$	4,429			11,129				13,965			18,582			(60.2	)		(24.8	)

(1)		Adjusted EBITDA is a financial measure that is not defined within generally accepted accounting principles (“GAAP”). See section entitled “Adjusted EBITDA” for an explanation of this measure and a reconciliation of the measure to net earnings (loss).
(2)		The percentage change is not calculable or not meaningful.

19LXE: Net sales for LXE reached an all-time high for second quarter and first six months sales in the three and six months ended July 2, 2011. Net sales improved by $1.4 million and $7.1 million in the second quarter and first six months of 2011, respectively, as compared with the same periods in 2010. Net sales increased in the International market and to OEMs in both the second quarter and first six months of 2011, as compared with the same periods in 2010. Net sales to the Americas market were lower in the second quarter of 2011, and increased in the first six months of 2011 as compared with the same periods in 2010 mainly due to the timing of shipments in those periods. The improvement in net sales in both the second quarter and first six months of 2011 was mainly due to a higher volume of terminal shipments reflecting the continued improvement in the overall market in 2011, the continued success of LXE’s marketing strategy to extend its market reach through channel partners and distributors, and the strong demand for rugged handheld computer products which has continued to gain acceptance in the OEM market. The improvement in net sales was also due to the favorable effects of foreign currency translation on net sales due to the weaker U.S. dollar relative to foreign currencies in the second quarter and first six months of 2011 as compared with the same periods in 2010.

~~Aviation:~~Cost ~~Net~~of sales ~~decreased~~as bya ~~$1.2 million~~percentage of net sales was higher in the ~~three~~second ~~months~~quarter ~~ended~~and ~~April 2,~~first six months of 2011 as compared with the same ~~period~~periods inof 2010 mainly due to a higher cost-of-sales percentage related to LXE’s service revenue in 2011. The ~~decrease~~increase in LXE’s service cost-of-sales percentage was mainly due to ~~lower~~higher ~~net~~discounts ~~sales~~on service contracts as a result of ~~in-cabin~~competitive pricing ~~connectivity~~pressures ~~products~~mainly ~~into~~in the ~~air~~international ~~transport~~ market, and ~~fewer~~higher ~~funded~~labor ~~engineering~~costs ~~projects, partially~~for ~~offset~~additional byresources needed ~~higher~~in ~~net~~the ~~sales~~second quarter of ~~high-speed-data~~2011 ~~aeronautical~~to ~~products~~address ~~into~~ the ~~military~~repair ~~and~~order backlog that resulted during the ~~government~~upgrade ~~markets~~of LXE’s enterprise reporting system in the ~~three~~first ~~months~~quarter ~~ended~~of ~~April 2,~~ 2011.

~~Cost~~LXE generated operating income of ~~sales~~$0.1 million asin athe ~~percentage~~second quarter of ~~net~~2011 ~~sales~~as ~~was~~compared ~~lower~~with ~~for~~$2.1 million in the ~~three~~second ~~months~~quarter ~~ended~~of ~~April 2,~~2010. ~~2011~~This asdecrease in operating income of $2.0 million was ~~compared~~mainly ~~with~~a ~~the~~result ~~three~~of ~~months~~a ~~ended~~lower ~~April 3,~~margin contribution ~~2010.~~generated ~~The~~from a less favorable cost-of-sales percentage, ~~was~~higher ~~lower~~commissions ~~mainly~~and other ~~due~~selling toexpenses as a ~~more~~result ~~favorable~~of ~~product~~the ~~mix~~higher net sales, an increase in ~~2011~~marketing expenses related to LXE’s new products introductions, ~~partially~~the ~~offset~~ThorTM byvehicle-mount ancomputer and the ~~unfavorable~~MarathonTM ~~effect~~field computer, in the second quarter of ~~changes~~2011, and higher depreciation expense related to the upgrade of LXE’s enterprise reporting system in ~~foreign~~2011. ~~currency~~Operating ~~exchange~~income ~~rates~~as ~~that~~a percentage ~~affected~~of ~~our~~net ~~reported~~sales was 0.3% and 5.7% in the second quarter of 2011 and 2010, respectively, and ~~international~~was ~~costs~~2.4% and 4.4% in the ~~three~~first six months ~~ended~~of ~~April 2~~2011 and 2010, ~~2011~~respectively.

~~Operating~~Adjusted ~~income~~EBITDA ~~increased~~decreased by $1.7 million and $0.57 million in the ~~three~~second ~~months~~quarter ~~ended~~and ~~April 2,~~first ~~2011 as compared with~~six ~~the~~months ~~same~~of ~~period~~2011, ~~in 2010~~respectively, ~~primarily~~ as acompared ~~result~~with ~~of a higher margin contribution from~~ the ~~favorable changes~~second inquarter ~~the cost-of-sales percentage~~ and ~~lower~~first ~~administrative~~six ~~support~~months ~~costs, mainly as a result~~ of ~~the transfer of operations~~2010, ~~from Aviation’s facility in Takoma Park~~respectively, MDmainly due to ~~its~~a ~~Moorestown,~~decrease NJin ~~facility~~operating atincome ~~the~~in ~~end of 2010~~2011. ~~These~~ ~~increases~~The decrease in ~~operating~~Adjusted ~~income~~EBITDA was ~~were~~ partially offset by ~~higher~~a ~~development~~favorable ~~costs~~change ~~for~~in ~~new products~~foreign ~~including~~currency ~~the~~gains ~~Aspire~~and ~~line~~losses offor ~~satellite communication equipment and~~ the ~~portable Airmail~~second ~~solutions,~~quarter and anfirst ~~unfavorable~~six ~~effect~~months of ~~foreign currency exchange rates in the three months ended April 2,~~ 2011. ~~Operating income~~ as acompared ~~percentage~~with ofthe ~~net~~same ~~sales~~periods ~~was 3.3% and 1.2%~~ in ~~the first three months of 2011 and~~ 2010~~, respectively~~.

~~Adjusted~~Global ~~EBITDA~~Tracking: Net sales increased by $01.62 million and $1.3 million in the ~~three~~second quarter and first six months ~~ended~~of ~~April 2~~2011, ~~2011~~respectively, as compared with the same periods in 2010. The increase in net sales was primarily a result of higher shipments of our tracking products mainly to the security ~~three~~market in the second quarter and first six months ~~ended~~of ~~April 3,~~2011 as compared with the same periods in 2010, ~~due~~reflecting to the continued strong demand for tracking and monitoring products in that market and an increase in ~~operating~~service ~~income,~~revenue from support contracts generated by emergency management projects in both periods. These increases in net sales were partially offset by lower product ~~amortization~~revenues generated from emergency management projects. Airtime revenues were comparable in the second quarter of 2011, and tothe asecond ~~favorable~~quarter ~~change~~of 2010. Airtime revenues increased in ~~foreign~~the ~~currency~~first six ~~gains~~months ~~and~~of ~~losses~~2011 ~~year~~as compared with the same period in 2010, mainly due an increase in the average ~~over~~revenue ~~year~~generated per terminal in 2011.

~~LXE:~~Cost ~~Net sales for LXE reached an all-time high for first quarter sales in the three months ended April 2, 2011 in spite~~ of ~~an operational shut-down during the quarter for the conversion to a new ERP system. Net~~ sales ~~improved by $5.6 million~~ as ~~compared~~a ~~with~~percentage ~~the same period in 2010, with increases in net sales in each~~ of ~~LXE’s three markets. The improvement in~~ net sales was ~~mainly~~lower ~~due to~~for athe ~~higher~~second ~~volume~~quarter of ~~terminal~~2011 ~~shipments,~~as ~~which increased by nearly 20%, reflecting the continued~~compared ~~improvement~~with in the ~~overall~~second ~~market~~quarter ~~in 2011 and the success~~ of ~~LXE’s~~2010 ~~marketing~~primarily ~~strategy~~due ~~adopted in early 2009~~ to ~~utilize~~a more ~~indirect~~favorable ~~sales~~product ~~channels through channel partners and distributors to extend its market reach~~mix. InCost ~~addition, the three months ended April 2, 2011 included additional revenue~~ of ~~$1.0 million~~sales as a percentage ~~result~~ of anet ~~change~~sales inwas ~~estimate~~relatively ofunchanged ~~returns from distributors. Prior to 2011, LXE did not have enough history on returns~~ for ~~certain~~the ~~distributors~~first tosix ~~allow~~months itof to2011 ~~recognize revenue~~as oncompared ~~an estimated returns basis. For 2011~~ with the ~~history~~first issix ~~now~~months ~~adequate to estimate returns for certain~~ of ~~these distributors~~2010.

~~Cost~~Operating ofincome ~~sales~~increased asby a$0.5 million ~~percentage~~and of$0.6 million ~~net~~in ~~sales~~the ~~was~~second ~~higher~~quarter inand ~~the~~first ~~three~~ six months ~~ended~~of ~~April 2~~2011, ~~2011~~respectively, as compared with the same ~~period~~periods in 2010, ~~mainly~~primarily ~~due~~as to a ~~higher~~result ~~cost-~~of- higher net sales, ~~percentage~~and ~~related~~lower ~~to LXE’s~~selling, ~~service~~general ~~revenue~~and administrative expense in 2011., ~~The~~partially ~~higher~~offset by ~~service~~an ~~cost-of-sales~~increase ~~percentage~~in ~~was~~development ~~primarily~~expenses. aOperating ~~result of~~income aalso ~~delay~~increased in the ~~fulfillment~~first six months of 2011 ~~repair~~due ~~orders~~to ~~during~~a higher contribution margin from the ~~upgrade~~lower cost-of-sales ~~LXE’s~~percentage ~~enterprise~~in ~~reporting~~2011. The ~~system~~lower selling, ~~which~~general ~~caused~~and ~~its~~administrative ~~repair~~expense ~~service~~was ~~revenue~~mainly due to be lower ~~than~~administrative ~~expected~~costs allocated into the ~~first~~Global ~~quarter~~Tracking ~~of 2011.~~segment ~~Product~~related ~~cost~~to ofthe ~~sales~~Ottawa asoperation athat ~~percentage~~is ofshared ~~net~~with ~~sales~~the Aviation ~~were~~segment. ~~relatively~~The ~~unchanged~~increase in ~~the~~development ~~three months~~expenses ~~ended~~was ~~April 2,~~mainly ~~2011~~for asdesign ~~compared~~and ~~with~~development efforts ~~the~~to ~~same~~enable ~~period~~existing intracking ~~2010.~~products ~~Higher~~to ~~overhead~~be ~~and~~compatible ~~royalty expenses~~with inother ~~2011~~satellite ~~were~~platforms, ~~offset~~and for bythe adevelopment ~~more~~of ~~favorable~~Global ~~product~~Tracking’s ~~mix,~~latest ~~and~~operations acontrol ~~favorable~~console, ~~effect~~the ofOCC-600, ~~changes in~~for ~~foreign~~emergency ~~currency~~management ~~exchange~~applications. ~~rates~~Operating ~~that~~income ~~affected~~as ~~our~~a ~~reported~~percentage ~~International~~of net sales. ~~Revenues~~was ~~are~~10.1% and ~~denominated~~6.5% in the ~~local~~second ~~functional~~quarter ~~currency~~of ~~but~~2011 ~~product~~and ~~costs~~2010, ~~are~~respectively, ~~denominated~~and inwas ~~the U~~6.S.4% ~~dollar, which~~and ~~was~~4.1% ~~weaker relative to the foreign currencies~~ in the ~~three~~first six months ~~ended~~of ~~April 2,~~ 2011 ~~compared~~ ~~with~~and ~~the same period in~~ 2010, respectively.

~~LXE generated operating income of $1.7 million in the three months ended April 2, 2011 as compared~~24 with $0.9 million in the three months ended April 3, 2010. This increase in operating income of $0.8 million was mainly a result of a higher margin contribution generated from higher net sales and lower development expenses as the development efforts for new products to be released in 2011 near completion. These favorable effects were partially offset by a less favorable cost-of-sales percentage, higher commissions and other selling expenses as a result of the higher net sales, and higher depreciation expense related to the upgrade of LXE’s enterprise reporting system. Operating income as a percentage of net sales was 4.7% and 2.9% in the three months ended April 2, 2011 and April 3, 2010, respectively.

Adjusted EBITDA increased by $1.0 million in the three months ended April 2, 2011 as compared with the three months ended April 3, 2010, mainly due to the increase in operating income in 2011.

~~Defense~~Adjusted &EBITDA ~~Space:~~increased ~~Net~~by ~~sales~~$0.4 million ~~were~~and ~~lower by~~ $20.5 million in the ~~three~~second ~~months~~quarter ~~ended~~and ~~April 2,~~first ~~2011 as~~six ~~compared~~months ~~with the same period in 2010 mainly due to a decrease in activity on certain programs that were completed or neared completion in the first quarter~~ of 2011, ~~coupled~~respectively, ~~with~~as ~~lower~~compared ~~labor utilization~~with ~~rates in~~ the ~~first~~second quarter ofand ~~2011~~first ~~caused~~six bymonths ~~a delay in the receipt~~ of ~~certain customer~~2010, ~~orders~~respectively, ~~that~~mainly ~~were~~due ~~expected~~ to ~~be received earlier in the quarter, and~~ an ~~unfavorable~~increase ~~impact of severe weather that resulted~~ in ~~fewer~~operating ~~working~~income ~~days~~ in ~~D&S’s~~2011. ~~Atlanta~~The ~~facility~~increase in ~~the first quarter~~Adjusted ofEBITDA ~~2011~~in asboth ~~compared with~~ the ~~same~~second ~~period~~quarter inand ~~2010.~~first ~~Order~~six ~~backlog~~months of ~~long-term~~2011 ~~development~~was ~~and production~~partially ~~contracts~~offset ~~increased~~ by ~~$13.9 million from December 31, 2010 to $87.0 million as of April~~an 2,unfavorable ~~2011.~~change ~~Orders received~~ in ~~the~~foreign ~~first~~currency ~~quarter~~gains ~~of 2011 included a significant order for components parts for the Iridium NEXT constellation which will be comprised of 81 satellites,~~ and ~~for~~losses ~~an airborne~~in ~~X-band SATCOM antenna system, which will become a new product offering for D&S~~2011.

~~Cost~~Aviation: ofNet sales asincreased aby ~~percentage~~$0.6 million in the second quarter of ~~net~~2011 ~~sales~~as ~~for~~compared with the second ~~three~~quarter ~~months~~of ~~ended~~2010, ~~April~~and decreased by $0.6 2,million in first six months of 2011 ~~was~~as ~~comparable~~compared with the first six months of 2010. Net sales were higher in the second quarter and first six months of 2011 from high-speed-data aeronautical products mainly to OEM partners as compared with the same periods ~~period~~ in 2010. ~~Lower~~These ~~labor~~higher ~~utilization~~net ~~rates~~sales ~~experienced~~were partially offset in the ~~first~~second quarter of 2011, and ~~were~~fully offset byin athe ~~favorable~~first ~~contract~~six ~~mix~~months of 2011, ~~strong~~due ~~contract~~to ~~performance~~lower onnet ~~key~~sales ~~defense~~of in-~~related~~cabin connectivity ~~programs~~products into the general aviation market as orders continue to fluctuate due to changes in the airline’s rollout schedule of connectivity, and from fewer funded engineering projects in both the second ~~adherence~~quarter toand ~~strong~~first ~~cost~~six ~~control~~months ~~guidelines~~of 2011 as compared with the same periods in 2010.

~~Operating~~Cost ~~income~~of ~~was~~sales ~~lower~~as bya ~~$0.5 million~~percentage of net sales was higher in the ~~three~~second ~~months~~quarter ~~ended~~and ~~April 2,~~first six months of 2011 as compared with the ~~three~~second ~~months~~quarter ~~ended~~and ~~April 3,~~first ~~2010.~~six ~~The~~months ~~lower~~of ~~operating~~2010 ~~income~~mainly ~~was primarily~~ due to ~~the~~a ~~decrease~~less favorable inproduct ~~net~~mix, ~~sales~~an ~~generated~~increase in contract ~~the~~costs ~~three~~on ~~months~~certain ~~ended~~development ~~April 2~~programs, ~~2011.~~and ~~Operating~~an ~~income~~unfavorable aseffect ~~a percentage~~ of ~~net~~changes ~~sales~~in ~~was~~foreign currency ~~3.1%~~exchange ~~and~~rates ~~5.6%~~that inaffected ~~the~~our ~~three~~reported ~~months~~international ~~ended~~costs ~~April 2,~~in 2011 ~~and April 3, 2010, respectively~~.

~~Adjusted~~Operating ~~EBITDA~~income decreased by $04.57 million and $4.2 million in the ~~three~~second ~~months~~quarter ~~ended~~and ~~April 2,~~first six months of 2011 as compared with the same periods in 2010, respectively. The decrease in operating income was primarily as a result of a lower margin contribution from the ~~three~~unfavorable ~~months~~changes ~~ended~~in ~~April 3~~the cost-of-sales percentage, ~~2010~~and ~~mainly~~an increase in selling, general and administrative costs and higher research development expenses. The decrease in operating income in the first six months of 2011 was also due to lower net sales generated in the ~~decrease~~first six months of 2011. The increase in selling, general and administrative costs and higher research and development expenses was mainly related to Aviation’s new product introductions in the second quarter of 2011, including the Aspire line of satellite communication equipment and the portable Airmail solutions. In addition, operating ~~income~~costs increased in 2011 as a result of an unfavorable effect of foreign currency exchange rates, lower administrative costs allocated to the Global Tracking segment related to the Ottawa operation that is shared with the Global Tracking segment. Operating results as a percentage of net sales was a negative 11.0% and a positive 7.2% in the second quarter of 2011 and 2010, respectively, and was a negative 4.0% and a positive 4.1% in the first six months of 2011 and 2010, respectively.

~~Global~~Adjusted ~~Tracking:~~EBITDA ~~Net~~decreased ~~sales~~by ~~were~~$4.5 million and $93.9 million ~~for~~in the ~~three~~second ~~months~~quarter ~~ended April 2, 2011~~ and ~~the~~first ~~three~~six months ~~ended~~of ~~April 3~~2011, ~~2010.~~respectively, ~~Net~~as ~~sales~~compared ~~included~~with athe ~~higher~~second ~~concentration~~quarter ofand ~~shipments~~first ofsix ~~our~~months ~~tracking~~of 2010, ~~products~~respectively, tomainly ~~the~~due ~~security~~to ~~and~~a ~~maritime~~decrease ~~markets~~ in ~~the~~operating ~~three~~income ~~months~~in ~~ended April 2~~2011, ~~2011~~partially asoffset ~~compared~~by lower ~~with~~amortization ~~the~~in ~~same~~2011. ~~period~~The decrease in ~~2010,~~Adjusted ~~reflecting~~EBITDA ~~the~~was ~~continued~~also ~~strong~~impacted ~~demand~~by ~~for~~an ~~tracking~~unfavorable ~~and monitoring~~change ~~products~~ in ~~those~~foreign ~~markets.~~currency ~~This~~gains ~~was~~and ~~offset~~losses byin ~~lower~~the ~~revenues~~second ~~generated~~quarter ~~from~~of ~~emergency~~2011 ~~management projects.~~as ~~Net~~compared ~~sales~~with ~~also~~the ~~included~~second quarter aof ~~higher~~2010. ~~concentration~~But, ofthe ~~airtime~~decrease ~~revenue~~in ~~mainly~~Adjusted asEBITDA afor ~~result~~the ~~of a~~first ~~higher~~six ~~number~~months of ~~terminals~~2011 inwas partially ~~use,~~offset ~~and~~by ana ~~increase~~favorable change in ~~the~~foreign ~~average~~currency ~~revenue~~gains ~~generated~~and ~~per~~losses ~~terminal for~~as ~~the~~compared ~~three~~with ~~months~~the same ~~ended~~period ~~April 2,~~of ~~2011~~2010.

~~Cost~~Defense of& Space: Net sales were lower by $1.0 million and $3.5 million in the second quarter and first six months of 2011 as compared with the same periods of 2010 mainly due to a ~~percentage~~decrease in activity on certain development programs that were completed at the end of ~~net~~2010, ~~sales~~and ~~was~~lower ~~somewhat~~labor utilization ~~higher~~rates resulting from a decrease in the number of programs available for near-term efforts. These decreases were partially offset by an increase in activity on a significant commercial program to provide antenna products for airborne internet and cell phone service and on a space program to provide component parts for the ~~three~~Iridium ~~months~~NEXT ~~ended~~constellation ~~April 2,~~in the second quarter of 2011. Net sales were also lower in the first six months of 2011 as compared with the same period in 2010 due to an unfavorable impact of severe weather that resulted in fewer working days in D&S’s Atlanta facility in the first quarter of 2011. ~~The~~However, ~~cost~~net sales were higher in the second quarter of 2011 by $1.7 million as compared with the first quarter of 2011 due to an acceleration in scheduled production activity for certain programs to utilize excess short-term capacity. Order backlog of long-~~sales~~term ~~percentage~~development ~~for~~and ~~the~~production ~~three~~contracts ~~months~~increased by $3.0 million ~~ended~~from ~~April~~December 31, 2010 to $76.1 million as of July 2, 2011. ~~included~~Other than a ~~less~~significant ~~favorable~~order ~~product/customer~~for component ~~mix~~parts ~~which~~for ~~was~~the ~~partially~~Iridium ~~offset~~NEXT ~~by the~~constellation, ~~favorable~~orders ~~effects~~have ofbeen ~~the~~lower ~~increase~~than inexpected ~~service~~during 2011. ~~revenue,~~The ~~which~~low ~~has~~order volume and a less favorable contract mix is expected to cause operating profits to be lower ~~cost-~~for D&S at least through the remainder of~~-sales percentage~~ ~~than~~2011 ~~product~~as ~~net~~compared ~~sales~~with 2010.

~~Operating income was relatively unchanged in the three months ended April 2, 2011 as compared with~~25 the same period in the previous year. The lower margin contribution from the higher cost-of-sales percentage, and an increase in development expenses were offset by lower selling, general and administrative expense in 2011. The increase in development expenses was mainly for design and development efforts to enable existing tracking products to be compatible with other satellite platforms. The lower selling, general and administrative expense was mainly due to lower administrative costs allocated to the Global Tracking segment related to the Ottawa operation that is shared with the Aviation segment. Operating income as a percentage of net sales was 2.1% and 1.6% in the first quarter of 2011 and 2010, respectively.

Adjusted EBITDA increased by $0.2 million in the three months ended April 2, 2011 as compared with the three months ended April 3, 2010.

Cost of sales as a percentage of net sales for second quarter and first six months of 2011 was higher as compared with the same periods in 2010 mainly due to lower labor utilization rates and a less favorable contract mix in 2011.

Operating income was lower by $1.4 million and $1.9 million in the second quarter and first six months of 2011, respectively, as compared with the same periods in 2010. The lower operating income was primarily due to the decrease in net sales generated in the second quarter and first six months of 2011, and the less favorable cost-of-sales percentage in those periods. Operating income was also lower due to increased sales commissions mainly due to higher commission fees related to the order for component parts for the Iridium NEXT constellation, and higher research and development costs to expand its technology base. Operating income as a percentage of net sales was 1.9% and 10.1% in the second quarter of 2011 and 2010, respectively, and was 2.4% and 7.8% in the first six months of 2011 and 2010, respectively.

Adjusted EBITDA decreased by $1.4 million and $2.0 million in the second quarter and first six months of 2011, respectively, as compared with the second quarter and first six months of 2010, respectively, mainly due to a decrease in operating income in 2011.

Supplemental Information

In February 2011, we formed EMS Global Resource Management, which is a combination of the LXE and Global Tracking segments. We also have begun the alignment of Aviation and D&S as the AeroConnectivity group. We have included the net sales, cost-of-sales (as a percentage of respective market net sales), operating income (loss) and Adjusted EBITDA for the three and six months ended ~~April~~July 2, 2011 and ~~April~~July 3, 2010 for these groups as follows (in thousands, except percentages):

	Three Months Ended						Six Months Ended
	April 2			April 3
	July 2			July 3			July 2		July 3
	2011			2010			2011		2010
Net sales:
Aviation	$	25,010			26,186
LXE	$	37,801			36,365			74,020		66,938
Defense & Space		14,072			16,534
Global Tracking		11,550			10,016			21,286		19,625
AeroConnectivity		39,082			42,720
Global Resource Management		49,351			46,381			95,306		86,563
LXE		36,219			30,573
Aviation		25,947			25,338			50,957		51,524
Global Tracking		9,736			9,609
Defense & Space		15,741			16,758			29,813		33,292
Global Resource Management		45,955			40,182
AeroConnectivity		41,688			42,096			80,770		84,816
Total	$	8591,~~037~~039			8288,~~902~~477			176,076		171,379
Cost of sales percentage:
Aviation		64.8	%		67.2
LXE		62.4	%		59.7			61.6		59.1
Defense & Space		76.2			77.5
Global Tracking		49.1			51.1			52.0		51.8
AeroConnectivity		68.9			71.2
Global Resource Management		59.2			57.8			59.4		57.4
LXE		60.9			58.3
Aviation		73.1			62.7			69.0		65.0
Global Tracking		55.3			52.5
Defense & Space		79.5			74.5			77.9		76.0
Global Resource Management		59.7			57.3
AeroConnectivity		75.5			67.4			72.3		69.3
Total		6367.03			6463.34			65.2		63.9
Operating income (loss):
Aviation	$	825			309
Defense & Space		432			918
AeroConnectivity		1,257			1,227
LXE		1,685			892
Global Tracking		205			154
Global Resource Management		1,890			1,046
Corporate & Other		422			(349	)
Total	$	3,569			1,924
Adjusted EBITDA
Aviation	$	2,769			2,159
Defense & Space		1,288			1,831
AeroConnectivity		4,057			3,990
LXE		2,714			1,707
Global Tracking		1,110			955
Global Resource Management		3,824			2,662
Corporate & Other		1,656			801
Total	$	9,537			7,453

2226


	Three Months Ended						Six Months Ended
	July 2			July 3			July 2			July 3
	2011			2010			2011			2010

Operating income (loss):
LXE	$	113			2,077			1,798			2,969
Global Tracking		1,190			684			1,395			838

Global Resource Management		1,303			2,761			3,193			3,807

Aviation		(2,867	)		1,816			(2,042	)		2,125
Defense & Space		292			1,694			724			2,612

AeroConnectivity		(2,575	)		3,510			(1,318	)		4,737
Corporate & Other		(5,958	)		(1,097	)		(5,536	)		(1,445	)

Total	$	(7,230	)		5,174			(3,661	)		7,099


Adjusted EBITDA
LXE	$	1,398			3,076			4,112			4,783
Global Tracking		2,165			1,808			3,275			2,762

Global Resource Management		3,563			4,884			7,387			7,545

Aviation		(810	)		3,713			1,959			5,872
Defense & Space		1,186			2,616			2,474			4,447

AeroConnectivity		376			6,329			4,433			10,319
Corporate & Other		490			(84	)		2,145			718

Total	$	4,429			11,129			13,965			18,582

Adjusted EBITDA (a non-GAAP financial measure)

In addition to traditional financial measures determined in accordance with GAAP, we also measure our performance based on the non-GAAP financial measure of earnings before interest expense, income taxes, depreciation and amortization, and before stock-based compensation, impairment loss on goodwill and related charges, acquisition-related items and proxy contest costs (“Adjusted EBITDA”). The following table is a reconciliation of net earnings (which is the most directly comparable GAAP operating performance measure) and earnings (loss) before income taxes by segment to Adjusted EBITDA for the three and six months ended ~~April~~July 2, 2011 and ~~April~~July 3, 2010 (in thousands):

				Global					~~Global~~		Corp &
	Aviation			LXE		D&S			Tracking		Other			Total
	LXE			Tracking		Aviation			D&S		Other			Total
Three Months Ended April 2, 2011
Three Months Ended July 2, 2011
Net earnings														$	2,394
Net loss														$	(6,444	)
Income tax expense															595
Income tax benefit															(1,337	)
Earnings (loss) before income taxes	$	~~802~~169			1,~~657~~184		~~432~~(2,943	)		~~159~~292		(616,483	)		2(7,~~989~~781	)
Interest expense		336			24—		—			—		~~486~~521			~~513~~557
Depreciation and amortization		1,~~878~~073			~~959~~934		~~773~~1,974			~~927~~751		~~299~~293			45,~~836~~025
Stock-based compensation		8675			7425		8393			2488		~~212~~233			~~479~~514
Proxy contest costs		—45			—22		—66			—55		~~720~~5,926			~~720~~6,114
Adjusted EBITDA	$	21,~~769~~398			2,~~714~~165		~~1,288~~(810	)		1,~~110~~186		~~1,656~~490		$	94,~~537~~429
Three Months Ended April 3, 2010
Net earnings														$	591
Income tax expense															344
Earnings (loss) before income taxes	$	(72	)		783		922			47		(745	)		935
Interest expense		—			17		—			—		460			477
Depreciation and amortization		2,168			838		845			894		295			5,040
Stock-based compensation		63			69		64			14		190			400
Impairment loss on goodwill related charges		—			—		—			—		384			384
Acquisition-related items		—			—		—			—		217			217
Adjusted EBITDA	$	2,159			1,707		1,831			955		801		$	7,453


			Global							Corp &
	LXE		Tracking		Aviation			D&S		Other			Total
Six Months Ended July 2, 2011
Net loss													$	(4,050	)
Income tax benefit														(742	)

Earnings (loss) before income taxes	$	1,826		1,343		(2,141	)		724		(6,544	)		(4,792	)
Interest expense		60		—		3			—		1,007			1,070
Depreciation and amortization		2,032		1,861		3,852			1,524		592			9,861
Stock-based compensation		149		49		179			171		444			992
Proxy contest costs		45		22		66			55		6,646			6,834

Adjusted EBITDA	$	4,112		3,275		1,959			2,474		2,145		$	13,965


Three Months Ended July 3, 2010
Net earnings													$	3,868
Income tax expense														1,109

Earnings (loss) before income taxes	$	2,050		888		1,877			1,694		(1,532	)		4,977
Interest expense		1		1		4			—		536			542
Depreciation and amortization		951		899		1,752			865		312			4,779
Stock-based compensation		74		20		80			57		254			485
Acquisition-related items		—		—		—			—		346			346

Adjusted EBITDA	$	3,076		1,808		3,713			2,616		(84	)	$	11,129


Six Months Ended July 3, 2010
Net earnings													$	4,459
Income tax expense														1,453

Earnings (loss) before income taxes	$	2,833		934		1,805			2,616		(2,276	)		5,912
Interest expense		18		1		4			—		996			1,019
Depreciation and amortization		1,789		1,793		3,920			1,710		607			9,819
Impairment loss on goodwill related charges		—		—		—			—		384			384
Stock-based compensation		143		34		143			121		444			885
Acquisition-related items		—		—		—			—		563			563

Adjusted EBITDA	$	4,783		2,762		5,872			4,447		718		$	18,582

We believe that earnings that are based on this non-GAAP financial measure provide useful information to investors, lenders and financial analysts because (i) this measure is more comparable with the results for prior fiscal periods, and (ii) by excluding the potential volatility related to the timing and extent of nonoperating 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 our ongoing operating activities. Also, we use this information, together with other appropriate metrics, to set goals for and measure the performance of our operating businesses, and to assess our compliance with debt covenants. Management further considers Adjusted EBITDA an important indicator of operational strengths and performance of our 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 to 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. This information should not be considered in isolation or in lieu of our 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.

2328

Backlog

Backlog is very important for our D&S segment due to the long delivery cycles for its projects. Many customers of our LXE segment typically require short delivery cycles. As a result, LXE usually converts orders into revenues within a few weeks, and it generally does not build up an order backlog that extends substantially beyond one fiscal quarter except for annual or multi-year maintenance service agreements. Our Aviation and Global Tracking businesses have projects with both short delivery cycles and delivery cycles that extend beyond the next twelve months. Our segment backlog as of ~~April~~July 2, 2011 and December 31, 2010 was as follows (in thousands):

	April 2		December 31
	July 2		December 31
	2011		2010
Aviation	$	39,884		38,049
LXE	$	23,985		29,106
Defense & Space		87,013		73,058
Global Tracking		16,490		15,449
LXE		25,078		29,106
Aviation		44,376		38,049
Global Tracking		19,567		15,449
Defense & Space		76,112		73,058
Total	$	~~171~~160,~~542~~963		155,662

Included in the backlog of firm orders for our D&S segment was approximately $32.69 million and $4.0 million of unfunded orders, mainly for military contracts, as of ~~April~~July 2, 2011, and December 31, 2010, respectively. Of the orders in backlog as of ~~April~~July 2, 2011, the following are expected to to be filled in the following twelve months: Aviation — 85%; LXE — 6560%; D&S — 5055%; and Global Tracking — 7585%.

Liquidity and Capital Resources

During the ~~three~~six months ended ~~April~~July 2, 2011, net cash and cash equivalents increased by $1516.6 9 million mainly due to a $1113.05 million increase in borrowings, ~~and~~ $65.32 million of cash provided by ~~operating~~ operating activities, and $2.7 million of cash from the exercise of stock options, partially offset by $25.6 7 million of cash used for capital expenditures during the ~~three~~six months ended ~~April~~July 2, 2011. Operating activities contributed $65.32 million in positive cash flow primarily from earnings generated by Global ~~LXE~~Tracking, D&S, and ~~Global Tracking~~LXE, an increase in payables due to the timing of supplier payments, and a decrease in receivables primarily from strong collections at D&S and Aviation. This was partially offset by incentive compensation payments, and an increase in inventory balances mainly at LXE and Aviation in the ~~three~~six months ended ~~April~~July 32, 2011 mainly to meet material requirements anticipated for the ~~second~~third quarter of 2011.

OfIn the first six months of 2011, we have incurred approximately $716.58 million of ~~cash~~costs asprimarily related to the proxy contest initiated by one of ~~April 2,~~our ~~2011~~shareholders, review of strategic alternatives and the merger transaction with Honeywell of which $672.0 million iswas ~~held~~paid byin ~~subsidiaries~~the ~~outside~~first six months of ~~the U~~2011.S. ~~These~~We ~~undistributed~~anticipate ~~earnings~~additional ~~are~~professional ~~considered~~fees toand betransaction ~~permanently~~costs ~~reinvested~~related ~~and~~to ~~are~~the ~~not available~~merger ~~for use~~ in the third Uquarter of 2011.S.

~~During~~Of the ~~three~~$72.8 million ~~months~~of ~~ended~~cash ~~April~~as of July 2, ~~2010~~2011, ~~net cash and cash equivalents increased by~~ $671.5 ~~million. Operating activities contributed $7.6~~ million inis ~~positive~~held ~~cash flow mainly due to earnings generated~~ by ~~LXE~~subsidiaries ~~and~~outside ~~Global Tracking, an increase in accounts payable due to the timing~~ of ~~supplier~~the ~~payments, and deferred service revenue at LXE~~U.S. ~~This~~These ~~was~~undistributed ~~partially~~earnings ~~offset~~are byconsidered anto ~~increase in~~be ~~inventory~~permanently ~~balances~~reinvested ~~mainly at LXE~~ and ~~Aviation,~~are ~~and~~not available anfor ~~increase~~use in ~~costs~~the ~~and~~U.S. ~~estimated~~We ~~earnings in~~do ~~excess~~not ofintend ~~billings~~to onrepatriate ~~long-term~~such ~~contracts~~holdings atto ~~Aviation~~the ~~and D&~~U.S.; ~~in the three months ended April 2~~however, ~~2010.~~if ~~The~~we ~~cash~~did, ~~flow~~some ~~generated~~portion ~~from~~of ~~operating~~any ~~activities~~such ~~was~~repatriated ~~partially~~holdings ~~offset~~would bybe ~~$1.8 million~~subject ~~used for~~to ~~capital~~income ~~expenditures~~tax ~~during~~in the ~~three months ended April 2, 2010~~U.S.

During the first six months of 2010, net cash and cash equivalents decreased by $2.4 million to $44.8 million as of July 3, 2010. The $7.4 million of positive cash flow contributed by operating activities excluding the portion of the payment for the contingent consideration agreement, and the additional $12.0 million of borrowings from our revolving credit facility was offset by an $8.6 million payment for the final award related to claims made by the purchaser of our former EMS Wireless division, a $7.2 million payment for the contingent consideration agreement related to one of the acquisitions completed in 2009, and $3.8 million of capital expenditures.

Operating activities contributed $6.7 million in positive cash flows in the first six months of 2010. We reported net earnings for the period of $4.5 million and the level of noncash charges, primarily for depreciation and amortization, exceeded increases in working capital. The growth in our business in the second quarter of 2010 resulted in increases in receivables from customers and inventories.

We have a revolving credit facility with a syndicate of banks with a $60 million total capacity for borrowing in the U.S. and $15 million total capacity for borrowing in Canada. The agreement also has a provision permitting an increase in the total borrowing capacity of up to an additional $50 million, subject to additional commitments from the current lenders or from new lenders. The existing lenders have no obligation to increase their commitments. The credit agreement provides for borrowings through February 28, 2013, with no principal payments required prior to that date. The credit agreement is secured by substantially all of our tangible and intangible assets, with certain exceptions for real estate that secures existing mortgages, for other permitted liens, and for certain assets outside the U.S.

~~As of April 2, 2011, we had $32.0 million of borrowings outstanding, $2.9 million of outstanding~~29 ~~letters of credit, and $40.1 million available borrowing capacity under the revolving credit facility. As of April 2, 2011, we were in compliance with all the covenants under the credit agreement.~~

As of July 2, 2011, we had $34.5 million of borrowings outstanding, $2.9 million of outstanding letters of credit, and $37.6 million available borrowing capacity under the revolving credit facility. As of July 2, 2011, we were in compliance with all the covenants under the credit agreement.

We expect that capital expenditures in 2011 will range from $10 million to $15 million, excluding acquisitions of businesses. These expenditures are being used to purchase equipment that enhances productivity, or is being used for new product introductions, and the replacement of the enterprise reporting systems of our Global Tracking segment.

Management believes that existing cash and cash equivalent balances, cash provided from operations, and borrowings available under our credit agreement will provide sufficient liquidity to meet the operating and capital expenditure needs for existing operations during the next twelve months.

Off-Balance Sheet Arrangements

We have $2.9 million of standby letters of credit outstanding under our revolving credit facility to satisfy performance guarantee requirements under certain customer contracts. While these obligations are not normally called, they could be called by the beneficiaries at any time before the expiration date, if we failed to meet certain contractual requirements. After deducting the outstanding letters of credit, as of ~~April~~July 2, 2011 we had $2724.27 million available for borrowing in the U.S. and $12.9 million available for borrowing in Canada under the revolving credit facility.

Commitments and Contractual Obligations

As of ~~April~~July 2, 2011, our material contractual cash commitments and material other commercial commitments have not changed significantly from those disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2010.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods. We discuss our critical accounting policies in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2010.

In the ~~three~~six months ended ~~April~~July 2, 2011, the Company adopted ASU 2009-13, Revenue Recognition — Multiple-Deliverable Revenue Arrangements, and ASU 2009-14, Software — Certain Revenue Arrangements That Include Software Elements. Refer to Note 1 to the consolidated financial statements in this Quarterly Report on Form 10-Q for a description of these updates. The effect of adoption was not material to the consolidated financial statements for the three ~~months~~and ~~ended~~six months ~~April~~ended July 2, 2011. We do not currently anticipate that the adoption will have a material effect on the consolidated financial statements for the year ending December 31, 2011, since historically we have not had significant aggregate deferrals of revenue related to multiple-element arrangements ~~for~~ for which revenue would be recognized earlier under the new ASUs. However, the actual effect on ~~the~~ the consolidated financial statements will depend on the specific types of multiple-element arrangements into which we enter in the future and the terms and conditions contained therein. There have been no other significant changes in our critical accounting policies since the end of 2010.

2530

Risk Factors and Forward-Looking Statements

The Company has included forward-looking statements in management’s discussion and analysis of financial condition and results of operations. All statements, other than statements of historical fact, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future, or that necessarily depend upon future events, including such matters as our expectations with respect to future financial performance, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments, potential business combinations, and the growth of our businesses and operations, are forward-looking statements. Actual results could differ materially from those suggested in any forward-looking statements as a result of a variety of factors. Such factors include, but are not limited to:

• ~~the~~failure ~~progress and results of our formal process~~ to ~~pursue~~consummate ~~strategic~~the ~~alternatives,~~proposed ~~including~~merger aof ~~possible~~the ~~sale~~Company ~~transaction~~with Honeywell;

• the ~~cost,~~ time required of our management and employees, ~~and~~the general disruption to our operations, ~~associated~~and ~~with~~additional ~~responding~~cost due to the ~~proxy~~proposed ~~contest~~merger bytransaction ~~MMI~~with ~~Investments, L.P.~~Honeywell;

•

economic conditions in the U.S. and abroad and their effect on capital spending in our principal markets;

•

difficulty predicting the timing of receipt of major customer orders, and the effect of customer timing decisions on our results;

•

our successful completion of technological development programs 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 on the cost structure of our operations outside the U.S., as well as the potential for realizing foreign exchange gains and losses associated with assets or liabilities denominated in foreign currencies;

•

successful resolution of technical problems, proposed scope changes, or proposed funding changes that may be encountered on contracts;

•

changes in our 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, and the extent to which deferred tax assets are considered realizable;

•

successful transition of products from development stages to an efficient manufacturing environment;

•

changes in the rate 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 increased potential for asset impairment charges as unfavorable economic or financial market conditions or other developments might affect the estimated fair value of one or more of our business units;

•

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 various mobile and high-speed 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;31

•

risk that changes 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 the distribution and manufacture of products in foreign countries;

•

the demand growth for various mobile and high-speed data communications services;

•

our ability to attract and retain qualified senior management and other personnel, particularly those with key technical skills;

•

our ability to effectively integrate our acquired businesses, products or technologies into our existing businesses and products, and the risk that any such acquired businesses, products or technologies do not perform as expected, are subject to undisclosed or unanticipated liabilities, or are otherwise dilutive to our earnings;

•

the potential effects, on cash and results of discontinued operations, of final resolution of potential liabilities under warranties and representations that we made, and obligations assumed by purchasers, in connection with our dispositions of discontinued operations;

•

the availability, capabilities and performance of suppliers of basic materials, electronic components and sophisticated subsystems on which we must rely in order to perform according to contract requirements, or to introduce new products on the desired schedule;

•

uncertainties associated with U.S. export controls and the export license process, which restrict our ability to hold technical discussions with customers, suppliers and internal engineering resources and can reduce our ability to obtain sales from customers outside the U.S. or to perform contracts with the desired level of efficiency or profitability; and

•

our ability to maintain compliance with the requirements of the Federal Aviation Administration and the Federal Communications Commission, and with other government regulations affecting our products and their production, service and functioning.

Further information concerning relevant factors and risks are identified under the caption “Risk Factors” in Part II Item 1A. of this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K for the year ended December 31, 2010.


Item 3.		Quantitative and Qualitative Disclosures about Market Risk

As of ~~April~~July 2, 2011, we had the following market-risk sensitive instruments (in thousands):

Money market funds with interest payable monthly at variable rates and interest-bearing time deposits with interest payable upon maturity (a weighted-average rate of 1.1% at April 2, 2011)	$	31,938
Money market funds with interest payable monthly at variable rates and interest-bearing time deposits with interest payable upon maturity (a weighted-average rate of 1.1% at July 2, 2011)	$	30,318
Revolving credit agreement with U.S. and Canadian banks, maturing in February 2013, interest payable quarterly at a variable rate (3.75% at April 2, 2011)	$	32,000
Revolving credit agreement with U.S. and Canadian banks, maturing in February 2013, interest payable quarterly at a variable rate (4.00% at July 2, 2011)		34,500

A 100 basis-point change in the interest rates of our market-risk sensitive instruments would have changed interest income by approximately $7178,000 for the three months ended ~~April~~July 2, 2011 based ~~upon~~ upon their respective average outstanding balances.

Our revolving credit agreement includes variable interest rates based on the lead bank’s prime rate or the then-published LIBOR for the applicable borrowing period. As of ~~April~~July 2, 2011, we had approximately $3234.05 million of borrowings outstanding in the U.S., and no borrowings outstanding in Canada under our revolving credit agreement. A 100 basis-point change in the interest rate on our revolving credit agreement would have changed interest expense by approximately $6674,000 for the three months ended ~~April~~July 2, 2011 based upon the average outstanding borrowings under these obligations.

27As of July 2, 2011, we also had intercompany accounts that eliminate in consolidation but that are considered market-risk sensitive instruments because they are denominated in a currency other than the local functional currency. These include short-term amounts due to the parent (payable by international subsidiaries arising from purchase of the parent’s products for sale), intercompany sales of products from foreign subsidiaries to a U.S. subsidiary, and cash advances to foreign subsidiaries as follows:


		Exchange Rate		Receivable /
		Functional		(Payable)
		Currency per		USD
Currency	Functional	Denominated		Equivalent
Denomination	Currency	Currency		(in thousands)

AUD	CAD		1.0348	$	4,677
USD	CAD		0.9585		(2,211	)
USD	EUR		0.6884		(1,136	)
USD	SEK		6.2634		(397	)
Other currencies					(388	)

				$	545

AsWe ~~of April 2, 2011, we also~~ had ~~intercompany~~ accounts ~~that~~receivable ~~eliminate~~and inaccounts ~~consolidation~~payable ~~but~~balances ~~that are considered market-risk sensitive instruments because they are~~ denominated in acurrencies ~~currency~~ other than the ~~local~~ functional currency. ~~These include short-term amounts due to the parent (payable by international subsidiaries arising from purchase~~ of the ~~parent’s~~ ~~products~~local ~~for~~entity ~~sale),~~at ~~intercompany sales of products from foreign subsidiaries to a U.S. subsidiary~~July 2, ~~and~~2011 ~~cash advances to foreign subsidiaries~~ as follows:

		~~Exchange Rate~~		Exchange Rate		~~Receivable /~~
		~~Functional~~		Functional		~~(Payable)~~
		~~Currency per~~		Currency per		~~USD~~		USD
Currency	Functional	~~Denominated~~		Denominated		~~Equivalent~~		Equivalent
Denomination	Currency	~~Currency~~		Currency		~~(in thousands)~~		(in thousands)
AUD	CAD		1.0001			$	3,991
Accounts Receivable
USD	CAD		~~0.9644~~		0.9585		~~(2,036~~	)$	16,525
EUR	GBP		0.8812				(1,001	)
USD	SEK				6.2972				531
EUR	SEK		8.9464				(734	)
USD	EUR				0.6884				458
Other currencies							45
GBP	EUR				1.1062				444
						$	265
Other currencies									1,066
								$	19,024
Accounts Payable
USD	CAD				0.9585			$	2,341
Other currencies									262
								$	2,603

We also had ~~accounts~~cash ~~receivable and~~ accounts ~~payable balances~~ denominated in currencies other than the functional currency of the local entity at ~~April~~ July 2, 2011 as follows:

~~Exchange Rate~~

Exchange Rate

~~Functional~~

Functional

~~Currency per~~

Currency per

~~USD~~

USD

Currency

Functional

~~Denominated~~

Denominated

~~Equivalent~~

Equivalent

Denomination

Currency

~~Currency~~

Currency

~~(in thousands)~~

(in thousands)

Accounts Receivable

GBP

USD

1.6075

1,281

USD

CAD

0.9644

15,234

GBP

CAD

1.5493

931

USD

SEK

6.2972

607

EUR

GBP

0.9040

799

USD

~~EUR~~SEK

~~0.7031~~

6.2634

~~591~~

682

GBP

EUR

1.1348

573

USD

CAD

0.9585

657

Other currencies

~~473~~

1,090

~~17,478~~

5,440

Accounts Payable

USD

CAD

0.9644

1,445

GBP

USD

1.6115

235

Other currencies

187

1,867

28We enter into foreign currency forward contracts in order to mitigate the risks associated with currency fluctuations on future fair values of foreign denominated assets and liabilities. At July 2, 2011, we had forward contracts as follows (in thousands, except average contract rate):


				Average		Fair
	Notional			Contract		Value
	Amount			Rate		(USD)
Foreign currency forward contracts:
U.S. dollars (sell for Canadian dollars)		12,300	USD		0.9611	$	(17	)
British pounds (sell for Canadian dollars)		150	GBP		1.5791		(1	)
Euros (sell for U.S. dollars)		300	EUR		1.4311		(6	)

						$	(24	)

We also had cash accounts denominated in currencies other than the functional currency of the local entity at April 2, 2011 as follows:

		Exchange Rate
		Functional
		Currency per		USD
Currency	Functional	Denominated		Equivalent
Denomination	Currency	Currency		(in thousands)
GBP	CAD		1.5533	$	1,237
USD	CAD		0.9644		948
EUR	GBP		0.8812		722
GBP	USD		1.6115		453
EUR	CAD		1.3688		357
AUD	CAD		1.0001		349
Other currencies					532
				$	4,598

We enter into foreign currency forward contracts in order to mitigate the risks associated with currency fluctuations on future fair values of foreign denominated assets and liabilities. At April 2, 2011, we had forward contracts as follows (in thousands, except average contract rate):

		Average	Fair
	Notional	Contract	Value
	Amount	Rate	(USD)
Foreign currency forward contracts:
U.S. dollars (sell for Canadian dollars)	14,300 USD	0.9751	$	143


Item 4.		Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

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

The CEO and CFO have evaluated the Company’s disclosure controls and procedures as of the end of the period covered in this report. Based upon this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of ~~April~~July 2, 2011.

(b) Changes in Internal Control Over Financial Reporting

During the ~~three~~second ~~months~~quarter ~~ended~~of ~~April 2,~~ 2011, the Company’s LXE segment completed the upgrade of its enterprise reporting system to Oracle R12. Although certain processes have been modified within LXE’s enterprise reporting system, its internal controls over financial reporting have remained relatively unchanged. In addition, the Company adopted ASU 2009-13, Revenue Recognition — Multiple-Deliverable Revenue Arrangements, and ASU 2009-14, Software — Certain Revenue Arrangements That Include Software Elements, and established controls over the implementation of these new standards. Except for these items, management has concluded that there were no ~~other~~ changes ~~in internal controls during the three months ended April 2, 2011,~~ that have materially affected, or are reasonably likely to materially affect, ~~the~~our ~~Company’s~~ internal control over financial reporting (as defined in Rule 13a — 15(f) under the Exchange Act).

3035

PART II

OTHER INFORMATION


Item 1A.		Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, carefully consider the factors discussed in Part I, Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially adversely affect our business, financial condition and/or operating results. In addition to the risks and uncertainties described ~~therein~~within this Quarterly Report, we believe our business and results of operations are subject to the following risks:

~~Our~~The ~~business~~merger ~~could~~transaction bewith ~~negatively~~Honeywell ~~affected~~may asnot abe ~~result~~completed. ofIf the ~~formal~~merger ~~process~~is ~~initiated~~not bycompleted, our ~~board~~ tostock ~~pursue~~price, ~~strategic~~future ~~alternatives~~business and ~~the~~results ~~ongoing~~of ~~proxy~~operations ~~contest~~could be materially adversely affected.

WeOn ~~commenced~~June 13, a2011, ~~formal~~the ~~process~~Company toentered ~~pursue~~into ~~strategic~~an ~~alternatives,~~agreement ~~including~~and ~~seeking~~plan ~~and reviewing~~of ~~inquiries~~merger ~~from~~(the ~~potentially~~“Merger”), with ~~interested~~Honeywell ~~parties~~International Inc. ~~In addition~~(“Honeywell”), ~~MMI~~a ~~Investments~~Delaware corporation, Land Egret Acquisition Corp.P., a Georgia corporation and a wholly-owned subsidiary of Honeywell (“Purchaser”). Under the ~~certain~~terms of ~~its~~the ~~affiliates~~Merger ~~launched~~Agreement, Purchaser commenced a ~~proxy~~tender ~~contest~~offer ~~relating~~(the to“Offer”) ~~our~~on June 27, 2011 ~~Annual~~to purchase ~~Meeting~~all of ~~Shareholders,~~ the issued and ~~nominated~~outstanding ~~their~~shares ~~own~~of ~~slate~~common stock, $0.10 par value, of ~~four~~EMS ~~nominees~~for $33.00 per share in cash. Refer to Note 2 in the Company’s consolidated financial statements in this Quarterly Report for ~~election~~additional information on the proposed merger transaction with Honeywell. The Merger has been approved by the Boards of Directors of both companies. The completion of the Merger is subject to ~~our~~obtaining ~~board~~approval of regulatory authorities including the Federal ~~directors~~Communications Commission. The ~~formal~~merger ~~process~~agreement is subject to ~~pursue~~customary ~~strategic~~closing ~~alternatives~~conditions and is expected to close in the ~~ongoing~~third ~~proxy~~quarter ~~contest~~of ~~could~~2011. If any of these conditions are not satisfied or ~~adversely~~waived, ~~affect~~the ~~our~~Merger may not be completed and we will remain liable for considerable related expenses that we have incurred. In addition, the future direction of the Company may be perceived as uncertain, which may result in the loss of potential business opportunities ~~because:~~and, to the extent that the current market price reflects an assumption that the Merger will be completed, our stock price may be adversely affected.

•The ~~conducting~~time ~~the~~required ~~formal~~of ~~process~~our management and ~~responding~~employees, the general disruption to ~~proxy~~our ~~contests~~operations, and additional ~~other~~cost ~~actions~~due byto ~~activist~~the ~~shareholders~~proposed ~~can~~merger betransaction ~~costly~~with ~~and~~Honeywell ~~time-consuming,~~could ~~disrupting~~adversely affect our business ~~operations~~ and ~~diverting~~results ~~the attention~~ of ~~management and our employees; and~~operations.

•While ~~perceived~~the ~~uncertainties~~Merger asis topending, a ~~our~~substantial ~~future~~amount ~~may~~of ~~result~~the inattention of management and employees is being directed toward the ~~loss~~completion of ~~potential~~the ~~business~~Merger ~~opportunities~~and therefore, may be diverted from day-to-day operations which could adversely affect our relationship with customers, suppliers, and other strategic partners and negatively impact our revenues and earnings. In addition, current and prospective employees may ~~make~~be ituncertain ~~more~~about ~~difficult~~their future roles following the completion of the Merger, which could impair our ability to attract prospective employees and retain ~~qualified~~and ~~personnel~~motivate current employees. Further, significant additional costs may be incurred for professional fees, including legal fees for any related litigation that has been or may be filed, and other fees related to the merger transaction. The impact of these factors could adversely affect our business ~~partners~~and results of operations.

~~The formal process initiated by the board of directors to pursue strategic alternatives may not~~36 ~~result in a transaction.~~

We commenced a formal process to pursue strategic alternatives, including seeking and reviewing inquires from potentially interested parties. We emphasize that there can be no assurance that the process will result in any transaction. Additionally, if a sale transaction or other transaction does not occur, to the extent that the current market price reflects an assumption that such a transaction would occur, our stock price may be adversely affected.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes the Company’s purchases of its common shares for the three months ended ~~April~~July 2, 2011:

ISSUER PURCHASES OF EQUITY SECURITIES

							(d) Maximum Number
					(c) Total Number		(or Approximate
					of Shares		Dollar Value) of
					Purchased as		Shares that May Yet
					Part of Publicly		Be Purchased
	(a) Total Number		(b) Average		Announced		Under the Plans or
	of Shares		Price Paid		Plans or		Programs (3)
Period	Purchased (1)		Per Share		Program (2)		(in millions)
Period 1 2011 (January 1 to January 29)		—		—		—
Period 4 2011 (April 3 to April 30)		—		—		—
Period 2 2011 (January 30 to February 26)		1,486	$	19.71		—
Period 5 2011 (May 1 to May 28)		2,050	$	25.54		—
Period 3 2011 (February 27 to April 2)		2,047		18.91		—
Period 6 2011 (May 29 to July 2)		—		—		—
Total		32,~~533~~050	$	~~19.~~25.54		—	$	—

(1)		The category represents 32,~~533~~050 shares delivered to us by employees to pay withholding taxes due upon vesting of restricted share awards.
(2)		During the period covered by this Quarterly Report on Form 10-Q, no shares were repurchased under the Company’s $20 million repurchase program (the Program) which was initially announced on July 30, 2008. Further repurchases are no longer permitted under the terms of the Company’s principal credit agreements.

3237


Item 6.		Exhibits

The following exhibits are filed as part of this report:

	3.1			Second Amended and Restated Articles of Incorporation of EMS Technologies, Inc., effective March 22, 1999 (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended April 4, 2009).
	2.1			Agreement and Plan of Merger, dated June 13, 2011, by and among EMS Technologies, Inc., Honeywell International Inc., and Egret Acquisition Corp. (incorporated by reference to Exhibit 2.1 to the Company’s Report on Form 8-K filed with the SEC by the Company on June 13, 2011).
	3.2			Bylaws of EMS Technologies, Inc. as amended through December 21, 2009 (incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the year ended December 31, 2009).
	3.1			Second Amended and Restated Articles of Incorporation of EMS Technologies, Inc., effective March 22, 1999 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 4, 2009).
	10.1			Form of Executive Protection Agreement dated as of March 7, 2011 between the Company and its Named Executive Officers other than the Chief Executive Officer. *
	3.2			Bylaws of EMS Technologies, Inc. as amended through November 5, 2010 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2010).
	10.2			Executive Protection Agreement dated as of March 7, 2011 between the Company and Neilson A. Mackay. *
	3.3			EMS Technologies, Inc. Shareholder Rights Plan (incorporated by reference to Exhibit 4.1 to the Company’s report on Form 8-A/A dated January 7, 2011).
	10.3			Executive Annual Incentive Compensation Plan as amended through March 7, 2011. *
	3.4			Amendment No. 1 to Amended and Restated Shareholder Rights Plan, dated as of June 12, 2011 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 13, 2011).
	10.1			Amendment, dated June 12, 2011, to the Employee Performance Bonus Plan (incorporate by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 16, 2011).
	10.2			Amendments, dated June 12, 2011, to the 1997 Stock Incentive Plan, 2000 Stock Incentive Plan and 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 16, 2011).
	10.3			Amendment, dated June 12, 2011, to the Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on June 16, 2011).
	10.4			Amended and Restated Executive Protection Agreement between the Company and Neilson A. Mackay, dated June 12, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 16, 2011).
	10.5			Amended and Restated Executive Protection Agreement between the Company and Gary B. Shell, dated June 23, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 27, 2011).
	31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
	31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
	32			Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *


*		Filed herewith

3338

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EMS TECHNOLOGIES, INC.
By:	/s/ Neilson A. Mackay	Date: ~~May~~August 1211, 2011
	Neilson A. Mackay President, and Chief Executive Officer (Principal Executive Officer)
	Neilson A. Mackay
By:	/s/ Gary B. Shell	Date: May 12, 2011
	President, and Chief Executive Officer
	Gary B. Shell Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
	(Principal Executive Officer)
By:	/s/ Gary B. Shell	Date: August 11, 2011
	Gary B. Shell
	Senior Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

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.

3439

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · EMS TECHNOLOGIES INC