ATLANTA, July 13, 2004 (PRIMEZONE) -- EMS Technologies, Inc. (Nasdaq:ELMG) today announced that during the second quarter of 2004, it received record defense contract awards that will benefit future periods; however, the Company's second quarter earnings will be below its previously issued guidance primarily due to a low order level in the SatNet division. EMS expects to announce final results for the second quarter during the week of July 26, 2004, at which time there will be a conference call to review both the historical results in detail and the Company's guidance for the remainder of the year.
Earnings from continuing operations for the second quarter of 2004 are expected to be in the range of $700,000 to $1.1 million, or $.06 - $.10 per share, on consolidated revenues of $65-to-$66 million. The results from continuing operations for the comparable period in 2003 were earnings of $2.5 million, or $.23 per share, on revenues of $66 million. Preliminary divisional results for the second quarter of 2004 indicate that Space & Technology/Atlanta, LXE, and SATCOM were solidly profitable, although somewhat below the 2003 second quarter. EMS Wireless was also profitable, but its performance was less strong than these other divisions.
The SatNet division had a major shortfall from order expectations. SatNet's business of providing hardware for two-way, broadband communications is similar to a startup situation, where the marketplace and customer base are still being defined, and timing of specific orders is difficult to predict. SatNet had a major opportunity that was expected but did not materialize late in the second quarter. The customer requirement for this opportunity still exists, and we are hopeful the order will be received in a future quarter. If SatNet had been able to convert this opportunity into a sale in the second quarter, EMS's consolidated earnings from continuing operations for the period would have improved by approximately $1 million.
Alfred G. Hansen, president and chief executive officer, commented, "The variance from expectation for the second quarter of 2004 is the result of current weakness in our orders stream at SatNet and, to a lesser extent, EMS Wireless. We believe this situation reflects current customer circumstances and timing decisions and not long-term fundamental problems in these target markets. With the recent high level of awards and other customer activity in most of our other business units, our long-term outlook remains very positive:
- "Space & Technology/Atlanta has recently been selected to
participate on some very large contracts for the U.S. Department
of Defense (DoD), resulting in a record level of new contract
awards in a quarter. Recent firm orders on current programs
included follow-on production that pushed the backlog to $7
million for antennas to be used in an advanced intra-flight data
link system for combat aircraft. By far the largest portion of
the second quarter awards related to new programs that we expect
to be converted into initial firm orders in the near future.
Several of these new programs are planned to extend more than a
decade and are expected to generate combined orders and revenues
to EMS exceeding $200 million over the programs' lives. We will
begin to ramp up in the remainder of 2004 for development efforts
that are expected to be worth $25-$30 million over the next two
years, with the further expectation of moving into production
phases that could yield combined annual revenues of over $20
million beginning in 2007. We expect to make more detailed public
announcements about these awards in the coming months, as
contractual documentation is completed and we obtain customer
consents for our press releases.
- "LXE set a new revenue record for the second quarter, extending
its string of consecutive record-setting periods to seven. An
important factor in LXE's sales growth has been our strategic
plan of R&D investment, which has allowed us to bring new
products to market earlier in the year. One of these recent new
products is a rugged handheld computer that can gather data using
both bar-code and RFID technologies.
- "SATCOM revenues were down slightly, as we continue to work on
completing several agreements for DoD applications, which should
benefit us during the remainder of the year. SATCOM is also
continuing to work through the unexpectedly slow process of
approvals for a search-and-rescue system to be installed in
Greece. In addition, we expect to sign a long-term agreement in
the near future to be a supplier of high-speed communications
products to one of the world's largest avionics companies, which
could generate more than $25 million in additional revenues for
SATCOM over the term of the agreement.
- "EMS Wireless' results will likely be slightly better than
breakeven for the second quarter. While sales of our repeaters
and shipments from our Brazilian operations have been much
stronger than in the previous year, sales of our base-station
antennas in the U.S. were less than expected. Considering the
uncertain timing of our customers' expected rollouts, we are
taking immediate action to reduce operating expenses, which
should improve the profit outlook for this division in the second
half of 2004.
- "SatNet continues to develop its base of new customers, but in
this developing market for two-way satellite broadband
communications, the timing of orders is difficult to predict.
However, we believe that interest in our open standard DVB-RCS
equipment remains high, and we are working closely with major
suppliers of broadcast services to expand our markets and
geographic base. We are also taking steps to reduce the
division's operating expenses and lower its breakeven point in
the second half of 2004.
"Our discontinued operations - Space & Technology/Montreal - are showing real improvement in their financial results. For the first two quarters of 2004, the division has returned to reporting profit before taxes, interest and other non-operating charges. We believe that the division's more stable financial situation and promising new opportunities for its unique capabilities will enhance the business prospects currently being evaluated by potential purchasers of these discontinued operations.
"Despite the disappointment of the expected second quarter results, there is much at EMS to be excited about. Our dynamic product lines continue to make us a formidable competitor in our markets, as our technology strength and leadership have enabled us to respond to new product opportunities ahead of our competition. We have proven extremely successful in our recent defense marketing efforts, and we have expanded beyond components to also supplying full systems for defense applications. And our balance sheet remains strong, with debt below the levels where we started the year."
EMS Technologies, Inc. is a leading provider of technology solutions to wireless and satellite markets. The Company focuses on mobile information users, and increasingly on broadband applications. The Company is headquartered in Atlanta, employs nearly 1,700 people worldwide, and has manufacturing facilities in Atlanta, Montreal, Ottawa and Brazil.
The Company has five reporting segments...
- Space & Technology antennas and other hardware, for space and
satellite communications, radar, surveillance, military
countermeasures, and other specialized uses,
- LXE mobile computers and wireless local area networks, for
materials handling and logistics,
- EMS Wireless base station antennas and repeaters, for
PCS/cellular telecommunications,
- SATCOM antennas and terminals, for aeronautical and land-mobile
and maritime communications via satellite, and
- SatNet broadband technologies for use in high-data-rate,
high-capacity two-way satellite communications systems.
Statements contained in this press release regarding the potential for
various businesses and products are forward-looking statements. Actual
results could differ from those statements as a result of a wide variety
of factors. Such factors include, but are not limited to...
-- Uncertainties related to identifying a purchaser of the Space &
Technology/Montreal division, as well as external market
conditions and internal priorities and constraints that could
affect a purchaser's willingness and ability to complete the
transaction on the terms and timing expected by the Company;
-- economic conditions in the U.S. and abroad and their effect on
capital spending in the Company's principal markets;
-- difficulty predicting the timing of receipt of major customer
orders, and the effect of customer timing decisions on our
quarterly results;
-- U.S. defense budget pressures on spending priorities;
-- uncertainties inherent in the process of converting contract
awards into firm contractual orders in the future;
-- volatility of foreign exchange rates relative to the U.S.
dollar and their effect on purchasing power of international
customers, as well as the potential for realizing foreign
exchange gains or losses associated with net foreign assets held
by the Company;
-- successful resolution of technical problems, potential scope
changes or potential funding changes that may be encountered on
contracts;
-- changes in the Company's consolidated effective income tax rate
caused by the extent to which the actual levels and mix of
taxable earnings among the U.S., Canada, and other taxing
jurisdictions may vary from our current expectations;
-- successful completion of technological development programs by
the Company and the effects of technology that may be developed
by competitors;
-- successful transition of products from development stages to an
efficient manufacturing environment;
-- customer response to new products and services, and general
conditions in our target markets (such as logistics, PCS/cellular
telephony, and space-based communications);
-- the availability of financing for satellite data communications
systems and for expansion of terrestrial PCS/cellular phone
systems;
-- the extent to which competing terrestrial systems reduce market
opportunities for space-based broadband communication systems by
providing extensive broadband Internet access on a dependable and
economical basis;
-- the growth rate of demand for various mobile and high-speed
communications services;
-- development of successful working relationships with local
business and government personnel in connection with distribution
and manufacture of products in foreign countries;
-- the Company's ability to attract and retain qualified personnel,
particularly those with key technical skills; and
-- the availability of sufficient additional credit or other
financing, on acceptable terms, to support the Company's expected
growth.
Additional relevant factors and risks are identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2003.