EMS Reports Third Quarter 2009 Financial Earnings

EMS Technologies, Inc. announced financial results for the third quarter of 2009.

In a November 5 release, EMS reported third quarter revenues of $85.7 million and earnings from continuing operations of $5.8 million, or $0.38 per share, on a non-GAAP reporting basis, excluding acquisition-related items. These earnings included substantial income tax benefits arising from both additional R&D tax credits and the effect of pre-tax losses in certain jurisdictions. EBITDA, excluding acquisition-related items, ("Adjusted EBITDA") was $7.1 million for the third quarter.

Third quarter earnings from continuing operations on a GAAP basis were $6.0 million or $0.39 per share. The GAAP results included a credit of $0.2 million to adjust the estimated fair value of the earn-out liability for a recent acquisition.

For 2009 year-to-date, revenues totaled $274.9 million, and earnings from continuing operations were $12.9 million, or $0.85 per share, on a non-GAAP reporting basis, excluding acquisition-related items, while GAAP earnings from continuing operations were $6.2 million, or $0.41 per share. Adjusted EBITDA for the nine months was $25.6 million.

The company said its recent acquisitions in the Communications & Tracking ("C&T") business contributed to this segment's 17 percent increase in revenue in third-quarter 2009 compared with 2008. Revenues in the third quarter included $14.0 million of incremental revenue from new acquisitions.

However, the company's aeronautical markets have slowed significantly from their record pace in recent years due to the effects of general economic conditions. As a result, this segment's Adjusted EBITDA for the third quarter fell to $3.2 million in 2009 compared with $6.9 million in 2008. However, EMS remains the aeronautical satcom leader, with orders in the third quarter for eNfusion broadband systems for military and classified customers.

The Defense & Space ("D&S") business reported third-quarter sales of $23.1 million and operating income of $2.2 million in 2009, which was up 46 percent compared with 2008. This improvement reflected higher military revenues in the 2009 third quarter. The D&S backlog totaled $93 million at the end of the period.

The company said its mobile logistics revenues have fluctuated in 2009, with third-quarter revenue of $26.2 million being 10 percent above the first quarter but 12 percent below the second quarter. Ongoing economic and currency uncertainties, particularly in Europe and Asia, appear to have been significant factors that affected the LXE order flow in the third quarter. This lower level of sales in the third quarter resulted in a $1.3 million operating loss and $(0.4) million Adjusted EBITDA from the LXE business in the third quarter.

Despite the market difficulties, the Company earned significant LXE orders during the third quarter, including U.S.-based Advance Auto Parts, which deployed a mix of LXE HX2 wearable terminals and MX7 handheld terminals through its national network of distribution centers. UK food retailer Morrisons is rolling out a custom version of the LXE MX7 handheld terminal to handle the retailer's warehouse and cold-storage environments. The recently launched MX9 ultra-rugged handheld terminal also began shipping in the third quarter; and customers are expressing considerable interest in this product for field service and port applications.

Third-quarter earnings from continuing operations included an income tax benefit of $4.1 million. This benefit related to additional research credits that were recognized after completion of a tax audit of prior years and also to the tax benefit of operating losses incurred in certain jurisdictions. The consolidated effective income tax rate for the remainder of 2009 will depend upon the levels of profitability achieved in various jurisdictions and the analysis of deferred tax asset valuation allowances. At present, it appears unlikely that there will be further significant income tax benefits in the fourth quarter of 2009.

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