Published: March 23, 2011
EMS Technologies Files Definitive Proxy Statement and Sends Letter to Shareholders
ATLANTA - (BUSINESS WIRE) - EMS Technologies, Inc. (NASDAQ: ELMG) ("EMS" ) today filed with the
Securities and Exchange Commission and will mail to its shareholders its
definitive proxy statement and the below letter in conjunction with its
2011 Annual Meeting of Shareholders scheduled for May 12, 2011. The
letter highlights the steps EMS has taken to create shareholder value
and provides perspective on the significant growth opportunities
emerging in the mobile connectivity and in-transit visibility markets.
The full text of the letter follows:
March 23, 2011
Dear Fellow Shareholder:
It's an exciting time at EMS Technologies. We recently announced record
2010 revenues and profits, and we see strong demand and new
opportunities for our products and services. We are a leader in our
markets, we have an accomplished management team, and we have taken
prudent steps on the strategic and operational fronts to fundamentally
change our organization, increase efficiency and accelerate growth. In
short, EMS has strong momentum. We are well positioned to grow and
capitalize on the extraordinary opportunities emerging in the mobile
connectivity and in-transit visibility markets, and we expect this will
drive very favorable results for the company and its investors in 2011
and beyond.
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Record Adjusted EBITDA for the fourth quarter of 2010 of $12.2
million and full-year 2010 of $40.3 million, and Adjusted EPS
of $0.97 for the full year, all of which exceeded the analysts'
consensus estimates; and
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Record quarterly sales of $98.1 million for the fourth quarter
of 2010 and continued strong positive cash flow, reflecting the
demand for our products and services, renewed economic activity in
North America, and the growing need for in-transit visibility.
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WE HAVE STRONG MOMENTUM AND
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WE EXPECT TO BUILD ON IT IN 2011 AND BEYOND
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Given our momentum and the confidence we have in our strategic plan, we
provided guidance for 2011 in our recent earnings announcement. For the
full year 2011, we expect consolidated revenues to be in the range of
$385 - $405 million, Adjusted EBITDA to be in the range of $43 - $46
million, Adjusted EPS to be in the range of $1.10 - $1.25 per share,
assuming an effective income tax rate of 20%, and net growth in
consolidated revenues to be close to 10%. Our 2011 outlook takes into
account the seasonality of our business, which typically delivers higher
revenue in the second half of the year.
Our 2010 results and 2011 outlook are a direct result of the steps we
have taken over the past 16 months, since Neil Mackay's appointment as
CEO, to simplify our corporate structure, improve financial performance,
and position EMS to capitalize on the opportunities in our rapidly
evolving marketplace. Since making these changes, EMS has outperformed
its peers and the broader market by significant margins.
STRATEGIC REALIGNMENT DRIVING GROWTH AND PROFITABILITY
We entered 2011 with a steadfast commitment to continue the work we
began in 2010 to further simplify our corporate structure. We are
focusing EMS in two main business sectors to drive synergies and
alignment across our businesses and to capture more opportunities in
mobile connectivity markets. These business sectors are Global
Resource Management, comprising our LXE and Global Tracking
segments, and Aero Connectivity, comprising the Aviation and
Defense & Space segments. These changes are expected to drive increased
innovation and efficiency throughout our business units, aligning our
R&D efforts and increasing coordination across our already strong sales
networks, thus enabling us to capture additional market share and
successfully enter new and rapidly evolving markets.
EMS has long been a leader in mobile connectivity, and our technology
has been extremely successful in a highly competitive marketplace that
includes much larger players. And now, with expanding markets and
increasing technology synergies, there is a sharp increase in the
potential for our businesses to coordinate their activities for even
greater success. Today, our businesses enable mobile connectivity
virtually anywhere in the world - indoors, outdoors, in the air, on
land, and at sea, using specialized handsets, networking devices,
radios, antennas and advanced components. Our product families utilize
an impressive range of connectivity technologies, including GSM, GPRS,
Bluetooth, Wi-Fi, GPS mapping, and RFID, as well as L, X, Ku, Ka and
even higher frequency bands.
The growing level of synergies within our broad array of products and
connectivity solutions has enabled us to expand into new markets and to
open previously unavailable revenue streams in our current markets. LXE,
for instance, has become an integral part of our broader growth plan for
the company, because its technology portfolio, including rugged
computers with wide-area radios, complements the satellite-tracking and
application capabilities of EMS Global Tracking. By integrating these
business units under Global Resource Management, we are enabling
new end-to-end solutions for greater in-transit visibility for a wide
variety of customers, and we expect to benefit from significant
revenue-enhancing opportunities in 2011 and beyond.
A few of the successes that are a result of our focus on alignment and
growth include:
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We expanded our presence in the market for mobile resource management
("MRM" ) through the successful 2010 launch of our popular MX9 rugged
computer. With its wide-area radio capabilities, the MX9 exemplifies
the growing list of new LXE products that will be capable of reaching
new vertical markets beyond the warehouse. These new LXE products are
being integrated with our Global Tracking or Aviation capabilities to
win new business and expand solution sales.
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We accelerated execution of the integration plan for our various
aviation operations. The resulting higher level of integration has
improved efficiency, reduced costs, and enhanced coordination of
strategic and development initiatives. Our aviation group has become
the provider of the core aero connectivity products used across
virtually all current and future major commercial aircraft platforms
(e.g., Boeing, Airbus, Bombardier).
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Our Aviation and Defense & Space divisions are collaborating at the
R&D level to develop broadband satellite products at the Ka-band,
which will be one of the key technologies of next generation broadband
services for the aeronautical sectors.
THE EMS BOARD IS COMMITTED TO ACTING IN THE BEST INTERESTS OF
SHAREHOLDERS
Recently, you may have seen letters about EMS from MMI Investments, or
its affiliate, Millbrook Capital Management (collectively, "MMI" ). MMI
is a hedge fund that has called for an immediate sale of EMS and/or its
businesses. This hedge fund has nominated four people to our 10 person
Board of Directors at EMS's upcoming Annual Meeting. We oppose giving
MMI such a dramatic say in your company.
The EMS board values open dialogue and input from all shareholders. We
simply disagree with this hedge fund's short term agenda - a
self-serving agenda that we believe would short change the majority of
our other shareholders.
EMS HAS A STRONG AND INDEPENDENT BOARD; FIVE NEW DIRECTORS IN 19
MONTHS
We have a strong, independent and experienced Board. Three of our
members are new in just the last 19 months and we are nominating two
new, highly experienced nominees for election at our upcoming Annual
Meeting: Richard A. Beyer and Russell G. Chew, both of whom have had
accomplished careers in global tracking and aviation, respectively.
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Richard A. Beyer is a veteran of the wireless data and vehicle
tracking industries. For the past eight years he has served in senior
positions at Trimble Navigation Limited and before that, TracerNET
Corporation, a wireless tracking company acquired by Trimble. Mr.
Beyer has also served as Division President of NEXIQ Technology
Holdings and General Manager of Rockwell International, Collins
Avionics Division.
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Russell G. Chew, a highly respected commercial aviation
executive, served as the President and Chief Operating Officer of
JetBlue Airways Corporation from 2007 to 2009, Chief Operating Officer
of the Federal Aviation Administration from 2003 until early 2007, and
spent 18 years with American Airlines, most recently as Managing
Director of Systems Operations Control.
MMI has criticized our Board for its government service and academic
credentials, but our Board's experience and expertise are highly
relevant to our business and the markets we serve. For example, several
of our directors have served as CEOs of companies in satellite
communications, aerospace and defense. The government service of our
directors has been at high levels of authority in national security and
defense. Our directors also have exceptional domain experience in
relevant technologies, including individuals with backgrounds such as a
Managing Director of Technology and Flight Test at United Airlines, the
director of NASA's Gravity Probe-B spacecraft development project and
integral member of NASA's space program, and co-inventor of the Global
Positioning System.
Our Board nominees are truly accomplished executives and experts in
their fields, and they are fully committed to acting in your best
interests. We urge you to support them at our upcoming Annual Meeting.
MMI DECLINED TO ALLOW EMS TO INTERVIEW ITS NOMINEES
In the interest of good corporate governance, we recently invited three
of MMI's director nominees to meet with our Governance Committee, which
is an initial step in our standard candidate evaluation process.
However, MMI refused to permit its nominees to meet with us unless we
agreed to enter into "confidential settlement discussions," which we
believe are not in your best interests at this time. We believe MMI has
a very short term agenda, and we believe we can create - and are
creating - significantly more value for shareholders by pursuing our
strategic plan at a time when demand for our products is increasing, as
evidenced by our record-setting results last quarter.
Our Board regularly reviews EMS's strategic position and alternatives
available to the Company, with the assistance of our financial advisors.
As a result, our Board has determined that executing on our strategic
plan will generate the most value for our shareholders - far more than
selling the Company now, especially at the beginning of an upturn in the
global economy and in many of the markets we serve.
We are a widely acknowledged leader in our markets, and we compete very
effectively with larger companies - as demonstrated by our key
competitive advantage in line-fit positions on commercial aircraft
platforms. In addition, we also believe that we have a unique niche in
our markets, which means we sell to many best-in-class international
corporations. Forcing a sale of the Company at this time could
jeopardize relationships with many of our largest customers and
significantly detract from the valuation the Company might achieve in a
potential sale transaction.
We believe it is important to distinguish between constructive
feedback from interested shareholders and potentially destructive
short-sighted proposals that lack a basic understanding of the evolving
mobile connectivity space.
In our view, MMI and its principals are NOT concerned with generating
long-term value at EMS; they want to force EMS into a quick sale of the
Company and/or its businesses. We believe that such a course would
deprive EMS shareholders of substantial future value.
We have the right plan in place to generate substantial shareholder
value by driving growth and capturing significant share in the
evolving mobile connectivity marketplace. We strongly urge you to reject
MMI's nominees by voting "FOR" EMS's nominees using the enclosed WHITE
proxy card.
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PROTECT YOUR INVESTMENT; VOTE THE ENCLOSED WHITE
CARD
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FOR THE EMS BOARD OF
DIRECTORS
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WE URGE YOU TO THROW AWAY ANY GOLD PROXY CARDS SENT TO YOU BY
MMI
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The EMS Board unanimously recommends that you vote "FOR" the
highly qualified slate of EMS directors named on the enclosed WHITE
proxy card. The EMS Board also urges you to throw away any gold proxy
card sent to you by MMI or its affiliates.
To vote "FOR" EMS's nominees, shareholders should sign, date and
return the WHITE proxy card as soon as it is received or vote via
telephone or internet by following the instructions indicated on the WHITE
proxy card.
Georgeson, Inc. is acting as EMS's proxy solicitor. If you need any
assistance or have any questions regarding how to vote, please call our
proxy solicitor, Georgeson, Inc. at (800) 561-2871.
We sincerely appreciate the positive feedback we have received from
shareholders, and thank you for your continued support.
Very truly yours,
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Jack Mowell
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Neil Mackay
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Chairman of the Board
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Chief Executive Officer
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Georgeson
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199 Water Street, 26th Floor
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New York, NY 10038-3560
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Banks and Brokers Call (212) 440-9800
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All Others Call Toll-Free (800) 561-2871
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Important Information
EMS Technologies, Inc. (the "Company" ) filed a definitive Proxy
Statement for the 2011 Annual Meeting of Shareholders with the
Securities and Exchange Commission (the "SEC" ) on March 23, 2011.
Shareholders are urged to read the Proxy Statement, as well as other
documents filed with the SEC, because they contain important
information. The definitive Proxy Statement and other documents filed
with the SEC concerning the Company are available free of charge at the
Company's website (www.ems-t.com)
under the heading "Investor Relations" , at the SEC's website (www.sec.gov),
or by contacting the Company at (770) 729-6512.
The Company, its directors and certain of its officers and employees are
participants in a solicitation of proxies in connection with the
Company's 2011 Annual Meeting of Shareholders. Information with respect
to the identity of these participants in the solicitation and a
description of their direct or indirect interest in the Company, by
security holdings or otherwise, is contained in the definitive Proxy
Statement filed with the SEC on March 23, 2011.
Forward-Looking Statements
Statements contained in this letter regarding the Company's
expectations for its financial results for 2011 and the potential for
various businesses and products are forward-looking statements. Actual
results could differ materially from those statements as a result of a
wide variety of factors. Such factors include, but are not limited to,
risk factors included in our Annual Report on Form 10-K for the
year ended December 31, 2010. Undue reliance should not be placed on any
forward-looking statements, which are based on current expectations. Further,
forward-looking statements speak only as of the date they are made, and
the Company's management undertakes no obligation to update publicly any
of them in light of new information or future events.
Non-GAAP Financial Measures
This letter contains information regarding our earnings per share,
excluding impairment loss related charges and acquisition-related items
("Adjusted Earnings Per Share" , or "Adjusted EPS" ) and earnings before
interest expense, income taxes, depreciation and amortization and
stock-based compensation and excluding impairment loss related charges
and acquisition-related items ("Adjusted EBITDA" ). The Company believes
that earnings that are based on these non-GAAP financial measures
provide useful information to investors, lenders and financial analysts
because (i) these measures are more comparable with the results for
prior fiscal periods, and (ii) by excluding the potential volatility
related to the timing and extent of 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 the Company's ongoing operating activities. Also, the Company uses
this information, together with other appropriate metrics, to set goals
for and measure the performance of its operating businesses, to
determine management's incentive compensation, and to assess the
Company's compliance with debt covenants. Management further considers
Adjusted EBITDA an important indicator of operational strengths and
performance of its businesses. EBITDA measures are used historically by
investors, lenders and financial analysts to estimate the value of a
company, to make informed investment decisions and 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 by the Company. This
information should not be considered in isolation or in lieu of the
Company's operating and other financial information determined in
accordance with GAAP. In addition, because EBITDA and adjustments to
EBITDA are not determined consistently by all entities, Adjusted EBITDA
as presented may not be comparable to similarly titled measures of other
companies.
Following is a reconciliation of our earnings per share to Adjusted
Earnings Per Share, the non-GAAP financial measure that excludes
impairment loss related charges and acquisition-related items for the
year ended December 31, 2010 - unaudited):
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As reported
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$
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0.92
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Impairment loss related charges
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0.01
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Acquisition-related items
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0.04
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As adjusted
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$
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0.97
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Following is a reconciliation of net earnings to Adjusted EBITDA for the
three months and year ended December 31, 2010 (in millions - unaudited):
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Three Months Ended December 31, 2010
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Net earnings
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$ 6.1
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Income tax expense
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Earnings before income taxes
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6.1
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Interest expense
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0.4
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Depreciation and amortization
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5.1
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Stock-based compensation
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0.6
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Adjusted EBITDA
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$ 12.2
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Year Ended December 31, 2010
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Net earnings
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$ 14.1
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Income tax expense
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1.8
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Earnings before income taxes
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15.9
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Interest expense
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1.9
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Depreciation and amortization
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19.5
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Impairment loss on goodwill and related charges
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0.4
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Stock-based compensation
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2.0
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Acquisition-related items
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0.6
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Adjusted EBITDA
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$ 40.3
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We have not provided a quantitative reconciliation of projected Adjusted
EBITDA or Adjusted Earnings Per Share for 2011. Not all of the
information necessary for quantitative reconciliation is available to us
at this time without unreasonable efforts; this is due primarily to
variability and difficulty in making accurate detailed forecasts and
projections. Accordingly, we do not believe that reconciling information
for such projected figures would be meaningful.
Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6656899&lang=en
EMS Media Relations
Jennifer Grigas, 770-595-2448
grigas.j@ems-t.com
or
Sard
Verbinnen & Co
Denise DesChenes / Robin Weinberg, 212-687-8080
ems@sardverb.com
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