Exhibit 99.1
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 | | Contact: Marie Castro (858) 505-3399 |
News Release
REMEC Announces Third Quarter FY 2005 Results
SAN DIEGO, CA — December 7, 2004 — REMEC, Inc. (NASDAQ: REMC) today announced financial results for its third quarter of fiscal year 2005, which ended October 29, 2004. Net sales from continuing operations for the three months ended October 29, 2004 increased 5.9% to $104.4 million as compared to $98.6 million for the quarter ended October 31, 2003. For the quarter ended October 29, 2004, the Company reported a net loss of $3.5 million or $0.06 per share. This compares to a loss of $4.1 million in the prior year third quarter.
Commenting on the quarter, Tom Waechter, REMEC’s President and CEO stated, “I am encouraged by our third quarter performance. Our Defense & Space business remains strong and the Company’s net loss of $3.5 million is a significant improvement over the second quarter.” Mr. Waechter continued, “Our cash position experienced a solid improvement over the second quarter benefiting from our strategy to sell non-core businesses and improved working capital performance. In addition our gross profit improved from the prior quarter as a direct result of the completion of the final phase of our move of production and procurement from Finland to China.”
The Wireless Systems segment net sales were $78.8 million for the three months ended October 29, 2004, up 1.5% from the comparable year earlier quarter primarily due to strong customer demand for power amplifiers used by the original equipment manufacturer (OEMs). Net sales in the Defense & Space segment rose 22.0%, to $25.6 million, as compared to $21.0 million for the prior year third quarter.
Company Gross profits for the quarter were $19.3 million, or 18.5% of sales. The Wireless Systems gross profit continues to be under pressure from downward pricing pressures on selected products and was adversely impacted by start up costs on new integrated filter and tower mounted amplifier products as well as the normally lower profit levels associated with new product introductions. Gross profit for Defense & Space remains strong. Low-cost basis inventory sales were $2.6 million for the quarter. The prior year third quarter gross profit of $21.9 million, or 22.2% of sales, included $1.9 million of low-cost basis inventory sales and had the benefit of stronger margins in essentially all Wireless Systems businesses.
Selling, general and administrative expenses, or SG&A, increased from 11.7% of sales for the three months ended October 30, 2003 to 13.2% of sales for the three months ended October 29, 2004. SG&A costs totaled $13.8 million for the three months ended October 29, 2004, as compared to $11.5 million for the comparable prior year quarter, an increase of $2.3 million. The increase was primarily due to Sarbanes-Oxley implementation costs and higher consulting costs.
Research and development expenses decreased $2.4 million, or 20.9%, for the three months ended October 29, 2004 as compared to the comparable prior year quarter. Expenses were $11.4 million in the prior year period, which compared to $9.0 million for the three months, ended October 29, 2004. The decrease was primarily due to efficiency improvements and improved cost controls. As a percentage of net sales, research and development expenses decreased to 8.7% for the three months ended October 29, 2004 compared to 11.6% in the comparable prior year.
The Company’s cash and short-term investment balances as of October 29, 2004 totaled $43.1 million, an increase of $16.8 million from the prior quarter. During the quarter REMEC entered into a banking arrangement with Nordea bank, which is in addition to the Company’s $30 million revolving line of credit with Silicon Valley Bank.
For more information:
Management will be holding a conference call to discuss quarterly earnings on December 7, 2004, at 2:00 p.m. Pacific Standard Time (Los Angeles). To participate on the conference call within the U.S., please call (800) 946-0713, confirmation code 922787. From outside the U.S., please call (719) 457-2642, confirmation code 922787, ten minutes prior to the scheduled time of the call. A simultaneous webcast of the call will also be provided by the Company. Log onto the Company’s website atwww.remec.com, then click on “Live Webcast-Q3 Earnings Call.”
About REMEC
REMEC is a designer and manufacturer of high frequency subsystems used in the transmission of voice, video and data traffic over wireless communications networks and in space and defense electronics applications.
Forward-looking Statements
Statements in this press release that are not historical are forward-looking statements, which involve known and unknown risks and uncertainties. Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors, including, general and industry economic conditions, competition, development factors, operating costs and other risks and uncertainties that are detailed from time to time in our filings with the Securities and Exchange Commission.
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REMEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
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| | | Three months ended
| | | Nine months ended
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| | | October 29,
2004
| | | October 31,
2003
| | | October 29,
2004
| | | October 31,
2003
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Net sales | | $ | 104,369 | | | $ | 98,575 | | | $ | 323,058 | | | $ | 252,369 | |
Cost of sales | | | 85,094 | | | | 76,672 | | | | 275,827 | | | | 194,056 | |
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Gross profit | | | 19,275 | | | | 21,903 | | | | 47,231 | | | | 58,313 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 13,781 | | | | 11,505 | | | | 41,432 | | | | 35,849 | |
Research and development | | | 9,049 | | | | 11,439 | | | | 31,274 | | | | 35,099 | |
Impairment of goodwill | | | — | | | | — | | | | 62,400 | | | | — | |
Restructuring (reversals)/charges | | | (17 | ) | | | — | | | | (888 | ) | | | 378 | |
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Total operating expenses | | | 22,813 | | | | 22,944 | | | | 134,218 | | | | 71,326 | |
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Loss from continuing operations | | | (3,538 | ) | | | (1,041 | ) | | | (86,987 | ) | | | (13,013 | ) |
Gain on sale of facility | | | — | | | | — | | | | — | | | | 945 | |
Interest income and other, net | | | (504 | ) | | | (1,954 | ) | | | (193 | ) | | | 846 | |
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Loss before income taxes | | | (4,042 | ) | | | (2,995 | ) | | | (87,180 | ) | | | (11,222 | ) |
Income taxes | | | 9 | | | | (31 | ) | | | 19 | | | | 24 | |
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Loss from continuing operations | | $ | (4,051 | ) | | $ | (2,964 | ) | | $ | (87,199 | ) | | $ | (11,246 | ) |
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Loss from discontinued operations, net of tax | | | 567 | | | | (1,120 | ) | | | 144 | | | | (3,507 | ) |
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Net loss | | $ | (3,484 | ) | | $ | (4,084 | ) | | $ | (87,055 | ) | | $ | (14,753 | ) |
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Basic net loss per common share: | | | | | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.07 | ) | | $ | (0.05 | ) | | $ | (1.41 | ) | | $ | (0.19 | ) |
Loss from discontinued operations | | | 0.01 | | | | (0.02 | ) | | | — | | | | (0.06 | ) |
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| | | $ | (0.06 | ) | | $ | (0.07 | ) | | $ | (1.41 | ) | | $ | (0.25 | ) |
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Diluted net loss per common share: | | | | | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.07 | ) | | $ | (0.05 | ) | | $ | (1.41 | ) | | $ | (0.19 | ) |
Loss from discontinued operations | | | 0.01 | | | | (0.02 | ) | | | — | | | | (0.06 | ) |
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| | | | (0.06 | ) | | | (0.07 | ) | | | (1.41 | ) | | | (0.25 | ) |
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Shares used in computing net loss per common share: | | | | | | | | | | | | | | | | |
Basic | | | 62,153 | | | | 59,260 | | | | 61,974 | | | | 58,382 | |
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Diluted | | | 62,153 | | | | 59,260 | | | | 61,974 | | | | 58,382 | |
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REMEC, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
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| | | October 29,
2004
| | January 31,
2004
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| | | (unaudited) | | |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 40,517 | | $ | 44,783 |
Short-term investments | | | 2,589 | | | 10,296 |
Accounts receivable, net | | | 76,061 | | | 64,194 |
Notes and other receivables | | | 7,271 | | | 7,708 |
Inventories, net | | | 67,746 | | | 75,850 |
Net assets of discontinued operations | | | — | | | 10,905 |
Other current assets | | | 3,432 | | | 3,481 |
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Total current assets | | | 197,616 | | | 217,217 |
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Property, plant and equipment, net | | $ | 67,359 | | $ | 75,503 |
Restricted cash | | | 571 | | | 569 |
Goodwill, net | | | 3,018 | | | 65,275 |
Intangible assets, net | | | 2,653 | | | 3,257 |
Other assets | | | 2,047 | | | 2,576 |
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| | | $ | 273,264 | | $ | 364,397 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 54,532 | | $ | 59,855 |
Accrued expenses and other current liabilities | | | 47,461 | | | 47,401 |
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Total current liabilities | | | 101,993 | | | 107,256 |
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Deferred income taxes and other long-term liabilities | | $ | 4,328 | | $ | 3,999 |
Shareholders’ equity | | $ | 166,943 | | $ | 253,142 |
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| | | $ | 273,264 | | $ | 364,397 |
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