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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED). |
For the fiscal year ended December 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]. |
For the transition period from to
Commission file number 0-27414
REMEC, Inc. Profit Sharing 401(k) Plan
3790 Via de la Valle
Del Mar, CA 92014
(Full title of the plan and the address of the plan)
REMEC, Inc.
3790 Via de la Valle
Del Mar, CA 92014
(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office)
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AUDITED FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
REMEC, Inc. Profit Sharing 401(k) Plan
Year ended December 31, 2004 with Report of Independent Registered Public Accounting Firm
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REMEC, Inc.
Profit Sharing 401(k) Plan
Audited Financial Statements and
Supplemental Schedule
Year ended December 31, 2004
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Report of Independent Registered Public Accounting Firm
REMEC, Inc. as Plan Administrator of
REMEC, Inc. Profit Sharing 401(k) Plan
We have audited the accompanying statement of net assets available for benefits of REMEC, Inc. Profit Sharing 401(k) Plan as of December 31, 2004, and the related statement of changes in net assets available for benefits for the year ended December 31, 2004. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2004 and the changes in its net assets available for benefits for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets (held at end of year) and nonexempt transactions as of December 31, 2004 are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ SQUAR, MILNER, REEHL & WILLIAMSON, LLP
Newport Beach, California
June 22, 2005
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Report of Independent Registered Public Accounting Firm
REMEC, Inc. as Plan Administrator of
REMEC, Inc. Profit Sharing 401(k) Plan
We have audited the accompanying statement of net assets available for benefits of REMEC, Inc. Profit Sharing 401(k) Plan as of December 31, 2003. This financial statement is the responsibility of the Plan’s management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2003 in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
San Diego, California
June 14, 2004
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Profit Sharing 401(k) Plan
Statements of Net Assets Available for Benefits
| December 31, | ||||||
| 2004 | 2003 | |||||
Investments, at fair value | $ | 41,480,151 | $ | 37,054,432 | ||
Employer contributions receivable | — | 168,440 | ||||
Employee contributions receivable | 77,900 | — | ||||
Other receivable | 98,375 | — | ||||
Net assets available for benefits | $ | 41,656,426 | $ | 37,222,872 | ||
See accompanying notes.
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Profit Sharing 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2004
Additions: | |||
Employee contributions | $ | 4,188,555 | |
Rollover contributions | 152,569 | ||
Employer contributions, net of forfeitures | 743,010 | ||
Net realized and unrealized appreciation in fair value of investments | 1,371,331 | ||
Interest and dividends | 593,157 | ||
Total additions | 7,048,622 | ||
Deductions: | |||
Distributions to participants | 3,504,485 | ||
Administrative expenses | 23,144 | ||
Total deductions | 3,527,629 | ||
Net increase | 3,520,993 | ||
Transfer of assets into the Plan | 912,561 | ||
Net assets available for benefits at: | |||
Beginning of year | 37,222,872 | ||
End of year | $ | 41,656,426 | |
See accompanying notes.
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Profit Sharing 401(k) Plan
Notes to Financial Statements
December 31, 2004
1. Significant Accounting Policies
General
The financial statements of REMEC, Inc. Profit Sharing 401(k) Plan (the “Plan”) are prepared on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments in registered investment company mutual funds are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year end. The shares of REMEC, Inc. common stock are valued at quoted market prices at year end. The participant loans are valued at their outstanding balance, which approximates fair value.
The REMEC, Inc. Common Stock Fund consists of the underlying company stock and a short-term cash component, Fidelity Institutional Money Market Fund, to provide liquidity for daily trading.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The realized gain or loss on investments is included with unrealized appreciation or depreciation in the current value of investments.
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REMEC, Inc.
Profit Sharing 401(k) Plan
Notes to Financial Statements (continued)
2. Description of the Plan
The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provision.
General
The Plan is a defined contribution profit sharing and retirement plan covering all eligible employees of REMEC, Inc. (the “Company” or the “Plan Sponsor”). The effective date of the Plan is January 1, 1990. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
The Company pays most administrative expenses of the Plan. Certain investment management fees and other charges paid to Fidelity Management Trust Company (the “Trustee”) are offset against fund performance in the net appreciation in future value of investments section of the statement of changes in net assets available for benefits and are not, therefore, separately reflected as administrative expenses.
The Plan is exposed to credit risk in the event of default by the issuers of the investments to the extent of amounts recorded on the statement of net assets available for benefits.
Eligibility
The Plan covers all employees of the Company over the age of 18. There is no service requirement. Employees may elect to join the Plan immediately upon meeting eligibility requirements of the Plan.
Contributions
Each year, participants may contribute from 1% to 15% of pretax compensation, as defined in the Plan and subject to the annual limits of the Internal Revenue Code.
The Company may make a discretionary profit-sharing contribution in an amount to be determined annually by the Plan Sponsor. A participant must be employed on the last day of the plan year and have earned at least 501 hours of service to be eligible for any profit-sharing contributions. The profit-sharing contributions to the Plan are allocated based on the ratio of each participant’s compensation to total compensation of all eligible participants. There were no discretionary profit-sharing contributions during 2004.
The Company also makes a matching contribution. The matching contribution is an amount equal to the percentage determined by the Plan Sponsor of all of the tax-deferred contributions of eligible participants for the contribution period up to a maximum match of $720 annually.
Participant Accounts
Each participant’s account is credited with the participant’s contributions, the participant’s share of the employer’s contributions, if any, and the Plan’s earnings or losses. The benefit to which a participant is allowed is limited to the vested balance in his account.
Forfeitures
Forfeited balances of terminated participants’ non-vested accounts are retained in the Plan and will first be applied against the Plan’s expenses for the plan year, and will then be used to reduce future employer contributions. The balance of forfeited non-vested accounts was not material as of December 31, 2004 or 2003. Forfeitures of $14,968 and $29,110 were used during 2004 and 2003 to pay the Plan’s expenses and reduce employer contributions, respectively.
Vesting
Participants are immediately vested in their elective contributions, plus actual earnings thereon, and such amounts are non-forfeitable. With regard to employer matching and discretionary contributions, participants are 50% vested after one year and 100% vested after two years of service.
Participants Notes Receivable
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan transactions are treated as a transfer from (to) the investment fund to (from) the loan fund. Loan terms range from 1 to 5 years or up to 10 years for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with local prevailing rates. Interest rates range from 1.75% to 11.5%. Principal and interest is paid through bi-weekly payroll deductions.
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REMEC, Inc.
Profit Sharing 401(k) Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
Payment of Benefits
Upon termination of service for any reason, a participant’s account is generally distributed in a single lump-sum payment upon request. At the Plan sponsor’s option, if the account balance is $5,000 or less, the entire balance may be distributed.
Administrative Expenses
Administrative expenses are borne by the Company, except for fees related to the administration of participant loans (and brokerage) which are deducted from the participants’ applicable account.
Plan Amendments
The Plan was amended and restated effective August 29, 2003 to comply with a series of federal laws affecting tax-qualified retirement plans, known as the “GUST” amendments. These amendments did not affect the net assets of the Plan. The Plan was again amended on August 1, 2004 to provide for the merger of the Paradigm Wireless Communications 401(K) Profit Sharing Plan into the Plan (Note 5).
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become fully vested in their accounts.
3. Investments
Fidelity Management Trust Company, the Trustee of the Plan, holds the Plan’s investments and executes all investment transactions. During 2004, the total Plan’s investments (including investments purchased, sold, as well as held during the year) appreciated in fair value as determined by quoted market prices as follows:
| Net realized and unrealized appreciation (depreciation) in fair value of investments | ||||
Common stock | $ | (832,788 | ) | |
Mutual funds | 2,204,119 | |||
Total | $ | 1,371,331 | ||
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REMEC, Inc.
Profit Sharing 401(k) Plan
Notes to Financial Statements (continued)
3. Investments (continued)
The fair value of individual investments that represent 5% or more of the Plan’s net assets is as follows:
| December 31, | ||||||
| 2004 | 2003 | |||||
Fidelity Magellan Fund | $ | 5,833,029 | $ | 5,117,825 | ||
REMEC, Inc. Common Stock | 5,503,862 | 7,359,225 | ||||
Fidelity Retirement Money Market Portfolio | 5,414,844 | 5,062,204 | ||||
Fidelity Growth Company Fund | 5,119,981 | 4,415,981 | ||||
Fidelity Growth and Income Portfolio | 4,747,004 | 3,948,826 | ||||
Fidelity Contrafund | 4,105,588 | 3,026,246 | ||||
Fidelity Asset Manager | 2,917,567 | 2,640,511 | ||||
4. Income Tax Status
The plan obtained its latest determination letter on June 24, 2004, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. However, the plan administrator and the plan’s tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
5. Plan Merger, or Transfers In of Participant Balances from Manulife Upon Acquisition of Paradigm Inc.
During 2004, the Paradigm Wireless Communications 401(k) Profit Sharing Plan merged into the Plan, pursuant to a business acquisition in 2003. As a result of the merger, former employees of the acquired company were allowed to transfer their account balances, previously held with Manulife, into the Plan. The net assets transferred into the Plan totaled $912,561.
6. Nonexempt Prohibited Transaction
Subsequent to year-end, the Plan Administrator found that during 2003 and 2004, salary deferrals elected by approximately 130 participants were not transmitted to the trust for the REMEC, Inc. Profit Sharing 401(k) Plan. In addition, during this period, the Profit Sharing/401(k) Plan accounts for approximately 90 participants were allocated with excess salary deferrals (based on the participant’s salary reduction agreement). The net effect, totaling $8,727, constitutes a nonexempt prohibited transaction under ERISA section 406. This amount is included as a receivable in the accompanying financial statements. Because the Plan is in the process of being audited by the Department of Labor (the “DOL”), it is anticipated that the DOL will be working with the Plan Sponsor on satisfying the requirements for the DOL Voluntary Fiduciary Correction Program (the “VFCP”).
7. Subsequent Events
On May 20, 2005, the Company announced that it had completed the sale of its Defense & Space group to Chelton Microwave. The former Defense and Space employees will not make any more contributions to REMEC’s Profit Sharing
Until the DOL approves the proposed resolution of the VFCP, the account balances for the former Defense and Space employees will be retained in the Plan. Upon receiving DOL approval and completion of the corrective measures, such account balances will be transferred in a plan-to-plan transfer to the new 401(k) Plan sponsored by Defense and Space.
Since the number of the former Defense & Space participants makes up more than 20 percent of the total Plan participants, the transfer of their account balances out of the Plan will constitute a partial plan termination. As such, the Plan is in the process of being amended to provide that all participants who are employed by the Company (and its controlled group members) on or after May 20, 2005 will become fully vested in accrued benefits at the partial termination date.
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REMEC, Inc. Profit Sharing 401(k) Plan
SCHEDULE OF NONEXEMPT PROHIBITED TRANSACTIONS
December 31, 2004
Employer I.D.: #95-3814301
Plan Number: 001
Identity of Party | Relationship to Plan, Employer, | Description of Transactions, including Maturity Date, Rate of Interest, Collateral, | Current Value | |||||
REMEC, Inc. | Plan Sponsor/Employer | Late deposits of elective deferrals during 2003 and 2004 | $ | 32,853 | ||||
REMEC, Inc. | Plan Sponsor/Employer Fidelity Mdcap Value | Allocation of excess salary deferrals to employees during 2003 and 2004 | (24,126 | ) | ||||
| Net amount of late deposits | $ | 8,727 | ||||||
See report of independent
registered accounting firm
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REMEC, Inc.
Profit Sharing 401(k) Plan
Employer ID #95-3814301, Plan 001
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2004
(a) | (b) Identity of issue | (c) Description/ | (d) Current | ||||
* | Fidelity Management Trust Company | ||||||
| Fidelity Aggressive International | 1,378.958 | $ | 23,056 | ||||
| Fidelity Asset Manager | 179,985.613 | 2,917,567 | |||||
| Fidelity Asset Manager Growth | 22,754.499 | 337,222 | |||||
| Fidelity Balanced | 402.318 | 7,169 | |||||
| Fidelity Blue Chip Growth | 64.938 | 2,709 | |||||
| Fidelity Blue Chip Value | 24.454 | 307 | |||||
| Fidelity Canada | 233.876 | 7,919 | |||||
| Fidelity Capital Appreciation | 208.184 | 5,419 | |||||
| Fidelity Cap & Income | 16,058.636 | 136,017 | |||||
| Fidelity Contrafund | 72,357.907 | 4,105,588 | |||||
| Fidelity Convertible Sec | 729.043 | 15,747 | |||||
| Fidelity Disciplined Equity | 91.213 | 2,307 | |||||
| Fidelity Diversified Intl | 44,132.747 | 1,263,962 | |||||
| Fidelity Equity Income | 2,427.577 | 128,128 | |||||
| Fidelity Europe | 187.973 | 6,419 | |||||
| Fidelity Exp & Multinatl | 10.401 | 204 | |||||
| Fidelity Fidelity | 578.316 | 17,280 | |||||
| Fidelity Fifty | 9.933 | 205 | |||||
| Fidelity Freedom 2000 | 3,287.706 | 39,715 | |||||
| Fidelity Freedom 2010 | 12,231.520 | 166,593 | |||||
| Fidelity Freedom 2020 | 3,896.017 | 54,388 | |||||
| Fidelity Freedom 2025 | 707.221 | 7,977 | |||||
| Fidelity Freedom 2030 | 6,748.202 | 95,015 | |||||
| Fidelity Freedom 2035 | 183.640 | 2,101 | |||||
| Fidelity Freedom 2040 | 8,899.667 | 73,600 | |||||
| Fidelity Freedom Income | 5,895.430 | 66,442 | |||||
| Fidelity Ginnie Mae | 479.610 | 5,314 | |||||
| Fidelity Inflat Prot Bond | 256.627 | 2,928 | |||||
| Fidelity Intermed Bond | 4,775.687 | 50,030 | |||||
| Fidelity International Discovery | 7.454 | 210 | |||||
| Fidelity International Small Cap | 1,298.395 | 30,227 | |||||
| Fidelity Japan | 8.948 | 115 | |||||
| Fidelity Large Cap Stock | 165.799 | 2,424 | |||||
| Fidelity Leveraged Company Stock | 57.429 | 1,302 | |||||
| Fidelity Managed Inc Port | 20,452.850 | 20,453 | |||||
| Fidelity Mid Cap Stock | 1,032,930 | 24,222 | |||||
| Fidelity NASDAQ Comp Index | 2.874 | 85 | |||||
| Fidelity New Markets Inc. | 2,772.195 | 39,726 | |||||
| Fidelity Overseas | 235.669 | 8,338 | |||||
| Fidelity Puritan | 28.601 | 542 | |||||
| Fidelity Real Estate Inc. | 37.374 | 441 | |||||
| Fidelity Real Estate Invs | 18,191.092 | 537,365 | |||||
| Fidelity Small Cap Independ | 10,082.372 | 198,824 | |||||
| Fidelity Small Cap Stock | 851.823 | 15,469 | |||||
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(a) | (b) Identity of issue | (c) Description/ | (d) Current Value | ||||
| Fidelity Southeast Asia | 318.185 | 5,225 | |||||
| Fidelity STR Lgcap Value | 594.215 | 7,261 | |||||
| Fidelity STR Mdcap Growth | 922.558 | 10,905 | |||||
| Fidelity Mdcap Value | 261.369 | 3,751 | |||||
| Fidelity Utilities | 2,368.646 | 32,190 | |||||
| Fidelity Value | 1,131.705 | 80,679 | |||||
| Fidelity Aggressive Growth | 5.106 | 85 | |||||
| Fidelity Emerging Markets | 317.785 | 4,109 | |||||
| Fidelity Growth & Inc | 124,234.600 | 4,747,004 | |||||
| Fidelity Growth Co | 91,314.098 | 5,119,981 | |||||
| Fidelity Invest Gr Bd | 224,195.377 | 1,688,191 | |||||
| Fidelity Low Pr Stk | 11,947.995 | 480,907 | |||||
| Fidelity Magellan | 56,200.302 | 5,833,029 | |||||
| Fidelity Retire Mmkt | 5,414,843.830 | 5,414,844 | |||||
| AIM Dynamics Inv | 60.425 | 997 | |||||
| AIM Midcap Core Eq A | 4.656 | 133 | |||||
| Allnz CCM Mid Cp Adm | 231.374 | 5,509 | |||||
| Ariel Appreciation | 64.061 | 3,054 | |||||
| Ariel Fund | 121.787 | 6,475 | |||||
| Artisan Mid Cap Inv | 37.693 | 1,114 | |||||
| Baron Asset Fund | 414.491 | 21,767 | |||||
| Baron Growth | 1,059.373 | 47,534 | |||||
| FMA Small Company Is | 41.027 | 900 | |||||
| Managers Bond Fund | 83.573 | 2,055 | |||||
| NB Focus Trust | 216.150 | 5,987 | |||||
| Oakmark Eq & Inc 1 | 797.588 | 18,743 | |||||
| Oakmark Fund I | 31.427 | 1,313 | |||||
| Pimco High Yield Adm | 1,877.716 | 18,721 | |||||
| Royce Low Priced Stk | 68.405 | 1,049 | |||||
| Scudder Intl Fund S | 26.809 | 1,186 | |||||
| Spartan US Eq Index | 22,020.298 | 943,790 | |||||
| TCW Gal Sm Cap Gr N | 190.002 | 3,029 | |||||
| TCW Galileo Sel Eq N | 188.878 | 3,628 | |||||
| Templeton Dev Mkts A | 204.014 | 3,778 | |||||
| Templeton Foreign A | 1.644 | 20 | |||||
| Templeton Growth A | 453.093 | 10,371 | |||||
| Templeton World A | 346.694 | 6,154 | |||||
| Templeton Global Bond A | 1,151.614 | 12,819 | |||||
* | REMEC, Inc. Common Stock | 94,597.870 | 5,405,487 | ||||
* | Participant loans | 1.75% to 11.5% interest, various maturities | 1,105,306 | ||||
| $ | 41,480,151 | ||||||
| * | Indicates party-in-interest |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, REMEC, Inc., as the administrator of the Plan, has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 29, 2005
REMEC, Inc. PROFIT SHARING 401(k) PLAN | ||
By: REMEC, Inc. | ||
By: | /s/ WINSTON E. HICKMAN | |
| Winston E. Hickman | ||
| Executive Vice President and Chief Financial Officer | ||
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EXHIBITS
| 23.1. | Consent of Squar, Milner, Reehl & Williamson, LLP, Independent Registered Public Accounting Firm | |
| 23.2. | Consent of Ernst & Young LLP Independent Registered Public Accounting Firm | |