SAN DIEGO, Dec. 9 /PRNewswire-FirstCall/ -- REMEC, Inc. (Nasdaq: REMC), announced results for its third quarter of fiscal 2003. Revenues in the third quarter were $59.4 million compared with $52.5 million for the comparable prior year period. The pre-tax loss for the third quarter was ($12.0) million compared with a pre-tax loss of ($14.7) million in the preceding quarter and ($11.0) million for the comparable prior year period. The Company did not record a tax benefit for its third quarter fiscal 2003 operating losses and, therefore, the net loss for the third quarter was $(12.0) million, or $(0.26) per diluted share, compared with a net loss of $(6.2) million, or $(0.14) per diluted share, in the same period last year.

Fiscal 2003 year-to-date revenues totaled $172.0 million as compared to $171.8 million for the comparable prior year. The pre-tax loss for the nine months ended November 1, 2002 was ($33.9) million compared with a pre-tax loss of ($35.6) million for the comparable prior year period. The company reported a net loss of ($28.0) million, or ($0.62) per diluted share, during the current fiscal year as compared to a net loss of ($21.7) million, or ($0.48) per diluted share in the prior year period.

Discussion of results:

• Third quarter fiscal 2003 revenues increased 11.1% over the second quarter of fiscal 2003 and 13.3% over the comparable prior year period.

• The Company saw improvements in both sales and gross margins during each month of the third quarter and this trend has continued during the fourth quarter.

• These results reflect greater demand from our commercial customers and include contract termination settlements of $2.1 million with two customers.

• The Company's commercial segment experienced an increase in demand at its European filter business and also generated significant revenue from the rollout of new Multi-Carrier Power Amplifier (MCPA) and Fixed Wireless Access (FWA) products.

• The Company anticipates that the on-going strengthening of demand for its commercial and Defense and Space products should lead to an increase in sales revenues during the fourth quarter of fiscal 2003, comparable to the quarter over quarter growth achieved during the third quarter.

• Gross margin as a percentage of revenues was 11.5% for the third quarter of fiscal 2003, or 13.2% excluding the impact of inventory reserves, as compared to 7.5% reported for the second quarter of fiscal 2003 and 14.0% reported in the comparable prior year period, which did not include subsequently acquired overhead costs.

• The improvement in gross margin as a percentage of revenue from its second quarter level reflects both the improvement in overhead absorption from the increased sales level and the impact of the previously announced reductions of the Company's manufacturing workforce.

• The Company completed a workforce reduction process during the third quarter of fiscal 2003 and anticipates that the full benefit of this effort, the ongoing shift of manufacturing to off-shore production facilities, the continuing rationalization of domestic facilities and the impact of increasing sales revenue will lead to improved gross margins during the fourth quarter of fiscal 2003.

• Selling, general and administrative costs, which included $0.8 million of information system implementation costs and $0.4 million of reserves for bad debts, decreased approximately $1.1 million during the preceding quarter and $2.4 million from the comparable prior year period as a result of headcount reductions from the Company's restructuring activities and the implementation of new accounting rules that eliminate the requirement to amortize goodwill.

• Research and development costs increased to $8.8 million in the third quarter of 2003 from $7.8 million in the preceding quarter and $6.5 million in the comparable prior year period as a result of the increase in the number of full time development staff and temporary consultants dedicated to new product introductions, including the MRI radio, Fixed Wireless Access, multi-carrier power amplifiers and advanced device development.

• During the third quarter of fiscal 2003, the Company did not record income tax benefit related to its third quarter fiscal 2003 operating losses. Prior to recording any additional income tax benefit, the Company is completing an assessment of its ability to realize any future tax benefits based on the tax implications of its planned acquisition of Spectrian.

• Based on the Company's forecast, including a return to profitability based upon improvement in revenues and gross margins, continued cost cutting measures and the implementation of tax planning strategies, the Company has continued to reflect a significant net deferred tax asset in its financial statements. If the Company is unable to achieve its forecast and complete its tax planning efforts, it will be required to review the carrying value of the net deferred tax asset.

Commenting on the results, Ron Ragland, Chairman and Chief Executive Officer of REMEC said, "Our overall top-line performance improved and we continue to see signs of increased demand from our commercial customer base. Our management team continues to focus on reorganizing and streamlining our commercial operations. Our top priorities remain returning to profitability and positive cash flow in the near-term. We expect our acquisition of Spectrian, with its numerous synergies, to accelerate our progress on the path to profitability."

For more information

Management will be holding a conference call to discuss quarterly earnings today, at 2:00 p.m. Pacific Standard Time (Los Angeles). To participate on the conference call within the U.S., please call (800) 474-8920, confirmation code #798912. From outside the U.S., please call (719) 457-2727, confirmation code #798912, ten minutes prior to the scheduled time of the call. To listen to the rebroadcast number, which will play for seven days, call (888) 203-1112 domestically or (719) 457-0820 internationally, with the confirmation code #798912.

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.

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.

                                   REMEC, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)
                                   (unaudited)

                             Three months ended         Nine months ended
                           November 1,  October 26,   November 1,  October 26,
                               2002        2001          2002         2001

    Net sales                  $59,448    $52,472       $171,999     $171,786
    Cost of sales               52,597     45,111        151,197      153,381
    Gross profit                 6,851      7,361         20,802       18,405

    Operating expenses:
    Selling, general and
     administrative             10,499     12,919         31,637       37,413
    Research and development,
     including in-process        8,846      6,493         24,457       19,241
    Asset impairment charge        659         --            659           --
    Total operating expenses    20,004     19,412         56,753       56,654

    Loss from operations       (13,153)   (12,051)       (35,951)     (38,249)
    Interest income and
     other, net                  1,185      1,010          2,012        2,681

    Loss before income taxes   (11,968)   (11,041)       (33,939)     (35,568)
    Credit for income taxes         --     (4,796)        (5,932)     (13,900)

    Net loss                  $(11,968)   $(6,245)      $(28,007)    $(21,668)

    Net loss per
     common share:
        Basic                   $(0.26)    $(0.14)        $(0.62)      $(0.48)
        Diluted                 $(0.26)    $(0.14)        $(0.62)      $(0.48)

    Shares used in
     computing net loss
     per common share:
        Basic                   45,489     44,980         45,342       44,834
        Diluted                 45,489     44,980         45,342       44,834



                                   REMEC, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  (in thousands)
                                   (unaudited)

                                            November 1,        January 31,
                                               2002               2002

    ASSETS
    Cash and cash equivalents                 $30,026            $49,438
    Accounts receivable, net                   37,670             33,765
    Inventories, net                           42,902             44,314
    Deferred income taxes                      25,201             34,582
    Other current assets                        6,586              2,767
    Total current assets                      142,385            164,866

    Property, plant and equipment, net         84,926             90,786
    Goodwill, net                              36,407             34,909
    Restricted cash                            17,049             17,049
    Intangible assets, net                      7,140              8,774
    Other assets                                5,144              8,354
                                             $293,051           $324,738

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Accounts payable                          $14,435            $11,039
    Accrued expenses and other current
     liabilities                               24,525             28,562
    Total current liabilities                  38,960             39,601
    Deferred income taxes and other
     long-term liabilities                      1,433              3,268
    Shareholders' equity                      252,658            281,869
                                             $293,051           $324,738


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SOURCE REMEC, Inc.

-0- 12/09/2002

/CONTACT: David L. Morash of REMEC, Inc., +1-858-560-1301/

/Company News On-Call: http://www.prnewswire.com/comp/109967.html /