SAN DIEGO, Sept. 9 /PRNewswire-FirstCall/ -- REMEC, Inc. (Nasdaq: REMC), announced results for its second quarter of 2002. Revenues in the second quarter were $53.5 million compared with $60.4 million for the comparable prior year period. The net loss for the second quarter was $(10.9) million, or $(0.24) per diluted share, compared with a net loss of $(6.3) million, or $(0.14) per diluted share, in the same period last year.

For the year to date, REMEC reported a net loss of ($16.0) million, or ($0.35) per diluted share, on revenues of $112.6 million. In the comparable prior year period, the Company reported a net loss of ($15.4) million, or ($0.34) per diluted share, on revenues of $119.3 million.

Discussion of results:

• Despite strong sales and profit performance by the Defense and Space Group, second quarter revenues declined 11.4% from the comparable prior year period as a result of the continued weak demand from telecommunications infrastructure equipment customers. The Global Manufacturing Services Group also experienced a significant one-quarter revenue reduction due to a customer's inventory adjustment during this time frame.

• On a sequential basis, second quarter revenues decreased 9.4% from first quarter levels due to the above factors.

• Gross margin as a percentage of revenues was 7.5% during the second quarter of 2002 compared with 11.8% in the comparable prior year period and 16.8% reported during the first quarter.

• The decline in gross margin as a percentage of revenue from its first quarter level reflects the decline in sales and the impact of recording additional inventory reserves totaling approximately $0.8 million.

• During the second quarter, REMEC established a goal of eliminating 750 positions (23% of its April 2002 headcount) with an anticipated annualized cost savings of approximately $17.5 million. Approximately 550 positions have been eliminated to date, and the Company anticipates that this reduction in workforce will be substantially completed by the end of the third quarter. The Company anticipates that while this headcount reduction will decrease manufacturing and overhead costs significantly in the third quarter, the full impact of these measures will not be in place until the fourth quarter. The Company continues to examine other cost cutting measures including its ongoing shift of manufacturing to off-shore production facilities and the rationalization of domestic facilities.

• Included in the second quarter reductions were two Executive Vice Presidents and a number of members of the senior management team.

• Despite $1.3 million of information system implementation costs in the second quarter, selling, general and administrative costs were down approximately $0.9 million from the comparable prior year period as a result of headcount reductions resulting 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 $7.8 million in the second quarter of 2002 from $6.5 million in the comparable prior year period as a result of the increase in the number of development staff dedicated to new product introductions, including the MRI radio, Fixed Wireless Access, multi-carrier power amplifiers and advanced device development.

• On the basis of 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 record tax benefit for domestic operating losses during the second quarter. If the Company is unable to achieve its forecast and complete its tax planning efforts, we may be unable to take tax benefit for future losses and will have to review the carrying value of our deferred tax assets.

• Despite the operating loss and a reduction of accrued expenses by $6.9 million, cash remained essentially unchanged from its first quarter level due to tax refunds of $12.9 million and a $3.6 million reduction in receivables as collections improved as the Company addressed its first quarter system implementation difficulties.

• Subsequent to quarter end, the Company completed the relocation of its UK facilities and entered escrow on the $21.0 million sale of its Kearney Mesa facility. The Company also expects to close escrow shortly and generate proceeds of $2.7 million from the sale of another San Diego facility.

Commenting on the results, Ron Ragland, Chairman and Chief Executive Officer of REMEC said, "Facing the reduced levels of commercial spending, we were again required to reduce our headcount dramatically. The reality of the prolonged telecommunications downturn and the uncertainty of recovery dictate these strong measures. We believe that these cost savings initiatives and the growing strength of our defense unit will provide the platform for near term improvement in our operating results. We also anticipate that commercial revenues should improve as we begin shipments under two major commercial contracts. We are hopeful that we have seen the market bottom and remain committed to our goal of achieving positive cash flow and subsequent break even performance as soon as possible."

For more information

Management will be holding a conference call to discuss quarterly earnings today, at 2:00 p.m. Pacific Daylight Time (Los Angeles). To participate on the conference call within the U.S., please call (800) 946-0705, confirmation code #795188. From outside the U.S., please call (719) 457-2637, confirmation code #795188, 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 #795188.

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   Six months ended
                                        August 3, July 27,  August 3, July 27,
                                          2002     2001      2002      2001

    Net sales                            $53,488  $60,391  $112,551  $119,314
    Cost of sales                         49,470   53,718    98,600   108,270
    Gross profit                           4,018    6,673    13,951    11,044

    Operating expenses:
    Selling, general and administrative   11,583   12,494    21,138    24,494
    Research and development               7,783    6,545    15,611    12,748
    Total operating expenses              19,366   19,039    36,749    37,242

    Income (loss) from operations        (15,348) (12,366)  (22,798)  (26,198)
    Interest income and other, net           650    1,731       827     1,671

    Income (loss) before provision
     (credit) for income taxes           (14,698) (10,635)  (21,971)  (24,527)
    Provision (credit) for income taxes   (3,823)  (4,380)   (5,932)   (9,103)

    Net income (loss)                   $(10,875) $(6,255) $(16,039) $(15,424)

    Earnings (loss) per common share:
        Basic                             $(0.24)  $(0.14)   $(0.35)   $(0.34)
        Diluted                           $(0.24)  $(0.14)   $(0.35)   $(0.34)

    Shares used in computing earnings
     (loss) per common share:
        Basic                             45,320   44,833    45,268    44,759
        Diluted                           45,320   44,833    45,268    44,759


                                   REMEC, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  (in thousands)

                                                  August 3,        January 31,
                                                    2002                2002
    ASSETS
    Cash and cash equivalents                      $34,530            $49,438
    Accounts receivable, net                        40,099             33,765
    Inventories, net                                43,866             44,314
    Deferred income taxes and other
     current assets                                 32,952             41,180
    Total current assets                           151,447            168,697

    Property, plant and equipment, net              90,128             92,802
    Restricted cash                                 17,049             17,049
    Intangible and other assets                     47,742             52,037
                                                  $306,366           $330,585


    LIABILITIES AND SHAREHOLDERS' EQUITY
    Accounts payable                               $15,646            $11,039
    Accrued expenses and other current
     liabilities                                    19,782             30,578
    Total current liabilities                       35,428             41,617

    Deferred income taxes and other
     long-term liabilities                           6,405              7,099

    Shareholders' equity                           264,533            281,869
                                                  $306,366           $330,585


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SOURCE REMEC, Inc.

-0- 09/09/2002

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

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