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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q

REMEC, INC.
(Exact name of registrant as specified in its charter)

        Indicate by check whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 month (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate number of shares outstanding of each of the issuer's classes of common stock, at the latest practicable date:

REMEC, Inc.
Form 10-Q
For The Quarterly and Nine Month Periods Ended November 1, 2002

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PART I—FINANCIAL INFORMATION

Item 1

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

See accompanying notes.

3

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

See accompanying notes.

4

REMEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

See accompanying notes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)

1.    Quarterly Financial Statements

        The interim condensed consolidated financial statements included herein have been prepared by REMEC, Inc. (the "Company" or "REMEC") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, normally included in annual financial statements, have been condensed or omitted pursuant to such SEC rules and regulations; nevertheless, the management of REMEC believes that the disclosures herein are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended January 31, 2002, included in REMEC's Annual Report on Form 10-K/A. In the opinion of management, the interim condensed consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position of REMEC as of November 1, 2002, and the results of its operations for the three and nine month periods ended November 1, 2002 and October 26, 2001. The results of operations for the interim periods ended November 1, 2002, are not necessarily indicative of the results which may be reported for any other interim period or for the entire fiscal year.

        The statements in this report on Form 10-Q that relate to future plans, events or performance are forward-looking statements. Actual results could differ materially due to a variety of factors, including REMEC's success in penetrating the commercial wireless market, risks associated with the cancellation or reduction of orders by significant commercial or defense customers, trends in the commercial wireless and defense markets, risks of cost overruns and product nonperformance, and other risk factors and considerations described in REMEC's Annual Report on Form 10-K/A, and the other documents REMEC files from time to time with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. REMEC undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, other than as required by applicable law, that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

2.    Net Loss Per Share

        REMEC calculates earnings per share in accordance with SFAS No. 128, "Earnings per Share." Basic earnings per share is computed using the weighted average shares outstanding for each period presented. Diluted earnings per share is computed using the weighted average shares outstanding plus potentially dilutive common shares using the treasury stock method at the average market price during the reporting period.

        Dilutive securities may include options, warrants, and preferred stock as if converted and restricted stock subject to vesting. Potentially dilutive securities (consisting of stock options) totaling 43,000 and 157,000 shares for the three and nine months ended November 1, 2002, and 591,000 and 608,000 shares for the three and nine months ended October 26, 2001, respectively, were excluded from the calculation of diluted earnings per share because of their anti-dilutive effect.

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3.    Inventories

        Inventories consist of the following (in thousands):

        Inventories related to contracts with prime contractors to the U.S. Government included capitalized general and administrative expenses of $800 and $1,067 at November 1, 2002, and January 31, 2002, respectively. REMEC had a reserve for obsolete and unusable inventory of $20,031 and $23,221 as of November 1, 2002, and January 31, 2002, respectively.

4.    Comprehensive Income (loss)

        Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other adjustments included in comprehensive income (loss), including foreign currency translation adjustments and unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at comprehensive income (loss).

        The components of comprehensive loss, net of tax, are as follows (in thousands):

5.    Acquisition Transactions

ADC Mersum Oy ("Solitra")

        On October 26, 2001, REMEC acquired Solitra in Oulu, Finland from ADC Telecommunications, Inc. The Company acquired the assets and assumed all of the obligations of Solitra's radio frequency (RF) division and 100% of the shares of Solitra in exchange for cash consideration of $51.6 million. Solitra specializes in supplying RF equipment to the leading OEMs in the mobile wireless infrastructure industry. The addition of Solitra expanded our product portfolio and global footprint, and furthered our engineering expertise within products currently developed and already supplied for 2.5G and 3G cellular systems. Solitra further expands our presence in Europe and strengthens our relationship with key strategic customers, especially those located in Scandinavia. The acquisition has been accounted for as a purchase, and accordingly, the total purchase price has been allocated to the acquired assets and liabilities assumed at their estimated fair values in accordance with the provisions of SFAS 141. The estimated excess of the purchase price over the net tangible assets acquired of approximately $29.6 million is being carried as intangible assets, including goodwill of $24.8 million. REMEC's consolidated financial statements include the results of Solitra from the date of acquisition.

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Pacific Microwave Corporation ("PMC")

        On March 7, 2001, REMEC acquired substantially all of the assets and assumed all of the obligations of PMC, a privately held microwave electronics manufacturing company located in the Philippines, in exchange for cash consideration of approximately $23.1 million. PMC specializes in the assembly, manufacture and test of RF, microwave and millimeter wave gallium arsenide devices, components, subsystem and systems for broadband voice, and data transmission over wireless communications networks. The addition of PMC provided an increase in our millimeter wave manufacturing capacity. The acquisition has been accounted for as a purchase, and accordingly, the total purchase price has been allocated to the acquired assets and liabilities assumed at their estimated fair values. REMEC's consolidated financial statements include the results of PMC from the date of acquisition.

Humphrey, Incorporated

        On February 26, 2001, REMEC sold substantially all of the operating assets and operations of its wholly owned subsidiary Humphrey, Inc. in exchange for cash consideration of $13.8 million. The sale of Humphrey resulted in a gain of $7.6 million in the fiscal 2002.

Pro Forma Information

        The following unaudited pro forma summary presents the consolidated results of operations of the Company assuming that the acquisition's of Solitra and PMC and the disposition of Humphrey had occurred on the first day of REMEC's fiscal year ended January 31, 2002. The pro forma condensed consolidated results of operations would be as follows (in thousands, except per share data):

6.    Information by Segment

        During the third quarter of fiscal 2003, we divided our business into two groups for financial reporting purposes: Commercial Wireless (which encompasses our former Mobile Wireless, Broadband Wireless and Global Manufacturing groups) and Defense and Space. Not included in the above groups are certain non-operating subsidiaries of REMEC and Nanowave, Inc., a majority owned subsidiary which designs and produces critical modules and integrated subassemblies for fiber optic and other wireless communications. The Company's reportable segments have been determined based on the nature of the customers for the products offered. The Company evaluates performance and allocates resources based on profit or loss from operations before interest, other income and income taxes. Historical segment data has been restated to reflect these changes.

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Segment Data (in thousands):

7.    Restructuring

        During the fourth quarter of fiscal 2002, the Company announced that it was undertaking various actions to restructure its operations to improve its overall financial performance. The Company's restructuring plan included reductions in its overall cost structure, realignment of manufacturing capacity to current levels of demand and the transition of manufacturing operations to low cost, low tax offshore locations. Part of the restructuring effort also included a reduction in force of approximately 1,100 employees. As a result of this plan, restructuring related charges of approximately $17.3 million were recognized as operating expenses in fiscal 2002.

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        The following table (in thousands) summarizes the balance of the accrued restructuring reserve, which has been included in accrued liabilities at November 1, 2002:

        The Company completed the disposal of redundant assets, the facility consolidation and the remaining workforce reductions associated with its restructuring during the third quarter of fiscal 2003. As of November 1, 2002, the Company continues to believe that its estimates of accrued restructuring costs remain appropriate and adequate to complete these efforts.

8.    Goodwill and Other Intangible Assets—Adoption of Statement 142

        In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No.141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations closed after June 30, 2001. SFAS 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. Additionally, SFAS 142 requires that goodwill included in the carrying value of equity method investments no longer be amortized.

        The Company has implemented SFAS 141 and SFAS 142 and began applying the new rules on accounting for goodwill and other intangible assets effective February 1, 2002. The net book value assigned to our assembled workforce intangible asset at November 1, 2002, which totaled approximately $0.5 million has been reclassed and reported as goodwill and will no longer be amortized effective February 1, 2002.

        The following table presents a roll-forward of goodwill from February 1, 2002 to November 1, 2002 (in thousands):

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        The following table presents reconciliation's of net loss and per share data to what would have been reported had the new rules been in effect for the three and nine months ended October 26, 2001. (in thousands, except per share data):

Other Intangible Assets

        Acquired intangible assets subject to amortization at November 1, 2002 were as follows (in thousands):

        Amortization expense for intangible assets was $448 and $1,151 for the three months and nine months ended November 1, 2002, respectively, and $244 and $732 for the three and nine months ended October 26, 2001, respectively.

9.    Newly Issued Accounting Standards

        In July 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities."