UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 1-16541
REMEC, INC.
(Exact name of registrant as specified in its charter)
| CALIFORNIA | 95-3814301 | |
| (State of other jurisdiction of incorporation or organization) |
I.R.S. Employer Identification Number |
| 3790 VIA DE LA VALLE, SUITE 311 DEL MAR, CALIFORNIA |
92014 | |
| (Address of principal executive offices) | (Zip Code) |
(858) 505-3713
(Registrant’s telephone number, including area code)
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 x NO ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
Indicate number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| Class |
Outstanding as of: August 31, 2004 | |
| Common Stock, $.01 par value | 61,900,221 |
Form 10-Q
For The Quarterly Period Ended July 30, 2004
| Index |
Page No. | |||
| PART I |
FINANCIAL INFORMATION | |||
| Item 1. |
Financial Statements: | |||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||
| Item 3. |
Qualitative and Quantitative Disclosures About Market Risk | 25 | ||
| Item 4. |
Controls and Procedures | 26 | ||
| PART II |
OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 28 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 28 | ||
| SIGNATURES | 29 | |||
| CERTIFICATIONS | ||||
| EXHIBITS | ||||
| Exhibit 10.1 |
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| Exhibit 31.1 |
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| Exhibit 31.2 |
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| Exhibit 32.1 |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| July 30, 2004 |
January 31, 2004 | |||||
| (unaudited) | ||||||
| ASSETS |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 21,856 | $ | 44,783 | ||
| Short-term investments |
4,494 | 10,296 | ||||
| Accounts receivable, net |
79,607 | 64,194 | ||||
| Notes and other receivables |
7,212 | 7,708 | ||||
| Inventories, net |
64,643 | 75,850 | ||||
| Net assets of discontinued operations (Note 8) |
8,841 | 10,905 | ||||
| Other current assets |
6,963 | 3,481 | ||||
| Total current assets |
193,616 | 217,217 | ||||
| Property, plant and equipment, net |
68,864 | 75,503 | ||||
| Restricted cash |
571 | 569 | ||||
| Goodwill, net |
3,018 | 65,275 | ||||
| Intangible assets, net |
2,824 | 3,257 | ||||
| Other assets |
2,229 | 2,576 | ||||
| $ | 271,122 | $ | 364,397 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||
| Current liabilities: |
||||||
| Accounts payable |
$ | 50,894 | $ | 59,855 | ||
| Accrued expenses and other current liabilities |
45,030 | 47,401 | ||||
| Total current liabilities |
95,924 | 107,256 | ||||
| Deferred income taxes and other long-term liabilities |
4,817 | 3,999 | ||||
| Shareholders’ equity |
170,381 | 253,142 | ||||
| $ | 271,122 | $ | 364,397 | |||
See accompanying notes.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
| Three months ended |
Six months ended |
|||||||||||||||
| July 30, 2004 |
August 1, 2003 |
July 30, 2004 |
August 1, 2003 |
|||||||||||||
| Net sales |
$ | 108,755 | $ | 80,196 | $ | 218,689 | $ | 153,795 | ||||||||
| Cost of sales |
98,807 | 60,302 | 190,734 | 117,385 | ||||||||||||
| Gross profit |
9,948 | 19,894 | 27,955 | 36,410 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
14,199 | 11,611 | 27,545 | 24,345 | ||||||||||||
| Research and development |
10,542 | 11,775 | 22,225 | 23,660 | ||||||||||||
| Impairment of goodwill (Note 10) |
62,400 | — | 62,400 | — | ||||||||||||
| Restructuring and impairment of other long-lived assets (reversals)/charges |
(765 | ) | 378 | (765 | ) | 378 | ||||||||||
| Total operating expenses |
86,376 | 23,764 | 111,405 | 48,383 | ||||||||||||
| Loss from continuing operations |
(76,428 | ) | (3,870 | ) | (83,450 | ) | (11,973 | ) | ||||||||
| Gain on sale of facility |
— | 945 | — | 945 | ||||||||||||
| Interest income and other, net |
463 | 777 | 312 | 2,800 | ||||||||||||
| Loss before income taxes |
(75,965 | ) | (2,148 | ) | (83,138 | ) | (8,228 | ) | ||||||||
| Income taxes |
7 | 555 | 10 | 555 | ||||||||||||
| Loss from continuing operations |
$ | (75,972 | ) | $ | (2,703 | ) | $ | (83,148 | ) | $ | (8,783 | ) | ||||
| Loss from discontinued operations, net of tax |
(500 | ) | (855 | ) | (423 | ) | (1,886 | ) | ||||||||
| Net loss |
$ | (76,472 | ) | $ | (3,558 | ) | $ | (83,571 | ) | $ | (10,669 | ) | ||||
| Basic net loss per common share: |
||||||||||||||||
| Loss from continuing operations |
$ | (1.22 | ) | $ | (0.05 | ) | $ | (1.34 | ) | $ | (0.15 | ) | ||||
| Loss from discontinued operations |
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||
| $ | (1.23 | ) | $ | (0.06 | ) | $ | (1.35 | ) | $ | (0.18 | ) | |||||
| Diluted net loss per common share: |
||||||||||||||||
| Loss from continuing operations |
$ | (1.22 | ) | $ | (0.05 | ) | $ | (1.34 | ) | $ | (0.15 | ) | ||||
| Loss from discontinued operations |
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||
| $ | (1.23 | ) | $ | (0.06 | ) | $ | (1.35 | ) | $ | (0.18 | ) | |||||
| Shares used in computing net loss per common share: |
||||||||||||||||
| Basic |
61,965 | 58,520 | 61,884 | 57,944 | ||||||||||||
| Diluted |
61,965 | 58,520 | 61,884 | 57,944 | ||||||||||||
See accompanying notes.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Six months ended |
||||||||
| July 30, 2004 |
August 1, 2003 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net loss from continuing operations |
$ | (83,148 | ) | $ | (8,783 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: |
||||||||
| Depreciation and amortization |
9,886 | 8,882 | ||||||
| Impairment of goodwill |
62,400 | — | ||||||
| Unrealized gain/(loss) on foreign currency hedges |
1,395 | (1,694 | ) | |||||
| Gain on sale of facilities |
— | (945 | ) | |||||
| Other |
(765 | ) | 1 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts and other receivables |
(14,376 | ) | (3,686 | ) | ||||
| Inventories |
10,805 | (16,999 | ) | |||||
| Other current assets |
(3,482 | ) | 195 | |||||
| Accounts payable |
(8,961 | ) | 6,380 | |||||
| Accrued expenses, deferred income taxes and other long-term liabilities |
(990 | ) | (6,657 | ) | ||||
| Net cash used by operating activities |
(27,236 | ) | (23,306 | ) | ||||
| INVESTING ACTIVITIES |
||||||||
| Additions to property, plant and equipment |
(8,018 | ) | (7,525 | ) | ||||
| Change in restricted cash |
(2 | ) | 16,480 | |||||
| Payment for acquisition, net of cash acquired |
— | (1,847 | ) | |||||
| Short-term investments, net |
5,247 | (2,696 | ) | |||||
| Proceeds from sale of property, plant & equipment |
5,145 | 6,190 | ||||||
| Other assets |
204 | 136 | ||||||
| Net cash provided by investing activities |
2,576 | 10,738 | ||||||
| FINANCING ACTIVITIES |
||||||||
| Proceeds from issuance of long term debt |
— | — | ||||||
| Proceeds from sale of common stock |
1,997 | 1,756 | ||||||
| Net cash provided by financing activities |
1,997 | 1,756 | ||||||
| Decrease in cash from continuing operations |
(22,663 | ) | (10,812 | ) | ||||
| Net cash provided by discontinued operations |
1,763 | 4,825 | ||||||
| Effect of exchange rate changes on cash |
(2,027 | ) | (485 | ) | ||||
| Decrease in cash and cash equivalents |
(22,927 | ) | (6,472 | ) | ||||
| Cash and cash equivalents at beginning of period |
44,783 | 64,396 | ||||||
| Cash and cash equivalents at end of period |
$ | 21,856 | $ | 57,924 | ||||
See accompanying notes.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended January 31, 2004, included in REMEC’s Annual Report on Form 10-K. In the opinion of management, the condensed consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, except for impairment of goodwill of $62.4 million (See Note 10), necessary to present fairly the consolidated financial position of REMEC as of July 30, 2004, and the results of its operations for the three and six month periods ended July 30, 2004 and August 1, 2003. The results of operations for the interim period ended July 30, 2004, are not necessarily indicative of the results, which may be reported for any other interim period or for the entire fiscal year.
2. Earnings Per Share