-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GfbcNIX1Oi2BI6NNFPKzDXjbdUht274JiZ6pKtdvNzH/giZoazkwPzgDrkxwd2T3 FbOn6dUFEqhI/2cKcCn/Jw== /in/edgar/work/20000814/0000897101-00-000808/0000897101-00-000808.txt : 20000921 0000897101-00-000808.hdr.sgml : 20000921 ACCESSION NUMBER: 0000897101-00-000808 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVEX INC CENTRAL INDEX KEY: 0000050601 STANDARD INDUSTRIAL CLASSIFICATION: [3679 ] IRS NUMBER: 411223933 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13143 FILM NUMBER: 697053 BUSINESS ADDRESS: STREET 1: 530 ELEVENTH AVENUE SOUTH CITY: HOPKINS STATE: MN ZIP: 55343-9904 BUSINESS PHONE: 6129384155 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Period ended June 30, 2000. OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number: 0-13143 INNOVEX, INC. (Exact name of registrant as specified in its charter) Minnesota 41-1223933 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359-9003 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (763) 479-5300 Indicate by check mark 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 months (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 As of August 2, 2000, 14,841,070 shares of the registrant's common stock, $.04 par value per share, were outstanding. Exhibit Index, page 13 PART I: ITEM 1 FINANCIAL INFORMATION INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30, 2000 1999 ASSETS (Unaudited) (Audited) - ------ ------------- ------------- Current assets: Cash and equivalents $ 7,378,158 $ 6,231,430 Short-term investments 5,000 19,310,000 Accounts receivable 22,223,936 28,498,621 Inventories 18,542,453 15,891,945 Income taxes receivable 3,418,317 -- Other current assets 9,180,612 6,385,053 ------------- ------------- Total current assets 60,748,476 76,317,049 Property, plant and equipment, net of accumulated depreciation of $15,308,000 and $18,740,000 93,876,492 87,158,237 Intangible and other assets, net of accumulated amortization of $1,100,000 and $506,000 7,259,717 4,841,025 Deferred income taxes 10,897,908 10,442,908 Other assets 41,137 46,905 ------------- ------------- $ 172,823,730 $ 178,806,124 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current maturities of long-term debt $ 5,385,720 $ 307,702 Line of credit 8,500,000 9,163,931 Accounts payable 23,877,126 25,104,517 Accrued compensation 2,537,190 932,573 Income taxes payable -- 592,264 Other accrued liabilities 16,129,115 9,195,392 ------------- ------------- Total current liabilities 56,429,151 45,296,379 Long-term debt, less current maturities 21,685,247 26,375,546 Stockholders' equity: Common stock, $.04 par value; 30,000,000 shares authorized, 14,841,070 and 14,822,104 shares issued and outstanding 593,643 592,884 Capital in excess of par value 16,282,408 16,181,730 Retained earnings 77,833,281 90,359,585 ------------- ------------- Total stockholders' equity 94,709,332 107,134,199 ------------- ------------- $ 172,823,730 $ 178,806,124 ============= =============
See accompanying notes to condensed consolidated financial statements. Page 2 of 14 INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30, 2000 1999 ------------- ------------- Net sales $ 38,433,243 $ 20,636,068 Costs and expenses: Cost of sales 31,660,185 14,313,843 Selling, general and administrative 4,011,065 2,003,330 Engineering 1,883,599 924,137 Restructuring charges (183,928) 1,695,387 Net interest (income) expense 745,726 (543,561) Net other (income) expense (234,948) 116,261 ------------- ------------- Income before taxes 551,544 2,126,671 Provision for income taxes 159,000 617,000 ------------- ------------- Net income $ 392,544 $ 1,509,671 ============= ============= Net income per share: Basic $ 0.03 $ 0.10 ============= ============= Diluted $ 0.03 $ 0.10 ============= ============= Weighted average shares outstanding: Basic 14,837,671 14,804,630 ============= ============= Diluted 14,941,741 15,060,356 ============= ============= Nine Months Ended June 30, 2000 1999 ------------- ------------- Net sales $ 124,546,000 $ 63,367,708 Costs and expenses: Cost of sales 108,411,008 43,183,819 Selling, general and administrative 12,389,832 6,538,951 Engineering 5,455,105 2,867,831 Restructuring charges 13,601,157 1,695,387 Net interest (income) expense 1,860,098 (1,425,299) Net other (income) expense (361,680) 585,480 ------------- ------------- Income (loss) before taxes (16,809,520) 9,921,539 Provision for income taxes (4,876,164) 2,878,000 ------------- ------------- Net income (loss) $ (11,933,356) $ 7,043,539 ============= ============= Net income (loss) per share: Basic $ (0.80) $ 0.48 ============= ============= Diluted $ (0.80) $ 0.47 ============= ============= Weighted average shares outstanding: Basic 14,826,952 14,792,330 ============= ============= Diluted 14,826,952 15,085,692 ============= =============
See accompanying notes to condensed consolidating financial statements. Page 3 of 14 INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended June 30, 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(11,933,356) $ 7,043,539 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 8,647,705 5,046,373 Restructuring and asset impairment charges 13,601,157 1,695,382 Other non-cash charges (credits) 149,295 (143,812) Changes in operating assets and liabilities: Accounts receivable 6,093,317 (1,588,872) Inventories (2,980,455) (608,617) Other current assets (2,795,559) 1,046,852 Accounts payable (1,227,391) 1,505,202 Other liabilities 2,053,855 (124,133) Income taxes payable (4,465,581) 2,391,071 ------------ ------------ Net cash provided by (used in) operating activities 7,142,987 16,262,985 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (21,378,846) (13,809,747) Business acquisition (3,750,000) -- Proceeds from sale of assets 595,310 610,773 Purchase of held-to-maturity securities -- (28,120,000) Maturities of held-to-maturity securities 19,305,000 34,069,000 ------------ ------------ Net cash provided by (used in) investing activities (5,228,536) (7,249,974) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (398,048) (167,116) Net activity on line of credit (663,931) -- Issuance of long-term debt 785,767 -- Proceeds from exercise of stock options 101,437 296,813 Dividends paid (592,948) (1,700,958) ------------ ------------ Net cash provided by (used in) financing activities (767,723) (1,571,261) Increase (decrease) in cash and equivalents 1,146,728 7,441,750 Cash and equivalents at beginning of year 6,231,430 17,021,264 ------------ ------------ Cash and equivalents at end of period $ 7,378,158 $ 24,463,014 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest was $2,258,000 and $54,000 in 2000 and 1999, respectively. Income tax payments were $236,000 and $1,875,000 in 2000 and 1999, respectively.
See accompanying notes to condensed consolidating financial statements. Page 4 of 14 INNOVEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - FINANCIAL INFORMATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions on Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of Innovex, Inc. and its subsidiaries (the "Company") after elimination of all significant intercompany transactions and accounts. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of operating results have been made. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. The Company utilizes a fiscal year that ends on the Saturday nearest to September 30. For clarity of presentation, the Company has described all periods as if they end at the end of the calendar quarter. For further information, refer to the consolidated financial statements and footnotes included in the registrant's annual report on Form 10-K for the year ended September 30, 1999. Preparation of the Company's condensed consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from these estimates. NOTE 2 - RESTRUCTURING CHARGES LEAD WIRE ASSEMBLY PRODUCT LINE DISPOSITION- During the fourth quarter of fiscal 1999, the Company recorded a charge of approximately $2,765,000 related to the discontinuation of the lead wire assembly product line. The charge included approximately $871,000 related to asset impairment, $1,403,000 for the write off of inventory and supplies, $197,000 in employee severance, $156,000 in facility abandonment costs and $138,000 to increase the accounts receivable reserve. The disposition was substantially completed by June 30, 2000. The restructuring charge was reduced by $184,000 in the third quarter of fiscal 2000 as a result of a change in the estimated liability. MANUFACTURING OPERATIONS RESTRUCTURING- The fiscal 2000 first quarter includes a $13,785,085 restructuring charge related to restructuring the Company's manufacturing operations. The restructuring is primarily related to moving operations from the Company's Agua Prieta, Mexico facility to its new facility in Lamphun, Thailand. The charge was recorded pursuant to a plan announced in November 1999. The charge included approximately $6,581,000 related to asset impairment of property and equipment, $380,000 for the write off of inventory and supplies, $176,000 for increasing the accounts receivable reserve, and accrued liabilities of $2,101,000 for facility abandonment costs and $4,547,000 in employee severance and benefits. The company expects approximately 2,100 employees to be terminated as a result of the restructuring, primarily in the Agua Prieta, Mexico facility. This restructuring will be substantially complete by September 2000. The remaining restructuring accrual as of June 30, 2000 totaled $4,521,000. Selected information regarding the restructuring follows (in thousands): Page 5 of 14
Lead Wire Assembly Product Manufacturing Operations Line Disposition Restructuring Facility Employee Facility Employee Abandonment Termination Abandonment Termination Charges Benefits Charges Benefits Total ---------------------------------------------------------------------------- Accrual at September 30, 1999 $ 156 $ 197 $ -- $ -- $ 353 Establishment of accrual 2,101 4,547 6,648 Payments (26) (361) (387) ---------------------------------------------------------------------------- Accrual remaining at December 31, 1999 156 171 1,740 4,547 6,614 Payments (49) (177) (611) (837) ---------------------------------------------------------------------------- Accrual remaining at March 31, 2000 156 122 1,563 3,936 5,777 Payments (3) (50) (208) (811) (1,072) Change in estimate (153) 19 (50) (184) ---------------------------------------------------------------------------- Accrual remaining at June 30, 2000 $ -- $ 91 $ 1,305 $ 3,125 $ 4,521 ============================================================================
NOTE 3 - EARNINGS PER SHARE The Company's basic net income per share is computed by dividing net income by the weighted average number of outstanding common shares. The Company's diluted net income per share is computed by dividing net income by the weighted average number of outstanding common shares and common share equivalents relating to stock options when dilutive. Options to purchase 809,350 and 770,823 shares of common stock with weighted average exercise prices of $13.96 and $14.45 were outstanding during the three and nine month periods ending June 30, 2000, but were excluded from the computation of common share equivalents because they were not dilutive. Options to purchase 209,550 and 185,150 shares of common stock with weighted average exercise prices of $24.83 and $26.32, respectively, were outstanding during the three and nine month periods ending June 30, 1999, but were excluded from the computation of common share equivalents because they were not dilutive. NOTE 4 - INVENTORIES Inventories are comprised of the following: June 30, September 30, 2000 1999 -------------------------------- Raw materials and purchased parts $ 8,492,535 $ 8,753,336 Work-in-process and finished goods 10,049,918 7,138,609 -------------------------------- $18,542,453 $15,891,945 ================================ PART I: ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE COMPANY On July 7, 1999, Innovex, Inc. and its subsidiaries (the "Company") commenced a tender offer to purchase all of the issued and outstanding stock of ADFlex Solutions, Inc. ("ADFlex") at a purchase price of $3.80 per share. The tender offer closed on August 3, 1999. Approximately 76% of the outstanding shares of ADFlex were tendered in response to the offer. On August 9, 1999, the Company consummated the purchase of the tendered shares. The remaining approximately 24% of ADFlex issued and outstanding common stock not tendered in response to the tender offer was acquired by the Company through a merger transaction completed on September 14, 1999. The total ADFlex purchase Page 6 of 14 price, including transaction costs, change in control payments and all of the issued and outstanding common stock was approximately $37 million. The Company also obtained credit facilities totaling in principal amount $40 million, which were utilized to refinance ADFlex's outstanding debt, pay down current liabilities and pay related transaction costs. Prior to the acquisition, ADFlex was a leading supplier of flexible circuit based solutions to the computer, computer peripheral, communications and consumer electronics industries. Applications for these flex-based interconnects include cellular phones, hard disk drives, other storage systems, high-end consumer products, notebook computers, pagers and personal communication systems. ADFlex's diverse customer and industry base has reduced Innovex's reliance on the disk drive industry. Prior to the ADFlex acquisition, the Company had one primary operating group, Innovex Precision Components. The Company is combining the newly acquired ADFlex operation into its existing operations of designing and manufacturing flexible circuits. Prior to fiscal 1999, the Company operated through three divisions, Precision Products (Precision), Litchfield Precision Components (LPC) and Iconovex. Each division had its own administrative, engineering, manufacturing and marketing organizations. During the quarter ending September 30, 1998, the Company combined the operations of its two core operating divisions, Precision and LPC into one operating division, Innovex Precision Components. The combination merged the rapidly growing LPC flexible circuit fabrication and chemical etching operations with Precision's high volume fine wire manufacturing expertise. The combination also allowed Innovex to leverage Precision's disk drive industry market and trade knowledge to disk drive industry flexible circuit applications as the industry transitioned from wire interconnects. Prior to the divisional combination, the largest division, Precision, developed, engineered and manufactured specialty precision electromagnetic products for original equipment manufacturers ("OEM's"). Lead wire assemblies for the thin film disk drive market were the division's primary product. Lead wire assemblies are fine twisted magnet wires that connect the back end electronics of a disk drive with the disk drive heads that read and write information on the disk. Since the divisional combination, the lead wire assembly revenue phased out as anticipated. As a result, during the fiscal 1999 fourth quarter, charges of $2.8 million were recorded to account for the discontinuance of this product line. LPC, prior to the fiscal 1998 divisional combination, designed and manufactured highly complex flexible circuitry and chemically machined components for computer, computer peripheral, medical and other applications. The Company purchased Litchfield Precision Components, Inc. on May 16, 1996. This acquisition reduced the Company's reliance on the disk drive industry while providing an entry into the large and rapidly growing flexible circuit market. Innovex's flexible circuit operation is one of a limited number of companies in the world able to produce flexible circuits with line and spacing tolerances of less than 2 mils for the high-end portion of the flexible circuit market. The Iconovex subsidiary was established in fiscal 1994 to market and further develop a technologically advanced software product purchased in November 1993. In October 1997, Iconovex became the 51% owner of a joint venture with Solutions Corporation of America. The operations of Iconovex and its joint venture, Smart Solution, were discontinued in June 1999 as a result of revenue not developing as expected and the Company recorded a $1.7 million charge related to this disposition. Innovex, Inc. was incorporated under the laws of the State of Minnesota in 1972. Its principal executive offices are located at 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359-9003 and its telephone number is (763) 479-5300. Products are developed and manufactured through the Company's wholly owned subsidiaries, Innovex Precision Components, Inc., Innovex Southwest, Inc., Innovex (Thailand) Ltd. and Innovex Limited. Innovex Precision Components, Inc. and Innovex Ltd. are Minnesota corporations. Innovex Southwest, Inc. is a Delaware corporation and Innovex (Thailand) Ltd. is a Thailand corporation. Page 7 of 14 RESULTS OF OPERATIONS NET SALES The Company's net sales from operations totaled $38,433,000 for the quarter, up 86% from $20,636,000 reported in fiscal 1999. Sales of $124,546,000 for the nine months ended June 30, 2000 increased 97% from the prior year period. The increase in net sales for the third quarter and nine months of fiscal 2000 was due, in part to the increase in flexible circuit revenue from the disk drive industry. In addition, a large portion of the increase was due to revenue generated from the telecommunication, network system, consumer and other industries related to the August 1999 acquisition of ADFlex. These increases offset a reduction in revenue generated from lead wire interconnects as the disk drive industry completes its transition to integrated interconnects including the Company's Head Interconnect Flex (HIF) and Flex Suspension Assembly (FSA). None of the revenue for the quarter and 1% of revenue for the first nine months was generated by lead wire assemblies as compared to 20% and 38% for the same periods last year. Revenue from the disk drive industry generated 59% and 58% of the Company's revenue for the quarter and nine months, respectively. In addition, during the third fiscal quarter, 7% of the revenue was generated by flexible circuits for telecommunication applications, 19% from consumer applications, 9% from network system applications and 6% from applications from other industries. The acquisition of ADFlex has reduced the Company's dependence on the disk drive industry significantly from its historical levels of 85-90% of revenue. Fiscal 2000 should benefit from continued growth in the demand for high technology flexible circuit products including the Company's HIF, FSA and Bridge Flex. Reductions in lead wire assembly revenue should not have a significant impact on fiscal 2000 revenue as the transition away from lead wire assembly interconnects to integrated interconnects was nearly complete at the end of fiscal 1999. Significant progress has been made in gaining customer acceptance of the Company's FSA product which will be integral to increasing revenue in the fourth quarter of fiscal 2000 and fiscal 2001. GROSS MARGINS The Company's gross profit as a percent of sales for the quarter decreased to 18%, from the 31% reported for the fiscal 1999 third quarter. The gross profit as a percent of sales for the first nine months decreased to 13% from the 32% reported for the same period last year. The decreases were due to fiscal 2000 including lower margin revenue related to the acquired ADFlex operation. The acquisition related revenue generates a lower gross margin percent than the high-end Innovex flexible circuit revenue due to the higher material content of the assembly portion of the business and lower level of technical tolerances required. Gross margins for the high-end flexible circuit revenue for the nine month period were lower as compared to the prior year due to reduced yields and costs related to new capacity installation. Fiscal 2000 third quarter gross margins for the high-end flexible circuit revenue continued to improve over the prior quarters as a result of improving yields and higher unit volumes. An increase in sales volume related to the ADFlex acquisition should result in an increase in gross margin dollars while causing a decrease in the overall gross margin percent. The Company anticipates stable to growing gross margin percents on the pre-acquisition Innovex revenue during fiscal 2000 through improved yield performance and increased utilization of the high volume manufacturing facility. Gross margins on the revenue generated by the acquired operations are expected to improve as the transfer of manufacturing operations from Mexico to Thailand is completed and other cost saving initiatives are implemented. OPERATING EXPENSES Operating expenses were 15.3% of sales for the current quarter, as compared to 14.2% in the prior year's third quarter. Operating expenses for the nine months of fiscal 2000 were 14.3%, down from 14.8% for the prior years first nine months. The increase in operating expenses as a percent of sales for the current quarter is due to an increase in engineering expense related to the development of base Page 8 of 14 material manufacturing process in the new Maple Plain Minnesota facility. In addition, the current quarter was impacted by a temporary reduction in revenue during the transition of operations from the Mexican facility to the new facility in Thailand. The decrease in operating expenses as a percent of sales for the nine month period is primarily due to increased revenue as a result of the ADFlex acquisition. Total operating expenditures increased by approximately $3.0 and $8.4 million for the third quarter and first nine months, respectively, primarily as a result of the ADFlex acquisition. Fiscal 2000 operating expenses are expected to decrease as a percent of sales and increase in total as a result of the ADFlex acquisition. RESTRUCTURING CHARGES A restructuring charge of $13,785,000 was recorded during the first quarter of fiscal 2000 related to the restructuring of the Company's manufacturing operations. The restructuring is primarily related to moving operations from the Company's Agua Prieta, Mexico facility to its new facility in Lamphun, Thailand. The majority of this charge includes employee severance, asset impairment of property and equipment and facility abandonment costs. The restructuring is expected to significantly reduce operating costs by the end of the fiscal year as a result of consolidating facilities and the lower Thailand cost structure. A $184,000 reduction in estimated restructuring charges was recorded in the third quarter primarily related to the lead wire product line disposition. OPERATING PROFIT (LOSS) The consolidated operating income of $1,062,000 in the current quarter was down from the $1,699,000 profit for the prior year third quarter. Consolidated operating loss for the first nine months was $(15,311,000) versus profit of $9,082,000 for the same period last year. The reduction for the quarter is primarily due to the loss being incurred by the acquired ADFlex operation. The reduction for the nine month period is primarily due to the restructuring charge recorded during the first quarter in addition to the loss being incurred by the acquired ADFlex operation and the discontinuation of the lead wire assembly operation. Improvements in the cost structure of the acquired ADFlex operation as a result of the manufacturing restructuring move from Mexico to Thailand will begin having a favorable impact on operating profit in the first quarter of fiscal 2001. NET INCOME (LOSS) Consolidated net income for the fiscal 2000 third quarter was $393,000 as compared to net income of $1,510,000 for the prior year. Basic and diluted net income per share were $0.03 as compared to $0.10 for the prior year third quarter. Consolidated net loss for the first nine months of fiscal 2000 was $(11,933,000) as compared to net income of $7,044,000 for the prior year. Basic and diluted net loss per share were ($0.80) as compared to basic and diluted net income per share of $0.48 and $0.47 for the same period last year. LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments decreased to $7.4 million at June 30, 2000 from $25.5 million at September 30, 1999. This decrease was primarily due to the acquisition of the Company's Thailand subcontractor for $3.8 million and capital expenditures of $21.4 million. Accounts receivable at June 30, 2000 decreased by $6.1 million from September 30, 1999 due to the decreased level of revenue related to the acquired ADFlex operation in June as compared to September and the favorable timing of collections at quarter end. Inventory increased by $3.0 million from September 30, 1999 due to inventory built to facilitate the move from Mexico to Thailand and to reflect the increase in inventory held for customers in intermediate warehouses as more customers move to a just-in-time inventory environment. Accounts payable at June 30, 2000 decreased by $1.2 million as compared to September 30, 1999 primarily due to the payment of older payables obtained with the ADFlex acquisition. Page 9 of 14 Working capital totaled $4.3 million and $31.0 million at June 30, 2000 and September 30, 1999. The decrease was primarily due to the acquisition of the Company's subcontractor and capital expenditures made during the nine month period. Since September 30, 1999, the Company has invested $21.4 million in capital expenditures and $3.8 million to acquire the Company's Thailand subcontractor. Capital expenditures include FSA attachment equipment, equipment to expand the high volume flexible circuit manufacturing facility capacity, metalizing and plating equipment required to produce base material for the flexible circuit manufacturing process, the building expansion in Thailand related to the manufacturing move from Mexico to Thailand and the construction of a material manufacturing facility in Maple Plain, Minnesota. Capital expenditures of approximately $3 million are expected during the remainder of fiscal 2000. These expenditures will increase the Company's high volume flexible circuit manufacturing and FSA production capacities, complete the move of the Mexican operation to Thailand and equip and complete construction of the Maple Plain facility to produce material for use in flexible circuit manufacturing. During the quarter, the Company entered into a $5.7 million operating lease facility. Approximately $4.8 million of the facility was funded as of June 30, 2000. Existing and committed credit facilities, cash and investments and cash generated from operations are believed to be sufficient to support Company operations at current levels and capital expenditures in fiscal 2000. Additional funding may be required to fund anticipated growth. Management believes the Company's resources are sufficient to secure any growth related funding requirements. YEAR 2000 UPDATE Prior to December 31, 1999, the Company prepared a plan of action to ensure that it was not adversely affected by the year 2000 equipment and software failures that may arise in software applications and equipment with embedded logic where two-year digits are used to define the applicable year. The Company incurred costs of less than $100,000 to prepare for year 2000 issues. Based on currently available information, the Company has not experienced any material adverse impact from year 2000 issues. The Company will continue to monitor its internal systems, products, supplies and customers on an on going basis. FORWARD LOOKING STATEMENTS Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in the Company's Form 10-Q and in future filings by the Company with the SEC, except for the historical information contained herein and therein, are "forward-looking statements" that involve risks and uncertainties. These risks and uncertainties include the timely availability and acceptance of new products, the impact of competitive products and pricing, interruptions in the Company's operations or those of its suppliers or major customers as may be caused by problems arising from the year 2000, the successful move of the Mexican operation to Thailand and the successful integration of the ADFlex acquisition. In addition, a significant portion of the Company's revenue is generated from the disk drive, consumer, network systems and telecommunication industries and any changes in the structure, technology or outlook of these industries could have a significant impact on the Company's operations. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect subsequent events or circumstances or the occurrence of unanticipated events. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no material changes in the Company's market risk during the three-month period ended June 30, 2000. Page 10 of 14 PART II - OTHER INFORMATION Responses to Items 1 through 5 are omitted since these items are either inapplicable or the response thereto would be negative. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 27 Financial Data Schedule b) Reports on Form 8-K None. Page 11 of 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INNOVEX, INC. Registrant Date: August 14, 2000 By /s/ William P. Murnane William P. Murnane President and Chief Executive Officer By /s/ Douglas W. Keller Douglas W. Keller Vice President, Finance Page 12 of 14 INDEX TO EXHIBIT Exhibit Page 27 Financial Data Schedule 14 Page 13 of 14 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THE 10-Q FOR THE QUARTER ENDED JUNE 30,2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS SEP-30-2000 JUN-30-2000 7,378 5 23,271 1,047 18,542 60,748 109,184 15,308 172,824 56,429 21,685 0 0 594 94,116 172,824 124,546 124,546 108,411 108,411 0 0 2,318 (16,810) (4,876) (11,933) 0 0 0 (11,933) (0.08) (0.08)
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