-----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, LJhrNtmcLRPpVTzoAOljZZldubb6E84KjoHjYo6dEjlalaS5R8wTtxr+5jgkhqjx IShfkSjZDe9z0ZtccTxJLg== 0000897101-96-000651.txt : 19960814 0000897101-96-000651.hdr.sgml : 19960814 ACCESSION NUMBER: 0000897101-96-000651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVEX INC CENTRAL INDEX KEY: 0000050601 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 411223933 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13143 FILM NUMBER: 96611118 BUSINESS ADDRESS: STREET 1: 1313 S FIFTH ST CITY: HOPKINS STATE: MN ZIP: 55343-9904 BUSINESS PHONE: 6129384155 10-Q 1 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, 1996. 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.) 1313 South Fifth Street, Hopkins, Minnesota 55343-9904 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (612) 938-4155 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, 1996, 7,110,127 shares of the registrant's common stock, $.04 par value per share, were outstanding. Exhibit Index, page 10 PART 1: ITEM 1 FINANCIAL INFORMATION INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30, 1996 1995 ASSETS (Unaudited) (Audited) ----------- ----------- Current assets: Cash and cash equivalents $ 1,930,954 $ 7,384,298 Short-term investments 15,455,000 15,130,000 Accounts receivable, less allowance for doubtful accounts of $329,000 and $265,000) 11,232,428 5,787,282 Inventories 5,171,782 2,191,345 Other current assets 2,507,278 1,738,438 ----------- ----------- Total current assets 36,297,442 32,231,363 Property, plant and equipment, net of accumulated depreciation of $7,897,000 and $6,357,000 12,375,447 7,067,876 Intangible assets, net of amortization of $1,616,000 and $1,008,000 2,935,544 1,979,244 Other assets 889,000 5,000 ----------- ----------- $52,497,433 $41,283,483 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 108,000 $ 358,000 Accounts payable 2,442,123 1,486,154 Accrued compensation 1,797,413 1,570,983 Income taxes payable 1,341,222 60,360 Other accrued liabilities 666,620 393,870 ----------- ----------- Total current liabilities 6,355,378 3,869,367 Long-term debt 1,108,777 1,172,798 Other long-term liabilities 375,185 212,145 Stockholders' equity: Common stock, $.04 par value; 15,000,000 shares authorized, 7,110,127 and 7,062,127 shares issued and outstanding 284,405 282,485 Capital in excess of par value 9,207,834 8,930,301 Retained earnings 35,165,854 26,816,387 ----------- ----------- Total stockholders' equity 44,658,093 36,029,173 ----------- ----------- $52,497,433 $41,283,483 =========== ===========
See accompanying notes. INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, 1996 1995 ------------ ------------ Net sales $ 19,254,632 $ 14,025,617 Costs and expenses: Cost of sales 11,960,015 7,760,021 Selling, general and administrative 1,833,857 1,366,483 Engineering 625,630 716,594 Net interest (income) expense (205,458) (163,029) Other (income) expense (46,546) (144) ------------ ------------ Income before taxes 5,087,134 4,345,692 Provision for income taxes 1,525,000 1,391,000 ------------ ------------ Net income $ 3,562,134 $ 2,954,692 ============ ============ Primary and fully dilutive net income per share: $ 0.49 $ 0.41 ============ ============ Common and common equivalent shares outstanding: Primary 7,235,728 7,198,041 ============ ============ Assuming full dilution 7,251,887 7,198,041 ============ ============ Nine months Ended June 30, 1996 1995 ------------ ------------ Net sales $ 47,040,796 $ 35,694,306 Costs and expenses: Cost of sales 28,215,881 20,638,549 Selling, general and administrative 4,390,017 3,611,430 Engineering 1,841,353 1,770,861 Net interest (income) expense (602,005) (453,202) Other (income) expense (46,039) 212,637 ------------ ------------ Income before taxes 13,241,589 9,914,031 Provision for income taxes 3,972,000 3,220,000 ------------ ------------ Net income $ 9,269,589 $ 6,694,031 ============ ============ Primary and fully dilutive net income per share: $ 1.28 $ 0.94 ============ ============ Common and common equivalent shares outstanding: Primary 7,230,779 7,112,692 ============ ============ Assuming full dilution 7,245,725 7,112,692 ============ ============ See accompanying notes. INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended June 30, 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,269,589 $ 6,694,031 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,615,419 2,058,729 Other non-cash charges (credits) 130,948 (53,026) Changes in operating assets and liabilities, net of business acquisition: Accounts receivable (3,793,276) (2,090,419) Inventories (1,631,230) (279,784) Other current assets (662,993) (222,793) Accounts payables (50,030) 577,715 Other liabilities (109,348) (99,487) Income taxes payable 1,280,862 926,123 ------------ ------------ Net cash provided by (used in) operating activities 7,049,941 7,511,089 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,927,040) (2,065,519) Business and product line acquisitions (7,389,990) (310,698) Investment in limited partnership (884,000) -- Proceeds from sale of assets 13,637 75 Purchase of held-to-maturity securities (9,255,000) (12,205,000) Maturities of held-to-maturity securities 8,930,000 4,785,000 Sale of available-for-sale securities -- 3,215,915 ------------ ------------ Net cash provided by (used in) investing activities (11,512,393) (6,580,227) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (350,226) (325,427) Proceeds from exercise of stock options 279,453 896,807 Dividends paid (920,119) (801,641) ------------ ------------ Net cash provided by (used in) financing activities (990,892) (230,261) Increase (decrease) in cash and cash equivalents (5,453,344) 700,601 Cash and cash equivalents at beginning of year 7,384,298 1,719,587 ------------ ------------ Cash and cash equivalents at end of period $ 1,930,954 $ 2,420,188 ============ ============
SUPPLEMENTAL DISCLOSURES: The Company considers all highly liquid investments with a maturity date of three months or less when purchased to be "cash equivalents." In May 1996, the Company acquired certain assets in connection with a business acquisition by assuming liabilities of approximately $1,788,000. Cash paid for interest was $66,000 and $91,000 in 1996 and 1995, respectively. Income tax payments were $2,691,000 and $2,291,000 in 1996 and 1995, respectively. See accompanying notes. INNOVEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING POLICIES 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 which may be expected for the year as a whole. 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, 1995. NOTE 2 - THREE FOR TWO STOCK SPLIT Net income per share calculations for prior periods have been adjusted to reflect a three for two stock split effective on May 31, 1995. NOTE 3 - BUSINESS ACQUISITION On May 16, 1996, the Company purchased substantially all of the assets of Litchfield Precision Components, Inc. The purchase price of approximately $9,178,000 was in the form of $3,500,000 in cash and the assumption of specified liabilities amounting to $5,678,000. Approximately $4,000,000 of the assumed debt was paid off at the time of close. The acquisition has been accounted for as a purchase and, accordingly, the results of operations since acquisition are included in the accompanying financial statements. The purchase price and fair value of the assets acquired were as follows in thousands: Current assets $ 3,081 Property, plant and equipment 4,773 Intangible assets 1,324 ------- $ 9,178 ======= PART I: ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE COMPANY Innovex, Inc. (the Company), through its largest division, Precision Products, develops, engineers and manufactures specialty precision electromagnetic products for original equipment manufacturers ("OEM's"). Lead wire assemblies for the thin film disk drive market are the Division's primary product. Effective May 16, 1996, the Company purchased substantially all of the assets of Litchfield Precision Components, Inc. (LPC) for approximately $9.2 million. LPC designs and manufactures highly complex flexible circuitry and chemically machined components. Approximately 40% of LPC's sales are medical product applications, 40% are computer and computer peripheral applications with the remaining 20% primarily being communications industry or other applications. The purchased assets include several buildings and all of the manufacturing equipment required to operate the business as a division at its present location in Litchfield, Minnesota. The Company also operates two other divisions, Iconovex and InnoMedica. These divisions currently only produce a small portion of the Company's revenue. Iconovex is responsible for the further development and marketing of a document handling software product which was purchased in November 1993. The purchased software prepares indexes and abstracts of documents stored on electronic media. The initial application derived from the purchased software, Indexicon, was designed for use on personal computers and began shipping in fiscal 1994. Another product, AnchorPage, was released in fiscal 1995. AnchorPage enables Internet World Wide Web sites to provide their users access to web site information automatically using conceptual navigational techniques. The division's newest product, EchoSearch, will be available for sale during the fiscal 1996 fourth quarter. EchoSearch, is a desktop based tool for browsers of the World Wide Web which enables users to simultaneously query multiple search engines. The search responses are indexed and abstracted to present the user a condensed view that improves both the speed and accuracy of the search. The Division intends to focus future attention on licensing its technology to OEM software developers. InnoMedica was formed late in fiscal 1993 to further develop the Company's medical business. In line with this strategy, the Company acquired Daig Corporation's pacemaker lead wire and adapter product line in September 1993 and Possis Medical, Inc's pacemaker lead wire product line in March 1994. Revenue generated by this division should continue to increase throughout fiscal 1996 as its customer base expands. RESULTS OF OPERATIONS NET SALES The Company's net sales from operations totaled $19,255,000 for the quarter, up 37% from $14,026,000 reported in fiscal 1995. Sales of $47,041,000 for the nine months ended June 30, 1996 increased 32% from the prior year period. The increases were due to the continued strong demand for lead wire assemblies caused by increased demand for disk drives and the addition of sales from the May 16, 1996 LPC acquisition. The increase in lead wire assembly unit sales volume was partially offset by decreases in selling price of the low end inductive lead wire assemblies which were primarily volume driven. Also contributing to the sales increase was an increasing portion of high end MR lead wire assemblies being included in the product mix, partially as a result of the success of Innovex's new WAT technology. These MR lead wire assemblies have a higher value added content and sell for a higher price than the low end inductive assemblies. The lead wire assembly demand is expected to remain strong throughout the remainder of the fiscal year with an increasing portion of the lead wire sales being the high end MR products. The LPC acquisition should also continue to contribute to an increase in sales for the remainder of the fiscal year. GROSS MARGINS The Company's consolidated gross profit as a percent of sales for the third quarter decreased to 38% from the 45% reported for the same period last year while the gross margin percent for the first nine months decreased to 40% from the 42% reported for the same period last year. The primary causes of the current quarter decrease include lead wire assembly selling price reductions which partially offset the increased unit sales volume in the current year and the inclusion of LPC sales which receive a lower gross margin than the Precision Products Division's lead wire assemblies. The gross margin may be slightly lower in the fourth quarter due to the inclusion of a full quarter of sales from the LPC acquisition. Gross margins for the existing lead wire assembly business should remain relatively stable for the remainder of the fiscal year as improved manufacturing efficiencies should offset any price concessions which may occur. OPERATING EXPENSES Operating expenses were 12.8% of sales for the current quarter, down from 14.9% in the prior year's third quarter. Operating expenses for the first nine months of fiscal 1996 were 13.2% of sales, down from 15.1% for the prior year's first nine months. The decrease in operating expenses as a percent of sales for the current year is primarily due to the increase in sales more than offsetting the increase in total operating expenses. Total operating expenses increased primarily due to the inclusion of operating costs from LPC which was acquired on May 16, 1996 and the higher level of costs being incurred by the two start up divisions as compared to the prior year. The level of operating expenses is not expected to change significantly as a percent of sales for the remainder of the fiscal year. OPERATING PROFIT Consolidated operating profit of $4,835,000 in the current quarter was up from the $4,183,000 profit for the prior year third quarter. Consolidated operating profit for the first nine months was $12,594,000 versus $9,673,000 for the same period last year. This is primarily the result of the increased sales volume. Operating profit for the remainder of the fiscal year is expected to remain strong due to the continued high demand for thin-film lead wire assemblies and the inclusion of LPC's operating results. Although revenues from the Company's Iconovex and InnoMedica Divisions are expected to continue to increase they will remain a small portion of the Company's total sales and are not expected to operate at a profitable level until the next fiscal year. NET INCOME Consolidated net income for the 1996 third quarter was $3,562,000 or $0.49 per share as compared to $2,955,000 or $0.41 per share for the prior year third quarter. Consolidated net income for the first nine months of fiscal 1996 was $9,270,000 or $1.28 per share versus $6,694,000 or $0.94 per share for the same period last year. LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments decreased to $17.4 million at June 30, 1996 from $22.5 million at September 30, 1995. This decrease was primarily due to the purchase of substantially all of the assets of LPC on May 16, 1996. Cash payments of approximately $7.3 million were made at the time of close including the payoff of selected assumed liabilities. Accounts receivable at June 30, 1996 increased by $3,793,000 from September 30, 1995, net of the LPC acquisition, due to the increased level of sales at the end of the third quarter and the timing of payments received from one customer. Inventory increased by $1,631,000 from September 30, 1995, net of the LPC acquisition, to support the increased level of activity. Working capital totaled $29.9 million and $28.4 million at June 30, 1996 and September 30, 1995, respectively. Since September 30, 1995, the Company has invested $2.9 million in fixed assets. These additions include approximately $2.3 million for equipment and remodeling to expand and further automate the lead wire assembly production and packaging process. Management believes that internally generated funds will provide adequate sources of capital for supporting projected growth in fiscal 1996. 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 11 Statement regarding Computation of Per Share Earnings 27 Financial Data Schedule b) Reports on Form 8-K Form 8-K Current Report dated May 16,1996 was filed including Item 2 reporting the acquisition of substantially all of the assets of Litchfield Precision Components, Inc. and Item 7 reporting pro forma financial information and exhibits relating to the acquisition. 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 13, 1996 By \s\ Thomas W. Haley Thomas W. Haley Chief Executive Officer By \s\ Douglas W. Keller Douglas W. Keller Corporate Controller INDEX TO EXHIBITS Exhibits Page 11 Computation of Per Share Net Income 11 27 Financial Data Schedule 12 EX-11 2 EXHIBIT 11 - COMPUTATION OF PER SHARE NET INCOME
For the Three Months Ended June 30, 1996 1995 ---- ---- Net income for the period used in determining net income per share $3,562,134 $2,954,692 Weighted average common and common equivalent shares used in determining net income per share: Primary 7,235,728 7,198,041 Assuming full dilution 7,251,887 7,198,041 Primary and fully dilutive net income per share $0.49 $0.41
For the Nine Months Ended June 30, 1996 1995 ---- ---- Net income for the period used in determining net income per share $9,269,589 $6,694,031 Weighted average common and common equivalent shares used in determining net income per share: Primary 7,230,779 7,112,692 Assuming full dilution 7,245,725 7,112,692 Primary and fully dilutive net income per share $1.28 $0.94
EX-27 3 FINANCIAL DATA SCHEDULE FOR THE 3RD QUARTER 10-Q
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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS Sep-30-1995 Jun-30-1996 1,931 15,455 11,562 329 5,172 36,297 20,272 7,897 52,497 6,355 1,109 0 0 284 44,374 52,497 47,041 47,041 28,216 28,216 6,231 0 87 13,242 3,972 9,270 0 0 0 9,270 1.28 1.28
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