-----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, GnjkF4sMo42N+WEJFbP7LAk3MRSnc7sv0PFvvaDzEg3rKXqLQ/Na4bODva1yLNCl aqxTVWaTYZUs33jiw2SKmg== 0000897101-97-000891.txt : 19970813 0000897101-97-000891.hdr.sgml : 19970813 ACCESSION NUMBER: 0000897101-97-000891 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 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: 97656945 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, 1997. 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 July 28, 1997, 14,584,304 shares of the registrant's common stock, $.04 par value per share, were outstanding. Exhibit Index, page 9 PART 1: ITEM 1 FINANCIAL INFORMATION INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30, 1997 1996 ASSETS (Unaudited) (Audited) ----------- ----------- Current assets: Cash and cash equivalents $10,062,684 $ 5,635,534 Short-term investments 26,870,000 16,140,000 Accounts receivable, less allowance for doubtful accounts of $601,000 and $317,000 21,481,691 12,034,349 Inventories 6,770,903 5,570,582 Other current assets 3,551,005 2,648,112 ----------- ----------- Total current assets 68,736,283 42,028,577 Property, plant and equipment, net of accumulated depreciation of $11,198,000 and $8,743,000 19,295,281 12,731,980 Intangible assets, net of accumulated amortization of $2,814,000 and $2,317,000 2,051,451 2,308,737 Other assets 291,052 1,175,052 ----------- ----------- $90,374,067 $58,244,346 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 96,000 $ 96,000 Accounts payable 4,591,984 3,581,628 Accrued compensation 2,738,305 2,158,834 Income taxes payable 4,587,710 1,809,038 Other accrued liabilities 793,493 841,150 ----------- ----------- Total current liabilities 12,807,492 8,486,650 Long-term debt 985,492 1,063,253 Other long-term liabilities 309,110 294,327 Stockholders' equity: Common stock, $.04 par value; 30,000,000 shares authorized, 14,565,384 and 14,221,254 shares issued and outstanding 582,615 284,425 Capital in excess of par value 10,840,955 9,418,376 Retained earnings 64,848,403 38,697,315 ----------- ----------- Total stockholders' equity 76,271,973 48,400,116 ----------- ----------- $90,374,067 $58,244,346 =========== ===========
See accompanying notes. INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, 1997 1996 ------------ ------------ Net sales $ 41,960,060 $ 19,254,632 Costs and expenses: Cost of sales 23,597,133 11,960,015 Selling, general and administrative 2,185,779 1,833,857 Engineering 893,120 625,630 Net interest and other (income) expense (346,290) (252,004) ------------ ------------ Income before taxes 15,630,318 5,087,134 Provision for income taxes 4,688,000 1,525,000 ------------ ------------ Net income $ 10,942,318 $ 3,562,134 ============ ============ Primary and fully dilutive net income per share: $ 0.72 $ 0.25 ============ ============ Common and common equivalent shares outstanding: Primary 15,221,231 14,471,456 ============ ============ Assuming full dilution 15,221,231 14,503,774 ============ ============ Nine Months Ended June 30, 1997 1996 ------------- ------------- Net sales $ 109,660,885 $ 47,040,796 Costs and expenses: Cost of sales 61,608,458 28,215,881 Selling, general and administrative 7,212,908 4,390,017 Engineering 2,625,942 1,841,353 Net interest and other (income) expense (838,456) (648,044) ------------- ------------- Income before taxes 39,052,033 13,241,589 Provision for income taxes 11,715,000 3,972,000 ------------- ------------- Net income $ 27,337,033 $ 9,269,589 ============= ============= Net income per share: Primary $ 1.81 $ 0.64 ============= ============= Fully dilutive $ 1.80 $ 0.64 ============= ============= Common and common equivalent shares outstanding: Primary 15,129,909 14,461,558 ============= ============= Assuming full dilution 15,176,731 14,491,450 ============= ============= See accompanying notes. INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended June 30, 1997 1996 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 27,337,033 $ 9,269,589 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,338,774 2,615,419 Other non-cash charges (credits) 128,767 130,948 Changes in operating assets and liabilities: Accounts receivable (9,447,342) (3,793,276) Inventories (1,200,321) (1,631,230) Other current assets (902,893) (662,993) Accounts payable 1,010,356 (50,030) Other liabilities 546,597 (109,348) Income taxes payable 2,778,672 1,280,862 ------------ ------------ Net cash provided by (used in) operating activities 23,589,643 7,049,941 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (9,841,453) (2,927,040) Business acquisition -- (7,389,990) Investment in limited partnership -- (884,000) Proceeds from sale of investment in limited partnership 884,000 -- Proceeds from sale of assets 67,898 13,637 Purchase of held-to-maturity securities (23,060,000) (9,255,000) Maturities of held-to-maturity securities 12,330,000 8,930,000 ------------ ------------ Net cash provided by (used in) investing activities (19,619,555) (11,512,393) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (77,761) (350,226) Proceeds from exercise of stock options 1,720,769 279,453 Dividends paid (1,185,946) (920,119) ------------ ------------ Net cash provided by (used in) financing activities 457,062 (990,892) Increase (decrease) in cash and cash equivalents 4,427,150 (5,453,344) Cash and cash equivalents at beginning of year 5,635,534 7,384,298 ------------ ------------ Cash and cash equivalents at end of period $ 10,062,684 $ 1,930,954 ============ ============ SUPPLEMENTAL DISCLOSURES: Cash paid for interest was $62,000 and $66,000 in 1997 and 1996. Income tax payments were $9,173,000 and $2,691,000 in 1997 and 1996.
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. Preparation of the Company's 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. 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, 1996. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENT The FASB has issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, which is effective for financial statements issued for periods ending after December 15, 1997. Early adoption of the new standard is not permitted. The new standard eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share together with disclosure of how the per share amounts were computed. The pro forma effect of adopting the new standard for the quarters ended June 30, 1997 and 1996 would be basic earnings per share of $0.76 and $0.25 and diluted earnings per share of $0.72 and $0.25. The pro forma effect of adopting the new standard for the nine month periods ended June 30, 1997 and 1996 would be basic earnings per share of $1.90 and $0.65 and diluted earnings per share of $1.81 and $0.64. NOTE 3 - TWO FOR ONE STOCK SPLIT All share and per share information for prior periods has been adjusted to reflect a two for one stock split effective on December 23, 1996. PART I: ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE COMPANY Innovex, Inc. and its subsidiaries (the Company) operate through four divisions, Precision Products, Litchfield Precision Components, InnoMedica and Iconovex. Each division has its own administrative, engineering, manufacturing and marketing organizations. The 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. Lead wire assemblies are fine twisted magnet wires that connect the back end electronics of a disk drive with the thin film heads which read or write the information on the disk. The Litchfield Precision Components Division (LPC) designs and manufactures highly complex flexible circuitry and chemically machined components. Approximately 30% of LPC's sales are medical product applications, 50% are computer and computer peripheral applications with the remaining 20% being other applications. LPC 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 mills. 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 Division intends to locate either a marketing partner, buyer or licensee for its technology prior to the end of the fiscal year. 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. RESULTS OF OPERATIONS NET SALES The Company's net sales from operations totaled $41,960,000 for the quarter, up 118% from $19,255,000 reported in fiscal 1996. Sales of $109,661,000 for the nine months ended June 30, 1997 increased 133% 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. Also contributing to the sales increase was an increasing portion of high end MR lead wire assemblies being included in the product mix. 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 shipments in the fiscal 1997 fourth quarter are expected to be down as compared to the third quarter. Demand is expected to increase again during fiscal 1998. Sales generated by LPC should continue to increase over their levels from the prior fiscal year. GROSS MARGINS The Company's consolidated gross profit as a percent of net sales for the quarter increased to 44%, up from the 38% reported for the same period last year. The gross margin percent for the first nine months increased to 44% from the 40% reported last year. Gross margin percents increased primarily due to the growth in sales volume increasing faster than the related overhead costs causing an increased leverage of those costs. The gross margin percent is expected to moderate in the fiscal 1997 fourth quarter from year to date margins as a result of the anticipated reduced sales volume. Comparisons to the prior fiscal year will continue to be extremely favorable. Gross margins are expected to remain strong during the next fiscal year with the projected increase in demand. OPERATING EXPENSES Operating expenses were 7.3% of sales for the current quarter, as compared with 12.8% in the prior year's third quarter. Operating expenses for the first nine months of fiscal 1997 were 9.0%, down from 13.2% for the same period last year. The decrease in operating expenses as a percent of net sales 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 addition of infrastructure required to handle the higher level of activity within the Precision Products Division. The level of operating expenses is not expected to change significantly for the remainder of the fiscal year. OPERATING PROFIT Consolidated operating profit of $15,284,000 in the current quarter was up 216% from the $4,835,000 profit for the prior year third quarter. Consolidated operating profit for the first nine months was $38,214,000 versus $12,594,000 for the same period last year. These increases are primarily the result of increased sales volume. Operating profit for the remainder of the fiscal year is expected to remain strong as compared to the prior year due to the higher demand for thin-film lead wire assemblies. Revenues from the Company's Iconovex and InnoMedica Divisions remain a small portion of the Company's total sales. Both Iconovex and InnoMedica generated operating losses during the third quarter and are not expected to improve significantly for the remainder of the fiscal year. InnoMedica is expected to break-even during the next fiscal year while efforts are being made to find a buyer or joint venture partner for Iconovex which should improve their impact on the Company's combined fiscal 1998 operating results. NET INCOME Consolidated net income for the fiscal 1997 third quarter was $10,942,000 or $0.72 per share as compared to $3,562,000 or $0.25 per share for the prior year third quarter. Consolidated net income for the first nine months of fiscal 1997 was $27,337,000 versus $9,270,000 for the same period last year. Primary and fully diluted net income per share for the first nine months of fiscal 1997 were $1.81 and $1.80 compared with $0.64 for the prior year nine month period. LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments increased to $36.9 million at June 30, 1997 from $21.8 million at September 30, 1996. This increase was primarily due to income generated from operating activities. Accounts receivable at June 30, 1997 increased by $9,447,000 from September 30, 1996 due to the increased level of sales. Inventory increased by $1,200,000 from September 30, 1996 to support the increased level of activity and the start up of a new sub-contractor in China. Working capital totaled $55.9 million and $33.5 million at June 30, 1997 and September 30, 1996. The increase is primarily due to income generated from operating activities. Since September 30, 1996, the Company has invested over $9.8 million in capital expenditures. These additions include equipment to expand and further automate the lead wire assembly production process, computer equipment and software, leasehold improvements for a new corporate office and research and development facility and initial spending on a new automated flexible circuit production facility. Management believes that internally generated funds will provide adequate sources of capital for supporting projected growth in the foreseeable future, including the planned $20 million expansion of the Litchfield Precision Components operation over the next two years. FORWARD LOOKING STATEMENTS Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations, in letters to shareholders, elsewhere in the Company's Form 10-Q and in future filings by the Company with the SEC, except for historical information contained herein and therein, are "foreword looking statements" that involve risks and uncertainties, including the timely availability and acceptance of new products, the impact of competitive products and pricing and a general downturn in the Company's principal market. The Company disclaims any obligation subsequently to revise any foreword looking statements to reflect subsequent events or circumstances or the occurrence of unanticipated events. 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 Computation of Per Share Net Income 27 Financial Data Schedule b) Reports on Form 8-K None. 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 8, 1997 By \s\ Thomas W. Haley Thomas W. Haley Chief Executive Officer (Principal Executive Officer) By \s\ Douglas W. Keller Douglas W. Keller Vice President, Finance (Principal Financial and Accounting Officer) INDEX TO EXHIBITS Exhibits Page 11 Computation of Per Share Net Income 10 27 Financial Data Schedule 11 EX-11 2 COMPUTATION OF PER SHARE NET INCOME EXHIBIT 11 COMPUTATION OF PER SHARE NET INCOME
For the Three Months Ended June 30, 1997 1996 ----------- ----------- Net income for the period used in determining net income per share $10,942,318 $ 3,562,134 Weighted average common and common equivalent shares used in determining net income per share: Primary 15,221,231 14,471,456 Assuming full dilution 15,221,231 14,503,774 Primary and fully dilutive net income per share $ 0.72 $ 0.25 For the Nine Months Ended June 30, 1997 1996 ----------- ----------- Net income for the period used in determining net income per share $27,337,033 $ 9,269,589 Weighted average common and common equivalent shares used in determining net income per share: Primary 15,129,909 14,461,558 Assuming full dilution 15,176,731 14,491,450 Net income per share: Primary $ 1.81 $ 0.64 Assuming full dilution $ 1.80 $ 0.64
EX-27 3 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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS SEP-30-1997 JUN-30-1997 10,063 26,870 22,083 601 6,771 68,736 30,493 11,198 90,374 12,807 985 0 0 583 75,689 90,374 109,661 109,661 61,608 61,608 0 42 74 39,052 11,715 27,337 0 0 0 27,337 1.81 1.80
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