-----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, LL6cN9U1Z6BBlGrhAC7XANHMi0TajBBJQMs2v3htEiwY0DT0cnmrAOBX3Bbtv1lN Zu4iUA/sTtyRoHoW3/lFUQ== 0000897101-98-000148.txt : 19980218 0000897101-98-000148.hdr.sgml : 19980218 ACCESSION NUMBER: 0000897101-98-000148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 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: SEC FILE NUMBER: 000-13143 FILM NUMBER: 98540066 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 December 31, 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 February 9, 1998, 14,651,004 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
December 31, September 30, 1997 1997 ASSETS (Unaudited) (Audited) - ------ ------------ ----------- Current assets: Cash and cash equivalents $ 16,056,213 $ 9,442,620 Short-term investments 30,030,000 28,440,000 Accounts receivable, less allowance for doubtful accounts of $585,000 and $621,000 17,336,306 22,052,121 Inventories 7,981,599 7,252,596 Other current assets 3,660,398 4,161,938 ------------ ----------- Total current assets 75,064,516 71,349,275 Property, plant and equipment, net of accumulated depreciation of $13,491,000 and $12,202,000 29,206,283 23,748,632 Intangible assets, net of amortization of $3,243,000 and $3,099,000 1,893,404 1,849,381 Other assets 327,466 327,466 ------------ ----------- $106,491,669 $97,274,754 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current maturities of long-term debt $ 104,000 $ 104,000 Accounts payable 5,082,938 4,662,543 Accrued compensation 1,510,119 2,980,086 Income taxes payable 3,970,170 864,313 Other accrued liabilities 1,105,552 895,705 ------------ ----------- Total current liabilities 11,772,779 9,506,647 Long-term debt 922,421 950,733 Stockholders' equity: Common stock, $.04 par value; 30,000,000 shares authorized, 14,641,904 and 14,619,504 shares issued and outstanding 585,676 584,780 Capital in excess of par value 14,208,317 14,065,186 Retained earnings 79,002,476 72,167,408 ------------ ----------- Total stockholders' equity 93,796,469 86,817,374 ------------ ----------- $106,491,669 $97,274,754 ============ ===========
See accompanying notes. INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended December 31, 1997 1996 ------------ ------------ Net sales $ 33,008,635 $ 29,311,887 Costs and expenses: Cost of sales 19,901,993 17,204,240 Selling, general and administrative 1,921,784 2,403,125 Engineering 1,266,441 873,928 Net interest and other (income) expense (460,747) (224,752) ------------ ------------ Income before taxes 10,379,164 9,055,346 Provision for income taxes 3,105,000 2,717,000 ------------ ------------ Net income $ 7,274,164 $ 6,338,346 ============ ============ Net income per share: Basic $ 0.50 $ 0.44 ============ ============ Diluted $ 0.48 $ 0.42 ============ ============ Weighted average shares outstanding: Basic 14,634,617 14,311,340 ============ ============ Diluted 15,187,201 15,000,557 ============ ============ See accompanying notes. INNOVEX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended December 31, 1997 1996 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,274,164 $ 6,338,346 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,514,187 1,049,199 Other non-cash charges (credits) 9,914 3,777 Changes in operating assets and liabilities: Accounts receivable 4,715,815 (5,679,954) Inventories (729,003) (701,596) Other current assets 501,540 108,079 Accounts payable 420,395 1,917,427 Other liabilities (1,260,120) (705,093) Income taxes payable 3,105,857 533,707 ------------ ----------- Net cash provided by (used in) operating activities 15,552,749 2,863,892 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (7,030,947) (1,680,382) Proceeds from sale of investment in limited partnership -- 884,000 Proceeds from sale of assets 5,171 -- Purchase of held-to-maturity securities (8,440,000) (7,190,000) Maturities of held-to-maturity securities 6,850,000 3,790,000 ------------ ----------- Net cash provided by (used in) investing activities (8,615,776) (4,196,382) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (28,312) (25,392) Proceeds from exercise of stock options 144,027 450,259 Dividends paid (439,095) (320,883) ------------ ----------- Net cash provided by (used in) financing activities (323,380) 103,984 Increase (decrease) in cash and cash equivalents 6,613,593 (1,228,506) Cash and cash equivalents at beginning of year 9,442,620 5,635,534 ------------ ----------- Cash and cash equivalents at end of period $ 16,056,213 $ 4,407,028 ============ ===========
SUPPLEMENTAL DISCLOSURES: The Company considers all highly liquid investments with a maturity date of three months or less when purchased to be "cash equivalents." Cash paid for interest was $18,000 and $20,000 in 1997 and 1996. Income tax payments were $116,000 and $876,000 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. 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, 1997. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENT The Company adopted FASB Statement of Financial Accounting Standards No. 128, Earnings Per Share, which was effective for financial statements issued for periods ending after December 15, 1997. 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. All share and per share information for prior periods has been adjusted to reflect the adoption of SFAS 128 effective for the period ending December 31, 1997. 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% primarily being communications industry or 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 was established to market and further develop a technologically advanced software product. The core software utilizes syntactical analysis to recognize meanings and relationships among words and phrases in order to prepare indexes and abstracts of electronically stored information. In October 1997, Iconovex became the 51% owner of a joint venture with Solutions Corporation of America. The new joint venture, Smart Solution, intends to target the corporate intranet market by providing a product to organize, analyze, screen and index email and to eventually perform the same function for corporate databases. InnoMedica provides contract development and manufacturing services primarily to the medical device industry as well as pacing/defibrillation leads and adapters for the implantable bradycardia and tachacardia industry. Manufacture of these products utilizes silicone rubber molding, similar and dissimilar metal laser welding, product fabrication and miniature product assembly. Products may be either proprietary or made to customer specifications. RESULTS OF OPERATIONS NET SALES The Company's net sales from operations totaled $33,009,000 for the quarter, up 13% from $29,312,000 reported in fiscal 1997. The increase was due to larger shipments of lead wire assemblies caused by increased demand for disk drives as compared to the prior years first quarter. 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 largest portion of the Company's sales for the remainder of fiscal 1998 will continue to be generated by the Precision Products Division. Although lead wire assembly unit volumes for the second quarter are expected to be lower than the first quarter, unit volumes are expected to increase later in the fiscal year. An increasing portion of the Company's sales will come from Litchfield Precision Components(LPC) due to the strong demand for LPC's high end flexible circuit products including the Head Interconnect Flex (HIF). The HIF product provides a technologically advanced solution for the Company's customers which is significantly more cost effective than any competing new technologies. The Company expects that an increasing portion of the demand for disk drive head interconnects will be met by products such as the HIF. GROSS MARGINS The Company's consolidated gross profit as a percent of sales for the quarter was 40% as compared to 41% reported for the same period last year. Gross margins for the existing lead wire assembly business will fluctuate during the remainder of the fiscal year as a function of unit demand for the disk drive industry. Increased fixed costs related to the new Litchfield Precision Components production facility will reduce gross margins during its start up phase. The gross margins will improve as the production volume in the new facility increases. OPERATING EXPENSES Operating expenses were 9.7% of sales for the current quarter, improved from 11.2% in the prior year's first quarter. The decrease in operating expenses as a percent of sales for the current year is primarily due to a reduction in incentive based compensation and an increased level of sales. Total operating expenses remained relatively stable as a result of increased engineering spending offsetting the reduction in incentive based compensation. 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 $9.9 million in the current quarter was up 12% from the $8.8 million profit for the prior year first quarter as a result of the increased sales volume. The Precision Products Division's operating profit for the remainder of the fiscal year will vary depending on changes in disk drive industry unit volumes. Continued operating profit improvements are expected at Litchfield Precision Components as the demand for high end flexible circuits increases. Revenues from the Company's Iconovex and InnoMedica Divisions are expected to remain a small portion of the Company's total sales. NET INCOME Consolidated net income for the fiscal 1998 first quarter was $7,274,000 as compared to $6,338,000 for the prior year. Basic and diluted net income per share was $0.50 and $0.48 as compared to $0.44 and $0.42 for the prior year first quarter. LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments increased to $46.1 million at December 31, 1997 from $37.9 million at September 30, 1997. This increase was primarily due to income generated from operating activities. Accounts receivable at December 31, 1997 decreased by $4.7million from September 30, 1997 due to a reduction in days sales outstanding at several large customers and the decreased level of sales at the end of the quarter. Inventory increased by $729,000 from September 30, 1997 primarily to support the increased level of activity at Litchfield Precision Components. Working capital totaled $63.3 million and $61.8 million at December 31, 1997 and September 30, 1997. The increase is primarily due to the increase in cash. Since September 30, 1997, the Company has invested over $7.0 million in property, plant and equipment. These additions include a portion of the costs to construct and equip a high volume production facility at Litchfield Precision Components to meet the expected demand for new high volume applications including the Head Interconnect Flex (HIF) and chip packaging related products. Management believes that internally generated funds will provide adequate sources of capital for supporting projected growth in fiscal 1998. 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 "forward 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 forward 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 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: February 13, 1998 By \s\ Thomas W. Haley Thomas W. Haley Chief Executive Officer By \s\ Douglas W. Keller Douglas W. Keller Vice President, Finance INDEX TO EXHIBITS Exhibits Page 27 Financial Data Schedule 10 EX-27 2 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 DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 3-MOS SEP-30-1998 DEC-31-1997 16,056 30,030 17,922 595 7,982 75,065 42,697 13,491 106,492 11,773 922 0 0 586 93,211 106,492 33,009 33,009 19,902 19,902 0 0 18 10,350 3,105 7,274 0 0 0 7,274 0.50 0.48
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