SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 1996
INNOVEX INC.
(Exact name of registrant as specified in its charter)
Minnesota 0-13143 41-1223933
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) 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
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 16, 1996, Innovex, Inc. ("Innovex") acquired substantially all
of the assets of Litchfield Precision Components, Inc.("LPC"), an unrelated
privately held Subchapter S corporation. The purchase price of approximately
$8,500,000, was in the form of $3,500,000 in immediately available funds and the
assumption of specified liabilities amounting to approximately $5,000,000.
Approximately $4,000,000 of the assumed debt was paid off at the time of close.
The purchase price was determined pursuant to arm's length negotiations between
Innovex and LPC. The purchase was financed using internally available funds.
LPC designs and manufactures highly complex flexible circuitry and
chemically machined components. The purchased assets include several buildings
and all of the manufacturing equipment required to continue to operate the
business of LPC at its present headquarters and manufacturing location in
Litchfield, Minnesota.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
(1) Audited Financial Statements of Litchfield Precision Components,
Inc. as of December 31, 1995 and 1994 and for the years then ended (attached as
Appendix A hereto).
(2) Unaudited Financial Statements of Litchfield Precision Components,
Inc. as of March 31, 1996 and for the three-month periods ended March 31, 1996
and March 31, 1995 (attached as Appendix B hereto).
(b) Pro Forma Financial Information
(1) Pro Forma Combined Financial Information consisting of a pro forma
combined balance sheet as of March 31, 1996 and pro forma consolidated
statements of income for the six month period ended March 31, 1996 and the year
ended September 30, 1995 (attached as Appendix C hereto).
(c) Exhibits.
<TABLE>
<CAPTION>
<S> <C> <C>
2 Asset Purchase Agreement by and between Innovex,
Inc. and Litchfield Precision Components, Inc.
April 5, 1996 Incorporated by reference to
Exhibit 10.1 of the Innovex
Quarterly Report of Form
10-Q for the quarter ended
March 31, 1996
(File No. 0-13143)
</TABLE>
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 hereunto duly authorized.
INNOVEX INC.
Registrant
Date: June 14, 1996
By \s\ Thomas W. Haley
Thomas W. Haley
Chairman and Chief Executive Officer
By \s\ Douglas W. Keller
Douglas W. Keller
Corporate Controller
INDEX TO EXHIBITS
Exhibits Page
2 Asset Purchase Agreement by and between Innovex, Inc. and Previously
Litchfield Precision Components, Inc. dated April 5, 1996 filed
Appendix A
LITCHFIELD PRECISION COMPONENTS, INC.
FINANCIAL REPORT
DECEMBER 31, 1995
CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT F2
FINANCIAL STATEMENTS
Balance sheets F3-F4
Statements of income F5
Statements of stockholders' equity F6
Statements of cash flows F7-F8
Notes to financial statements F9-F12
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Litchfield Precision Components, Inc.
Litchfield, Minnesota
We have audited the accompanying balance sheets of Litchfield Precision
Components, Inc. as of December 31, 1995 and 1994, and the related statements of
income, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Litchfield Precision
Components, Inc. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
\s\ McGladrey & Pullen, LLP
Minneapolis, Minnesota
March 1, 1996, except for Notes 2(b) and 5,
as to which the date is April 15, 1996
LITCHFIELD PRECISION COMPONENTS, INC.
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS(Note 2) 1995 1994
Current Assets
Trade receivables, less allowance for doubtful
accounts of $30,000 (Note 4) $ 1,389,928 $ 1,361,909
Inventories 1,010,195 907,991
Prepaid expenses and other 31,202 74,051
Restricted cash (Notes 2 and 3) 4,950 3,637
----------- -----------
Total current assets 2,436,275 2,347,588
----------- -----------
Restricted Investment (Notes 2 and 3) 326,772 326,419
----------- -----------
Property and Equipment, at cost
Land and land improvements 407,455 407,455
Buildings 4,371,989 4,371,989
Equipment 5,377,269 5,032,383
Office furniture and equipment 574,982 594,186
----------- -----------
10,731,695 10,406,013
Less accumulated depreciation 6,710,489 6,356,916
----------- -----------
4,021,206 4,049,097
----------- -----------
Intangible, bond issue costs, less accumulated
amortization 1995 $72,500; 1994 $65,000 77,500 85,000
----------- -----------
$ 6,861,753 $ 6,808,104
=========== ===========
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
Current Liabilities
Note payable to bank (Note 2) $ 917,915 $ 950,192
Current maturities of long-term debt 723,029 776,972
Accounts payable 913,600 610,132
Accrued expenses:
Compensation 457,046 381,363
Taxes, other than income taxes 189,582 156,726
Interest and other 50,410 72,667
Dividends payable 42,600 13,070
---------- ----------
Total current liabilities 3,294,182 2,961,122
---------- ----------
Long-Term Debt, less current maturities (Note 2) 2,066,143 2,455,707
---------- ----------
Contingency (Note 5)
Stockholders' Equity (Note 2)
Class A voting common stock, no par value; stated
at $0.01 per share; authorized 100,000 shares;
issued and outstanding 8,851 shares 89 89
Class B nonvoting common stock, no par value;
stated at $0.01 per share; authorized 9,900,000
shares; issued and outstanding 876,249 shares 8,762 8,762
Additional paid-in capital 430,049 430,049
Retained earnings 1,062,528 952,375
---------- ----------
1,501,428 1,391,275
---------- ----------
$6,861,753 $6,808,104
========== ==========
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
STATEMENTS OF INCOME
Years Ended December 31, 1995 and 1994
1995 1994
Revenue:
Net sales (Note 4) $ 11,860,043 $ 10,944,281
Other operating revenues 252 34,775
------------ ------------
Total revenue 11,860,295 10,979,056
Cost of sales 9,388,390 8,770,453
------------ ------------
Gross profit 2,471,905 2,208,603
Operating expenses 1,768,571 1,419,072
------------ ------------
Operating income 703,334 789,531
------------ ------------
Other income (expense):
Interest income 23,768 19,129
Interest expense (375,187) (387,924)
Loss on sale of equipment (29,935) --
Other 24,209 7,642
------------ ------------
(357,145) (361,153)
------------ ------------
Net income $ 346,189 $ 428,378
============ ============
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Common
Stock Stock Additional
Common Class A Class B Paid-In Retained
Stock Voting Nonvoting Capital Earnings Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 9,025 $ -- $ -- $ 438,503 $ 660,860 $ 1,108,388
Redemption of common stock (174) -- -- (8,454) (21,372) (30,000)
Common stock recapitalization (8,851) 89 8,762 -- -- --
Dividends -- -- -- -- (115,491) (115,491)
Net income -- -- -- -- 428,378 428,378
---------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 -- 89 8,762 430,049 952,375 1,391,275
Dividends -- -- -- -- (236,036) (236,036)
Net income -- -- -- -- 346,189 346,189
---------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 $ -- $ 89 $ 8,762 $ 430,049 $ 1,062,528 $ 1,501,428
=========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and 1994
1995 1994
Cash Flows From Operations
Net Income $ 346,189 $ 428,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful receivables 1,339 16,750
Depreciation and amortization 522,354 469,322
Loss on sale of equipment 29,935 --
Decrease (increase) in:
Trade receivables (29,358) (120,244)
Inventories (102,204) (81,557)
Prepaid expenses and other 42,849 (72,992)
Increase (decrease) in:
Accounts payable 221,468 131,231
Accrued expenses 73,212 (113,459)
----------- -----------
Net cash provided by operating activities 1,105,784 657,429
----------- -----------
Cash Flows From Investing Activities
Proceeds from sale of equipment 1,400 --
Purchase of property and equipment (405,314) (516,359)
Purchase of restricted investment (318,563) (319,938)
Maturity of restricted investment 319,938 317,100
(Increase) decrease in restricted cash and
investments (3,041) 59,470
----------- -----------
Net cash used in investing activities (405,580) (459,727)
----------- -----------
Cash Flows From Financing Activities
Net (payments) borrowings on
note payable to bank (32,277) 274,651
Proceeds from long-term borrowings 300,000 500,000
Principal payments on long-term debt (774,491) (862,432)
Cash paid for redemption of
common stock -- (7,500)
Dividends paid (193,436) (102,421)
----------- -----------
Net cash used in financing activities (700,204) (197,702)
----------- -----------
Increase (decrease) in cash -- --
Cash
Beginning -- --
----------- -----------
Ending $ -- $ --
=========== ===========
LITCHFIELD PRECISION COMPONENTS, INC.
STATEMENTS OF CASH FLOWS(CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
Supplemental Disclosures of Cash Flow
Information
Cash payments for interest $374,119 $425,997
======== ========
Supplemental Schedules of Noncash
Financing Activities
Issuance of note payable in connection
with redemption of common stock $ -- $ 22,500
Dividends payable 42,600 13,070
Equipment purchases included in
accounts payable 82,000 --
Capital lease incurred for new
equipment 30,984 --
======== ========
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Company's operation is principally the production and
assembly of components to customer specifications in the electronic, computer
peripheral, medical, and related industries. The Company sells the components
primarily to customers in the Midwest region of the United States on credit
terms that the Company establishes for its customers.
A summary of the Company's significant accounting policies follows:
INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out
method) or market. At December 31, the composition of inventories was as
follows:
1995 1994
Raw materials $ 695,193 $ 450,053
Work in process 315,002 457,938
---------- ----------
$1,010,195 $ 907,991
========== ==========
BOND ISSUE COSTS: Bond issue costs are being amortized on the straight-line
method over the 20-year term of the Industrial Revenue Bond.
DEPRECIATION: Depreciation of property and equipment is computed on the
straight-line and accelerated methods over the following estimated useful lives:
Years
Land improvements 10
Buildings 30-35
Equipment 5
Office furniture and equipment 3-7
FAIR VALUE OF FINANCIAL INSTRUMENTS: At December 31, 1995, the Company adopted
Financial Accounting Standards Board Statement No. 107, Disclosures About Fair
Value of Financial Instruments, which requires disclosure of fair value
information of financial instruments. The fair value of the Company's financial
instruments and the underlying methods and assumptions are as follows:
RESTRICTED CASH: The carrying amount approximates fair value because of the
nature of the investment.
NOTES PAYABLE AND LONG-TERM DEBT: The current and long-term notes payable have
interest rates that are adjustable as the prime rate fluctuates and are at rates
which approximate market; therefore, the carrying amount approximates the fair
value.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
PROFIT SHARING AND 401(K) PLAN: The Company has a qualified profit sharing plan
for those employees who meet the eligibility requirements set forth in the plan.
Contributions to the plan are made at the discretion of the Board of Directors.
There were no profit sharing contributions to the plan for the years ended
December 31, 1995 and 1994.
Effective January 1, 1994, the Company amended the plan to allow employees to
contribute salary deferrals. The Company can also make a discretionary matching
contribution. The Company made contributions of $29,362 and $27,568 for the
years ended December 31, 1995 and 1994, respectively.
INCOME TAXES: The stockholders have elected to be taxed as an S Corporation.
Under these provisions, the stockholders report net income or losses of the
Company on their individual income tax returns. Therefore, these statements do
not include a provision for corporate income taxes.
S CORPORATION DIVIDEND DISTRIBUTIONS: The Company intends to make S Corporation
dividend distributions each year in amounts necessary to fund the stockholders'
personal income tax liabilities associated with the Company's taxable income
less tax credits. The amount of taxable income may be different than income for
financial statement purposes due to differences in the tax bases of various
assets and liabilities.
RECLASSIFICATION: Certain 1994 amounts have been reclassified to be consistent
with the 1995 presentation.
NOTE 2. LINE OF CREDIT AND LONG-TERM DEBT
LINE OF CREDIT: The line of credit agreement provides for advances of up to
$1,500,000 based upon qualifying accounts receivable and inventory and expires
December 31, 1996. The Company had advances under the revolving line of credit
of $917,915 and $950,192 at December 31, 1995 and 1994, respectively. Advances
issued under this line of credit accrue interest at a rate of 1.5 percent over
the prime rate (b).
LONG-TERM DEBT:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
8.8% (blended) Industrial Revenue Bond, due in monthly
installments of approximately $27,000, including interest, to August
2006, secured by related real estate, restricted cash and investment,
and personal guarantees of stockholder (a) $2,122,917 $2,245,000
Term notes to bank, due in monthly installments of $50,000,
plus interest, at prime plus 2.0% to December 1996 (b) 559,632 849,363
5% installment note, due in monthly installments of $1,888,
including interest, to January 1999, secured by certain
equipment and personal guarantee of stockholders 64,562 83,474
Others
42,061 54,842
---------- ----------
2,789,172 3,232,679
Less current maturities 723,029 776,972
---------- ----------
$2,066,143 $2,455,707
========== ==========
</TABLE>
(a) The Industrial Revenue Bond debt agreement contains various restrictions
as to adherence to financial ratios and covenants, indebtedness,
dividends, compensation levels, capital stock, and related-party
transactions. The agreement also contains covenants restricting additional
liens and security interests on assets owned or acquired.
(b) The line of credit and the term notes are part of the same agreement. The
loans are secured by accounts receivable, inventory, certain equipment,
certain property, and the personal guarantee of majority stockholders of
$1,000,000. The agreement requires, among other things, various
restrictions as to adherence to financial ratios and covenants,
indebtedness, stock dividends, capital stock, and capital expenditures. At
December 31, 1995, there were certain covenant violations, which were
waived subsequent to year end.
The approximate aggregate maturities with respect to long-term debt for years
subsequent to December 31, 1995, are as follows:
Amount
1996 $ 723,000
1997 178,000
1998 183,000
1999 173,000
2000 182,000
Thereafter 1,350,000
-----------
$ 2,789,000
===========
NOTE 3. RESTRICTED CASH AND INVESTMENTS
The terms of the Company's Industrial Revenue Bond Agreement require the Company
to maintain certain levels of cash and investments to be held in trust as a
reserve fund and collateral for obligations under the Industrial Revenue Bond
Agreement.
The restricted cash has been classified as current to meet current payment
obligations under the Industrial Revenue Bond Agreement.
At December 31, 1995, the long-term restricted investment is an investment in a
US Government Agency Security maturing in July 1996. This investment is recorded
as a held-to-maturity security and is carried at amortized cost which
approximates fair value. The amount required to be maintained as a long-term
investment represents approximately one year of debt service.
NOTE 4. MAJOR CUSTOMER
Net sales made to and trade receivables due from a major customer (which
individually accounts for 10 percent or more of net sales in 1995 or 1994) are
summarized as follows:
<TABLE>
<CAPTION>
Net Sales Trade Receivables
---------------------------------- ----------------------------------
Year Ended December 31 December 31
---------------------------------- ----------------------------------
Customer 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A $ 1,662,000 $ 2,415,000 $ 65,000 $ 221,000
</TABLE>
NOTE 5. SUBSEQUENT EVENT
On April 5, 1996, the Company signed an agreement to sell substantially all of
the assets of the Company. The closing of this transaction is subject to the
completion by the buyer of their due diligence.
Appendix B
LITCHFIELD PRECISION COMPONENTS, INC.
FINANCIAL REPORT
MARCH 31, 1996
LITCHFIELD PRECISION COMPONENTS, INC.
UNAUDITED BALANCE SHEET
MARCH 31, 1996
ASSETS
Current Assets
Trade receivables, less allowance for doubtful
accounts of $30,000 $ 1,154,746
Inventories 1,263,359
Prepaid expenses and other 55,946
Restricted cash 2,870
-----------
Total current assets 2,476,921
-----------
Restricted Investment 331,342
-----------
Property and Equipment, at cost
Land and land improvements 407,455
Buildings 4,371,989
Equipment 5,441,511
Office furniture and equipment 590,775
-----------
10,811,730
Less accumulated depreciation 6,842,264
-----------
3,969,466
-----------
Intangible, bond issue costs, less accumulated
amortization of $74,375 75,625
-----------
$ 6,853,354
===========
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
UNAUDITED BALANCE SHEET (CONTINUED)
MARCH 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to bank $1,218,746
Current maturities of long-term debt 576,063
Accounts payable 823,732
Accrued compensation 414,303
Other accrued liabilities 255,650
----------
Total current liabilities 3,288,494
----------
Long-Term Debt, less current maturities 2,023,484
----------
Stockholders' Equity
Class A voting common stock, no par value;
stated at $0.01 per share; authorized
100,000 shares; issued and outstanding
8,851 shares 89
Class B nonvoting common stock, no par value;
stated at $0.01 per share; authorized
9,900,000 shares; issued and outstanding
876,249 shares 8,762
Additional paid-in capital 430,049
Retained earnings 1,102,476
----------
1,541,376
----------
$6,853,354
==========
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
UNAUDITED STATEMENTS OF INCOME
Three Months Ended
March 31,
1996 1995
Net sales $ 2,990,021 $ 3,116,413
Cost of sales 2,371,964 2,345,429
----------- -----------
Gross profit 618,057 770,984
Operating expenses 476,450 395,288
----------- -----------
Operating income 141,607 375,696
----------- -----------
Other income (expense):
Interest income 6,605 7,680
Interest expense (88,123) (99,785)
Other 359 198
----------- -----------
(81,159) (91,907)
----------- -----------
Net income $ 60,448 $ 283,789
=========== ===========
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Common Common
Stock Stock Additional
Class A Class B Paid-In Retained
Voting Nonvoting Capital Earnings Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 89 $ 8,762 $ 430,049 $ 1,062,528 $ 1,501,428
Dividends -- -- -- (20,500) (20,500)
Net income -- -- -- 60,448 60,448
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1996 $ 89 $ 8,762 $ 430,049 $ 1,102,476 $ 1,541,376
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash Flows From Operations
Net Income $ 60,448 $ 283,789
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 133,650 124,911
Decrease (increase) in:
Trade receivables 235,182 (143,862)
Inventories (253,164) 14,785
Prepaid expenses and other (24,744) 14,631
Increase (decrease) in:
Accounts payable (89,868) (165,132)
Accrued expenses (47,585) 76,045
Net cash provided by operating activities 13,919 205,167
--------- ---------
Cash Flows From Investing Activities
Purchase of property and equipment (80,035) (78,780)
Increase in restricted cash and investments (2,490) (4,246)
--------- ---------
Net cash used in investing activities (82,525) (83,026)
--------- ---------
Cash Flows From Financing Activities
Net borrowings on note payable to bank 300,831 79,172
Principal payments on long-term debt (189,625) (201,313)
Dividends paid (42,600) --
--------- ---------
Net cash provided by (used in) financing activities 68,606 (122,141)
--------- ---------
Increase (decrease) in cash -- --
Cash
Beginning -- --
--------- ---------
Ending $ -- $ --
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ 88,048 $ 100,661
========= =========
</TABLE>
See Notes to Financial Statements.
LITCHFIELD PRECISION COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. - ACCOUNTING POLICIES
The accompanying unaudited financial statements do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The unaudited financial statements include
the accounts of Litchfield Precision Components, Inc.. 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 whole. For further information, refer to the audited
financial statements and footnotes for the year ended December 31, 1995 included
in Appendix A above.
APPENDIX C
INNOVEX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are based on the
historical financial statements of Innovex, Inc. ("Innovex"). These statements
also show the unaudited pro forma information to give effect to the acquisition
of the assets of Litchfield Precision Components, Inc. ("LPC") which were
acquired as of May 16, 1996. This acquisition was accounted for as a purchase.
The accompanying unaudited consolidated balance sheet reflects this acquisition
as if it occurred at March 31, 1996. The unaudited pro forma consolidated
statement of operations for the six month period ended March 31, 1996 and for
the year ended September 30, 1995 reflect the acquisition as if it occurred as
of October 1, 1994. The unaudited pro forma consolidated financial statements
are not necessarily indicative of the results of future operations.
INNOVEX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
----------------------
ASSETS Innovex LPC Adjustments Combined
- ------ ------- --- ----------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 7,349 $ -- $ (6,847)(1) $ 502
Short-term investments 17,765 -- -- 17,765
Accounts receivable 7,360 1,155 -- 8,515
Inventories 3,194 1,263 -- 4,457
Other current assets 2,240 59 (59)(1) 2,240
-------- -------- -------- --------
Total current assets 37,908 2,477 (6,906) 33,479
Property, plant and equipment 7,340 3,969 690(1) 11,999
Intangible and other assets 1,827 407 877(1) 3,111
-------- -------- -------- --------
$ 47,075 $ 6,853 $ (5,339) $ 48,589
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long-term debt $ 108 $ 1,795 $ (1,795)(1) $ 108
Accounts payable 1,741 824 -- 2,565
Other accrued liabilities 2,513 670 -- 3,183
-------- -------- -------- --------
Total current liabilities 4,362 3,289 (1,795) 5,856
Long-term debt 1,119 2,023 (2,003)(1) 1,139
Other long-term liabilities 371 -- -- 371
Stockholders' equity:
Common stock 283 9 (9)(1) 283
Capital in excess of par value 9,017 430 (430)(1) 9,017
Retained earnings 31,923 1,102 (1,102)(1) 31,923
-------- -------- -------- --------
Total stockholders' equity 41,223 1,541 (1,541) 41,223
-------- -------- -------- --------
$ 47,075 $ 6,853 $ (5,339) $ 48,589
======== ======== ======== ========
</TABLE>
See notes to Pro Forma Consolidated Financial Statements.
INNOVEX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1996
Pro Forma
-----------------------
Innovex LPC Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 27,786 $ 6,095 $ 33,881
Costs and expenses:
Cost of sales 16,256 4,900 $ (65)(2) 21,091
Selling, general and administrative 2,557 996 60(3) 3,613
Engineering 1,216 -- -- 1,216
Net interest and other (income)
expense (397) 173 29(4) (195)
-------- -------- -------- --------
Income before taxes 8,154 26 (24) 8,156
Provision for income taxes 2,447 -- 1(5) 2,448
-------- -------- -------- --------
Net income $ 5,707 $ 26 $ (25) $ 5,708
======== ======== ======== ========
Primary and fully dilutive net income
per share: $ 0.79 $ 0.79
======== ========
Common and Common Equivalent Shares Outstanding:
Primary 7,229 7,229
======== ========
Assuming full dilution 7,229 7,229
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended September 30, 1995
Pro Forma
-----------------------
Innovex LPC Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 50,194 $ 11,512 $ 61,706
Costs and expenses:
Cost of sales 28,631 9,038 $ (115)(2) 37,554
Selling, general and administrative 4,727 1,653 121 6,501
Engineering 2,464 -- -- 2,464
Net interest and other (income)
expense (446) 388 16(4) (42)
-------- -------- -------- --------
Income before taxes 14,818 433 (22) 15,229
Provision for income taxes 4,789 -- 148(5) 4,937
-------- -------- -------- --------
Net income $ 10,029 $ 433 $ (170) $ 10,292
======== ======== ======== ========
Net income per share
Primary: $ 1.40 $ 1.44
Assuming full dilution: $ 1.39 $ 1.42
Common and Common Equivalent Shares Outstanding:
Primary 7,161 7,161
Assuming full dilution 7,228 7,228
</TABLE>
INNOVEX INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) To reflect the purchase of the assets of Litchfield Precision Components,
Inc. based on the assumption that the transaction was completed as of March
31, 1996. The acquisition has been accounted for under the purchase method
and , accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on their fair values. The excess
of the purchase price above the fair value of the assets, approximately
$1,284,000, has been assigned to intangible assets and is being amortized
over ten years.
(2) To decrease depreciation expense to reflect the restatement to fair value
and adjustment in estimated useful lives of the fixed assets as a result of
the acquisition.
(3) To record the amortization of the portion of the purchase price allocated to
intangible assets over 10 years and eliminate the amortization of the bond
issue costs which related to bonds paid off at the time of acquisition.
(4) To eliminate interest expense recorded on debt which was paid off at the
time of acquisition and eliminate interest income on $6,847,000 of cash and
short term investments used to complete the purchase.
(5) To adjust income taxes as a result of the effects of the pro forma
adjustments on income before taxes and to adjust for the change in
Litchfield Precision Components, Inc.'s tax status from a Subchapter S
corporation to filing as part of a consolidated Subchapter C corporation.
