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, 1995.
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 January 31, 1996, 7,074,127 shares of the registrant's common stock, $.04
par value per share, were outstanding.
Exhibit Index, page 9
PART 1: ITEM 1 FINANCIAL INFORMATION
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<CAPTION>
INNOVEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1995 1995
ASSETS (Unaudited) (Audited)
- ------ ----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,134,323 $ 7,384,298
Short-term investments 18,105,000 15,130,000
Accounts receivable, less allowance for
doubtful accounts of $273,000 (1995 - $265,000) 6,324,199 5,787,282
Inventories 2,435,863 2,191,345
Other current assets 1,968,912 1,738,438
----------- -----------
Total current assets 34,968,297 32,231,363
Property, plant and equipment,
net of accumulated depreciation
of $7,012,000 and $6,357,000 7,163,648 7,067,876
Intangible and other assets,
net of accumulated amortization of
$1,153,000 and $1,008,000 1,913,597 1,984,244
----------- -----------
$44,045,542 $41,283,483
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 358,000 $ 358,000
Accounts payable 1,472,136 1,486,154
Accrued compensation 653,606 1,570,983
Income taxes payable 1,084,124 60,360
Other accrued liabilities 322,050 393,870
----------- -----------
Total current liabilities 3,889,916 3,869,367
Long-term debt 1,146,112 1,172,798
Other long-term liabilities 429,112 212,145
Stockholders' equity:
Common stock, $.04 par value;
15,000,000 shares authorized,
7,074,127 and 7,062,127 shares
issued and outstanding 282,965 282,485
Capital in excess of par value 9,012,825 8,930,301
Retained earnings 29,284,612 26,816,387
----------- -----------
Total stockholders' equity 38,580,402 36,029,173
----------- -----------
$44,045,542 $41,283,483
=========== ===========
</TABLE>
See accompanying notes.
INNOVEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
1995 1994
------------ ------------
Net sales $ 13,111,707 $ 9,975,859
Costs and expenses:
Cost of sales 7,595,475 6,089,041
Selling, general and administrative 1,203,795 1,123,483
Engineering 586,791 433,090
Net interest and other (income) expense (204,545) (27,268)
------------ ------------
Income before taxes 3,930,191 2,357,513
Provision for income taxes 1,179,000 801,000
------------ ------------
Net income $ 2,751,191 $ 1,556,513
============ ============
Primary and fully dilutive net income per share: $ 0.38 $ 0.23
============ ============
Common and common equivalent shares outstanding:
Primary 7,251,957 6,793,731
========= =========
Assuming full dilution 7,251,957 6,793,731
========= =========
See accompanying notes.
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<CAPTION>
INNOVEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ending December 31,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,751,191 $ 1,556,513
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 808,270 588,158
Other non-cash charges (credits) 514 (3,720)
Changes in operating assets and liabilities:
Receivables (536,917) 430,924
Inventories (244,518) (61,618)
Other current assets (230,474) 150,095
Accounts payable (14,018) 204,442
Other current liabilities (772,230) (406,654)
Income taxes payable 1,023,764 684,132
----------- -----------
Net cash provided by (used in)
operating activities 2,785,582 3,142,272
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (845,410) (392,559)
Cash paid for product line acquisitions -- (120,881)
Proceeds from sale of assets 11,500 75
Purchase of held-to-maturity securities (5,075,000) (4,050,000)
Maturity of held-to-maturity securities 2,100,000 1,300,000
----------- -----------
Net cash provided by (used in) investing activities (3,808,910) (3,263,365)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (26,686) (24,515)
Proceeds from exercise of stock options 83,004 54,859
Dividends paid (282,965) (249,154)
----------- -----------
Net cash provided by (used in)
financing activities (226,647) (218,810)
Increase (decrease) in cash and cash equivalents (1,249,975) (339,903)
Cash and cash equivalents at beginning of year 7,384,298 1,719,587
----------- -----------
Cash and cash equivalents at end of period $ 6,134,323 $ 1,379,684
=========== ===========
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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 $26,000 and $33,000 in 1995 and 1994, respectively.
Income tax payments were $155,000 and $114,000 in 1995 and 1994, 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.
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.
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 line 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 at the end of the fiscal
1995 third quarter. AnchorPage enables Internet World Wide Web sites to provide
their users access to web site information automatically using conceptual
navigational techniques. The current method involves the manual insertion of
tags to create hypertext links used for accessing the information. AnchorPage
provides faster and more reliable access to that information.
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 $13,112,000 for the
quarter, up 31% from $9,976,000 reported in fiscal 1995. The increase was due to
the strong demand for lead wire assemblies caused by the increased demand for
thin-film disk drives. The increase in lead wire assembly unit sales volume was
partially offset by decreases in selling price caused by pricing pressure. Lead
wire assembly demand is expected to remain strong throughout the fiscal year.
GROSS MARGINS
The Company's consolidated gross profit as a percent of sales for the
first quarter increased to 42% from the 39% reported for the same period last
year. This is primarily due to strong sales volume in the current year. The high
level of sales continues to result in efficient utilization of the Company's
automation-related fixed costs while improvements in the manufacturing process
have also reduced product costs. The gross margin 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 13.7% of net sales for the current quarter,
down from 15.6% in the prior year's first quarter. The decrease in operating
expenses as a percent of net sales for the current year is primarily due to the
significant increase in sales more than offsetting the increase in total
operating expenses. Total operating expenses increased due to the higher level
of costs being incurred by the two start-up divisions and increased process and
new product research spending 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 $3,726,000 in the current quarter was
up from the $2,330,000 profit for the prior year first quarter. 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. Revenues from the Company's
Iconovex and InnoMedica Divisions are expected to continue to increase with each
division expected to be operating at a profitable level by the end of the fiscal
year.
NET INCOME
Consolidated net income for the 1996 first quarter was $2,751,000 or
$0.38 per share as compared to $1,557,000 or $0.23 per share for the prior year
first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased to $24.2 million at December
31, 1995 from $22.5 million at September 30, 1995. This increase was primarily
due to income generated by the Company's operating activities.
Accounts receivable at December 31, 1995 increased by $537,000 from
September 30, 1995 due to the month-end timing of customer payments. Other
current liabilities decreased by $772,000 from September 30, 1995 to December
31, 1995 primarily due to the payment of incentive based compensation accrued at
September 30, 1995.
Working capital totaled $31,100,000 and $28,400,000 at December 31,
1995 and September 30, 1995, respectively.
Since September 30, 1995, the Company has invested $771,000 in fixed
assets. These additions include approximately $500,000 for equipment to expand
and further automate the lead wire assembly production and packaging process and
$150,000 to upgrade the Company's manufacturing facilities.
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
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 12, 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 10
27 Financial Data Schedule 11
EXHIBIT 11 - COMPUTATION OF PER SHARE NET INCOME
For the Three Months Ended December 31,
1995 1994
---- ----
Net income for the period used in
determining net income per share $2,751,191 $1,556,513
Weighted average common and common
equivalent shares used in determining net
income per share:
Primary 7,251,957 6,793,731
Assuming full dilution 7,251,957 6,793,731
Primary and fully dilutive net
income per share $ 0.38 $ 0.23
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THE 10-Q FOR THE QUARTER ENDED
DECEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 6,134
<SECURITIES> 18,105
<RECEIVABLES> 6,597
<ALLOWANCES> 273
<INVENTORY> 2,436
<CURRENT-ASSETS> 34,968
<PP&E> 14,175
<DEPRECIATION> 7,012
<TOTAL-ASSETS> 44,046
<CURRENT-LIABILITIES> 3,890
<BONDS> 1,146
0
0
<COMMON> 283
<OTHER-SE> 38,297
<TOTAL-LIABILITY-AND-EQUITY> 44,046
<SALES> 13,112
<TOTAL-REVENUES> 13,112
<CGS> 7,595
<TOTAL-COSTS> 7,595
<OTHER-EXPENSES> 1,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31
<INCOME-PRETAX> 3,930
<INCOME-TAX> 1,179
<INCOME-CONTINUING> 2,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,751
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
