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 March 31, 2000.
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.)
5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359-9003
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (763) 479-5300
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 May 2, 2000, 14,829,104 shares of the registrant's common stock, $.04 par
value per share, were outstanding.
Exhibit Index, page 13
<PAGE>
PART 1: ITEM 1 FINANCIAL INFORMATION
INNOVEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
ASSETS (Unaudited) (Audited)
- ------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 5,519,839 $ 6,231,430
Short-term investments 5,000 19,310,000
Accounts receivable 28,995,952 28,498,621
Inventories 14,843,717 15,891,945
Income taxes receivable 3,625,460 --
Other current assets 7,403,431 6,385,053
------------ ------------
Total current assets 60,393,399 76,317,049
Property, plant and equipment, net of accumulated depreciation
of $17,004,000 and $18,740,000 92,523,238 87,158,237
Intangible and other assets, net of accumulated amortization of
$972,000 and $506,000 7,388,453 4,841,025
Deferred income taxes 10,897,908 10,442,908
Other assets 41,725 46,905
------------ ------------
$171,244,723 $178,806,124
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long-term debt $ 3,810,702 $ 307,702
Line of credit 15,000,000 9,163,931
Accounts payable 21,347,623 25,104,517
Accrued compensation 1,569,329 932,573
Income taxes payable -- 592,264
Other accrued liabilities 11,762,239 9,195,392
------------ ------------
Total current liabilities 53,489,893 45,296,379
Long-term debt, less current maturities 23,491,059 26,375,546
Stockholders' equity:
Common stock, $.04 par value; 30,000,000 shares authorized,
14,829,104 and 14,822,104 shares issued and outstanding 593,164 592,884
Capital in excess of par value 16,229,870 16,181,730
Retained earnings 77,440,737 90,359,585
------------ ------------
Total stockholders' equity 94,263,771 107,134,199
------------ ------------
$171,244,723 $178,806,124
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 2 of 14
<PAGE>
INNOVEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 41,388,132 $ 20,703,779
Costs and expenses:
Cost of sales 36,741,374 13,918,648
Selling, general and administrative 4,142,925 2,112,432
Engineering 1,867,391 1,022,188
Net interest (income) expense 587,543 (487,319)
Net other (income) expense (321,392) 540,729
------------ ------------
Income (loss) before taxes (1,629,709) 3,597,101
Provision for income taxes (473,071) 1,058,000
------------ ------------
Net income (loss) $ (1,156,638) $ 2,539,101
============ ============
Net income (loss) per share:
Basic $ (0.08) $ 0.17
============ ============
Diluted $ (0.08) $ 0.17
============ ============
Weighted average shares outstanding:
Basic 14,826,407 14,791,885
============ ============
Diluted 14,826,407 15,134,617
============ ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 86,112,757 $ 42,731,640
Costs and expenses:
Cost of sales 76,750,823 28,869,976
Selling, general and administrative 8,378,767 4,535,622
Engineering 3,571,506 1,943,693
Restructuring charges 13,785,085 --
Net interest (income) expense 1,114,372 (881,738)
Net other (income) expense (126,732) 469,219
------------ ------------
Income (loss) before taxes (17,361,064) 7,794,868
Provision for income taxes (5,035,164) 2,261,000
------------ ------------
Net income (loss) $(12,325,900) $ 5,533,868
============ ============
Net income (loss) per share:
Basic $ (0.83) $ 0.37
============ ============
Diluted $ (0.83) $ 0.37
============ ============
Weighted average shares outstanding:
Basic 14,821,592 14,786,180
============ ============
Diluted 14,821,592 15,098,359
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3 of 14
<PAGE>
INNOVEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(12,325,900) $ 5,533,868
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,002,753 3,368,086
Restructuring and asset impairment charges 13,785,085 --
Other non-cash charges (credits) (270,311) 46,697
Changes in operating assets and liabilities:
Accounts receivable (673,331) (424,751)
Inventories 668,228 (562,788)
Other current assets (1,018,378) 1,079,654
Accounts payable (3,756,894) 1,270,921
Other liabilities (3,444,280) (481,568)
Income taxes payable (4,672,724) 2,674,071
------------ ------------
Net cash provided by (used in) operating activities (5,705,752) 12,504,190
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,495,523) (7,618,075)
Business acquisition (3,750,000) --
Proceeds from sale of assets 24,630 33,649
Purchase of held-to-maturity securities -- (17,240,000)
Maturities of held-to-maturity securities 19,305,000 22,220,000
------------ ------------
Net cash provided by (used in) investing activities (915,893) (2,604,426)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (167,254) (42,015)
Net activity on line of credit 5,836,069 --
Issuance of long-term debt 785,767 --
Proceeds from exercise of stock options 48,420 144,159
Dividends paid (592,948) (1,109,014)
------------ ------------
Net cash provided by (used in) financing activities 5,910,054 (1,006,870)
Increase (decrease) in cash and equivalents (711,591) 8,892,894
Cash and equivalents at beginning of year 6,231,430 17,021,264
------------ ------------
Cash and equivalents at end of period $ 5,519,839 $ 25,914,158
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest was $1,152,000 and $42,000 in 2000 and 1999,
respectively.
Income tax payments were $221,000 and $975,000 in 2000 and 1999, respectively.
See accompanying notes.
Page 4 of 14
<PAGE>
INNOVEX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL INFORMATION
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 that may be expected for the year as a
whole. The Company utilizes a fiscal year that ends on the Saturday nearest to
September 30. For clarity of presentation, the Company has described all periods
as if they end at the end of the calendar quarter. 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, 1999.
Preparation of the Company's condensed 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.
NOTE 2 - RESTRUCTURING CHARGES
LEAD WIRE ASSEMBLY PRODUCT LINE DISPOSITION-
During the fourth quarter of fiscal 1999, the Company recorded a charge of
approximately $2,765,000 related to the discontinuation of the lead wire
assembly product line. The charge included approximately $871,000 related to
asset impairment, $1,403,000 for the write off of inventory and supplies,
$197,000 in employee severance, $156,000 in facility abandonment costs and
$138,000 to increase the accounts receivable reserve. The disposition will be
substantially complete by May 2000.
MANUFACTURING OPERATIONS RESTRUCTURING-
The fiscal 2000 first quarter includes a $13,785,085 restructuring charge
related to restructuring the Company's manufacturing operations. The
restructuring is primarily related to moving operations from the Company's Agua
Prieta, Mexico facility to its new facility in Lamphun, Thailand. The charge was
recorded pursuant to a plan announced in November 1999. The charge included
approximately $6,581,000 related to asset impairment of property and equipment,
$380,000 for the write off of inventory and supplies, $176,000 for increasing
the accounts receivable reserve, and accrued liabilities of $2,101,000 for
facility abandonment costs and $4,547,000 in employee severance and benefits.
This restructuring will be substantially complete by September 2000.
As of March 31, 2000, the following amounts were accrued:
<TABLE>
<CAPTION>
Balance at Balance at
September 30, March 31,
1999 Activity 2000
---------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Lead wire product assembly line disposition
Employee severance ..................... $ 197 $ (75) $ 122
Facility abandonment costs ............. 156 -- 156
- -----------------------------------------------------------------------------------------
. ......................................... 353 (75) 278
Manufacturing network restructure
Employee severance ..................... -- 3,936 3,936
Facility abandonment costs ............. -- 1,563 1,563
- -----------------------------------------------------------------------------------------
. ......................................... -- 5,499 5,499
- -----------------------------------------------------------------------------------------
Total ......................... $ 353 $ 5,424 $ 5,777
======== ======= =======
</TABLE>
Page 5 of 14
<PAGE>
NOTE 3 - EARNINGS PER SHARE
The Company's basic net income per share is computed by dividing net income by
the weighted average number of outstanding common shares. The Company's diluted
net income per share is computed by dividing net income by the weighted average
number of outstanding common shares and common share equivalents relating to
stock options when dilutive. Options to purchase 731,150 and 751,560 shares of
common stock with weighted average exercise prices of $14.70 and $14.71 were
outstanding during the three and six month periods ending March 31, 2000, but
were excluded from the computation of common share equivalents because they were
not dilutive. Options to purchase 154,850 and 172,950 shares of common stock
with weighted average exercise prices of $28.31 and $27.22, respectively, were
outstanding during the three and six month periods ending March 31, 1999, but
were excluded from the computation of common share equivalents because they were
not dilutive.
NOTE 4 - INVENTORIES
Inventories are comprised of the following:
March 31, September 30,
2000 1999
--------------------------------
Raw materials and purchased parts $7,285,799 $8,753,336
Work-in-process and finished goods 7,557,918 7,138,609
--------------------------------
$14,843,717 $15,891,945
================================
PART I: ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
On July 7, 1999, Innovex, Inc. and its subsidiaries (the "Company") commenced a
tender offer to purchase all of the issued and outstanding stock of ADFlex
Solutions, Inc. ("ADFlex") at a purchase price of $3.80 per share. The tender
offer closed on August 3, 1999. Approximately 76% of the outstanding shares of
ADFlex were tendered in response to the offer. On August 9, 1999, the Company
consummated the purchase of the tendered shares. The remaining approximately 24%
of ADFlex issued and outstanding common stock not tendered in response to the
tender offer was acquired by the Company through a merger transaction completed
on September 14, 1999. The total ADFlex purchase price, including transaction
costs, change in control payments and all of the issued and outstanding common
stock was approximately $37 million. The Company also obtained credit facilities
totaling in principal amount $40 million, which were utilized to refinance
ADFlex's outstanding debt, pay down current liabilities and pay related
transaction costs. Prior to the acquisition, ADFlex was a leading supplier of
flexible circuit based solutions to the computer, computer peripheral,
communications and consumer electronics industries. Applications for these
flex-based interconnects include cellular phones, hard disk drives, other
storage systems, high-end consumer products, notebook computers, pagers and
personal communication systems. ADFlex's diverse customer and industry base has
reduced Innovex's reliance on the disk drive industry.
Prior to the ADFlex acquisition, the Company had one primary operating group,
Innovex Precision Components. The Company is combining the newly acquired ADFlex
operation into its existing operations of designing and manufacturing flexible
circuits.
Prior to fiscal 1999, the Company operated through three divisions, Precision
Products (Precision), Litchfield Precision Components (LPC) and Iconovex. Each
division had its own administrative, engineering, manufacturing and marketing
organizations. During the quarter ending September 30, 1998, the Company
combined the operations of its two core operating divisions, Precision and LPC
into
Page 6 of 14
<PAGE>
one operating division, Innovex Precision Components. The combination merged the
rapidly growing LPC flexible circuit fabrication and chemical etching operations
with Precision's high volume fine wire manufacturing expertise. The combination
also allowed Innovex to leverage Precision's disk drive industry market and
trade knowledge to disk drive industry flexible circuit applications as the
industry transitioned from wire interconnects.
Prior to the divisional combination, the largest division, Precision, developed,
engineered and manufactured specialty precision electromagnetic products for
original equipment manufacturers ("OEM's"). Lead wire assemblies for the thin
film disk drive market were 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 disk drive heads that read and write information on the disk.
Since the divisional combination, the lead wire assembly revenue phased out as
anticipated. As a result, during the fiscal 1999 fourth quarter, charges of $2.8
million were recorded to account for the discontinuance of this product line.
LPC, prior to the fiscal 1998 divisional combination, designed and manufactured
highly complex flexible circuitry and chemically machined components for
computer, computer peripheral, medical and other applications. The Company
purchased Litchfield Precision Components, Inc. on May 16, 1996. This
acquisition reduced the Company's reliance on the disk drive industry while
providing an entry into the large and rapidly growing flexible circuit market.
Innovex's flexible circuit operation 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 mils for the high-end portion of the flexible circuit market.
The Iconovex subsidiary was established in fiscal 1994 to market and further
develop a technologically advanced software product purchased in November 1993.
In October 1997, Iconovex became the 51% owner of a joint venture with Solutions
Corporation of America. The operations of Iconovex and its joint venture, Smart
Solution, were discontinued in June 1999 as a result of revenue not developing
as expected and the Company recorded a $1.7 million charge related to this
disposition.
Innovex, Inc. was incorporated under the laws of the State of Minnesota in 1972.
Its principal executive offices are located at 5540 Pioneer Creek Drive, Maple
Plain, Minnesota 55359-9003 and its telephone number is (763) 479-5300. Products
are developed and manufactured through the Company's wholly owned subsidiaries,
Innovex Precision Components, Inc., Innovex Southwest, Inc., Innovex (Thailand)
Ltd. and Innovex Limited. Innovex Precision Components, Inc. and Innovex Ltd.
are Minnesota corporations. Innovex Southwest, Inc. is a Delaware corporation
and Innovex (Thailand) Ltd. is a Thailand corporation.
RESULTS OF OPERATIONS
NET SALES
The Company's net sales from operations totaled $41,388,000 for the quarter, up
100% from $20,704,000 reported in fiscal 1999. Sales of $86,113,000 for the six
months ended March 31, 2000 increased 102% from the prior year period. The
increase in net sales for the first quarter and six months of fiscal 2000 was
due, in part to the increase in flexible circuit revenue from the disk drive
industry. A large portion of the increase was due to revenue generated from the
telecommunication, network system, consumer and other industries related to the
August 1999 acquisition of ADFlex Solutions, Inc. These increases offset a
reduction in revenue generated from lead wire interconnects as the disk drive
industry completes its transition to integrated interconnects including the
Company's Head Interconnect Flex (HIF) and Flex Suspension Assembly (FSA). Less
than 1% of the revenue for the quarter and 2% of revenue for the first six
months was generated by lead wire assemblies as compared to 37% and 47% for the
same periods last year.
Revenue from the disk drive industry generated 58% and 54% of the Company's
revenue for the quarter and first six months, respectively. In addition, during
the second fiscal quarter, 11% of the
Page 7 of 14
<PAGE>
revenue was generated by flexible circuits for telecommunication applications,
12% from consumer applications, 6% from network system applications and 13% from
applications from other industries. The acquisition of ADFlex has reduced the
Company's dependence on the disk drive industry significantly from its
historical levels of 85-90% of revenue. Fiscal 2000 should benefit from
continued growth in the demand for high technology flexible circuit products
including the Company's HIF, FSA and Bridge Flex. Reductions in lead wire
assembly revenue should not have a significant impact on fiscal 2000 revenue as
the transition away from lead wire assembly interconnects to integrated
interconnects was nearly complete at the end of fiscal 1999. Significant
progress has been made in gaining customer acceptance of the Company's FSA
product which will be integral to increasing revenue in the last half of fiscal
2000. Revenue is expected to increase significantly in fiscal 2000 as a result
of the ADFlex acquisition.
GROSS MARGINS
The Company's gross profit as a percent of sales for the quarter decreased to
11%, from the 33% reported for the fiscal 1999 second quarter. The gross profit
as a percent of sales for the first six months decreased to 11% from the 32%
reported for the same period last year. The decreases were due to fiscal 2000
including lower margin revenue related to the acquired ADFlex Solutions, Inc.
operation. The acquisition related revenue generates a lower gross margin
percent than the high-end Innovex flexible circuit revenue due to the higher
material content of the assembly portion of the business and lower level of
technical tolerances required. Gross margins for the high-end flexible circuit
revenue were lower as compared to the prior year due to reduced yields and costs
related to new capacity installation. Fiscal 2000 second quarter gross margins
for the high-end flexible circuit revenue improved significantly over the first
quarter as a result of improving yields.
The increase in fiscal 2000 sales volume related to the ADFlex acquisition
should result in an increase in gross margin dollars while causing a decrease in
the overall gross margin percent. The Company anticipates stable to growing
gross margin percents on the pre-acquisition Innovex revenue during fiscal 2000
through improved yield performance and increased utilization of the high volume
manufacturing facility. Gross margins on the revenue generated by the acquired
operations are expected to improve as the transfer of manufacturing operations
from Mexico to Thailand is completed and other cost saving initiatives are
implemented.
OPERATING EXPENSES
Operating expenses were 14.5% of sales for the current quarter, as compared to
15.1% in the prior year's second quarter. Operating expenses for the first six
months of fiscal 2000 were 13.9%, down from 15.2% for the prior years first six
months. The decrease in operating expenses as a percent of sales for the current
year is primarily due to increased revenue as a result of the ADFlex
acquisition. Total operating expenditures increased by approximately $2.9 and
$5.5 million for the second quarter and first six months, respectively,
primarily as a result of the ADFlex acquisition. Fiscal 2000 operating expenses
are expected to decrease as a percent of sales and increase in total as a result
of the ADFlex acquisition.
RESTRUCTURING CHARGES
A restructuring charge of $13,785,000 was recorded during the first quarter of
fiscal 2000 related to the restructuring of the Company's manufacturing
operations. The restructuring is primarily related to moving operations from the
Company's Agua Prieta, Mexico facility to its new facility in Lamphun, Thailand.
The majority of this charge includes employee severance, asset impairment of
property and equipment and facility abandonment costs. The restructuring is
expected to significantly reduce operating costs by the end of the fiscal year
as a result of consolidating facilities and the lower Thailand cost structure.
OPERATING PROFIT (LOSS)
The consolidated operating loss of $(1,364,000) in the current quarter was down
from the $3,651,000 profit for the prior year second quarter. Consolidated
operating loss for the first six months was
Page 8 of 14
<PAGE>
$(16,373,000) versus profit of $7,382,000 for the same period last year. The
reduction for the quarter is primarily due to the loss being incurred by the
acquired ADFlex operation and the elimination of the profit generated by the
lead wire assembly business in 1999. The reduction for the six month period is
primarily due to the restructuring charge recorded during the first quarter in
addition to the loss being incurred by the acquired ADFlex operation and the
discontinuation of the lead wire assembly operation. Improvements in the cost
structure of the acquired ADFlex operation as a result of the manufacturing
restructuring move from Mexico to Thailand will begin having a favorable impact
on operating profit in the first quarter of fiscal 2001.
NET INCOME (LOSS)
Consolidated net loss for the fiscal 2000 second quarter was $(1,157,000) as
compared to net income of $2,539,000 for the prior year. Basic and diluted net
loss per share were ($0.08) as compared to net income per share of $0.17 for the
prior year second quarter. Consolidated net loss for the first six months of
fiscal 2000 was $(12,326,000) as compared to net income of $5,534,000 for the
prior year. Basic and diluted net loss per share were ($0.83) as compared to
basic and diluted net income per share of $0.38 and $0.37 for the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments decreased to $5.5 million at March 31, 2000 from
$25.5 million at September 30, 1999. This decrease was primarily due to the
acquisition of the Company's Thailand subcontractor for $3.8 million and capital
expenditures of $16.5 million.
Accounts receivable at March 31, 2000 increased by $0.7 million from September
30, 1999 due to the increased level of revenue in March. Inventory decreased by
$0.7 million from September 30, 1999 due to fewer components being required in
inventory as a result of a smaller proportion of assembly related sales being
included in the revenue mix.
Accounts payable at March 31, 2000 decreased by $3.8 million primarily due to
the payment of older payables obtained with the ADFlex acquisition.
Working capital totaled $6.9 million and $31.0 million at March 31, 2000 and
September 30, 1999. The decrease was primarily due to the acquisition of the
Company's subcontractor and capital expenditures made during the six month
period.
Since September 30, 1999, the Company has invested $16.5 million in capital
expenditures and $3.8 million to acquire the Company's Thailand subcontractor.
Capital expenditures include FSA attachment equipment, equipment to expand the
high volume flexible circuit manufacturing facility capacity, metalizing and
plating equipment required to produce base material for the flexible circuit
manufacturing process, the building expansion in Thailand related to the
manufacturing move from Mexico to Thailand and progress payments related to the
construction of a material manufacturing facility in Maple Plain, Minnesota.
Capital expenditures of approximately $10 million are expected during the
remainder of fiscal 2000. These expenditures will increase the Company's high
volume flexible circuit manufacturing and FSA production capacities, complete
the move of the Mexican operation to Thailand and equip and complete
construction of the Maple Plain facility to produce material for use in flexible
circuit manufacturing.
Existing and committed credit facilities, cash and investments and cash
generated from operations are believed to be sufficient to support Company
operations at current levels and capital expenditures in fiscal 2000. Additional
funding may be required to fund anticipated growth. Management believes the
Company's resources are sufficient to secure any growth related funding
requirements.
YEAR 2000 UPDATE
Prior to December 31, 1999, the Company prepared a plan of action to ensure that
it was not adversely affected by the year 2000 equipment and software failures
that may arise in software applications and
Page 9 of 14
<PAGE>
equipment with embedded logic where two-year digits are used to define the
applicable year. The Company incurred costs of less than $100,000 to prepare for
year 2000 issues.
Based on currently available information, the Company has not experienced any
material adverse impact from year 2000 issues. The Company will continue to
monitor its internal systems, products, supplies and customers on an on going
basis.
FORWARD LOOKING STATEMENTS
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, elsewhere in the Company's Form 10-Q and in
future filings by the Company with the SEC, except for the historical
information contained herein and therein, are "forward-looking statements" that
involve risks and uncertainties. These risks and uncertainties include the
timely availability and acceptance of new products, the impact of competitive
products and pricing, interruptions in the Company's operations or those of its
suppliers or major customers as may be caused by problems arising from the year
2000, the successful move of the Mexican operation to Thailand and the
successful integration of the ADFlex acquisition. In addition, a significant
portion of the Company's revenue is generated from the disk drive and
telecommunication industries and any changes in the structure, technology or
outlook of these industries could have a significant impact on the Company's
operations. The Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect subsequent events or circumstances or the
occurrence of unanticipated events.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in the Company's market risk during the
three-month period ended March 31, 2000.
PART II - OTHER INFORMATION
Responses to Items 1 through 3 and 5 are omitted since these items are either
inapplicable or the response thereto would be negative.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of the shareholders of Innovex, Inc. was held on
January 19, 2000. There were 14,823,704 shares of common stock entitled
to vote at the meeting and a total of 13,918,104 shares were
represented at the meeting.
b) Eight directors were elected at the meeting to serve for one year or
until their successors are elected and qualified. Shares were voted as
follows:
For Withheld
--- --------
Gerald M. Bestler 13,588,407 329,697
Frank L. Farrar 13,565,575 352,529
Thomas W. Haley 13,462,247 455,857
Elick Eugene Hawk 13,573,660 344,444
William J. Miller 12,605,404 1,312,700
William P. Murnane 13,580,447 337,656
Michael C. Slagle 13,587,753 330,351
Bernt M. Tessem 13,579,705 338,399
c) Other matters voted on at the meeting:
Proposal #2. A proposal was made to approve the adoption of the
Employee Stock Purchase Plan. Shares were voted as follows:
Page 10 of 14
<PAGE>
For Against Abstain
---- ------- -------
13,183,169 490,738 244,196
Proposal #3. A proposal was made to approve the selection of the
Company's independent public accountants for the current fiscal year.
Shares were voted as follows:
For Against Abstain
---- ------- -------
13,794,281 54,623 69,199
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
None.
Page 11 of 14
<PAGE>
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: May 12, 2000
By \s\ William P. Murnane
William P. Murnane
President and Chief Executive Officer
By \s\ Douglas W. Keller
Douglas W. Keller
Vice President, Finance
Page 12 of 14
<PAGE>
INDEX TO EXHIBITS
Exhibits Page
27 Financial Data Schedule 14
Page 13 of 14
<TABLE> <S> <C>
<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 MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,520
<SECURITIES> 5
<RECEIVABLES> 30,110
<ALLOWANCES> 1,114
<INVENTORY> 14,844
<CURRENT-ASSETS> 60,393
<PP&E> 109,527
<DEPRECIATION> 17,004
<TOTAL-ASSETS> 171,245
<CURRENT-LIABILITIES> 53,490
<BONDS> 23,491
0
0
<COMMON> 593
<OTHER-SE> 93,671
<TOTAL-LIABILITY-AND-EQUITY> 171,245
<SALES> 86,113
<TOTAL-REVENUES> 86,113
<CGS> 76,751
<TOTAL-COSTS> 76,751
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,530
<INCOME-PRETAX> (17,361)
<INCOME-TAX> (5,035)
<INCOME-CONTINUING> (12,326)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,326)
<EPS-BASIC> (0.83)
<EPS-DILUTED> (0.83)
</TABLE>
