Innovex: Fiscal 1Q08 Financial Results

Innovex reported revenue of $20.8 million and
revenue excluding pass through material of $11.0 million for the fiscal
2008 first quarter ending December 29, 2007. In the fiscal 2007 fourth
quarter Innovex, Inc. (the “Company”)
reported revenue of $21.8 million and revenue excluding pass through
material of $11.6 million.

The Company’s net loss was $7.9 million or
$0.41 per share in the first quarter of fiscal 2008 as compared to a net
loss of $10.2 million or $0.52 per share in the fourth quarter of fiscal
2007. The fiscal 2008 first quarter includes restructuring charges of
$2.3 million or $0.12 per share. The Company’s
fiscal 2008 first quarter net loss excluding the restructuring charge
was $5.6 million or $0.29 per share. The Company’s
fiscal 2007 fourth quarter net loss was $6.2 million or $0.32 per share
excluding restructuring charges of $1.0 million and goodwill impairment
of $3.0 million.

Flex Suspension Assembly (FSA) products constituted 34% of the Company’s
net sales for the fiscal 2008 first quarter, Actuator Flex Circuit (AFC)
revenue was 34%, Flat Panel Display (FPD) product revenue was 29%, and
integrated circuit packaging application, network system and other
application revenue was 3%.

The fiscal 2008 first quarter decrease in revenue as compared to the
fiscal 2007 fourth quarter was driven by reductions of $1.6 million in
FSA revenue and $1.2 million in AFC revenue. These reductions were
offset by a $1.9 million increase in FPD revenue. The FSA decrease was
expected as that product reaches the end of its life cycle. The AFC
reduction was related to production issues reducing the Company’s
product allocation at a significant customer and year end customer
inventory reductions. The growth in the Company’s
FPD business resulted from the ramp of a number of new FPD programs and
increased volume from programs which began ramping last quarter.

“We did not realize the increase in revenue
we expected in the fiscal 2008 first quarter as it took longer than
expected to resolve the production issues with our AFC products that we
experienced near the end of last quarter. The issues primarily related
to the introduction of a new material set into our production process.
Although we have resolved the issue, it delayed the ramp up of a
significant program at a new customer and resulted in a temporary
reduction in product allocation from another customer,”
stated Terry Dauenhauer, Innovex’s President
and Chief Executive Officer. “We expect
increases in AFC and FPD revenue to offset the reduction in FSA revenue
in the fiscal 2008 second quarter as the FSA product reaches its end of
life and we expect double digit sequential quarterly revenue growth
throughout the remainder of fiscal 2008 as a result of new AFC customer
ramps, expanding FPD product ramps and penetration of new markets.”

Gross margins for the fiscal 2008 first quarter were impacted by lower
than expected revenue and the short-term incremental costs incurred
while addressing the operating efficiency issues which affected the
fiscal 2007 fourth quarter and the beginning of the first quarter. The
Company’s cost structure will improve in the
fiscal 2008 second quarter as manufacturing activity was discontinued at
the Company’s Korat, Thailand facility in
November and the operating efficiency improvements made during the
fiscal 2008 first quarter will be in place for the entire quarter.

With the delay in the increase in AFC revenue, the Company now expects
generating positive EBITDA, excluding restructuring charges, in the
third quarter of fiscal 2008 and positive operating income during the
first quarter of fiscal 2009.

On October 1, 2007, the Company announced plans to strengthen its
presence in Asia and significantly lower its cost structure by
relocating many of its corporate business functions to Lamphun,
Thailand. As part of the plan, most administrative, sales and
engineering functions have been relocated to Asia. The Company has
retained key sales and engineering resources in the U.S. to support its
U.S. based customers. The discontinuation of manufacturing activity at
the Company’s Korat, Thailand facility in
November 2008 to achieve additional cost savings was also part of the
plan.

Total restructuring charges related to these changes are still expected
to be around $4.0 million. Included in the total are non-cash asset
impairment charges recorded in September 2007 of $400,000 related to the
disposition of assets at the Korat location. The remaining expected
restructuring charges of approximately $3.6 million are primarily
comprised of severance of $3.1 million and contract termination and
asset transfer costs of $0.5 million. Approximately $2 million of these
charges were recorded in the fiscal 2008 first quarter. The remainder
will be recorded as the liabilities are incurred over the next three to
six months. Capital expenditures related to the changes will be minimal.

The Company expects annual cost savings of at least $6.0 million related
to these changes by the end of the fiscal 2008 third quarter. Annualized
cost savings of approximately $2 million were realized by the end of the
fiscal 2008 first quarter with most of the remaining savings to be
realized by the end of the fiscal 2008 second quarter. Nearly all of the
savings will be cash related. Approximately 70% of the savings are
expected to reduce general and administrative expenses while the
remaining savings will reduce cost of goods sold.

Fiscal 2008 first quarter cash used in operating activities was $9.6
million. The Company’s liquidity on December
29, 2007 was $21.4 million, which was comprised of $7.8 million of cash
on hand and $13.6 million of availability under the Company’s
existing credit facilities. Capital expenditures for the fiscal 2008
first quarter were $369,000. Capital expenditures for the remainder of
fiscal 2008 are expected to be approximately $2.5 million. The Company’s
liquidity is expected to provide adequate cash resources to complete the
Company’s restructuring and support the
revenue growth anticipated through a portion of the fiscal 2008 fourth
quarter. The Company is exploring alternatives for generating additional
working capital and long-term financing and will continue to pursue
financing opportunities to better leverage its assets.

Innovex also announced that its Board of Directors has decided to
explore strategic alternatives to enhance shareholder value, included
but not limited to the raising of capital, a recapitalization, and the
combination, sale or merger of the Company with another entity. Piper
Jaffray & Co., which the Company engaged earlier this year to assist
with strategic matters, will serve as one of the Company’s
financial advisors in this process.

There can be no assurances that this process will result in any specific
transaction. The Company does not intend to disclose developments
regarding its exploration of strategic alternatives unless its Board of
Directors approves a definitive transaction.

Innovex, Inc.