Contact: Mark Murphy, Chief Executive Officer
(949) 769-3200
Jeff Stanlis, Investor Relations
Hayden Communications, Inc.
(602) 476-1821
For Immediate Release
PRO-DEX, INC. ANNOUNCES
FISCAL FIRST QUARTER 2009
RESULTS AND $4.0 MILLION IN
NEW ORDERS FROM EXISTING
CUSTOMERS
IRVINE, CA, November 13, 2008 - PRO-DEX, INC. (NASDAQ: PDEX) today announced financial results for the first fiscal quarter 2009, the period ending September 30, 2008. In addition, Pro-Dex announced receiving new purchase commitments subsequent to the end of the quarter from existing customers for $4.0 million of product to be delivered throughout calendar year 2009.
Consolidated net sales for the fiscal first quarter decreased 6% to $5.7 million compared to $6.0 million reported for the fiscal first quarter of 2008. Consolidated gross profit for the quarter decreased 19% over the same quarter in the previous year to $1.7 million, a 31% gross profit margin, compared to gross profit of $2.2 million or 36% gross profit margin last year.
Commenting on top line performance, Mark P. Murphy, the Company’s President and Chief Executive Officer, said, “It’s important to understand the specifics of our top line changes when making year-to-year comparisons. Sales to our largest customer increased 14% compared to last year and, subsequent to the end of the quarter, this customer placed a new $1.0 million purchase order for delivery in early 2009. Conversely, sales to our second-largest customer decreased year-over-year, accounting for almost the entire consolidated decrease in sales for the quarter. A year ago, this customer was purchasing a significant amount of component inventory from us in preparation for manufacturing their own surgical handpieces. However, given improved relations between our companies, this customer aborted their own manufacturing efforts, increased their finished product purchases from us, and hired Pro-Dex to design a next generation product for them.”
As a result, total sales to this customer decreased given the elimination of last year’s component sales. Subsequent to the end of the Q1, this customer placed a new $3.0 million purchase order for delivery in calendar year 2009.
Inclusive of the $4.0 million addition, the Company ended October with an $11.2 million backlog of orders to be shipped over the next 12 months. Pro-Dex also has an additional $3.2 million in contractual purchase commitments related to new product development projects, order commitments not reflected in current backlog numbers. The Company anticipates receipt of purchase orders for this new product by the end of 2008. Historically, step-function increases in backlog have been a reliable leading indicator to future increases in sales.
Consolidated operating expenses for the fiscal first quarter 2009 increased by 17% to $1.9 million, compared to $1.6 million in the first fiscal quarter 2008, primarily driven by increased labor expenditures, higher costs associated with Sarbanes Oxley compliance, and increased costs associated with new corporate facilities.
Commenting on the company’s expenses, Mr. Murphy noted, “In the last year, we have built a significant amount of infrastructure to respond to new product development opportunities. Although significant contracts have been won and the development of the associated new products is under way, the increased shipments from these investments have not yet been realized. While we remain confident that these sales will begin this fiscal year, we are taking immediate actions to align our cost structure with existing revenues to ensure profitability and positive cash flow during the interim.”
Net loss for the first fiscal quarter 2009 was $118,000 or $(0.01) per basic and diluted share compared to net income of $326,000 or $0.03 per share on a basic and diluted basis for the three months ended September 30, 2007.
Mr. Murphy concluded, “We’ve reduced our borrowing under our credit lines by $300,000 since the end of Q1, leaving a total of $3.7 million of borrowing capacity remaining, if necessary. In addition, the Company repurchased almost 65,000 shares during the first quarter, at a total cost of approximately $60,000, and we have repurchased an additional 40,000 shares during the early part of the second quarter. Moving forward, we believe we will post another consecutive year of top line growth. With current development projects nearing completion and with a filled pipeline of project proposals, we are cautiously optimistic that we are nearing the inflection point and believe we will make continued progress during the coming quarters.”
Teleconference Information:
Investors and all others are invited to listen to a conference call discussing the first fiscal quarter 2009 results, today at 4:30 p.m. Eastern Time. The call is scheduled to be broadcast live over the Internet and may be accessed by visiting the Company's website at http://www.pro-dex.com. Mark Murphy, Chief Executive Officer and Jeff Ritchey, Chief Financial Officer, plan to host the call. If you would like to join the call, dial (866) 323-3543 U.S. and (706) 679-0672 International, conference I.D. 73154118. You may identify the call as the Pro-Dex First Quarter Earnings Call. An online archive of the broadcast will be available within one hour of the completion of the call and will be accessible on the Company's website for 30 days. Additionally, a telephone replay will be available 2 hours after the call for 48 hours by dialing (800) 642-1687 U.S. or (706) 645-9291 for international callers, conference I.D. number 73154118.
Pro-Dex Inc., with operations in Irvine, California, Beaverton, Oregon and Carson City, Nevada, specializes in bringing speed to market in the development and manufacture of technology-based solutions that incorporate embedded motion control, miniature rotary drive systems and fractional horsepower DC motors, serving the medical, dental, semi-conductor, scientific research and aerospace markets. Pro-Dex's products are found in hospitals, dental offices, medical engineering labs, scientific research facilities, commercial and military aircraft, and high tech manufacturing operations globally.
For more information, visit the Company's website at www.pro-dex.com.
Statements herein concerning the Company's plans, growth and strategies may include 'forward-looking statements' within the context of the federal securities laws. Statements regarding the Company's future events, developments and future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.
(tables follow)
PRO-DEX, INC. and SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | | | | |
| | | September 30, 2008 (unaudited) | | June 30,2008 (audited) | |
ASSETS | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | | $ | 384,000 | | $ | 517,000 | |
| Accounts receivable, net of allowance for doubtful accounts | | | | | | | |
| of $130,000 at September 30, 2008 and $144,000 at June 30, 2008 | | | 3,183,000 | | | 2,842,000 | |
| Other current receivables | | | - | | | 205,000 | |
| Inventories | | | 4,640,000 | | | 5,101,000 | |
| Prepaid expenses | | | 265,000 | | | 214,000 | |
| Prepaid income taxes | | | 869,000 | | | 860,000 | |
| Deferred income taxes | | | 1,182,000 | | | 1,176,000 | |
| Total current assets | | | 10,523,000 | | | 10,915,000 | |
| | | | | | | | |
| Property, plant, equipment, net | | | 6,416,000 | | | 6,470,000 | |
| Other assets: | | | | | | | |
| Goodwill | | | 2,997,000 | | | 2,997,000 | |
| Intangibles - Patents, net | | | 1,197,000 | | | 1,221,000 | |
| Other | | | 62,000 | | | 68,000 | |
| Total other assets | | | 4,256,000 | | | 4,286,000 | |
| | | | | | | | |
| Total assets | | $ | 21,195,000 | | $ | 21,671,000 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
| Credit Line | | $ | 2,600,000 | | $ | 2,000,000 | |
| Accounts payable | | | 1,303,000 | | | 1,736,000 | |
| Accrued expenses | | | 1,712,000 | | | 2,053,000 | |
| Income taxes payable | | | - | | | 114,000 | |
| Current portion of term note | | | 333,000 | | | 396,000 | |
| Current portion of real estate loan | | | 31,000 | | | 30,000 | |
| Total current liabilities | | | 5,979,000 | | | 6,329,000 | |
| Long-term liabilities | | | | | | | |
| Real estate loan | | | 1,553,000 | | | 1,560,000 | |
| Patent deferred payable | | | 44,000 | | | 44,000 | |
| Deferred income taxes | | | 290,000 | | | 290,000 | |
| Deferred rent | | | 167,000 | | | 150,000 | |
| Total long-term liabilities | | | 2,054,000 | | | 2,044,000 | |
| Total liabilities | | | 8,033,000 | | | 8,373,000 | |
| Commitments and contingencies | | | | | | | |
| Shareholders' equity: | | | | | | | |
| Common shares; no par value; 50,000,000 shares authorized; | | | | | | | |
| 9,738,437 shares issued and outstanding September 30, 2008, | | | | | | | |
| 9,803,366 shares issued and outstanding June 30, 2008, | | | 16,527,000 | | | 16,545,000 | |
| Accumulated deficit | | | (3,365,000 | ) | | (3,247,000 | ) |
| | | | | | | | |
| Total shareholders’ equity | | | 13,162,000 | | | 13,298,000 | |
| | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 21,195,000 | | $ | 21,671,000 | |
PRO-DEX, INC. and SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |
Three months ended September 30 (unaudited) | |
| | | | | | |
| | | 2008 | | 2007 | |
| | | | | | |
| Net sales | | $ | 5,656,000 | | $ | 5,992,000 | |
| | | | | | | | |
| Cost of sales | | | 3,902,000 | | | 3,839,000 | |
| Gross profit | | | 1,754,000 | | | 2,153,000 | |
| | | | | | | | |
| Operating expenses: | | | | | | | |
| Selling expenses | | | 344,000 | | | 323,000 | |
| General and administrative expenses | | | 835,000 | | | 735,000 | |
| Research and development costs | | | 731,000 | | | 575,000 | |
| Total operating expenses | | | 1,910,000 | | | 1,633,000 | |
| | | | | | | | |
| Income (loss) from operations | | | (156,000 | ) | | 520,000 | |
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Other expense, net | | | - | | | 6,000 | |
| Royalty income | | | 2,000 | | | 6,000 | |
| Interest expense | | | (61,000 | ) | | (47,000 | ) |
| Total | | | (59,000 | ) | | (35,000 | ) |
| | | | | | | | |
| Income (loss) before provision (benefit) for income taxes | | | (215,000 | ) | | 485,000 | |
| | | | | | | | |
| Provision (benefit) for income taxes | | | (97,000 | ) | | 159,000 | |
| Net income (loss) | | $ | (118,000 | ) | $ | 326,000 | |
| | | | | | | | |
| Net income (loss) per share: | | | | | | | |
| Basic | | $ | (0.01 | ) | $ | 0.03 | |
| Diluted | | $ | (0.01 | ) | $ | 0.03 | |
| | | | | | | | |
| Weighted average shares outstanding - basic | | | 9,783,407 | | | 9,718,366 | |
| Weighted average shares outstanding - diluted | | | 9,783,407 | | | 9,947,884 | |
PRO-DEX, INC. and SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
Three months ended September 30 (unaudited) | |
| | | | | | |
| | | 2008 | | 2007 | |
| Cash Flows from Operating Activities: | | | | | |
| Net Income (Loss) | | $ | (118,000 | ) | $ | 326,000 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
| Depreciation and amortization | | | 222,000 | | | 120,000 | |
| Stock based compensation | | | 42,000 | | | 48,000 | |
| (Recovery of) provision for doubtful accounts | | | (14,000 | ) | | (12,000 | ) |
| Provision for slow moving and obsolete inventory | | | - | | | 15,000 | |
| (Decrease) in deferred taxes | | | (5,000 | ) | | - | |
| Changes in: | | | | | | | |
| (Increase) decrease in accounts receivable | | | (122,000 | ) | | 481,000 | |
| Decrease in inventories | | | 461,000 | | | 172,000 | |
| (Increase) in prepaid expenses | | | (50,000 | ) | | (51,000 | ) |
| (Increase) decrease in other assets | | | 5,000 | | | (12,000 | ) |
| (Decrease) Increase in accounts payable and accrued expenses | | | (756,000 | ) | | 58,000 | |
| (Decrease) in income taxes payable | | | (124,000 | ) | | (53,000 | ) |
| Net Cash (used by) provided by Operating Activities | | | (459,000 | ) | | 1,092,000 | |
| | | | | | | | |
| Cash Flows From Investing Activities: | | | | | | | |
| Purchases of equipment and leasehold improvements | | | (144,000 | ) | | (344,000 | ) |
| | | | | | | | |
| Net Cash used in Investing Activities | | | (144,000 | ) | | (344,000 | ) |
| | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | |
| Net borrowing (payments) on line of credit | | | 600,000 | | | (300,000 | ) |
| Principal payments on term note | | | (63,000 | ) | | (63,000 | ) |
| Principal payments on mortgage | | | (7,000 | ) | | (7,000 | ) |
| Stock Repurchases | | | (60,000 | ) | | - | |
| | | | | | | | |
| Net Cash provided by (used by) Financing Activities | | | 470,000 | | | (370,000 | ) |
| | | | | | | | |
| Net Increase (decrease) in Cash and Cash Equivalents | | | (133,000 | ) | | 378,000 | |
| Cash and Cash Equivalents, beginning of period | | | 517,000 | | | 403,000 | |
| | | | | | | | |
| Cash and Cash Equivalents, end of period | | $ | 384,000 | | $ | 781,000 | |
| | | | | | | | |
Supplemental Information | | | | | | | |
| Cash payments for interest | | $ | 56,000 | | $ | 45,000 | |
| | | | | | | | |
| Cash payments for income taxes | | $ | - | | $ | 215,000 | |
