Exhibit 99.1
Contact: Jeff Ritchey, CEO, CFO, & Secretary
(714) 241-4411
Matthew Hayden, Investor Relations
Hayden Communications, Inc.
(858) 704 - 5065
For Immediate Release
PRO-DEX, INC. ANNOUNCES THIRD QUARTER FINANCIAL RESULTS
Sales Increase 30% over prior year quarter and 24% year to date
Backlog up 53% since December
SANTA ANA, CA, May 22, 2006 - PRO-DEX, INC. (NASDAQ: PDEX), a developer
and manufacturer of embedded motion control, miniature rotary drive systems and
fractional horsepower DC motors, which enables speed-to-market for customers who
serve the medical, dental, factory automation, scientific research, aerospace
and military markets, today announced financial results for the fiscal third
quarter ending March 31, 2006.
Consolidated net sales for the third quarter were $4.2 million, an
increase of 30.0 percent compared to the $3.2 million reported for the third
quarter last year and a 10.8 percent sequential increase compared to the $3.8
million for the second quarter of the 2006 fiscal year. Approximately 818,000 of
the increase was due to the Astromec acquisition. Net income for the quarter
decreased to $6,000, or $0.00 per basic and diluted share, as compared to a net
income of $275,000 or $0.03 per basic and diluted share for the three months
ended March 31, 2005. For purposes of calculating diluted earnings per share,
approximately 10.0 million shares were used for the quarter ending March 31,
2006, compared to approximately 9.6 million shares for the prior year.
Pro-Dex's CEO, Jeff Ritchey, commented, "We continue to generate
top-line growth and remain profitable, despite the challenges that have impacted
our operations during the past few quarters. While the financial results
reported today are disappointing, our order backlog, together with continuing
structure and system improvements, should allow us to maintain a positive
outlook on future sales and profits."
"Recent acquisitions have proven to be valuable additions to the
Company. As they have siginificantly broadened our product offering and
increased the size of our addressable market," Mr. Ritchey continued. The
reception for the Intraflow(R) system has been very positive at the Dental and
Endodontist trade shows and we are beginning to see sales build to meaningful
levels. Our Pro-Dex Astromec acquisition has been accretive to our operating
income and we continue to work toward integrating its specialized motor
manufacturing technology into the medical devices and other systems we provide
for both current and prospective customers.
For the three months ended March 31, 2006, the Company's consolidated
gross profit decreased 11.4 percent to $1.5 million, or 34.5 percent of sales,
compared to $1.6 million, or 50.7 percent of sales, for the same three months in
the previous year. Margins were impacted by approximately $359,000 in costs
directly related to the repair and upgrade of product shipped during fiscal
2005. This included an accrual of $235,000 for estimated warranty reserve costs
for costs associated with shipments made in prior periods. These repair and
upgrade costs resulted from previously disclosed faulty vendor-supplied
components that required design changes impacting many of our medical device
products.
Total operating expenses for the quarter ended March 31, 2006 increased
11.1 percent to $1.4 million, compared to $1.3 million for the three months
ended March 31, 2005. The increase was the result of additional sales and
marketing expenses associated with the IntraFlow product and administrative
costs associated with Pro-Dex Astromec, offset by personnel expense reductions.
Operating expenses during the third quarter were 34.3 percent of sales compared
to 50.7 percent in the prior year third quarter.
Consolidated net sales for the nine months ending March 31, 2006 were
$11.7 million, up 23.9 percent compared to the $9.5 million reported for the
same period last year. Gross profit for the nine months ending March 31, 2006
was $4.9 million, or 41.6 percent of sales, compared to $5.1 million, or 54.1
percent of sales in the same period last year. The decrease in gross profit as a
percentage of sales was primarily related to the impact of approximately
$551,000 in unplanned warranty and accrued costs incurred during the first nine
months of the fiscal year associated with faulty vendor-supplied components and
associated product redesigns. Total operating expenses for the nine months
ending March 31, 2006 were $4.0 million, up 4.8 percent compared to the $3.8
million for the same period last year. As a result, net income for the nine
months ending March 31, 2006 decreased 35.2 percent to $596,000, or $0.06 per
basic and diluted share, as compared to a net income of $921,000 or $0.10 per
basic and diluted share, for the nine months ended March 31, 2005.
Addressing the Company's ongoing operations, Mr. Ritchey noted, "We completed
the quarter with a backlog of approximately $10.7 million (inclusive of the $1.9
million backlog from the Pro-Dex Astromec operations) up from $7.0 million at
the end of December. We have already begun to see more robust product designs as
a result of the improvements made in our product development, procurement and
manufacturing processes. The system improvements have strengthened our current
product offerings while making us more attractive to both current and
prospective customers. Consequently, our product development efforts continue to
be active as we ended the quarter with six active product development projects,
all expected to launch and produce meaningful revenue in the next fiscal year."
On March 30, the Company completed the $2.2 million purchase of a
20,000 square foot industrial building, associated land and related
improvements, located in Carson City, Nevada, which was a subsequent component
of the Astromec acquisition.
The Company completed the quarter with $408,000 in cash on hand and $1
million of its credit line available. Shareholders' equity increased 7.3 percent
to $11.8 million, compared to $11.1 million as of June 30, 2005.
Investors and all others are invited to listen to a conference call
discussing the third quarter results, today at 4:30 p.m. Eastern Time. The call
will be broadcast over the Internet at www.pro-dex.com. An online replay will be
available for 30 days. Additionally, a telephone replay will be available two
hours after the call for 48-hours by dialing (800) 642-1687 for domestic callers
and (706) 645-9291 for international callers; conference ID# 8872980.
Pro-Dex Inc., with operations in Santa Ana, 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.
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2006 June 30,2005
--------------- ---------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 409,000 $ 2,584,000
Accounts receivable, net of allowance for doubtful
accounts of $40,000 at March 31 and $100,000
at June 30
2,899,000 3,521,000
Inventories, net 4,603,000 3,145,000
Prepaid expenses 173,000 66,000
Income tax receivable - 96,000
Deferred income taxes 771,000 519,000
--------------- ---------------
Total current assets 8,855,000 9,931,000
--------------- ---------------
Property, Plant, equipment and leasehold improvements,
net 3,702,000 1,156,000
--------------- ---------------
Other assets:
Goodwill 2,892,000 1,110,000
Intangibles - Patents, net 1,441,000 -
Deferred income taxes 392,000 541,000
Other 36,000 18,000
--------------- ---------------
Total other assets 4,761,000 1,669,000
--------------- ---------------
Total assets $ 17,318,000 $ 12,756,000
=============== ===============
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (con't)
March 31, 2006 June 30,2005
--------------- ---------------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,000,000 $ -
Accounts payable 851,000 1,158,000
Accrued expenses 701,000 472,000
Income taxes payable - 13,000
Current portion of term note 250,000 -
Current portion of real estate loan 26,000 -
Current portion of "patent" deferred payable 71,000 -
--------------- ---------------
Total current liabilities 2,899,000 1,643,000
Long-term liabilities:
Real estate loan payable 1,624,000 -
Term note 709,000 -
Patent deferred payable 245,000 -
--------------- ---------------
Total long-term liabilities 2,578,000 -
--------------- ---------------
Total liabilities 5,477,000 1,643,000
--------------- ---------------
Commitments and contingencies
Shareholders' equity:
Common shares; no par value; 50,000,000 shares authorized;
9,539,792 shares issued and outstanding March 31,
9,449,396 shares issued and outstanding June 30 16,065,000 15,933,000
Accumulated deficit (4,224,000) (4,820,000)
--------------- ---------------
Total shareholders' equity 11,841,000 11,113,000
--------------- ---------------
Total liabilities and shareholders' equity $ 17,318,000 $ 12,756,000
=============== ===============
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31 (unaudited)
2006 2005
--------------- ---------------
Net sales $ 4,214,000 $ 3,241,000
Cost of sales 2,759,000 1,598,000
--------------- ---------------
Gross profit 1,455,000 1,643,000
Operating expenses:
Selling 317,000 249,000
General and administrative 564,000 586,000
Research and development 566,000 467,000
--------------- ---------------
Total operating expenses 1,447,000 1,302,000
--------------- ---------------
Income from operations 8,000 341,000
Other income (expense):
Other income, net - 6,000
Royalty income 5,000 12,000
Interest (expense) (13,000) -
--------------- ---------------
Total (8,000) 18,000
--------------- ---------------
Income before provision for income taxes - 359,000
(Benefit) provision for income taxes (6,000) 84,000
--------------- ---------------
Net income $ 6,000 $ 275,000
Net Income per share:
--------------- ---------------
Basic $ 0.00 $ 0.03
--------------- ---------------
Diluted $ 0.00 $ 0.03
--------------- ---------------
Weighted average shares outstanding - basic 9,523,212 9,163,900
--------------- ---------------
Weighted average shares outstanding - diluted 9,998,691 9,615,127
--------------- ---------------
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31 (unaudited)
2006 2005
--------------- ---------------
Net sales $ 11,728,000 $ 9,466,000
Cost of sales 6,854,000 4,344,000
--------------- ---------------
Gross profit 4,874,000 5,122,000
Operating expenses:
Selling 827,000 726,000
General and administrative 1,684,000 1,711,000
Research and development 1,451,000 1,343,000
--------------- ---------------
Total operating expenses 3,962,000 3,780,000
--------------- ---------------
Income from operations 912,000 1,342,000
Other income (expense):
Other income (expense), net (7,000) 47,000
Royalty income 42,000 56,000
Interest income (expense ) 31,000 (9,000)
--------------- ---------------
Total 66,000 94,000
--------------- ---------------
Income before provision for income taxes 978,000 1,436,000
Provision for income taxes 382,000 515,000
--------------- ---------------
Net income $ 596,000 $ 921,000
Net Income per share:
Basic $ 0.06 $ 0.10
--------------- ---------------
Diluted $ 0.06 $ 0.10
--------------- ---------------
Weighted average shares outstanding - basic 9,490,317 9,006,073
--------------- ---------------
Weighted average shares outstanding - diluted 10,020,766 9,434,431
--------------- ---------------
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31 (unaudited)
2006 2005
--------------- ---------------
Cash Flows from Operating Activities:
Net Income $ 596,000 $ 921,000
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 302,000 176,000
Loss on disposal 7,000 -
(Recovery of) Provision for doubtful accounts (60,000) 5,000
Reserve for obsolete inventory 267,000 37,000
Stock based compensation - 19,000
Deferred taxes (103,000) -
Changes in:
(Increase) Decrease in accounts receivable 683,000 (200,000)
(Increase) in inventories (1,724,000) (447,000)
(Increase) in prepaid expenses (107,000) (94,000)
(Increase) in other assets (19,000) (32,000)
(Decrease) in accounts payable and accrued
expenses (79,000) (120,000)
Increase (Decrease) in income taxes payable 83,000 (154,000)
--------------- ---------------
Net Cash (used in) provided by Operating Activities (154,000) 111,000
=============== ===============
Cash Flows From Investing Activities:
Acquisition of Astromec, net of assets acquired (2,359,000) -
Proceeds from equipment sale 1,000 -
Purchase of equipment and leasehold improvements (588,000) (156,000)
Purchase of Intangible Assets - Patents related to
Interflow (1,165,000) -
--------------- ---------------
Net Cash (used in) Investing Activities (4,111,000) (156,000)
--------------- ---------------
Cash Flows from Financing Activities:
Principal payments on long-term shareholder borrowings - (145,000)
Borrowing on Line of Credit 1,000,000 -
Borrowing on Term Note 1,000,000 -
Principal payment on Term Note (42,000) -
Proceeds from option and warrant exercise 132,000 379,000
--------------- ---------------
Net Cash provided by Financing Activities 2,090,000 234,000
--------------- ---------------
Net (decrease) increase in Cash and Cash Equivalents (2,175,000) 189,000
Cash and Cash Equivalents, beginning of period 2,584,000 2,070,000
--------------- ---------------
Cash and Cash Equivalents, end of period $ 409,000 $ 2,259,000
=============== ===============
Supplemental Information
Cash payments for interest $ 18,000 $ 9,000
Cash payments for income taxes $ 385,000 $ 668,000
Non-Cash Disclosure of Investing and Financing Activities
Long term payable incurred in acquisition of intangible assets $ 316,000 $ -
--------------- ---------------
Acquisition of building and land - Real Estate Loan $ 1,650,000 $ -
--------------- ---------------
Intravantage Deferred Payable $ 317,000 $ -
--------------- ---------------
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