Exhibit 99.1
Contact: Mark Murphy, Chief Executive Officer
(714) 241-4411
Brett Maas, Investor Relations
Hayden Communications, Inc.
(646) 536-7331
FOR IMMEDIATE RELEASE
PRO-DEX, INC. ANNOUNCES FOURTH QUARTER AND FISCAL 2006 RESULTS
SALES INCREASE 27% FOR THE QUARTER, 23% FOR THE YEAR; EARNINGS AT HIGH-END
OF RANGE PROVIDED AUGUST 14
BACKLOG REACHES $11.7 MILLION AS OF JUNE 30, 2006
SANTA ANA, CA, September 27, 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 fourth quarter and full-year period ending June 30, 2006. The audited annual
results met the revenue expectations for the year and the earnings were at the
high-end of the Company's preliminary earnings outlook provided August 14, 2006.
Consolidated net sales for the fourth quarter were $5.3 million, a
sequential increase of 27 percent compared to the third quarter and an increase
of 22 percent compared to the $4.4 million reported during the fourth quarter of
fiscal 2005. For the fiscal year ended June 30, 2006, the Company reported
revenues of $17.1 million, 23% higher than the $13.8 million reported for fiscal
year 2005.
Net income for the fourth quarter was $231,000, or $0.02 per basic and
diluted share, compared to net income of $6,000, or $0.00 per basic and diluted
share for the third quarter and compared to net income of $928,000, or $0.09 per
basic and diluted share for the three months ended June 30, 2005. The Company
reported net income for the year of $827,000, or $0.09 per basic and $0.08 per
fully diluted share, compared to net income of $1.9 million, or $0.20 per basic
and $0.19 per fully diluted share last year. Last year's fourth quarter earnings
included a $227,000 favorable reversal of an income tax valuation reserve that
was not repeated this year. In calculating earnings per share for fiscal year
2006, the Company utilized 10.0 million fully diluted shares compared to 9.7
million fully diluted shares for the fiscal year 2005.
Mark Murphy, the Company's President and Chief Executive Officer,
commented, "We reported top and bottom line improvements in our fourth quarter
results compared to last quarter, but recognize the pressing need to make
further adjustments in our processes and our organizational structure to fully
realize the Company's earnings potential. We continue to see strong demand for
our expertise in helping customers accelerate the development of their products.
Our goal is to increase our quality and engineering capacity to meet this
growing demand in a more efficient manner with high standards for quality.
During fiscal 2006, we made two strategic asset acquisitions, strengthening our
product line by adding a high impact specialty dental product and a component
supplier with a majority of its sales to the aerospace market. These
acquisitions are expected to provide additional capacity for growth and a
high-margin product for us to market directly to the dental industry. We remain
excited by the potential of these two acquisitions and believe that we can
leverage these new assets to benefit shareholders."
Gross profit for the fourth quarter was $1.7 million, or 31.9 percent
of sales, compared to gross profit of $2.0 million, or 44.8 percent of sales for
the fourth quarter last year. The fourth quarter gross profit this year was
unfavorably impacted by $155,000 in warranty costs and $230,000 excess inventory
costs. Gross profit for the year was $6.6 million, or 38.5 percent of sales,
compared to gross profit of $7.1 million, or 51.2 percent of sales last year.
Gross profit for the year was impacted by over $700,000 in warranty costs and
over $500,000 in obsolete inventory costs.
Operating expenses increased by 21 percent to $1,468,000 compared to
$1,208,000 in the fourth quarter last year, due to expenses associated with the
Intraflow product launch of $150,000 and by incurring the normal operating costs
acquired with the Astromec acquisition of $161,000. For the full fiscal year,
operating expense increased 13.4 percent to $5.4 million from $4.8 million last
year, but as a percentage of sales, was reduced from 34.1 percent to 31.9
percent.
Mr. Murphy continued, "We completed the year with a backlog of $11.7
million compared with a backlog of $10.7 million at March 31, 2006 and $7.9
million at June 30, 2005 and recorded over $17 million in new order bookings
during fiscal year 2006, demonstrating ongoing demand for our expertise. The
quality issues we faced did not result in the loss of any customers,
demonstrating the Company's commitment to deliver on its promises. We look
forward to meeting the challenges which face our business today, and believe we
can build an even stronger Company, with more consistent revenue growth and
profitability, as we fully integrate our speed to market capability with
industry leading quality."
We completed the fiscal year with cash and cash equivalents of $358,000
compared to cash and cash equivalents of $2.6 million as of June 30, 2005, with
the decrease due to the acquisitions made during the year. We generated over
$200,000 in operating cash during the fourth quarter and reduced our credit line
borrowings by $100,000 during that period, leaving $1.1 million of our credit
line available at the end of the quarter. Total working capital was $6.1 million
as of June 30, 2006 compared to $8.3 million on June 30, 2005. Shareholder's
equity increased 8.6 percent to $12.1 million from $11.1 million as of June 30,
2005.
OUTLOOK:
- --------
For fiscal 2007, the Company does not currently plan to provide sales
and earnings guidance.
TELECONFERENCE INFORMATION:
- ---------------------------
Investors and all others are invited to listen to a conference call
discussing the fourth quarter and fiscal 2006 results, today at 4:30 p.m.
Eastern Time. The call is scheduled to be broadcast live over the Internet on
Wednesday, September 27, 2006 at 4:30 p.m. Eastern Time and may be accessed by
visiting the Company's website at 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. 7132629. You may identify the call as the Pro-Dex
Fourth Quarter Earnings Call.
Pro-Dex Inc., with operations in Santa Ana, California and Beaverton,
Oregon, specializes in bringing speed to market in the development and
manufacture of technology-based solutions that incorporate embedded motion
control and miniature rotary drive systems, serving the medical, dental, factory
automation, and scientific research markets. Pro-Dex's products are found in
hospitals, dental offices, medical engineering labs, scientific research
facilities and high tech manufacturing operations around the world.
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
30-Jun-06 30-Jun-05
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 358,000 $ 2,584,000
Accounts receivable, net of allowance for doubtful accounts
of $40,000 at June 30, 2006 and $100,000 at June 30, 2005 3,841,000 3,521,000
Inventories, net 3,980,000 3,145,000
Prepaid expenses 91,000 66,000
Income tax receivable 222,000 96,000
Deferred income taxes 766,000 519,000
-------------- --------------
Total current assets 9,258,000 9,931,000
-------------- --------------
Property, plant, equipment and leasehold improvements, net 3,726,000 1,156,000
-------------- --------------
Other assets:
Goodwill 2,931,000 1,110,000
Intangibles - Patents, net 1,417,000 -
Deferred income taxes 378,000 541,000
Other 44,000 18,000
-------------- --------------
Total other assets 4,770,000 1,669,000
-------------- --------------
Total assets $ 17,754,000 $ 12,756,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $ 900,000 $ -
Accounts payable 952,000 1,158,000
Accrued expenses 971,000 472,000
Income taxes payable - 13,000
Current portion of term note 250,000 -
Current portion of real estate loan 27,000 -
Current portion of "patent" deferred payable 71,000 -
-------------- --------------
Total current liabilities 3,171,000 1,643,000
Long-term liabilities:
Term note 646,000 -
Real estate loan 1,619,000 -
Patent deferred payable 245,000 -
-------------- --------------
Total long-term liabilities 2,510,000 -
-------------- --------------
Total liabilities 5,681,000 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 June 30, 2006
9,449,396 shares issued and outstanding June 30, 2005 16,066,000 15,933,000
Accumulated deficit (3,993,000) (4,820,000)
-------------- --------------
Total shareholders' equity 12,073,000 11,113,000
-------------- --------------
Total liabilities and shareholders' equity $ 17,754,000 $ 12,756,000
============== ==============
See notes to unaudited consolidated financial statements.
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30
2006 2005
-------------- --------------
Net sales $ 17,061,000 $ 13,834,000
Cost of sales 10,485,000 6,754,000
-------------- --------------
Gross profit 6,576,000 7,080,000
Operating expenses:
Selling 1,191,000 957,000
General and administrative expenses 2,230,000 2,091,000
Research and development costs 2,009,000 1,740,000
-------------- --------------
Total operating expenses 5,430,000 4,788,000
-------------- --------------
Income from operations 1,146,000 2,292,000
Other:
Other income (expense), net (19,000) 40,000
Royalty income 51,000 77,000
Interest income (expense), net (25,000) 21,000
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Total 7,000 138,000
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Income before income taxes provision 1,153,000 2,430,000
Income taxes provision 326,000 581,000
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Net income $ 827,000 $ 1,849,000
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Net Income per share:
-------------- --------------
Basic $ 0.09 $ 0.20
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Diluted $ 0.08 $ 0.19
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Weighted average shares outstanding - basic 9,502,652 9,106,846
-------------- --------------
Weighted average shares outstanding - diluted 9,988,569 9,650,980
-------------- --------------
See notes to consolidated financial statements.
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PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30
2006 2005
-------------- --------------
Cash Flows from Operating Activities:
Net Income $ 827,000 $ 1,849,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 356,000 348,000
Loss on disposal 7,000 -
(Recovery of) Provision for doubtful accounts (60,000) 60,000
(Recovery of) Reserve for obsolete inventory 502,000 (18,000)
Stock based compensation - 25,000
Deferred taxes (84,000) 521,000
Changes in:
(Increase) in accounts receivable (259,000) (1,212,000)
(Increase) in inventories (1,336,000) (585,000)
(Increase) decrease in prepaid expenses (25,000) 10,000
(Increase) in other assets (26,000) (1,000)
Increase in accounts payable and accrued expenses 292,000 453,000
(Decrease) in income taxes payable (139,000) (893,000)
-------------- --------------
Net Cash provided by Operating Activities 55,000 557,000
-------------- --------------
Cash Flows From Investing Activities:
Acquisition of Astromec, net of assets acquired (2,398,000) -
Proceeds from equipment sale 1,000 -
Purchase of equipment and leasehold improvements (642,000) (474,000)
Purchase of Intangible Assets - Patents related to Interflow (1,167,000) -
-------------- --------------
Net Cash (used in) Investing Activities (4,206,000) (474,000)
-------------- --------------
Cash Flows from Financing Activities:
Principal payments on long-term shareholder borrowings - (145,000)
Borrowing on Line of Credit 900,000 -
Borrowing on Term Note 1,000,000 -
Principal payments on Term Note (104,000) -
Principal payments on Mortgage (4,000) -
Proceeds from option and warrant exercise 133,000 576,000
-------------- --------------
Net Cash provided by Financing Activities 1,925,000 431,000
-------------- --------------
Net (decrease) increase in Cash and Cash Equivalents (2,226,000) 514,000
Cash and Cash Equivalents, beginning of period 2,584,000 2,070,000
-------------- --------------
Cash and Cash Equivalents, end of period $ 358,000 $ 2,584,000
============== ==============
Supplemental Information
Cash payments for interest $ 68,000 $ 9,000
Cash payments for income taxes $ 543,000 $ 943,000
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 $ -
See notes to consolidated financial statements.
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