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 SECOND QUARTER FISCAL 2007 FINANCIAL RESULTS
SALES INCREASE 23.5% FOR THE QUARTER; ONGOING WARRANTY SITUATION AND
REFUND OF A SPECIFIC PROJECT RESULT IN LOWER GROSS MARGINS, NET LOSS FOR THE
QUARTER
BACKLOG REACHES $11.7 MILLION VS. $7.0 MILLION AS OF 12/31/05 AND
$11.7 MILLION AT 6/30/06
SANTA ANA, CA, February 13, 2007 - 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 second
quarter ending December 31, 2006.
Consolidated net sales for the second fiscal quarter were $4.6 million, an
increase of 23.5 percent compared to the second fiscal quarter of 2006. The net
loss for the second fiscal quarter was $138,000, or $(0.01) per basic and fully
diluted share compared to net income of $327,000, or $0.03 per basic and fully
diluted share last year. In calculating earnings per share, the Company utilized
9.6 million fully diluted shares for the fiscal 2007 second quarter and 10.1
million diluted shares for the 2006 fiscal second quarter.
Mark P. Murphy, the Company's President and Chief Executive Officer,
commented, "We continue to grow our revenue base, due in large part to Astromec
which contributed $861,000 in revenue to our top line. In addition, we booked
$5.5 million in new orders during the quarter, increasing our backlog to $11.7
million. This level of backlog demonstrates the ongoing demand for our expertise
and sets the stage for continued revenue growth and a return to profitability as
we work to put the warranty issue behind us in the coming quarters."
Gross profit for the second fiscal quarter was $1.4 million, or 29.6
percent of sales, compared with gross profit of $1.7 million, or 46.1 percent of
sales in the second fiscal quarter last year. Approximately 7 percent of the
difference in gross profit margin compared to the prior-year second quarter is
due to less favorable product sales mix with the reduced medical product sales
and approximately 4 percent of the difference is due to lower margins associated
with the Astromec products that have margins in the 20-30 percent range. The
higher warranty costs caused a 3 percent reduction and the associated
manufacturing inefficiencies incurred in the second quarter was responsible for
approximately 2 percent of the reduction.
Mr. Murphy continued, "We faced a number of challenges during the quarter,
impacting our profitability, but I am pleased with the progress we have made to
date in resolving these issues. During the first fiscal quarter, we hired Mr.
Joe Rotino as our new Vice President of Quality Management and Regulatory
Affairs, adding a 20-year veteran in medical and dental device manufacturing who
previously worked for Kendall McGaw Labs, Baxter Healthcare, and Sybron Dental
to our technical team. We can already see that Joe's collaborative and energetic
leadership style will enable us to reach the next level of quality focus that we
require.
Operating expenses increased by 35.1 percent to $1.7 million compared to
$1.2 million in the second fiscal quarter last year, due to expenses associated
with higher product development and increased sales and marketing costs.
Included in operating expenses for the second quarter of fiscal 2007 was a 33.9
percent increase in selling expenses, a 39.7 percent decrease in general and
administrative expenses and a 30.4 percent increase in research and development
expense. The addition of Pro-Dex Astromec added $96,000 to the total
consolidated research and development costs and the remainder of the increase
was due to the timing of audit fees related to the year-end audit and a $52,000
increase in expense as a result of the adoption of FAS 123 (R).
Mr. Murphy concluded, "We continue to invest in our future, increasing our
R&D budget to deliver on our promises as well as enhancing advertising
initiatives to drive future growth. We believe these investments will benefit
our shareholders in the coming quarters, setting the stage for our next phase of
growth, capitalizing on our strong reputation in the marketplace and the strong
demand for our services."
For the six month period ended December 31, 2006, consolidated sales
increased to $9.9 million, up 31 percent from the $7.5 million for the six
months ended December 31, 2005. Gross profit for the six months decreased 2
percent compared to the same period in the previous year due to the jeffwarranty
expenses and increased inventory reserve coupled with the decreased sales levels
of medical products that carry higher gross margins. Gross profit as a
percentage of sales decreased to 34 percent for the six months compared to 46
percent for the six months ended December 31, 2005. Selling, General and
Administrative expenses increased to $2.0 million for the six months from $1.6
million last year and Company-funded research and development expenses increased
$340,000, or 38%, to $1.2 million for the six months from $886,000 last year.
Consolidated operating profit for the six months decreased to $130,000 compared
to $855,000 for the same period in the previous year due to the lower gross
margin coupled with the higher level of SG&A and engineering expenses. Net
income for the six months was $103,000 or $0.01 per share on a basic and diluted
basis, as compared to a net income of $577,000 or $0.06 per share on a basic and
diluted basis for the six months ended December 31, 2005.
Pro-Dex completed the second quarter with cash and cash equivalents of
$366,000, compared to cash and cash equivalents of $295,000 on September 30,
2006 and $358,000 as of June 30, 2006. The Company generated more than $200,000
in operating cash during the second quarter and increased its credit line
borrowings by $500,000 during that period, leaving $800,000 of its credit line
available at the end of the quarter. Total working capital was $6.0 million as
of December 30, 2006 compared to $6.1 million on June 30, 2006. Shareholder's
equity increased 1.5 percent to $12.3 million from $12.1 million as of June 30,
2006.
TELECONFERENCE INFORMATION:
- ---------------------------
Investors and all others are invited to listen to a conference call
discussing the second quarter 2007 results, today at 4:30 p.m. Eastern Time. The
call is scheduled to be broadcast live over the Internet on Tuesday, February
13, 2007 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. 8597726. You may identify the call as the Pro-Dex Second Quarter
Earnings Call.
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.
(tables follow)
PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2006 2006
------------ ------------
(audited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 366,000 $ 358,000
Accounts receivable, net of allowance for doubtful
accounts of $117,000 at December 31 and
$40,000 at June 30 3,341,000 3,841,000
Inventories, net 4,743,000 3,980,000
Prepaid expenses 182,000 91,000
Income tax receivable 117,000 222,000
Deferred income taxes 1,153,000 766,000
------------ ------------
Total current assets 9,902,000 9,258,000
------------ ------------
Property, plant, equipment and
leasehold improvements, net 3,761,000 3,726,000
------------ ------------
Other assets:
Goodwill 2,997,000 2,931,000
Intangibles - Patents, net 1,370,000 1,417,000
Deferred income taxes 295,000 378,000
Other 74,000 44,000
------------ ------------
Total other assets 4,736,000 4,770,000
------------ ------------
Total assets $ 18,399,000 $ 17,754,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Credit Line $ 1,200,000 $ 900,000
Accounts payable 1,351,000 952,000
Accrued expenses 949,000 971,000
Current portion of term note 250,000 250,000
Current portion of real estate loan 27,000 27,000
Current portion of "patent" deferred payable 82,000 71,000
------------ ------------
Total current liabilities 3,859,000 3,171,000
Long-term liabilities
Term note 521,000 646,000
Real estate loan 1,605,000 1,619,000
Patent deferred payable 158,000 245,000
------------ ------------
Total long-term liabilities 2,284,000 2,510,000
------------ ------------
Total liabilities 6,143,000 5,681,000
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common shares; no par value; 50,000,000 shares
authorized; 9,551,550 shares issued and
outstanding December 31, 2006, 9,539,792 shares
issued and outstanding June 30, 2006, 16,124,000 16,066,000
Accumulated deficit (3,868,000) (3,993,000)
------------ ------------
Total shareholders' equity 12,256,000 12,073,000
------------ ------------
Total liabilities and shareholders' equity $ 18,399,000 $ 17,754,000
============ ============
See notes to consolidated financial statements.
PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31 (unaudited)
2006 2005
------------ ------------
Net sales $ 4,631,000 $ 3,750,000
Cost of sales 3,262,000 2,022,000
------------ ------------
Gross profit 1,369,000 1,728,000
Operating expenses:
Selling 340,000 254,000
General and administrative expenses 746,000 534,000
Research and development costs 579,000 444,000
------------ ------------
Total operating expenses 1,665,000 1,232,000
------------ ------------
(Loss) income from operations (296,000) 496,000
Other income (expense):
Royalty income 18,000 26,000
Interest income (expense) (58,000) 21,000
------------ ------------
Total (40,000) 47,000
------------ ------------
(Loss) income before (benefit) provision
for income taxes (336,000) 543,000
(Benefit) provision for income taxes (198,000) 216,000
------------ ------------
Net (loss) income $ (138,000) $ 327,000
------------ ------------
Net (loss) income per share:
Basic $ (0.01) $ 0.03
------------ ------------
Diluted $ (0.01) $ 0.03
------------ ------------
Weighted average shares outstanding - basic 9,550,521 9,495,673
------------ ------------
Weighted average shares outstanding - diluted 9,550,521 10,053,076
------------ ------------
PRO-DEX, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended December 31 (unaudited)
2006 2005
------------ ------------
Net sales $ 9,864,000 $ 7,514,000
Cost of sales 6,514,000 4,094,000
------------ ------------
Gross profit 3,350,000 3,420,000
Operating expenses:
Selling 678,000 509,000
General and administrative expenses 1,316,000 1,120,000
Research and development costs 1,226,000 886,000
------------ ------------
Total operating expenses 3,220,000 2,515,000
Income from operations 130,000 905,000
Other income (expense):
Other expense, net - (7,000)
Royalty income 25,000 37,000
Interest income (expense ) (112,000) 43,000
------------ ------------
Total (87,000) 73,000
------------ ------------
Income before (benefit) provision for income taxes 43,000 978,000
(Benefit) provision for income taxes (60,000) 389,000
------------ ------------
Net income $ 103,000 $ 589,000
------------ ------------
Net Income per share:
Basic $ 0.01 $ 0.06
------------ ------------
Diluted $ 0.01 $ 0.06
------------ ------------
Weighted average shares outstanding - basic 9,545,757 9,474,227
------------ ------------
Weighted average shares outstanding - diluted 9,769,444 10,045,179
------------ ------------
PRO-DEX, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31 (unaudited)
2006 2005
------------ ------------
Cash Flows from Operating Activities:
Net Income $ 103,000 $ 589,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 232,000 189,000
Loss on disposal - 6,000
(Recovery) provision for doubtful accounts 77,000 (60,000)
Reserve for obsolete inventory 200,000 99,000
Vested option expense 55,000 -
(Decrease) increase in deferred taxes (305,000) 45,000
Changes in:
Decrease in accounts receivable 422,000 939,000
(Increase) in inventories (963,000) (528,000)
(Increase) in prepaid expenses (90,000) (158,000)
(Increase) in other assets (30,000) (17,000)
Increase (decrease) in accounts
payable and accrued expenses 376,000 (244,000)
Increase in income taxes payable 127,000 92,000
------------ ------------
Net Cash provided by Operating Activities 204,000 952,000
------------ ------------
Cash Flows From Investing Activities:
Proceeds from equipment sale - 1,000
Additions to Astromec acquisition cost (66,000) -
Additions to Intangible assets - Patents related to
Intraflow (2,000) (1,223,000)
Purchases of equipment and leasehold improvements (217,000) (250,000)
------------ ------------
Net Cash used in Investing Activities (285,000) (1,472,000)
------------ ------------
Cash Flows from Financing Activities:
Net borrowing on line of credit 300,000 -
Principal (payments) on term note (125,000) -
Principal (payments) on mortgage (13,000) -
Principal (payment) on patent deferred payable (76,000) -
Proceeds from warrant and option exercise 3,000 113,000
------------ ------------
Net Cash provided by Financing Activities 89,000 113,000
------------ ------------
Net Increase (decrease) in Cash and Cash Equivalents 8,000 (407,000)
Cash and Cash Equivalents, beginning of period 358,000 2,584,000
------------ ------------
Cash and Cash Equivalents, end of period $ 366,000 $ 2,177,000
============ ============
Supplemental Information
Cash payments for interest $ 150,000 $ 9,000
Cash payments for income taxes $ 137,000 $ 660,000