Pro-Dex, Inc. Announces Fiscal Second Quarter 2010 Results
Company reports second quarter sales of $5.7 million and earnings of $0.06 per share and announces the departure of Executive Vice President / Business Development Executive.
IRVINE, Calif., Feb. 4 /PRNewswire-FirstCall/ -- PRO-DEX, INC. (Nasdaq: PDEX) today announced its financial results for the fiscal second quarter 2010, the period ending December 31, 2009.
Sales for the second quarter ended December 31, 2009, increased 9% to $5.7 million compared to $5.2 million for the previous year's second quarter, due to continued increases in medical device sales. The higher medical device sales were substantially driven by the new arthroscopic surgical hand-piece that began shipping at the end of the first fiscal quarter. Net income for the second quarter was $580,000 or $0.06 per share compared to a net income of $81,000 or $0.01 per share for the previous year's second quarter.
Gross profit for the quarter ended December 31, 2009, increased to $2.0 million, a 35% gross profit margin, compared to gross profit of $1.9 million or 37% gross profit margin in last year's second quarter. The profit increase was consistent with the increased sales; however the gross profit margin was reduced due to a lower margin mix of products.
Operating expenses for the second quarter (excluding the impairment charge discussed below) declined due to cost saving measures implemented last year. The cost savings measures were primarily structurally decreased labor expenses.
Included in this quarter's net income were two non-recurring events:
- A pre-tax impairment charge of approximately $140,000 for the remaining value of certain patents purchased in 2005. Strategic options to sell, license, or otherwise exploit this technology have not materialized and do not appear imminent.
- An income tax gain of approximately $489,000 created by reversing a portion of the income tax valuation allowance recorded in the third quarter of fiscal year 2009. In November 2009, a change in the tax law extended the allowable time period of net operating loss carry backs from two to five years. This enabled the Company to use the benefits and file for a refund for the 2004 and 2005 tax years.
These two non-recurring items created a net $0.04 per share profit in the quarter.
During the second quarter of fiscal year 2010, the Company continued to strengthen its balance sheet, generating an additional $561,000 of operating cash. In the first six months of fiscal year 2010, the Company generated $971,000 in operating cash, a significant improvement from the $56,000 in cash used in the first six months of fiscal year 2009. At December 31, 2009, the Company had cash and cash equivalents of $1,790,000 compared to cash and cash equivalents of $1,124,000 as of June 30, 2009 and $406,000 as of December 31, 2008. The Company’s net debt (total debt less cash) was $1.3 million at December 31, 2009, down from $2.2 million at June 30, 2009 and down from $3.9 million at December 31, 2008.
Mark Murphy, the Company’s President and Chief Executive Officer, commented, “We are pleased to report another quarter of solid sales, earnings and cash generation. Excluding both the negative impact of the patent write-off and the positive impact of the tax gain, the Company’s operating engine produced its third consecutive two-cents per share quarter. And in an environment where cash is critical, it is encouraging to post another half-million dollar positive operating cash quarter. Stronger fiscal year 2010 sales, combined with our reduced cost structure, have allowed the Company to function more efficiently.”
Pro-Dex also announced today that Mr. Patrick Johnson will be leaving the employment of the Company effective February 5, 2010. Mr. Johnson joined the Company in 2000 as the General Manager of the Micro Motors Division, served as CEO from 2002 to 2006, and as Executive Vice President and Chief Business Development Officer since 2006.
Commenting on this event, Mr. Murphy stated, “Patrick has made significant contributions to Pro-Dex during his 10 year career here. He led the reinvention of the Company in the early 2000’s, transforming Pro-Dex from a dental hand-piece company into a comprehensive medical device development and manufacturing player. His leadership has framed a large part of who we are today. Patrick will next be applying his leadership skills to a major humanitarian relief effort in Haiti, heading up a project called WorldBed. On behalf of the Company, I want to thank Patrick and wish him all the best in his future endeavors.”
Teleconference Information:
Investors and all others are invited to listen to a conference call discussing the second fiscal quarter 2010 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 or directly at http://www.videonewswire.com/event.asp?id=65942. 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 (877) 356-8625 U.S. and (706) 634-9779 International, conference I.D. 54190245. You may identify the call as the Pro-Dex Second Quarter Earnings Call. An online archive of the broadcast will be available within two hours of the completion of the call and will be accessible on the Company's website for 365 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 54190245.
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 miniature rotary drive systems, embedded motion control 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, commercial and military aircraft, scientific research facilities and high tech manufacturing operations around the world.
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
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
12/31/2009 6/30/2009
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents $1,790,000 $1,124,000
Accounts receivable, net of
allowance for doubtful accounts
of $57,000 at 12/31/09 and $52,000
at 6/30/09 2,300,000 2,515,000
Other Current Receivables - 16,000
Inventories 3,216,000 3,365,000
Prepaid expenses 302,000 117,000
Prepaid income taxes - 118,000
Deferred income taxes 643,000 -
------- ---
Total current assets 8,251,000 7,255,000
========= =========
Property, plant, equipment and
leasehold improvements, net 5,706,000 5,981,000
--------- ---------
Other assets:
Goodwill 2,997,000 2,997,000
Intangibles - Patents, net - 147,000
Other 87,000 87,000
------ ------
Total other assets 3,084,000 3,231,000
========= =========
Total assets $17,041,000 $16,467,000
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $568,000 $827,000
Accrued expenses 1,561,000 1,394,000
Income taxes payable 64,000 53,000
Current Portion of T.I. Loan 400,000 400,000
Current portion of real estate
loan 34,000 33,000
------ ------
Total current liabilities 2,627,000 2,707,000
Long-term liabilities:
Notes Payable - T.I. Loan 1,167,000 1,367,000
Real estate loan 1,511,000 1,528,000
Deferred income taxes 184,000 171,000
Deferred rent 236,000 212,000
------- -------
Total long-term liabilities 3,098,000 3,278,000
========= =========
Total liabilities 5,725,000 5,985,000
--------- ---------
Commitments and contingencies
Shareholders' equity:
Common shares; no par value;
50,000,000 shares authorized;
9,668,671 shares issued and
outstanding Dec 31, 2009
9,668,671 shares issued and
outstanding June 30, 2009 16,645,000 16,574,000
Accumulated deficit (5,329,000) (6,092,000)
---------- ----------
Total shareholders’ equity 11,316,000 10,482,000
Total liabilities and
shareholders’ equity $17,041,000 $16,467,000
=========== ===========
See notes to condensed consolidated financial statements.
PRO-DEX, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended December 31 (unaudited)
2009 2008
---- ----
Net sales $5,696,000 $5,237,000
Cost of sales 3,696,000 3,305,000
--------- ---------
Gross profit 2,000,000 1,932,000
Operating expenses:
Selling expense 353,000 329,000
General and administrative expenses 799,000 833,000
Impairment of intangible asset 140,000 -
Research and development costs 576,000 677,000
------- -------
Total operating expenses 1,868,000 1,839,000
--------- ---------
Income from operations 132,000 93,000
Other income (expense):
Royalty income 2,000 8,000
Interest expense (53,000) (60,000)
------- -------
Total (51,000) (52,000)
------- -------
Income before (benefit) for income
taxes 81,000 41,000
(Benefit) for income taxes (499,000) (40,000)
-------- -------
Net income $580,000 $81,000
-------- -------
Net income per share:
Basic $0.06 $0.01
----- -----
Diluted $0.06 $0.01
----- -----
Weighted average shares outstanding
-basic 9,668,671 9,698,913
--------- ---------
Weighted average shares outstanding
-diluted 9,695,518 9,714,917
--------- ---------
See notes to condensed consolidated financial statements.
PRO-DEX, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended December 31 (unaudited)
2009 2008
---- ----
Net sales $11,329,000 $10,893,000
Cost of sales 7,456,000 7,206,000
--------- ---------
Gross profit 3,873,000 3,687,000
Operating expenses:
Selling expense 641,000 673,000
General and administrative
expenses 1,526,000 1,681,000
Impairment of intangible asset 140,000 -
Research and development costs 1,197,000 1,396,000
--------- ---------
Total operating expenses 3,504,000 3,750,000
--------- ---------
Income (loss) from operations 369,000 (63,000)
Other income (expense):
Royalty income 3,000 9,000
Interest expense (103,000) (121,000)
-------- --------
Total (100,000) (112,000)
-------- --------
Income before (benefit) for
income taxes 269,000 (175,000)
Provision (Benefit) for income
taxes (494,000) (138,000)
-------- --------
Net Income (loss) $763,000 $(37,000)
-------- --------
Net income (loss) per share:
Basic $0.08 $(0.00)
----- ------
Diluted $0.08 $(0.00)
----- ------
Weighted average shares
outstanding -basic 9,668,671 9,741,160
--------- ---------
Weighted average shares
outstanding -diluted 9,686,331 9,741,160
--------- ---------
See notes to condensed consolidated financial statements
PRO-DEX, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended December 31 (unaudited)
2009 2008
---- ----
Cash Flows from Operating Activities:
Net Income (loss) $763,000 $(37,000)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 371,000 417,000
Impairment of intangible asset 140,000 -
Stock based compensation 71,000 86,000
Provision for (Recovery of) doubtful
accounts 5,000 (5,000)
(Decrease) in deferred tax allowance (525,000) (7,000)
Changes in:
Decrease in accounts receivable 226,000 362,000
Decrease in inventories 148,000 1,095,000
(Increase) Decrease in prepaid expenses (185,000) 43,000
(Increase) in other assets - (17,000)
(Decrease) in accounts payable and
accrued expenses (68,000) (1,887,000)
(Decrease) in income taxes payable 25,000 (106,000)
------ --------
Net Cash provided (used) by Operating
Activities 971,000 (56,000)
------- -------
Cash Flows From Investing Activities:
Purchases of equipment and leasehold
improvements (90,000) (180,000)
------- --------
Net Cash used in Investing Activities (90,000) (180,000)
------- --------
Cash Flows from Financing Activities:
Net (payments) on line of credit - (1,600,000)
Principal (payments) on term note - (125,000)
Principal (payments) borrowing on TI
Loan (200,000) 1,967,000
Principal (payments) on mortgage (16,000) (16,000)
Stock repurchases - (101,000)
--- --------
Net Cash (used) provided by Financing
Activities (216,000) 125,000
-------- -------
Net increase (decrease) in Cash and
Cash Equivalents 665,000 (111,000)
Cash and Cash Equivalents, beginning of
period 1,125,000 517,000
--------- -------
Cash and Cash Equivalents, end of
period $1,790,000 $406,000
========== ========
Supplemental Information
------------------------
Cash payments for interest $105,000 $117,000
Cash payments for income taxes $6,000 $-
------ ---
SOURCE Pro-Dex, Inc.
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