Full Press Release Details
Contact: Harold A. Hurwitz, Chief Executive
PRO-DEX, INC. ANNOUNCES FISCAL 2013 FOURTH
AND FULL-YEAR RESULTS
Company Announces Share Repurchase Program
CA, September 25, 2013 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results
for its fiscal 2013 fourth quarter and full-year ended June 30, 2013.
Quarter Ended June 30, 2013
Sales for the quarter
ended June 30, 2013 decreased 26% to $2.7 million from $3.7 million for the corresponding quarter in 2012. This decrease was due
primarily to the previously disclosed reductions in purchases by the Company's former largest customer and to a deferral
in the timing of product orders from the Company's current largest powered surgical instrument customer, both of which were
partially offset by increases in surgical instrument sales to other customers.
the quarter ended June 30, 2013 decreased to $565,000, compared to gross profit of $858,000 for the year-ago period, primarily
as a result of the sales volume decrease between periods and the accrual in 2013 of anticipated losses from the development portion
of certain contracts. Gross profit as a percentage of sales was 21% for the quarter ended June 30, 2013, as compared to 23% for
the corresponding quarter in 2012. This decrease was due primarily to the effects of the accrual for estimated contract losses
and to unfavorable variances consistent with the lower sales and manufacturing volume, partially offset by the effects of improved
cost performance and lower warranty costs in 2013, relative to 2012.
(which include selling, general and administrative, and research and development expenses) for the quarter ended June 30, 2013
decreased 24% to $1.3 million from $1.7 million in the prior year's corresponding quarter. Included in operating expenses
for the quarter ended June 30, 2013 were severance costs amounting to $173,000, as compared to $36,000 of such costs in the corresponding
Loss from continuing
operations for the quarter ended June 30, 2013 was $680,000, compared to a loss from continuing operations of $430,000 in the corresponding
quarter in 2012. Net loss for the quarter ended June 30, 2013 was $673,000, or $0.20 per diluted share, compared to a net loss
of $544,000, or $0.17 per diluted share, for the corresponding quarter in 2012. Of note is that the fiscal 2012 fourth quarter
results reflect a $276,000 benefit from the carry back of tax-basis net operating losses that offset taxable income from prior
years. Because the 2012 carry back fully offset such prior years' taxable income, a comparable benefit was not available
Year Ended June 30, 2013
ended June 30, 2013 decreased 29% to $12.2 million from $17.3 million in fiscal year 2012. Excluding product sales and repair services
to the Company's former largest customer, which represented a reduction of $6.0 million in fiscal 2013 from fiscal 2012,
sales and repair services of surgical instruments increased $1.4 million, or 16%, in fiscal 2013 when compared to fiscal 2012.
June 30, 2013, gross profit was $3.7 million, compared to $5.4 million in fiscal 2012. This decrease resulted primarily from the
reduced sales and manufacturing volume in fiscal 2013, and from the
accrual in fiscal 2013 of anticipated losses from the development
portion of certain contracts, partially offset by a decrease in warranty costs from fiscal 2012 to fiscal 2013. As a percentage
of sales, gross margin was 30% for the year ended June 30, 2013, as compared to 31% in fiscal 2012. This decrease was due primarily
to the accrual in fiscal 2013 of the anticipated contract losses, partially offset by favorable changes in warranty costs.
for the year ended June 30, 2013 decreased 17% to $5.6 million, from $6.8 million in fiscal 2012. Comprising this decrease were
planned, Company-wide expense reductions, and the deployment of engineering resources, normally charged to research and development
expense, to support revenue-producing development contracts with customers, the costs of which will be recorded as costs of sales
when the development projects are completed. Partially offsetting these expense decreases were costs of $190,000 incurred in fiscal
2013 that were associated with the contested election of directors at our January 2013 annual meeting of shareholders.
June 30, 2013, loss from continuing operations was $1.9 million, compared to a loss from continuing operations of $960,000 in fiscal
2012. Net loss for the year ended June 30, 2013 was $1.8 million, or $0.54 per diluted share, as compared to a net loss of $876,000,
or $0.27 per diluted share, for fiscal 2012. As described above, the fiscal 2012 results reflect a $276,000 tax benefit not available
During the year ended June
30, 2013, the Company used $1.3 million of cash in operating activities. This use of cash reflects primarily an increase in inventories,
amounting to $1.0 million, resulting largely from a build-up of the Company's stock of components with the objective of shortening
lead times with respect to certain of the Company's products. In the fourth quarter of fiscal 2013, the Company's largest
customer began deferring the timing of its product orders, thus prolonging the effect of this inventory build-up with respect to
inventory unique to that customer's products.
In addition, as announced
previously, in September 2012 the Company repaid the entire outstanding balance on its term loan from Union Bank amounting to $685,000,
and in June 2013 the Company made its first investments, amounting to $365,000, as part of its program to direct excess capital
into opportunities identified by a capital allocation committee established by the Company's Board of Directors.
As a result of the foregoing,
cash on hand at June 30, 2013 was $1.7 million, compared to $4.1 million at June 30, 2012.
Share Repurchase Program
The Company also announced today that its Board of Directors has approved a share repurchase program authorizing
the Company to repurchase up to 750,000 shares of its common stock. The share repurchase program has no stated expiration date.
Hurwitz, the Company's President and Chief Executive Officer, commented, "Pro-Dex's
plan for fiscal year 2013 had a clear and challenging agenda -- to rebuild our revenue base and right-size our cost footprint.
A look beneath the surface of our reported results allows for an understanding of our progress in both areas."
we commenced engineering work on projects in which we are developing a next-generation platform for powered surgical instruments,
which, if our work is successful, are expected to begin generating manufacturing revenues from our customers in fiscal 2014 or 2015. In
addition, we started development efforts on a contract manufacturing project related to a device to be used in a potentially disruptive
new surgical system being developed by one of our customers, also with the expectation of generating manufacturing revenues commencing in fiscal 2014
or 2015. These projects arose from business development efforts through which we initiated contact with these customers two years
ago. And we currently are in either discussions or the proposal phase for additional next-generation or contract manufacturing
projects as a result of our continuing business development efforts. Our hard work to rebuild our revenue base is starting to show
"One note with respect
to our reported revenues: The close of fiscal 2013 marks the end of the year-over-year comparisons that have been affected by the
loss of our former largest customer. This disclosure has cast a shadow over our results since fiscal 2010. We are happy to close
this chapter, and look forward to focusing our comments on the revenue rebuilding effort, which we believe is the true measure
of our revenue performance."
are with a 17% year-over-year reduction in operating expenses, this comparison does not fully reflect our progress in right-sizing
our expense footprint. During fiscal 2013 we reduced the composition of our senior management team from six to four members, and
our headcount from 74 to 67. As a result, our annualized base compensation was reduced from $4.6 million at June 30, 2012 to $3.7
million at June 30, 2013, a 20% decrease. In addition, we have renegotiated the rental rate for the remainder of the lease term
for our facility in Irvine, California that will result in a reduction of annualized expense of approximately $51,000, and annualized
compensation for non-employee members of our Board of Directors has been reduced by approximately $140,000 compared to recent years
based on a new compensation plan approved by our Board in May 2013. We enjoyed but a portion of the benefits of these, among many
other, cost savings measures in fiscal 2013, and we are looking forward to realizing the full-year effect of our efforts in the
current fiscal year 2014."
"During fiscal 2013,
we invested $1.0 million in inventory growth, principally to accommodate delivery commitments to our largest customer based on
its anticipated delivery requirements. In the fiscal 2013 fourth quarter, we learned from this customer of its need to schedule
deliveries for later dates than originally anticipated. As a result, conversion to cash of the inventory related to this customer
will likely be weighted toward the second half of the current fiscal year 2014 and possibly the first half of fiscal year 2015."
"Even with this unanticipated
prolonged investment in inventory, we continue to maintain liquidity in excess of our anticipated short-term requirements. As a
result, as of June 30, 2013, we had invested $365,000 in marketable equity securities under the investment framework approved by
our Board, as we have previously described."
not satisfied with the direction and magnitude of our fiscal 2013 loss from continuing operations and cash used in operations.
While proxy contest and severance costs, aggregating $560,000, constituted 30% of the loss and 44% of the cash usage, the point
remains that our goal is to restore Pro-Dex to profitability and positive cash flow from operations. Accomplishing this goal is
neither easy nor assured. Nonetheless, the examples of rebuilding the revenue base and right-sizing our cost footprint discussed
herein are evidence of our best efforts to accomplish this goal in the context of our new operating structure."
Board Chairman Comments
to thank the Pro-Dex team for their hard work and engagement. Tough circumstances required Hal and the new board to make difficult