Full Press Release Details
Contact: Harold A. Hurwitz, Chief Executive Officer
PRO-DEX, INC. ANNOUNCES FISCAL 2014 THIRD
AND NINE-MONTH RESULTS
12, 2014 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2014 third quarter ended March 31, 2014.
months ended March 31, 2014 decreased $656,000, or 21%,
to $2.4 million from $3.1 million for the three
months ended March 31, 2013, due primarily to decreases of $659,000 in medical device
development and manufacturing revenues. The decrease in the Company's medical device product line was primarily due to a
decrease in product and repair revenues from its largest customer, arising from the revised terms negotiated with the customer
in December 2013 following the customer's suspension of orders from March through November 2013. Such revised terms provided
for lower monthly shipments in the 2014 period, relative to the 2013 period prior to the suspension.
March 31, 2014 decreased $343,000,
or 39%, to $540,000 from $883,000 for
the same period in 2013. Contributing to this decrease were the reduction in
sales volume, described above, and the related effects of increased under-absorption
of manufacturing costs, which reduced gross profit by $67,000. Also contributing to the decrease in gross profit was an accrual
of $47,000 for anticipated losses from the development services portion of certain contracts, which did not occur during the corresponding
period of the prior fiscal year. These factors were partially offset by an aggregate decrease of $102,000 in inventory and warranty
charges. Other than the reduction in sales volume, the factors affecting gross profit described above also resulted in a
decrease of gross margin as a percentage of sales to 22% for the three months ended March
31, 2014 from 29% for the corresponding period in 2013.
Operating expenses (which
include selling, general and administrative, and research and development expenses) for the quarter ended March 31, 2014 decreased
41% to $978,000 from $1.7 million in the prior year's corresponding quarter, reflecting primarily the effects of the Company's
cost reduction program.
Loss from continuing operations
for the quarter ended March 31, 2014 was $358,000, compared to a loss from continuing operations of $765,000 in the corresponding
quarter in 2013. Net loss for the quarter ended March 31, 2014 was $385,000, or $0.12 per share, compared to a net loss of $747,000,
or $0.22 per share, for the corresponding quarter in 2013.
Ended March 31, 2014
Net sales for the nine months ended March 31, 2014
decreased $1.9 million, or 20%, to $7.6 million from $9.5 million for the nine months ended March 31, 2013, due primarily to decreases of $1.6 million in medical
device development and manufacturing revenues, and $315,000 in motion control product revenues, which were partially offset by
an increase of $231,000 in dental product revenues.
$1.6 million decrease related to the Company's medical device product line was comprised of a $1.2 million decrease in revenues
from its current largest customer, arising from the effects of the suspension of orders discussed above during the first five months
of the nine-month period in 2014, and a $278,000 decrease in repair revenues from its former largest customer. The Company expects
sales to its former customer to decline to zero over the balance of fiscal year 2014.
Gross profit for the nine months ended March 31, 2014 decreased $1.1 million, or 35%, to $2.0 million from
$3.2 million for the same period in 2013. Contributing to this decrease were the reduction in sales volume described above and
the effects of unfavorable production variances, which reduced gross profit by $475,000. Also contributing to the decrease in gross
profit was an accrual of $278,000 for anticipated losses from the development services portion of certain contracts, which did
not occur during the corresponding period of the prior fiscal year. These factors were partially offset by an aggregate decrease
of $363,000 in inventory and warranty charges. Other than the reduction in sales volume, the factors affecting gross profit
described above also resulted in a decrease of gross margin as a percentage of sales to 27%
for the nine months ended March 31, 2014 from 33% for the corresponding period in 2013.
Operating expenses (which
include selling, general and administrative, and research and development expenses) for the nine months ended March 31, 2014 decreased
35% to $2.8 million from $4.4 million in the prior year's corresponding period, reflecting primarily the effects of the Company's
cost reduction program.
Loss from continuing operations
for the nine months ended March 31, 2014 was $679,000, compared to a loss from continuing operations of $1.2 million for the corresponding
period in 2013. Net loss for the nine months ended March 31, 2014 was $512,000, or $0.15 per share, compared to a net loss of $1.1
million, or $0.34 per share, for the corresponding period in 2013.
Hurwitz, the Company's President and Chief Executive Officer, commented, "Our results for the quarter ended March 31,
2014 were adversely impacted by low sales volume, which most directly affects gross margin in the form of underutilized manufacturing
capacity. We continue to closely monitor the relationship between manufacturing capacity and anticipated future sales volume in
determining whether further cost reductions will be necessary."
"Also affecting margins
are accruals, amounting to $47,000 for the quarter ended March 31, 2014 and $278,000 for the nine months then ended, relating to
anticipated losses on the fixed price engineering services portions of certain large projects currently underway. These projects are complex
and require that we meet stringent customer and regulatory specifications. Nonetheless, I am pleased to report that we recently conducted
a test of a prototype instrument for one of our customers, and look forward to conducting a test of another prototype instrument for a second customer this month. We continue to believe that these engineering projects will result in manufacturing revenues
"The nearly singular
objective on Pro-Dex's agenda remains that of rebuilding the revenue base. To that end, I can report that we had a good showing
at two important industry conferences in March and April of this year that resulted in promising leads. Of course, converting such
purchase orders is the goal on which our integrated team of business development, engineering and operations
leaders is focused."
"Our challenges notwithstanding,
it should be noted that we generated positive cash flow from operating activities during the quarter ended March 31, 2014 of $300,000.
This improvement results primarily from the partial liquidation of the inventory build-up undertaken in the first quarter of fiscal
year 2014 to reduce lead times and accommodate anticipated customer requirements. As we have previously publicly discussed, the
build-up was exacerbated by our largest customer having suspended its orders from us from March through November 2013, ostensibly
due to lagging demand for its product, and the inventory liquidation this past quarter results from the resumption of shipments
recently announced the completion of our rights offering of common stock that raised proceeds of $1.65 million, before expenses.
We are grateful for the participation of our two major shareholders, and we were particularly pleased with the participation of
the remaining broad base of shareholders whose subscriptions constituted nearly half of the offering proceeds."
Teleconference Information:
Investors and analysts
are invited to listen to a broadcast review of the Company's fiscal 2014 third quarter and nine-month financial results today
at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) that may be accessed by visiting the Company's website at www.pro-dex.com.
The conference call may also be accessed at www.InvestorCalendar.com. Investors and analysts who would like to participate
in the conference call may do so via telephone at (877) 407-8033, or at (201) 689-8033 if calling from outside the U.S. or Canada.
For those who cannot access
the live broadcast, a replay will be available approximately two hours after the completion of the call until midnight (Eastern
Time) on May 22, 2014 by calling (877) 660-6853, or (201) 612-7415 if calling from outside the U.S. or Canada, and then entering
conference I.D. number 13582049. An online archive of the broadcast will be available on the Company's website www.pro-dex.com
for a period of 365 days.
About Pro-Dex, Inc.:
Pro-Dex, Inc., with operations
in California and Oregon, specializes in the design, development and manufacture of powered rotary drive surgical and dental instruments
used primarily in the orthopedic, spine, maxocranial facial and dental markets. Its OMS division designs and manufactures embedded
motion control systems serving the medical, dental, semi-conductor 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