Full Press Release Details
Contact: Mark Murphy, Chief Executive Officer
Brett Maas, Investor Relations
Hayden Communications, Inc.
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
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
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,
TELECONFERENCE INFORMATION:
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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
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