Full Press Release Details
| Contact: | Mark Murphy, Chief Executive Officer |
| (949) 769-3200 | |
| Jeff Stanlis, Investor Relations | |
| Hayden IR. | |
| (602) 476-1821 |
INC. ANNOUNCES FISCAL THIRD QUARTER 2009 RESULTS
Reports $3 million or $(0.31) per share loss, consisting of $(0.04) from
from impairment of patents, and $(0.20) from an allowance for tax
IRVINE, CA, May 14, 2009 -
PRO-DEX, INC. (NASDAQ: PDEX) today announced financial results for its third
fiscal quarter, ending March 31, 2009.
net sales for the fiscal third quarter of 2009 decreased 39% to $4.6 million
compared to $7.6 million reported for the fiscal third quarter of 2008. A
significant contributor to the decrease was an inventory build of a single
product to a major medical customer during the third quarter of last fiscal
year. These sales were not repeated in the third quarter of fiscal 2009 as the
customer returned to a steadier, but lower shipping rate. The Company also
experienced a substantial decrease in industrial motion control sales during the
third quarter of 2009 as that industry, and specifically semiconductor equipment
manufacturers, has been negatively impacted by the current economic climate.
Aerospace sales were adversely affected by the timing of deliveries on certain
contracts that had lower requirements in this quarter. In addition, the Company
has been exiting the sale of low-profit, non-differentiated products throughout
Murphy, the Company's President and Chief Executive Officer, commented,
"Operationally, we continue to be challenged by our top line. Medical
products remain flat over all three quarters of this year, but down from last
year due to customers' inventory fluctuations. Motor sales had a soft
quarter as we predicted. Our most systemic challenge is the
precipitous decline in our motion control product sales, driven primarily by the
very sluggish semiconductor equipment market. Given the historical
length of these cycles, we are not counting on a rebound to previous motion
control sales levels in the next quarter, although we are cautiously optimistic
that spending patterns are at or near a bottom. We are doing everything possible
to accelerate revenues in all three product lines and I'm encouraged that our
backlog remains strong at $11.6 million as of March 31, 2009, up from $9.6
million a year earlier."
gross profit for the quarter ended March 31, 2009 decreased 50% from the same
quarter in the previous year to $1.1 million, a 24% gross profit margin,
compared to gross profit of $2.2 million or 29% gross profit margin last year.
Gross profit margins were lower than the same quarter in the previous year due
to lower volumes and an unfavorable sales mix that included fewer high margin
industrial and medical products. The negative effects of the
unfavorable sales mix were partially offset by reduced warranty expense
attributable to product improvements in the last six months, which reduced the
rate of expected returns as well as the per unit repair cost.
selling, general and administrative costs (excluding the impairment charge
discussed below) declined due to cost saving measures implemented earlier this
year. While the cost reductions were effective in shoring up the Company's
medical products profitability, they did not anticipate nor correct for the
motion control product shipment declines.
loss for the third fiscal quarter 2009 was $3.0 million or $(0.31) per basic and
diluted share (based on 9.7 million shares) compared to net income of $99,000 or
$0.01 per share on a basic and diluted basis for the three months ended March
31, 2008 (based on 9.7 and 9.9 million shares,
respectively). Included in this quarter's net loss were two
non-recurring, non-cash charges:
Murphy commented on these two charges, "We decided to write-down the value of
the patents based on a detailed analysis of several scenarios. We have stopped
actively marketing this product and we are looking for a company with a direct
dental distribution channel which might be interested in access to the
technology through product purchases, licenses, acquisition, joint venture, or
other means. Management remains committed to optimizing the value of this
technology for its shareholders, and will continue to pursue any opportunity to
accomplish that end. The tax asset write-off was precipitated by the
impairment charge, since that charge substantially reduced our historical
taxable earnings. While we believe that future profitability will
eventually allow us to use these tax benefits, we do not have the historical
evidence to support that position."
Murphy continued, "These two charges are significant and are not taken
lightly. At the same time, it is important to keep in mind that they
are non-cash, non-operating, and non-recurring charges that do not impact the
company's ability to generate either earnings or cash in the
future. Accordingly, it is the $(0.04) per share operating loss that
has my greatest attention. The other key metric is that we generated
$896,000 in operating cash during the third quarter. This, along with
our strong backlog, communicates volumes about the Company's underlying health
substantial loss reported by the Company has resulted in violations of certain
covenants related to the line of credit issued by Wells Fargo
Bank. While the bank reviews the situation to gain a better
understanding, it has issued a letter of forbearance concerning the violations
and reduced the amount of available credit from $4 million to $1 million as of
May 12, 2009. The Wells covenant violations in turn create a
violation of covenants under the Company's Union Bank mortgage on the Carson
City property. Union has issued a waiver of such
Murphy commented, "Wells Fargo's actions are understandable, given the
significance of the numbers and its need to fully understand
them. Our $4 million line was high relative to our historical needs
as we have not used more than $1 million for our operating
requirements. We currently have zero drawn against the line, so the
bank's actions are not expected to impact our operations."
Murphy concluded, "One final note is that Dick Corrington, our V.P. of
Engineering has accelerated his planned retirement to become effective May 29,
2009. I want to publicly acknowledge and thank Dick for his
contribution to Pro-Dex. Given our current financial circumstances,
we will likely leave this position open at the current time. There is
no question that we currently face our share of adversity. With our
revenues being challenged in all product lines, an operational loss this
quarter, and some very large balance sheet write-offs, this is clearly a trying
time for us. Attention and intention is being applied to every issue
we face. We are doing everything prudent to save costs and improve
our top line. In the meantime, we have a robust backlog, a shrinking
cost structure, and strong cash production. We will continue to
navigate with fiscal conservatism toward our ultimate success."
completed the March 31, 2009 quarter with cash and cash equivalents of $504,000