Full Press Release Details
Contact: Richard L. Van Kirk,
Chief Executive Officer
PRO-DEX, INC. ANNOUNCES FISCAL 2017 SECOND
AND SIX-MONTH RESULTS
IRVINE, CA, February
9, 2017 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2017 second quarter ended December 31,
2016. The Company also filed its Quarterly Report on Form 10-Q for the second quarter of fiscal year 2017 with the Securities and
Exchange Commission today.
Sale of OMS Division
As recently disclosed in
a Form 8-K and related press release, we sold our Oregon Micro Systems ("OMS") division to the division's long-time
general manager on January 27, 2017. The gain on the sale of approximately $0.3 million will be recorded during our third quarter
of fiscal 2017. As required by the accounting guidance, we have prepared the second quarter financial statements with the OMS division
reflected as a discontinued operation, which impacts all periods presented in the accompanying financial statements below.
Quarter Ended December
Net sales for the three
months ended December 31, 2016 decreased $632,000, or 12%, to $4.6 million from $5.2 million for the three months ended December
31, 2015, due to continued declining sales of our legacy dental products as well as reduced repair revenue.
Gross profit for the three
months ended December 31, 2016 decreased $114,000, or 8%, to $1.3 million from $1.4 million for the same period in fiscal 2015.
Although the gross profit declined during the three months ended December 31, 2016 compared to the corresponding period of the
prior year, the gross margin percentage increased by 1 percentage point to 28% from 27%. The increase in margin is reflective of
cost-cutting measures that were implemented during the quarter.
Operating expenses (which
include selling, general and administrative, and research and development expenses) for the quarter ended December 31, 2016 increased
$103,000 or 11%, to $1.0 million compared to the prior fiscal year's corresponding quarter, reflecting primarily increased
legal expenses in support of ongoing litigation related to our former investment in real property located in Ramsey, Minnesota
as described more fully in our Form 10-Q.
Income from continuing
operations for the quarter ended December 31, 2016 increased by $2.7 million to $3.1 million, compared to $481,000 in the corresponding
quarter in fiscal 2016. This increase reflects our income tax benefit of $2.9 million due to the release of our valuation allowance
against our deferred tax assets because we have reassessed our valuation allowance and believe that it is more likely than not
that we will generate sufficient levels of future profitability to realize substantially all of our deferred tax assets. Net income
for the quarter ended December 31, 2016 was $3.2 million, or $0.78 per share, compared to $391,000, or $0.09 per share, for the
corresponding quarter in fiscal 2016.
Net sales for the six months
ended December 31, 2016 increased $705,000, or 8%, to $9.7 million from $9.0 million for the six months ended December 31, 2015,
due primarily to increases in medical device product revenues offset by reduced repair revenue and legacy dental product sales.
We expect our repair revenue for the balance of fiscal 2017 to be lower than the comparable periods of the prior fiscal year because
many of our products are relatively new and more repairs are covered under warranty than in the previous periods.
Gross profit for the six
months ended December 31, 2016 increased $0.4 million, or 17% compared to the same period in fiscal 2016. The gross profit increase
is due to increased net sales of 8% as well as improved margins due to our investment in machinery and equipment.
Operating expenses (which
include selling, general and administrative, and research and development expenses) for the six months ended December 31, 2016
increased 14% to $2.2 million from $1.9 million in the prior fiscal year's corresponding period, reflecting primarily increased
general and administrative expenses mostly related to our ongoing litigation related to our former investment in real property
located in Ramsey, Minnesota as well as increased research and development costs relating to internal projects.
Income from continuing
operations for the six months ended December 31, 2016 was $3.4 million, compared to $408,000 for the corresponding period in fiscal
2016. This increase also reflects the tax benefit recorded in the second quarter due to the release of the valuation allowance
against our deferred tax assets. Net income for the six months ended December 31, 2016 was $3.5 million or $0.85 per share, compared
to $265,000, or $0.07 per share, for the corresponding period in fiscal 2016.
Van Kirk, the Company's President and Chief Executive Officer, commented, "We are pleased with our second quarter and
year-to-date results and we are pleased to have announced the sale of our OMS division. The capital infusion will be used for certain
internal R&D efforts that we expect will further enhance our line of surgical drivers. We look forward to continuing our momentum
About Pro-Dex, Inc.:
Pro-Dex, Inc. 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 Fineline Molds division manufactures plastic injection molding for a variety
of industries. Pro-Dex's products are found in hospitals, dental offices, and medical engineering labs around the world.
Pro-Dex also provides quality
and regulatory consulting services, as well as engineering consulting and placement services through its Engineering Services Division.
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
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.
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| December 31, 2016 | June 30, 2016 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 2,180 | $ | 2,294 | ||||
| Investments | 291 | - | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $25 and $20, respectively | 1,026 | 1,469 | ||||||
| Due from factor | 2,409 | 1,419 | ||||||
| Deferred costs | 582 | 238 | ||||||
| Assets held for sale | 310 | 287 | ||||||
| Other current receivables | 32 | 91 | ||||||
| Inventory | 3,272 | 3,364 | ||||||
| Prepaid expenses | 123 | 129 | ||||||
| Total current assets | 10,225 | 9,291 | ||||||
| Equipment and leasehold improvements, net | 1,458 | 1,222 | ||||||
| Deferred income taxes | 2,837 | - | ||||||
| Goodwill | 112 | 112 | ||||||
| Intangibles, net | 331 | 451 | ||||||
| Other assets | 71 | 71 | ||||||
| Total assets | $ | 15,034 | $ | 11,147 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 761 | $ | 841 | ||||
| Accrued expenses | 1,446 | 1,076 | ||||||
| Deferred revenue | 452 | 212 | ||||||
| Notes payable | 26 | 26 | ||||||
| Income taxes payable | 3 | 1 | ||||||
| Capital lease obligations | 31 | - | ||||||
| Total current liabilities | 2,719 | 2,156 | ||||||
| Deferred rent, net of current portion | 23 | 68 | ||||||
| Notes and capital leases payable, net of current portion | 91 | 46 | ||||||
| Total non-current liabilities | 114 | 114 | ||||||
| Total liabilities | 2,833 | 2,270 | ||||||
| Shareholders' equity: | ||||||||
| Common shares; no par value; 50,000,000 shares authorized; 4,040,169 and 4,052,987 shares issued and outstanding at December 31, 2016 and June 30, 2016, respectively | 17,838 | 17,988 | ||||||
| Accumulated comprehensive loss | (6 | ) | - | |||||
| Accumulated deficit | (5,631 | ) | (9,111 | ) | ||||
| Total shareholders' equity | 12,201 | 8,877 | ||||||
| Total liabilities and shareholders' equity | $ | 15,034 | $ | 11,147 |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net sales | $ | 4,599 | $ | 5,231 | $ | 9,728 | $ | 9,023 | ||||||||
| Cost of sales | 3,288 | 3,806 | 6,995 | 6,694 | ||||||||||||
| Gross profit | 1,311 | 1,425 | 2,733 | 2,329 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | 159 | 223 | 421 | 394 | ||||||||||||
| General and administrative expenses | 605 | 452 | 1,169 | 986 | ||||||||||||
| Research and development costs | 278 | 264 | 581 | 528 | ||||||||||||
| Total operating expenses | 1,042 | 939 | 2,171 | 1,908 | ||||||||||||
| Operating income | 269 | 486 | 562 | 421 | ||||||||||||
| Interest expense | (4 | ) | (20 | ) | (7 | ) | (26 | ) | ||||||||
| Interest income | 11 | 1 | 12 | - | ||||||||||||
| Gain from disposal of equipment | - | 14 | 3 | 14 | ||||||||||||
| Income from continuing operations before income taxes | 276 | 481 | 570 | 409 | ||||||||||||
| Income tax (expense) benefit | 2,859 | - | 2,852 | (1 | ) | |||||||||||
| Income from continuing operations | 3,135 | 481 | 3,422 | 408 | ||||||||||||
| Income (loss) from discontinued operations, net of income taxes | 59 | (90 | ) | 58 | (143 | ) | ||||||||||
| Net income | $ | 3,194 | $ | 391 | $ | 3,480 | $ | 265 | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||
| Unrealized loss from marketable equity investments | (6 | ) | - | (6 | ) | - | ||||||||||
| Comprehensive income | $ | 3,188 | $ | 391 | $ | 3,474 | $ | 265 | ||||||||
| Basic net income per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.77 | $ | 0.11 | $ | 0.84 | $ | 0.10 | ||||||||
| Income (loss) from discontinued operations | 0.02 | (0.02 | ) | 0.01 | (0.04 | ) | ||||||||||
| Net income | $ | 0.79 | $ | 0.09 | $ | 0.85 | $ | 0.06 | ||||||||
| Diluted net income per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.77 | $ | 0.11 | $ | 0.84 | $ | 0.10 | ||||||||
| Income (loss) from discontinued operations | 0.01 | (0.02 | ) | 0.01 | (0.04 | ) | ||||||||||
| Net income | $ | 0.78 | $ | 0.09 | $ | 0.85 | $ | 0.06 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 4,057 | 4,143 | 4,060 | 4,142 | ||||||||||||
| Diluted | 4,092 | 4,165 | 4,098 | 4,161 | ||||||||||||
| Common shares outstanding | 4,040 | 4,149 | 4,040 | 4,149 |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
| Six Months Ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 3,480 | $ | 265 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 275 | 334 | ||||||
| Gain from disposal of equipment | (3 | ) | (14 | ) | ||||
| Share-based compensation | 2 | 2 | ||||||
| Impairment of intangible assets | 113 | - | ||||||
| Deferred income tax benefit | (2,837 | ) | - | |||||
| Bad debt expense (recovery) | 5 | (16 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, due from factor and other current receivables | (493 | ) | (383 | ) | ||||
| Deferred costs | (344 | ) | 745 | |||||
| Assets held for sale | (23 | ) | - | |||||
| Inventory | 92 | (171 | ) | |||||
| Prepaid expenses and other assets | 6 | - | ||||||
| Accounts payable, accrued expenses and deferred rent | 245 | (778 | ) | |||||
| Deferred revenue | 240 | (312 | ) | |||||
| Income taxes payable | 2 | - | ||||||
| Net cash provided by (used in) operating activities | 760 | (328 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of investments | (300 | ) | - | |||||
| Purchases of equipment and leasehold improvements | (376 | ) | (21 | ) | ||||
| Purchase of Investment in Ramsey property and related notes receivable | - | (86 | ) | |||||
| Proceeds from liquidation of Ramsey assets | - | 277 | ||||||
| Proceeds from sale of equipment | 3 | 14 | ||||||
| Increase in intangibles | (20 | ) | (1 | ) | ||||
| Net cash provided by (used in) investing activities | (693 | ) | 183 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Purchase of common stock | (168 | ) | - | |||||
| Proceeds from Note Payable | - | 500 | ||||||
| Proceeds from exercise of options and ESPP contributions | 16 | 21 | ||||||
| Borrowings from Summit Loan | 600 | 1,600 | ||||||
| Repayments on Summit Loan | (600 | ) | (1,600 | ) | ||||
| Principal payments on notes payable and capital lease | (29 | ) | (20 | ) | ||||
| Net cash provided by (used in) financing activities | (181 | ) | 501 | |||||
| Net increase (decrease) in cash and cash equivalents | (114 | ) | 356 | |||||
| Cash and cash equivalents, beginning of period | 2,294 | 697 | ||||||
| Cash and cash equivalents, end of period | $ | 2,180 | $ | 1,053 |