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PRO-DEX, INC. Announces Fiscal 2009 Fourth Quarter and Full-year Results

IRVINE, Calif., Sept. 17 /PRNewswire-FirstCall/ -- PRO-DEX, INC. (Nasdaq: PDEX) today announced financial results for the fiscal fourth quarter and full-year ending June 30, 2009.

Sales for the fourth quarter ended June 30, 2009 increased 4% to $5.6 million compared to $5.4 million reported for the fourth quarter of fiscal 2008, as increases in medical device and motor shipments outpaced continued sluggish motion control sales. Net income for the fourth quarter was $202,000 or $0.02 per share (based on 9.7 million shares) compared to net loss of $412,000 or ($0.04) per share for the three months ended June 30, 2008.

Sales for the year ended June 30, 2009 decreased 16% to $21.1 million compared to $25.1 million in fiscal year 2008. The majority of the decrease was seen in medical products, as 2008 sales were unusually high due to a major customer, who built inventory in fiscal 2008, consumed it in fiscal 2009. The motion control business also reported lower sales as the economic slowdown adversely affected the end market for the capital equipment that use our motion control products. Motor sales remained flat year over year. A net loss was reported for the full fiscal year 2009 of $2,845,000 or $0.29 per share compared to net income of $317,000, or $0.03 per share for the full-year 2008 period.

Mark Murphy, the Company's President and Chief Executive Officer, commented, "Fiscal 2009 was a difficult year for Pro-Dex, like many other businesses. From FY2005 through FY2008, we grew consistently every year, delivering a 22% cumulative annual growth rate. This trend was starkly interrupted in FY2009 by a 16% top line decrease, the first decrease we had experienced in 4 years. We reacted immediately and definitively in our commitment to the fundamentals of profitability and cash-generation, resizing the company to match our revenue levels. While the year's results were sealed in Q3 with nearly $3 million of non-cash patent and deferred tax asset write-offs, we see the Q4 operating results as encouraging. We believe our largest medical customers have completed their inventory reductions and are now receiving product at rates that are more closely aligned with historical levels, helping to offset the continued softness in our motion control business. Comparing fiscal 2009 Q4 to Q3, we improved the top line by 22% (from $4.6 million to $5.6 million) and earnings per share from a loss of $0.31 ($0.27 from write-offs and $0.04 operationally) to earnings of $0.02. While it's too early to declare sustainable improvement, we have a $9.6 million backlog and look forward to the anticipated release of a new product."

Gross profit for the quarter ended June 30, 2009 increased to $1.9 million, a 35% gross profit margin, compared to gross profit of $1.5 million or 27% gross profit margin in last year's fourth quarter as a result of higher sales levels and the absence of the prior year's fourth quarter headquarters relocation costs of $225,000. Gross profit for the full 2009 fiscal year was $6.7 million, a 32% gross profit margin compared to gross profit of $8.2 million or 33% gross profit margin for the year-ago period. For the full year, margins were adversely impacted by lower volumes of our more profitable products.

Operating expenses for the fourth quarter decreased by 27% to $1.7 million, compared to $2.2 million in the fourth quarter 2008. While the 2008 fourth quarter operating expenses included move-related costs of $274,000, the remainder of the decrease in spending was attributable to structurally lower costs, primarily decreased labor expenses, resulting from our FY2009 cost-reduction efforts. For the full fiscal 2009 year, operating expenses, including the non-cash $997,000 intangible write-off, increased by $487,000 (6%) to $8.2 million from $7.7 million in fiscal 2008.

Mr. Murphy continued, "We have taken the necessary steps to adapt from our previous rapid growth to our current reality. This economy has severely tested the business models of many companies. Pro-Dex remains strong because our model is based on repeating sales of customized, high-value products. We grow fastest when new products are being developed and when such development requires accelerated timeframes. Neither has been the case this past fiscal year. It is now time to look forward. We are committed to identifying new products that we can assist our customers in bringing to market over the coming months and years. In the meantime, our cost structure has been better aligned with our current revenue base."

During both the fourth quarter and the entire fiscal year 2009, we continued to strengthen the balance sheet. In Q4, we generated an additional $878,000 of operating cash. For all of fiscal 2009, we generated $1.7 million in cash from operations compared to $2.0 million in the year-ago period. At June 30, 2009, we had cash and cash equivalents of $1,124,000 compared to cash and cash equivalents of $517,000 as of June 30, 2008. There was nothing borrowed under the terms of the Company's revolving credit line compared to $2,000,000 outstanding under that line at June 30, 2008. The Company's net debt (total debt less cash) was $2.2 million at June 30, 2009, down from $3.5 million at June 30, 2008.

Teleconference Information:

Investors and all others are invited to listen to a conference call discussing the fourth fiscal quarter and year end 2009 results, today at 4:30 p.m. Eastern Time. The call is scheduled to be broadcast live over the Internet and may be accessed by visiting the Company's website at or directly at 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 (877) 356-8625 U.S. and (706) 634-9779 International, conference I.D. 30139877. You may identify the call as the Pro-Dex Fourth Quarter Earnings Call. An online archive of the broadcast will be available within two hours of the completion of the call and will be accessible on the Company's website for 365 days. Additionally, a telephone replay will be available 2 hours after the call for 48 hours by dialing (800) 642-1687 U.S. or (706) 645-9291 for international callers, conference I.D. number 30139877.

Pro-Dex, Inc., with operations in Irvine, California, Beaverton, Oregon and Carson City, Nevada, provides a pathway to product solutions rarely envisioned by customers. A unique blend of creativity and systemic discipline enables us to develop and manufacture innovative designs that powerfully complete a customer's strategic product offering. Pro-Dex leverages extraordinary human collaboration and superior technical capability to power and control products used in medical, aerospace, military, research and industrial applications requiring high precision in harsh environments. With expertise in multi-axis motion control, fractional horsepower motors and rotary drive systems, we identify and create unexpected value for our customers.

For more information, visit the Company's website at

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.

                                  (tables follow)

                         PRO-DEX, INC. and SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                              30-Jun-09         30-Jun-08
                                              ---------         ---------
    Current assets:
      Cash and cash equivalents              $1,124,000          $517,000
      Accounts receivable, net of allowance
       for doubtful accounts of $52,000 in
       2009 and $144,000 in 2008              2,515,000         2,842,000
      Other Current Receivables                  16,000           205,000
      Inventories                             3,365,000         5,101,000
      Prepaid expenses                          117,000           214,000
      Prepaid income taxes                      118,000           860,000
      Deferred income taxes                           -         1,176,000
                                                    ---         ---------
        Total current assets                  7,255,000        10,915,000
                                              ---------        ----------
    Property, plant, equipment and
     leasehold improvements, net              5,981,000         6,470,000
                                              ---------         ---------
    Other assets:
      Goodwill                                2,997,000         2,997,000
      Intangibles - Patents, net                147,000         1,221,000
      Other                                      87,000            68,000
                                                 ------            ------
        Total other assets                    3,231,000         4,286,000
                                              ---------         ---------
    Total assets                            $16,467,000       $21,671,000
                                            ===========       ===========

    Current liabilities:
      Line of credit                                $ -        $2,000,000
      Accounts payable                          827,000         1,736,000
      Accrued expenses                        1,394,000         2,053,000
      Income taxes payable                       53,000           114,000
      Current portion of term note                    -           396,000
      Current Portion of T.I. Loan              400,000                 -
      Current portion of real estate loan        33,000            30,000
                                                 ------            ------
        Total current liabilities             2,707,000         6,329,000

    Long-term liabilities:
      Notes Payable - T.I. Loan               1,367,000                 -
      Real estate loan                        1,528,000         1,560,000
      Patent deferred payable                         -            44,000
      Deferred income taxes                     171,000           290,000
      Deferred rent                             212,000           150,000
                                                -------           -------
        Total long-term liabilities           3,278,000         2,044,000
                                              ---------         ---------
    Total liabilities                         5,985,000         8,373,000
                                              ---------         ---------
    Commitments and contingencies
    Shareholders' equity:
      Common shares; no par value;
       50,000,000 shares authorized;
       9,964,366 shares issued and 9,668,671
       outstanding June 30, 2009
       9,879,066 shares issued and 9,803,366
       outstanding June 30, 2008             16,574,000        16,545,000
      Accumulated deficit                    (6,092,000)       (3,247,000)
                                              ---------         ---------
        Total shareholders' equity           10,482,000        13,298,000

        Total liabilities and
         shareholders' equity               $16,467,000       $21,671,000
                                            ===========       ===========

              See notes to consolidated financial statements.

                             PRO-DEX, INC. and SUBSIDIARIES
                                  Years ended June 30

                                                           2009         2008
                                                           ----         ----

    Net sales                                       $21,122,000  $25,126,000

    Cost of sales                                    14,374,000   16,917,000
                                                     ----------   ----------
    Gross profit                                      6,748,000    8,209,000

    Operating expenses:
      Selling expense                                 1,295,000    1,482,000
      General and administrative expenses             3,157,000    3,265,000
      Irvine facility move related general and
       administrative expenses                                -      274,000
      Impairment of intangible asset                    997,000            -
      Research and development costs                  2,791,000    2,732,000
                                                      ---------    ---------
    Total operating expenses                          8,240,000    7,753,000
                                                      ---------    ---------
     (Loss) Income from operations                   (1,492,000)     456,000

      Other (expense), net                                    -       (9,000)
      Royalty income                                     14,000       35,000
      Interest income                                     2,000       17,000
      Interest (expense)                               (228,000)    (181,000)
                                                       --------     --------
    Total                                              (212,000)    (138,000)
                                                       --------     --------

    (Loss) Income before provision for income
     taxes                                           (1,704,000)     318,000

    Benefit (Provision) for Income Taxes              1,100,000       (1,000)
    Allowance for deferred tax asset                 (2,241,000)           -
                                                    -----------          ---
    Total Provision for Income taxes                 (1,141,000)      (1,000)
                                                    -----------       ------

    Net (Loss) Income                               $(2,845,000)    $317,000
                                                    -----------     --------

    Net (Loss) Income per share:
      Basic                                              $(0.29)       $0.03
                                                         ------        -----
      Diluted                                            $(0.29)       $0.03
                                                         ------        -----

    Weighted average shares outstanding - basic       9,710,755    9,736,249
                                                      ---------    ---------
    Weighted average shares outstanding - diluted     9,710,755    9,924,350
                                                      ---------    ---------

                  See notes to consolidated financial statements.

                            PRO-DEX, INC. and SUBSIDIARIES
                               Years ended June 30

                                                   2009              2008
                                                   ----              ----
    Cash Flows from Operating Activities:
    Net Income                              $(2,845,000)         $317,000
      Adjustments to reconcile net
       income to net cash used in
       operating activities:
        Depreciation and amortization           810,000           538,000
        Loss on disposal                         25,000                 -
        Impairment of intangible asset          997,000                 -
        (Recovery of) Provision for
         doubtful accounts                      (92,000)           (9,000)
        Stock based compensation                166,000           205,000
        Retained earnings adjustment
         for prior years due to
         accounting standard change                   -           (75,000)
        Deferred taxes                        1,058,000           434,000
          Changes in:
            Decrease in accounts receivable     609,000           396,000
            Decrease (increase)
             in inventories                   1,737,000          (478,000)
            Decrease (increase) in
             prepaid expenses                    97,000            (9,000)
            (Increase) in other assets          (20,000)          (43,000)
            (Decrease) increase in accounts
             payable and accrued expenses    (1,505,000)        1,645,000
            Increase (decrease) in
             income taxes payable               681,000          (903,000)
                                                -------           -------
    Net Cash provided by Operating
     Activities                               1,718,000         2,018,000
                                              ---------         ---------

    Cash Flows From Investing Activities:
      Purchase of equipment and
       leasehold improvements                  (269,000)       (3,130,000)
                                                -------         ---------

    Net Cash used in Investing Activities      (269,000)       (3,130,000)
                                                -------         ---------

    Cash Flows from Financing Activities:
      Principal payments of patent
       deferred payable                         (45,000)         (196,000)
      Net (payments) borrowing on
       Line of Credit                        (2,000,000)        1,700,000
      Principal (payments) on Term Note        (396,000)         (250,000)
      Net Principal borrowing on TI Loan      1,767,000                 -
      Principal payments on Real Estate Loan    (31,000)          (28,000)
      Stock Repurchases                        (137,000)                -
                                                -------               ---
    Net Cash (used in) provided by
     Financing Activities                      (842,000)        1,226,000
                                                -------         ---------
    Net increase  in Cash and Cash
     Equivalents                                607,000           114,000
    Cash and Cash Equivalents,
     beginning of year                          517,000           403,000
                                                -------           -------
    Cash and Cash Equivalents,
     end of year                             $1,124,000          $517,000
                                             ==========          ========

                    Supplemental Information

    Cash paid for interest                     $230,000          $181,000
    Cash paid for income taxes                      $ -          $560,000
                                                    ---          --------

SOURCE Pro-Dex, Inc.
Copyright©2009 PR Newswire.
All rights reserved

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