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Pro-Dex, Inc. Announces Fiscal Second Quarter 2010 Results

IRVINE, Calif., Feb. 4 /PRNewswire-FirstCall/ -- PRO-DEX, INC. (Nasdaq: PDEX) today announced its financial results for the fiscal second quarter 2010, the period ending December 31, 2009.  

Sales for the second quarter ended December 31, 2009, increased 9% to $5.7 million compared to $5.2 million for the previous year's second quarter, due to continued increases in medical device sales.  The higher medical device sales were substantially driven by the new arthroscopic surgical hand-piece that began shipping at the end of the first fiscal quarter.  Net income for the second quarter was $580,000 or $0.06 per share compared to a net income of $81,000 or $0.01 per share for the previous year's second quarter.  

Gross profit for the quarter ended December 31, 2009, increased to $2.0 million, a 35% gross profit margin, compared to gross profit of $1.9 million or 37% gross profit margin in last year's second quarter.  The profit increase was consistent with the increased sales; however the gross profit margin was reduced due to a lower margin mix of products.

Operating expenses for the second quarter (excluding the impairment charge discussed below) declined due to cost saving measures implemented last year.  The cost savings measures were primarily structurally decreased labor expenses.

Included in this quarter's net income were two non-recurring events:

  • A pre-tax impairment charge of approximately $140,000 for the remaining value of certain patents purchased in 2005.  Strategic options to sell, license, or otherwise exploit this technology have not materialized and do not appear imminent.
  • An income tax gain of approximately $489,000 created by reversing a portion of the income tax valuation allowance recorded in the third quarter of fiscal year 2009.  In November 2009, a change in the tax law extended the allowable time period of net operating loss carry backs from two to five years.  This enabled the Company to use the benefits and file for a refund for the 2004 and 2005 tax years.

These two non-recurring items created a net $0.04 per share profit in the quarter.

During the second quarter of fiscal year 2010, the Company continued to strengthen its balance sheet, generating an additional $561,000 of operating cash.  In the first six months of fiscal year 2010, the Company generated $971,000 in operating cash, a significant improvement from the $56,000 in cash used in the first six months of fiscal year 2009. At December 31, 2009, the Company had cash and cash equivalents of $1,790,000 compared to cash and cash equivalents of $1,124,000 as of June 30, 2009 and $406,000 as of December 31, 2008.  The Company’s net debt (total debt less cash) was $1.3 million at December 31, 2009, down from $2.2 million at June 30, 2009 and down from $3.9 million at December 31, 2008.

Mark Murphy, the Company’s President and Chief Executive Officer, commented, “We are pleased to report another quarter of solid sales, earnings and cash generation. Excluding both the negative impact of the patent write-off and the positive impact of the tax gain, the Company’s operating engine produced its third consecutive two-cents per share quarter.  And in an environment where cash is critical, it is encouraging to post another half-million dollar positive operating cash quarter.  Stronger fiscal year 2010 sales, combined with our reduced cost structure, have allowed the Company to function more efficiently.”

Pro-Dex also announced today that Mr. Patrick Johnson will be leaving the employment of the Company effective February 5, 2010.  Mr. Johnson joined the Company in 2000 as the General Manager of the Micro Motors Division, served as CEO from 2002 to 2006, and as Executive Vice President and Chief Business Development Officer since 2006.

Commenting on this event, Mr. Murphy stated, “Patrick has made significant contributions to Pro-Dex during his 10 year career here.  He led the reinvention of the Company in the early 2000’s, transforming Pro-Dex from a dental hand-piece company into a comprehensive medical device development and manufacturing player.  His leadership has framed a large part of who we are today.  Patrick will next be applying his leadership skills to a major humanitarian relief effort in Haiti, heading up a project called WorldBed.  On behalf of the Company, I want to thank Patrick and wish him all the best in his future endeavors.”

Teleconference Information:

Investors and all others are invited to listen to a conference call discussing the second fiscal quarter 2010 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. 54190245. You may identify the call as the Pro-Dex Second 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 54190245.

Pro-Dex, Inc., with operations in Irvine, California, Beaverton, Oregon and Carson City, Nevada, specializes in bringing speed to market in the development and manufacture of technology-based solutions that incorporate miniature rotary drive systems, embedded motion control and fractional horsepower DC motors, serving the medical, dental, semi-conductor, scientific research and aerospace markets.  Pro-Dex's products are found in hospitals, dental offices, medical engineering labs, commercial and military aircraft, scientific research facilities and high tech manufacturing operations around the world.

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
                                             12/31/2009     6/30/2009
                                             ----------     ---------
    Current assets:
         Cash and cash equivalents            $1,790,000   $1,124,000
         Accounts receivable, net of
          allowance for doubtful accounts
          of $57,000 at 12/31/09 and $52,000
          at 6/30/09                           2,300,000    2,515,000
         Other Current Receivables                     -       16,000
         Inventories                           3,216,000    3,365,000
         Prepaid expenses                        302,000      117,000
         Prepaid income taxes                          -      118,000
         Deferred income taxes                   643,000            -
                                                 -------          ---
             Total current assets              8,251,000    7,255,000
                                               =========    =========
    Property, plant, equipment and
     leasehold improvements, net               5,706,000    5,981,000
                                               ---------    ---------
    Other assets:
         Goodwill                              2,997,000    2,997,000
         Intangibles - Patents, net                    -      147,000
         Other                                    87,000       87,000
                                                  ------       ------
             Total other assets                3,084,000    3,231,000
                                               =========    =========
    Total assets                             $17,041,000  $16,467,000
                                             ===========  ===========
    Current liabilities:
         Accounts payable                       $568,000     $827,000
         Accrued expenses                      1,561,000    1,394,000
         Income taxes payable                     64,000       53,000
         Current Portion of T.I. Loan            400,000      400,000
         Current portion of real estate
          loan                                    34,000       33,000
                                                  ------       ------
            Total current liabilities          2,627,000    2,707,000
    Long-term liabilities:
        Notes Payable - T.I. Loan              1,167,000    1,367,000
        Real estate loan                       1,511,000    1,528,000
        Deferred income taxes                    184,000      171,000
        Deferred rent                            236,000      212,000
                                                 -------      -------
            Total long-term liabilities        3,098,000    3,278,000
                                               =========    =========
    Total liabilities                          5,725,000    5,985,000
                                               ---------    ---------
    Commitments and contingencies
    Shareholders' equity:
         Common shares; no par value;
          50,000,000 shares authorized;
          9,668,671 shares issued and
          outstanding Dec 31, 2009
          9,668,671 shares issued and
          outstanding June 30, 2009           16,645,000   16,574,000
         Accumulated deficit                  (5,329,000)  (6,092,000)
                                              ----------   ----------
          Total shareholders’ equity          11,316,000   10,482,000
         Total liabilities and
          shareholders’ equity               $17,041,000  $16,467,000
                                             ===========  ===========
            See notes to condensed consolidated financial statements.
                       PRO-DEX, INC. and SUBSIDIARIES
                  Three months ended December 31 (unaudited)
                                                 2009        2008
                                                 ----        ----
    Net sales                                 $5,696,000  $5,237,000
    Cost of sales                              3,696,000   3,305,000
                                               ---------   ---------
    Gross profit                               2,000,000   1,932,000
    Operating expenses:
      Selling expense                            353,000     329,000
      General and administrative expenses        799,000     833,000
      Impairment of intangible asset             140,000           -
      Research and development costs             576,000     677,000
                                                 -------     -------
    Total operating expenses                   1,868,000   1,839,000
                                               ---------   ---------
    Income from operations                       132,000      93,000
    Other income (expense):
      Royalty income                               2,000       8,000
      Interest expense                           (53,000)    (60,000)
                                                 -------     -------
    Total                                        (51,000)    (52,000)
                                                 -------     -------
    Income before (benefit) for income
     taxes                                        81,000      41,000
    (Benefit) for income taxes                  (499,000)    (40,000)
                                                --------     -------
    Net income                                  $580,000     $81,000
                                                --------     -------
    Net income per share:
      Basic                                        $0.06       $0.01
                                                   -----       -----
      Diluted                                      $0.06       $0.01
                                                   -----       -----
    Weighted average shares outstanding
     -basic                                    9,668,671   9,698,913
                                               ---------   ---------
    Weighted average shares outstanding
     -diluted                                  9,695,518   9,714,917
                                               ---------   ---------
         See notes to condensed consolidated financial statements.
                     PRO-DEX, INC. and SUBSIDIARIES
                Six months ended December 31 (unaudited)
                                              2009         2008
                                              ----         ----
    Net sales                            $11,329,000  $10,893,000
    Cost of sales                          7,456,000    7,206,000
                                           ---------    ---------
    Gross profit                           3,873,000    3,687,000
    Operating expenses:
      Selling expense                        641,000      673,000
      General and administrative
       expenses                            1,526,000    1,681,000
      Impairment of intangible asset         140,000            -
      Research and development costs       1,197,000    1,396,000
                                           ---------    ---------
    Total operating expenses               3,504,000    3,750,000
                                           ---------    ---------
    Income (loss) from operations            369,000      (63,000)
    Other income (expense):
      Royalty income                           3,000        9,000
      Interest expense                      (103,000)    (121,000)
                                            --------     --------
    Total                                   (100,000)    (112,000)
                                            --------     --------
    Income before (benefit) for
     income taxes                            269,000     (175,000)
    Provision (Benefit) for income
     taxes                                  (494,000)    (138,000)
                                            --------     --------
    Net Income (loss)                       $763,000     $(37,000)
                                            --------     --------
    Net income (loss) per share:
      Basic                                    $0.08       $(0.00)
                                               -----       ------
      Diluted                                  $0.08       $(0.00)
                                               -----       ------
    Weighted average shares
     outstanding -basic                    9,668,671    9,741,160
                                           ---------    ---------
    Weighted average shares
     outstanding -diluted                  9,686,331    9,741,160
                                           ---------    ---------
          See notes to condensed consolidated financial statements
                             PRO-DEX, INC. and SUBSIDIARIES
                        Six months ended December 31 (unaudited)
                                                           2009        2008
                                                           ----        ----
    Cash Flows from Operating Activities:
    Net Income (loss)                                   $763,000    $(37,000)
      Adjustments to reconcile net income to 
       net cash provided by operating activities:
         Depreciation and amortization                   371,000     417,000
         Impairment of intangible asset                  140,000           -
         Stock based compensation                         71,000      86,000
         Provision for (Recovery of) doubtful
          accounts                                         5,000      (5,000)
         (Decrease) in deferred tax allowance           (525,000)     (7,000)
         Changes in:
             Decrease in accounts receivable             226,000     362,000
             Decrease in inventories                     148,000   1,095,000
             (Increase) Decrease in prepaid expenses    (185,000)     43,000
             (Increase) in other assets                        -     (17,000)
             (Decrease) in accounts payable and
              accrued expenses                           (68,000) (1,887,000)
             (Decrease) in income taxes payable           25,000    (106,000)
                                                          ------    --------
    Net Cash provided (used) by Operating
     Activities                                          971,000     (56,000)
                                                         -------     -------
    Cash Flows From Investing Activities:
      Purchases of equipment and leasehold
       improvements                                      (90,000)   (180,000)
                                                         -------    --------
    Net Cash used in Investing Activities                (90,000)   (180,000)
                                                         -------    --------
    Cash Flows from Financing Activities:
      Net (payments) on line of credit                         -  (1,600,000)
      Principal (payments) on term note                        -    (125,000)
      Principal (payments) borrowing on TI
       Loan                                             (200,000)  1,967,000
      Principal (payments) on mortgage                   (16,000)    (16,000)
      Stock repurchases                                        -    (101,000)
                                                             ---    --------
    Net Cash (used) provided by Financing
     Activities                                         (216,000)    125,000
                                                        --------     -------
    Net increase (decrease) in Cash and
     Cash Equivalents                                    665,000    (111,000)
    Cash and Cash Equivalents, beginning of
     period                                            1,125,000     517,000
                                                       ---------     -------
    Cash and Cash Equivalents, end of
     period                                           $1,790,000    $406,000
                                                      ==========    ========
                            Supplemental Information
    Cash payments for interest                          $105,000    $117,000
    Cash payments for income taxes                        $6,000          $-
                                                          ------         ---

SOURCE Pro-Dex, Inc.



SOURCE Pro-Dex, Inc.
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