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Pro-Dex, Inc. Announces Fiscal Second Quarter and Six Month Results
Date:2/10/2011

IRVINE, Calif., Feb. 10, 2011 /PRNewswire/ -- PRO-DEX, INC. (Nasdaq: PDEX) today announced financial results for its fiscal second quarter and six months ended December 31, 2010.

Sales for the quarter ended December 31, 2010 increased 8% to $6.2 million from $5.7 million for the corresponding quarter in 2009, resulting primarily from growth in sales of the Company's medical device products to its largest customer, and from growth in sales of dental products.  For the six months ended December 31, 2010, sales increased 6% to $12.0 million from $11.3 million for the corresponding period in 2009, resulting from growth in sales of the Company's medical device and motion control products.  

Operating income was $571,000 for the quarter, a 333% improvement from $132,000 in the corresponding 2009 period.  For the six months ended December 31, 2010, operating income improved 165% to $977,000 from $369,000 for the corresponding six-month period in 2009.

Net income for the 2010 quarter was $401,000, or $0.12 per fully-diluted share, which represents a 31% decrease from net income of $580,000, or $0.18 per fully-diluted share, in the corresponding 2009 quarter which included recognition of deferred tax credits of $499,000.  For the six months ended December 31, 2010, net income was $743,000, a decrease of 3% from net income of $763,000 for the corresponding period in 2009 which included recognition of deferred tax credits of $494,000.  The 2009 deferred tax credits were attributable to income tax benefits recognized in 2009 resulting from utilization of net operating loss carryovers.  

Gross profit for the quarter ended December 31, 2010 grew to $2.4 million, a 39% gross profit margin, compared to gross profit of $2.0 million, a 35% gross profit margin, for the year-ago period.  The increase in gross profit as a percentage of sales during this three-month period was due to a change in mix toward sales of medical device products with relatively higher margins, and to cost reductions.  For the six months ended December 31, 2010, gross profit was $4.6 million, a 38% gross profit margin, compared to gross profit and margin of $3.9 million and 34%, respectively, for the corresponding six-month period in 2009.  The increase in gross profit as a percentage of sales during this six-month period was due to a change in mix toward sales of medical device and motion control products at relatively higher margins, and to cost reductions.Mark Murphy, the Company's President and Chief Executive Officer, commented, "We are very pleased with the results for the first half of fiscal 2011.  Sales for both quarters in this period increased sequentially and year-over-year.  This performance, combined with improved gross margins and control over operating expenses resulted in income from operations at significantly higher levels than in the corresponding periods of last year."

Bank Credit FacilityOn February 4, 2011, the Company entered into a credit facility agreement with Union Bank that replaced its previously existing Wells Fargo Bank credit facility. The Union Bank facility consists of (a) a revolving credit line of up to $1.5 million based on eligible accounts receivable and inventories, (b) a non-revolving credit line of up to $350,000 for the acquisition of equipment, which will convert to a 3-year term loan in one year, unless sooner converted based on amounts borrowed under the line, and (c) a 3 1/2-year term loan that replaced the previously existing term loan with Wells Fargo Bank.

Mr. Murphy remarked, "Our new relationship with Union Bank gives us expanded credit capacity and is an important step in pursuit of our strategic objectives."

Teleconference Information:Investors and analysts are invited to listen to a broadcast review of the Company's fiscal 2011 second quarter financial results today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) that may be accessed by visiting the Company's website at www.pro-dex.com.  The conference call may also be accessed at www.InvestorCalendar.com. Investors and analysts who would like to participate in the conference call may do so via telephone at (877) 407-8033, or at (201) 689-8033 if calling from outside the U.S.

For those who cannot access the live broadcast, a replay will be available from two hours after the completion of the call until midnight (Eastern Time) on February 25, 2011 by calling (877) 660-6853, or (201) 612-7415 if calling from outside the U.S., and then entering account number 286 and conference I.D. number 366897.  An online archive of the broadcast will be available on the Company's website www.pro-dex.com for a period of 365 days.

Pro-Dex, Inc., with operations in California, Oregon and 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.  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.

(tables follow)PRO-DEX, INC. and SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)December 31, 2010

June 30, 2010ASSETSCurrent assets:Cash and cash equivalents

$
2,019,000

$   3,794,000Accounts receivable, net of allowance for doubtful accountsof $15,000 at December 31, 2010 and $25,000 at June 30, 2010

2,566,000

2,682,000Other current receivables

-

22,000Inventories

3,906,000

3,228,000Prepaid expenses

205,000

174,000Deferred income taxes

209,000

209,000Total current assets

8,905,000

10,109,000Property, plant, equipment and leasehold improvements, net

3,767,000

4,092,000Other assets

60,000

78,000Total assets

$
2,732,000

$ 14,279,000LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
935,000

$   1,279,000Accrued expenses

1,681,000

1,947,000Income taxes payable

74,000

79,000Current portion of bank term loan

331,000

400,000Current portion of real estate loan

-

35,000Total current liabilities

3,021,000

3,740,000Long-term liabilities:Bank term loan

836,000

967,000Real estate loan

-

1,493,000Deferred income taxes

209,000

209,000Deferred rent

270,000

255,000Total long-term liabilities

1,315,000

2,924,000Total liabilities

4,336,000

6,664,000Commitments and contingencies Shareholders' equity:Common shares; no par value; 50,000,000 shares authorized;3,272,350 shares issued and outstanding at December 31, 20103,251,850 shares issued and outstanding at June 30, 2010

16,714,000

16,675,000Accumulated deficit

(8,318,000)

(9,060,000)Total shareholders’ equity

8,396,000

7,615,000Total liabilities and shareholders’ equity

$
2,732,000

$ 14,279,000PRO-DEX, INC. and SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME For The Three Months Ended December 31, (unaudited) 2010

2009Net sales

$ 6,157,000

$ 5,696,000Cost of sales

3,733,000

3,696,000Gross profit

2,424,000

2,000,000Operating expenses:Selling expenses

351,000

353,000General and administrative expenses

897,000

799,000Impairment of intangible asset

-

140,000Research and development costs

605,000

576,000Total operating expenses

1,853,000

1,868,000Income from operations

571,000

132,000Other income (expense):Royalty income

-

2,000Interest expense

(22,000)

(53,000)Total other income (expense)

(22,000)

(51,000)Income before provision (benefit) for income taxes

549,000

81,000Provision (benefit) for income taxes

148,000

(499,000)Net income

$
401,000

$
580,000Net income per share:Basic

$
.12

$
.18Diluted

$
.12

$
.18Weighted average shares outstanding - basic

3,263,437

3,222,890Weighted average shares outstanding - diluted

3,272,152

3,231,839PRO-DEX, INC. and SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOMEFor the Six Months Ended December 31, (unaudited)2010

2009Net sales

$ 11,986,000

$ 11,329,000Cost of sales

7,378,000

7,456,000Gross profit

4,608,000

3,873,000Operating expenses: Selling expense

775,000

641,000General and administrative expenses

1,660,000

1,526,000Impairment of intangible asset

-

140,000Research and development costs

1,196,000

1,197,000Total operating expenses

3,631,000

3,504,000Income from operations

977,000

369,000Other income (expense): Royalty income

-

3,000Interest expense

(80,000)

(103,000)Total other income (expense)

(80,000)

(100,000)Income before provision (benefit) for income taxes

897,000

269,000Provision (benefit) for income taxes

154,000

(494,000)Net income

$
743,000

$
763,000Net income (loss) per share:Basic

$
.23

$
.24Diluted

$
.23

$
.24Weighted average shares outstanding - basic

3,257,643

3,222,890Weighted average shares outstanding - diluted

3,263,654

3,228,777PRO-DEX, INC. and SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor The Six Months Ended December 31, (unaudited)2010

2009Cash flows from operating activities: Net income

$
743,000

$
763,000Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization

342,000

371,000Impairment of intangible asset

-

140,000(Decrease) increase in allowance for doubtful accounts

(10,000)

5,000Stock based compensation

12,000

71,000Decrease in deferred taxes

-

(525,000)Changes in:Decrease in accounts receivable and other current receivables

148,000

226,000(Increase) decrease in inventories

(678,000)

148,000(Increase) in prepaid expenses

(30,000)

(185,000)Decrease in other assets

17,000

-(Decrease) in accounts payable and accrued expenses

(597,000)

(68,000)(Decrease) increase in income taxes payable

(5,000)

25,000Net cash (used in) provided by operating activities

(58,000)

971,000Cash flows from investing activities: Purchases of equipment and leasehold improvements

(16,000)

(90,000)Net cash used in investing activities

(16,000)

(90,000)Cash flows from financing activities:Principal payments on bank term loan

(200,000)

(200,000)Principal payments on real estate loan

(1,528,000)

(16,000)Proceeds from exercise of stock options

27,000Net cash used in financing activities

(1,701,000)

(216,000)Net (decrease) increase in cash and cash equivalents

(1,775,000)

665,000Cash and cash equivalents, beginning of period

3,794,000

1,125,000Cash and cash equivalents, end of period

$
2,019,000

$
,790,000Supplemental InformationCash payments for interest

$
21,000

$
5,000Cash payments for income taxes

$
59,000

$
,000
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SOURCE Pro-Dex, Inc.
Copyright©2010 PR Newswire.
All rights reserved

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