Pro-Dex, Inc. Announces Fiscal Second Quarter And Six-Month Results

     Pro-Dex, Inc. Announces Fiscal Second Quarter And Six-Month Results

PR Newswire

IRVINE, Calif., Jan. 10, 2013

IRVINE, Calif., Jan. 10, 2013 /PRNewswire/ --PRO-DEX, INC. (NasdaqCM: PDEX)
today announced financial results for its fiscal second quarter and six months
ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20111025/LA93174LOGO-c)

Quarter Ended December 31, 2012

Sales for the quarter ended December 31, 2012 decreased 25% to $3.0 million
from $4.0 million for the corresponding quarter in 2011. As the Company has
previously discussed, this decrease was primarily the result of reductions in
purchases of the Company's powered surgical instrument products by its former
largest customer, partially offset by increases in such surgical instrument
sales to other customers. Excluding sales to the Company's former largest
customer, which represented a reduction of $1.5 million in the quarter ended
December 31, 2012 from the corresponding quarter in 2011, sales increased
$524,000, or 25%, in the quarter ended December 31, 2012.

Gross profit for the quarter ended December 31, 2012 was $1.0 million, or 34%,
compared to gross profit of $1.2 million, or 31%, for the year-ago period.
The increase in gross profit as a percentage of sales from 2011 to 2012 was
due primarily to a reduction in warranty costs and improvements in
manufacturing efficiencies, partially offset by unfavorable changes in product
mix.

Operating expenses, which include selling, general and administrative, and
research and development expenses, for the quarter ended December 31, 2012
decreased 10% to $1.4 million from $1.6 million in the prior year's
corresponding quarter. This decrease was attributable to the effects of
reduced employee compensation, other operating expense cuts, and the
utilization of engineering resources in contractual revenue-producing
activities. Included in operating expenses for the quarter ended December 31,
2012 was $42,000 of legal and other costs associated with the contested
election of directors, without which such costs the reduction in operating
expenses would have been 12%.

Loss from continuing operations for the quarter ended December 31, 2012 was
$364,000, compared to a loss from continuing operations of $329,000 in the
corresponding quarter in 2011. Net loss for the quarter ended December 31,
2012 was $348,000, or $0.11 per diluted share, compared to a net loss of
$292,000, or $0.09 per diluted share, for the corresponding quarter in 2011.
Earnings before interest, income taxes and depreciation ("EBITDA") for the
quarter ended December 31, 2012 was a loss of $196,000, compared to a loss of
$130,000 in the corresponding quarter in 2011.

During the quarter ended December 31, 2012, the Company used $619,000 of cash
in operating activities. This use of cash reflects primarily payments made in
the second fiscal quarter for the build-up of inventory in first fiscal
quarter in anticipation of customer orders and pursuant to the Company's
operating plan, one of the foundational objectives of which is to reduce
production lead times.

Six Months Ended December 31, 2012

Sales for the six months ended December 31, 2012 decreased 29% to $6.5 million
from $9.1 million in the corresponding six-month period in 2011. Excluding
sales to the Company's former largest customer, which represented a reduction
of $3.8 million in the six months ended December 31, 2012 from the
corresponding period in 2011, sales for the six months ended December 31, 2012
increased $1.2 million, or 25%, in the six months ended December 31, 2012.
During the six months ended December 31, 2012, the Company received new orders
of $9.4 million, compared to $2.8 million in the corresponding period in 2011,
excluding orders received from the former largest customer. The book to bill
ratio for the six months ended December 31, 2012 was 1.5.

For the six months ended December 31, 2012, gross profit was $2.3 million, or
35%, compared to $3.4 million and 37%, respectively, for the corresponding
period in 2011. The decrease in gross profit as a percentage of sales from
2011 to 2012 resulted primarily from reduced manufacturing efficiencies and
unfavorable changes in product mix, partially offset by a reduction in
warranty costs.

Operating expenses for the six months ended December 31, 2012 decreased 19% to
$2.7 million, from $3.3 million in the corresponding six-month period of 2011.
This decrease was attributable to the effects of reduced employee
compensation, other operating expense cuts, and the utilization of engineering
resources in contractual revenue-producing activities.

For the six months ended December 31, 2012, loss from continuing operations
was $418,000, compared to income from continuing operations of $17,000 for the
corresponding period in 2011. Net loss for the 2012 six-month period was
$365,000, or $0.11 per diluted share, as compared to net income of $154,000,
or $0.05 per diluted share, for the corresponding period in 2011. EBITDA for
the six months ended December 31, 2012 was a loss of $55,000, compared to
income of $473,000 in the corresponding period one year ago.

During the six months ended December 31, 2012, the Company used $791,000 of
cash in operating activities. This use of cash reflects primarily the
previously mentioned build-up of inventory in first fiscal quarter. In
addition, as announced previously, in September 2012 the Company repaid the
entire outstanding balance on the term loan from Union Bank amounting to
$685,000. As a result of the foregoing, cash on hand at December 31, 2012 was
$2.5 million, compared to $4.1 million at June 30, 2012.

Michael J. Berthelot, the Company's President and Chief Executive Officer,
commented, "We believe that the results of the quarter and six months ended
December 31, 2012 reflect continued progress on our strategy to move our
company forward. We believe that our continuing efforts to attract, quote on
and win new business are showing results. In the six months ended December
31, 2011, the first half of fiscal year 2012, we submitted five proposals to
potential customers, and submitted eight proposals for the entire fiscal
year. So far in this current fiscal year we have already submitted eight
proposals in the six months ended December 31, 2012 and have won one of them.
As important, the value of the current year proposals in both non-recurring
engineering and production value materially exceed those from last year.
While we can offer no assurances that we will win any of the business upon
which we have quoted, we know that we cannot win any business on which we do
not quote. We continue to win business from new customers as well as current
customers, as shown in a 25% increase in sales of powered surgical instruments
to customers other than our former largest customer compared to last year's
corresponding quarter and six-months, and continue to build our backlog with a
book to bill ratio of 1.5 for both the quarter and the six months ended
December 31, 2012."

"Our continuing efforts at cost reduction and improved manufacturing
efficiencies led to our gross margin for the quarter ended December 31, 2012
increasing to 34% from 31% in last year's corresponding quarter in spite of a
25% reduction in sales volume and an unfavorable shift in product mix," said
Mr. Berthelot. "Our programs to reduce cost in every non-manufacturing
department continue to bear fruit, as evidenced by the 10% reduction in
operating costs for the quarter from last year. It is important to point out
that $42,000 of the general and administrative costs for the quarter are
associated with the contested election of directors that we would not normally
incur."

Mr. Berthelot said, "With respect to product innovation and quality
improvement, much of the new proposals discussed above revolve around our
Pro-Driver platform and involve various derivatives and modifications to our
basic product. While the time-consuming process from initial meeting to
proposal, development, testing, acceptance and production may run from twelve
to eighteen months and involve resources from sales and marketing,
engineering, quality assurance, operations and finance, we have achieved
success in winning customer acceptance of our development process and we hope
that success will continue on if and when the product is released to
production. We have been working on an expansion of our dental product line
for several months. With a resurgent marketing effort, we hope to launch a
new product that will fill out our dental product line during the next six
months. As we push forward our product innovation and development efforts and
move to protect our intellectual property, we are seeing greater spending on
legal fees associated with patent and trademark filings, which aggregated
$22,000 and $47,000 during the quarter and six months ended December 31, 2012,
respectively."

Mr. Berthelot continued, "Lead times for our most significant products
continue to improve. As a result of a change in our production and planning
processes, we are now able to ship our standard Pro-Drivers, the product which
is currently attracting the most interest from potential customers, within two
days of order for small volumes and two weeks for larger volumes, compared to
quoted lead times of sixteen weeks in last fiscal year's fourth quarter. We
believe that an improved responsiveness to customer requests for samples and
small volume test and evaluation lots will help us in our efforts to
participate from the early phases of new customer programs."

"While we are making progress, we still have much to do. The second quarter
was, we believe, the toughest of the fiscal year, partly due to our shutdown
of operations for two weeks during the quarter for the Thanksgiving, Christmas
and New Year holidays as part of our cost reduction program. Our backlog is
strong for the second half of fiscal 2013. We expect to continue to press
down on our cost structure while increasing engineering resources. We expect
the programs and projects that we have begun to move our company forward and
to build value for every shareholder."

"Of course," Mr. Berthelot noted, "we appreciate the support of each and every
shareholder as we pursue our strategy amidst the distraction and diversion of
resources due to the contested election of directors. We understand that
there have been some logistical problems in our proxy materials arriving to
our shareholders on the West Coast. If you have not yet received the
Company's proxy materials which include the BLUE proxy card, we encourage you
to contact our proxy solicitor, AST Phoenix Advisers, at 1-866-721-1318 and
ask for the materials to be sent to you. We ask that all of our shareholders
vote for the Pro-Dex director nominees using the BLUE proxy card as quickly as
possible, and we thank you for your support."

Teleconference Information:

Investors and analysts are invited to listen to a broadcast review of the
Company's fiscal 2013 second quarter and six-month 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. or Canada.

For those who cannot access the live broadcast, a replay will be available
approximately two hours after the completion of the call until midnight
(Eastern Time) on January 24, 2013 by calling (877) 660-6853, or (201)
612-7415 if calling from outside the U.S. or Canada, and then entering
conference I.D. number 407053. An online archive of the broadcast will be
available on the Company's website www.pro-dex.com for a period of 365 days.

About Pro-Dex, Inc.:

Pro-Dex, Inc., with operations in California and Oregon, 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 OMS division designs and manufactures embedded motion
control systems serving the medical, dental, semi-conductor and scientific
research markets. Pro-Dex's products are found in hospitals, dental offices,
medical engineering labs, 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 SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


                                             December31,2012   June30,2012
ASSETS
Current assets:
Cash                                         $   2,549,000    $ 4,112,000
Accounts receivable, net of allowance for
doubtful accounts of $13,000 at December31, 1,175,000           1,581,000
2012 and $16,000 at June30, 2012
Other current receivables                    90,000              123,000
Inventories                                  3,515,000           2,791,000
Prepaid expenses                             237,000             172,000
Income taxes receivable                      570,000             609,000
Deferred income taxes                        109,000             109,000
Total current assets                         8,245,000           9,497,000
Property, plant, equipment and leasehold     2,290,000           2,539,000
improvements, net
Real estate held for sale                    733,000             733,000
Other assets                                 53,000              53,000
Total assets                                 $   11,321,000    $ 12,822,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                             $      576,000 $   633,000
Accrued expenses                             1,008,000           1,425,000
Income taxes payable                         47,000              47,000
Bank term loan                               --                  774,000
Total current liabilities                    1,631,000           2,879,000
Non-current liabilities:
Deferred income taxes                        109,000             109,000
Deferred rent                                280,000             284,000
Total non-current liabilities                389,000             393,000
Total liabilities                            2,020,000           3,272,000
Commitments and contingencies
Shareholders' equity:
Common shares; no par value; 50,000,000
shares authorized; 3,340,684 and 3,272,350
shares issued and outstanding at             16,962,000          16,846,000
December31, 2012 and June30, 2012,
respectively
Accumulated deficit                          (7,661,000)         (7,296,000)
Total shareholders' equity                   9,301,000           9,550,000
Total liabilities and shareholders' equity   $   11,321,000    $ 12,822,000







PRO-DEX, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


                                       ForTheThreeMonthsEndedDecember31,
                                       2012                  2011
Net sales                              $  3,007,000         $ 4,017,000
Cost of sales                          1,974,000             2,770,000
Gross profit                           1,033,000             1,247,000
Operating expenses:
Selling expenses                       322,000               369,000
General and administrative expenses    627,000               688,000
Research and development costs         464,000               508,000
Total operating expenses               1,413,000             1,565,000
Loss from continuing operations before (380,000)             (318,000)
items below
Other expense:
Interest expense                       --                    (10,000)
Total other expense                    --                    (10,000)
Loss from continuing operations before
provision for (benefit from) income    (380,000)             (328,000)
taxes
Provision for (benefit from) income    (16,000)              1,000
taxes
Loss from continuing operations        (364,000)             (329,000)
Income from discontinued operations,
net of provision for income taxes of   16,000                37,000
$21,000 in 2012 and $0 in 2011
Net loss                               $  (348,000)        $ (292,000)
Per share data:
Loss from continuing operations
Basic                                  $    (0.11)        $    (0.10)
Diluted                                $    (0.11)        $    (0.10)
Income from discontinued operations
Basic                                  $        --    $     0.01
Diluted                                $        --    $     0.01
Net loss
Basic                                  $    (0.11)        $    (0.09)
Diluted                                $    (0.11)        $    (0.09)
Weighted average shares outstanding -  3,319,180             3,272,350
basic
Weighted average shares outstanding -  3,319,180             3,272,350
diluted





PRO-DEX, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


                                         ForTheSixMonthsEndedDecember31,
                                         2012                2011
Net sales                                $  6,468,000       $ 9,062,000
Cost of sales                            4,199,000           5,707,000
Gross profit                             2,269,000           3,355,000
Operating expenses:
Selling expenses                         596,000             743,000
General and administrative expenses      1,234,000           1,504,000
Research and development costs           870,000             1,069,000
Total operating expenses                 2,700,000           3,316,000
Income (loss) from continuing operations (431,000)           39,000
before items below
Other expense:
Interest expense                         (6,000)             (20,000)
Total other expense                      (6,000)             (20,000)
Income (loss) from continuing operations
before provision for (benefit from)      (437,000)           19,000
income taxes
Provision for (benefit from) income      (19,000)            2,000
taxes
Income (loss) from continuing operations (418,000)           17,000
Income from discontinued operations, net
of provision for income taxes of $25,000 53,000              137,000
in 2012 and $0 in 2011
Net income (loss)                        $  (365,000)      $   154,000
Per share data:
Income (loss) from continuing operations
Basic                                    $      (0.13)  $      0.01
Diluted                                  $      (0.13)  $      0.01
Income from discontinued operations
Basic                                    $       0.02 $      0.04
Diluted                                  $       0.02 $      0.04
Net income (loss)
Basic                                    $      (0.11)  $      0.05
Diluted                                  $      (0.11)  $      0.05
Weighted average shares outstanding -    3,299,379           3,272,350
basic
Weighted average shares outstanding -    3,299,379           3,292,508
diluted









PRO-DEX, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


                                     ForTheSixMonthsEndedDecember31,
                                     2012                 2011
Cash flows from operating
activities:
Net income (loss)                    $    (365,000)   $     154,000
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Depreciation and amortization        298,000              339,000
Allowance for doubtful accounts      (3,000)              6,000
Share-based compensation             65,000               33,000
Changes in:
Accounts receivable and other        440,000              834,000
current receivables
Inventories                          (724,000)            (1,030,000)
Prepaid expenses                     (65,000)             (88,000)
Other assets                         --                   8,000
Accounts payable and accrued         (476,000)            (213,000)
expenses
Income taxes receivable and payable  39,000               (49,000)
Net cash used in operating           (791,000)            (6,000)
activities
Cash flows from investing
activities:
Purchases of equipment               (48,000)             (237,000)
Net cash used in investing           (48,000)             (237,000)
activities
Cash flows from financing
activities:
Proceeds from exercise of stock      50,000               --
options
Principal payments on term loan      (774,000)            (179,000)
Net cash used in financing           (724,000)            (179,000)
activities
Net decrease in cash                 (1,563,000)          (422,000)
Cash, beginning of period            4,112,000            4,689,000
Cash, end of period                  $   2,549,000     $   4,267,000
Supplemental Information
Cash payments for interest           $       9,000 $      10,000
Cash payments for income taxes       $         — $         —





PRO-DEX, INC. and SUBSIDIARIES


RECONCILIATION OF NON-GAAP DATA TO GAAP DATA


Loss From Continuing Operations Before Provision For Income Taxes



(in thousands)

(unaudited)
                           For The Three Months Ended For The Six Months Ended
                           December 31,               December 31,
                           2012          2011         2012          2011
Earnings before interest,
taxes, depreciation and    $(196,000)    $(130,000)   $(55,000)     $473,000
amortization ("EBITDA")
Interest expense           --            10,000       6,000         20,000
Depreciation and           147,000       151,000      298,000       297,000
amortization
Income from discontinued
operations, before
provision for income taxes
of $21,000 and $25,000 for
the three and six months   37,000        37,000       78,000        137,000
ended December 31, 2012,
respectively, and $0 for
each of the three and six
months ended December 31,
2011
Income (loss) from
continuing operations      $(380,000)    $(328,000)   $(437,000)    $19,000
before provision for
income taxes







SOURCE Pro-Dex, Inc.

Website: http://www.pro-dex.com
Contact: Michael J. Berthelot, Chief Executive Officer, +1-949-769-3200
 
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