EX-99.1 2 pi3526ex991.txt EXHIBIT 99.1 Exhibit 99.1 PRO-DEX, INC. ANNOUNCES FOURTH FISCAL QUARTER AND FISCAL 2005 RESULTS SALES INCREASE 19% FOR THE QUARTER NET INCOME UP 112% FOR THE QUARTER, 65% FOR THE YEAR BACKLOG REACHES 7.9 MILLION AS OF JUNE 30, 2005 SANTA ANA, Calif., Sept. 6 /PRNewswire-FirstCall/ -- PRO-DEX, INC. (Nasdaq: PDEX), a developer and manufacturer of embedded motion control and miniature rotary drive systems, serving the medical, dental, factory automation, and scientific research markets, today announced financial results for the fourth quarter and full-year period ending June 30, 2005. Consolidated net sales for the fourth quarter were $4.4 million, up 19 percent compared to the $3.7 million reported for the fourth quarter last year and a 35 percent sequential increase compared to the $3.2 million reported for the third quarter. For the year ended June 30, 2005, consolidated net sales were $13.8 million compared to $14.2 million for the same period last year, a decrease of 2.5 percent. Last year's revenues included approximately $675,000 in product sales (4.2 percent of total sales), which has subsequently transitioned to a royalty agreement as previously announced by the Company. Net income for the quarter was $928,000, or $0.09 per diluted share, as compared to a net income of $437,000 or $0.05 per diluted share, for the three months ended June 30, 2004. This represents an increase of $491,000, or 112 percent, compared to the prior year's fourth quarter. The Company reported net income for the year of $1.8 million, or $0.20 per basic and $0.19 per fully diluted share, compared to net income of $1.1 million, or $0.13 per basic and $0.12 per fully diluted share, last year. This represents an increase of $729,000, or 65 percent, over the previous year, despite the decrease in revenues. Net income for the fourth quarter and the year was positively impacted by a tax benefit of $332,000, with $227,000 resulting from the reversal of a reserve against the Company's deferred tax asset and $103,000 resulting from the use of a state tax credit. The net result of both tax matters was a $0.03 increase in earnings per share for the year. In calculating earnings per share for the quarter, the Company utilized 10.0 million fully diluted shares compared to 9.3 million diluted shares for the fourth quarter of fiscal year 2004. For the 2005 and 2004 fiscal years, 9.6 million and 9.3 million fully diluted shares were utilized in the calculations respectively. Commenting on the Company's financial performance for the quarter and the year, Pro-Dex's President and Chief Executive Officer, Patrick Johnson said, "We are pleased with our financial performance, especially knowing the fourth quarter was going to be challenging. Given the substantial increase in new orders received during the third quarter of the year, we recognized that the fourth quarter would provide the inflection point to guide the Company to the next level of revenue and profitability. However, significantly increasing production output is a complicated proposition in the short term, as our business model is based on a diverse, high-mix/low-volume product composition. In the case of the fourth quarter, that rapid increase in production included two new medical products, and overall, this ramp-up impacted our efficiency. However, having reached and sustained this new level of production, we expect gross profit to trend back toward the levels seen earlier in the year." Gross profit for the fourth quarter was $2.0 million, or 44.8 percent of sales, compared to gross profit of $2.0 million, or 53.3 percent of sales for the fourth quarter last year. The fourth quarter gross profit was impacted by $241,000 in unfavorable manufacturing variances resulting from the 35 percent increase in production output. In addition, gross profit was further diluted by a $145,000 in non-recurring inventory disposal and reserve adjustments. Gross profit for the year was $7.1 million, or 51.2 percent of sales, compared to gross profit of $6.8 million, or 47.9 percent of sales, last year. Operating expenses decreased by 19.3 percent to $1,007,000 compared to $1,248,000 in the fourth quarter last year, due to decreases in Company-funded research and development projects and decreases in administrative expenses following management's consolidation of the Company at the end of last year. For the full fiscal year, operating expense decreased 4 percent to $4.7 million compared to $5.0 million last year. During the fourth quarter, the Company received royalty income of $30,400 compared to $58,000 last year. For the full fiscal year, the Company received royalty income of $76,800 compared to $98,000 last year. Mr. Johnson continued, "In reflecting on our performance in the fourth quarter and the full fiscal year, I think the momentum we gained is just as important, if not more important, than what was achieved. In comparing how we finished the fourth quarter this year to last year, all indicators are trending up. Sales were up by 19 percent for the quarter, a pace we expect to continue into the new fiscal year as we have expanded the product mix from which we derive recurring revenue. Gross profit was up for the year by nearly 4 margin points, despite the non-reoccurring charges we saw in the fourth quarter, a trend that bodes well for gross profitability in the coming fiscal year. Expenses were down despite increases in product development, sales and marketing activities, all drivers of future sales. As a result, operating income was up 36 percent for the quarter and 25 percent for the year, further evidence of a favorable trend." "In addition, new order bookings were up by $700,000 in the fourth quarter compared to the prior quarter, pushing our total order backlog to $7.9 million at the end of the year, a $2.8 million or 52 percent increase over the end of last year," Mr. Johnson continued. "We ended the year with nine active product development projects, only one more project than last year, but those nine projects represent a potential first year revenue of $6.5 million compared to just $4 million the eight projects represented last year. This is an indication that we are bidding on and winning incrementally larger development projects, projects that will help drive our top-line sales and maintain our leverage in generating increased profitability. Finally, the Company remained debt free and we increased our cash on hand to $2.6 million, strengthening our position to fund future acquisitions. Given this momentum, we believe that we are trending in the right direction." Other highlights from the fiscal fourth quarter included: -- The Company hired two industry veterans to fill key positions. Mr. Ajay Kumar was appointed Vice President of Product Development. Mr. Kumar served as Director of New Product Development for Zimmer, in the Dental Division, manager of the R&D Department and Projects for Nobel Biocare, and R&D Engineer for Steri-Oss. Mr. Kumar has an MBA from the University of California, Irvine and a Masters in Biomedical Engineering from Rutgers University. In addition, he has a MSME from the University of Southern Illinois and a BSME from the National Institute of Technology, Kurukshetra, India. -- Mr. Mark Bennett was named Director of Sales for the Company's Factory Automation products. Mr. Bennett joins Pro-Dex from Encoder Products Company, where he served as Business Development Manager for Encoder's Motion Control and Industrial Control Distributors. Mr. Bennett also worked for the Parker Electromechanical Automation Technology Center, serving in an outside sales capacity and also as an Applications Engineer, and previously at Minarik Corporation, serving as Sales Manager and an Applications Engineer. In addition, he has a BSME from Oregon State University. Outlook: For fiscal 2006, management believes that the Company will achieve sales of $16-18 million and net income of $0.26-0.30 per share. "This estimate does not include new product launches yet to reach supply agreement negotiation, any potential acquisitions and does not include new royalty payments," Mr. Johnson continued. "This growth is indicative of the work we've done during the past two years: streamlining our corporate operations to reduce expenses and building a portfolio of development projects to produce profitable revenue growth. We are excited about the operating progress we have made to date and the opportunities before us." Teleconference Information: Investors and all others are invited to listen to a conference call discussing the fourth quarter and fiscal 2006 outlook today at 4:30 p.m. Eastern Time. The call will be broadcast over the Internet at http://www.pro-dex.com. An online replay will be available for 30 days. Additionally, a telephone replay will be available two hours after the call for 48-hours by dialing (800) 475-6701 for domestic callers and for international callers; conference ID# 794238. If you would like to join the call, dial (800) 553-0329 U.S. and (612) 332-0802 International. Pro-Dex Inc., with operations in Santa Ana, California and Beaverton, Oregon, specializes in bringing speed to market in the development and manufacture of technology-based solutions that incorporate embedded motion control and miniature rotary drive systems, serving the medical, dental, factory automation, 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 http://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 BALANCE SHEET June 30, 2005 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,584,000 Accounts receivable, net of allowance for doubtful accounts of $100,000 3,521,000 Inventories, net 3,145,000 Prepaid expenses 66,000 Income taxes receivable 120,000 Deferred income taxes 495,000 Total current assets 9,931,000 Equipment and leasehold improvements, net 1,156,000 Other assets: Goodwill 1,110,000 Deferred income taxes 541,000 Other 18,000 Total other assets 1,669,000 Total assets $ 12,756,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,158,000 Accrued expenses 472,000 Income taxes payable 13,000 Total current liabilities 1,643,000 Long-term liabilities - Total liabilities 1,643,000 Commitments and contingencies Shareholders' equity: Common shares; no par value; 50,000,000 shares authorized; 9,449,396 shares issued and outstanding, 15,933,000 Accumulated deficit (4,820,000) Total shareholders' equity 11,113,000 Total liabilities and shareholders' equity $ 12,756,000 PRO-DEX, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended June 30 (Unaudited) 2005 2004 ------------- ------------- Net sales $ 13,834,000 $ 14,200,000 Cost of sales 6,754,000 7,395,000 Gross profit 7,080,000 6,805,000 Operating expenses: Selling 897,000 857,000 General and administrative expenses 2,151,000 2,325,000 Research and development costs 1,740,000 1,790,000 Total operating expenses 4,788,000 4,972,000 Income from operations 2,292,000 1,833,000 Other income (expense): Other income, net 40,000 22,000 Royalty income 77,000 98,000 Interest income (expense) 21,000 (51,000) Total 138,000 69,000 Income before income taxes provision 2,430,000 1,902,000 Income taxes provision 581,000 782,000 Net income $ 1,849,000 $ 1,120,000 Net Income per share: Basic $ 0.20 $ 0.13 Diluted $ 0.19 $ 0.12 Weighted average shares outstanding - basic 9,106,846 8,799,477 Weighted average shares outstanding - diluted 9,640,980 9,327,423 PRO-DEX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 30 (Unaudited) 2005 2004 ------------- ------------- Cash Flows from Operating Activities: Net Income $ 1,849,000 $ 1,120,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 348,000 362,000 Provision for doubtful accounts 60,000 10,000 Reserve for obsolete inventory (18,000) (83,000) Stock based compensation 25,000 25,000 Deferred taxes 545,000 22,000 Changes in: (Increase) in accounts receivable (1,212,000) (760,000) Decrease in inventories (585,000) 376,000 Decrease in prepaid expenses 10,000 38,000 Decrease in other assets (1,000) 5,000 Increase (Decrease) in accounts payable and accrued expenses 453,000 159,000 Increase (Decrease) in income taxes payable (917,000) 780,000 Net Cash provided by Operating Activities 557,000 2,054,000 Cash Flows From Investing Activities: Purchases of equipment and leasehold improvements (474,000) (352,000) Net Cash provided by (used in) Investing Activities (474,000) (352,000) Cash Flows from Financing Activities: Principal payments on long-term shareholder borrowings (145,000) (71,000) Net (payments) on line of credit - (432,000) Additional paid in capital 576,000 76,000 Net Cash (used in) Financing Activities 431,000 (427,000) Net Increase in Cash and Cash Equivalents 514,000 1,275,000 Cash and Cash Equivalents, beginning of period 2,070,000 795,000 Cash and Cash Equivalents, end of period $ 2,584,000 $ 2,070,000 Supplemental Information Cash payments for interest $ 9,000 $ 51,000 Cash payments (refunds) for income taxes $ 943,000 $ (15,000) Disclosure of non-cash financing Conversion of preferred to common stock $ 283,000 $ - SOURCE Pro-Dex Inc. -0- 09/06/2005 /CONTACT: Patrick Johnson, President & CEO of Pro-Dex Inc., +1-714-241-4411; or Matthew Hayden, Investor Relations of Hayden Communications, Inc., +1-858-456-4533/ /Web site: http://www.pro-dex.com /