PRO DEX INC - FORM 8-K - EX-99.1 - PRESS RELEASE - September 5, 2017

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Exhibit 99.1

[pdex_ex99z1001.jpg]




Contact:  Richard L. Van Kirk, Chief Executive Officer

(949) 769-3200


For Immediate Release


PRO-DEX, INC. ANNOUNCES FISCAL 2017

FOURTH QUARTER AND FULL-YEAR RESULTS
FOURTH QUARTER NET INCOME INCREASES BY 279%



IRVINE, CA, September 5, 2017 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2017 fourth quarter and full-year ended June 30, 2017.


Quarter Ended June 30, 2017


Net sales for the three months ended June 30, 2017 increased $607,000, or 12%, to $5.6 million from $5.0 million for the three months ended June 30, 2016, due primarily to increased medical device sales, especially in the orthopedic and craniomaxillofacial (“CMF”) surgical segments. Gross profit for the three months ended June 30, 2017 increased $715,000, or 56%, to $2.0 million from $1.3 million for the same period in 2016. The increase in gross margin was due to manufacturing efficiencies mostly derived from investing in capital equipment to increase the in-house machining of parts that had previously been outsourced.


Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended June 30, 2017 increased 9% to $1.2 million from $1.1 million in the prior year’s corresponding quarter, reflecting primarily our increase general and administrative expenses.


Income from continuing operations for the quarter ended June 30, 2017 increased by $518,000, or 259%, to $718,000, compared to $200,000 in the corresponding quarter in 2016. Net income for the quarter ended June 30, 2017 was $716,000, or $0.18 per share, an increase of 279%, compared to net income of $189,000, or $0.05 per share, for the corresponding quarter in 2016.


Year Ended June 30, 2017


Net sales for the fiscal year ended June 30, 2017 increased $2.8 million, or 14%, to $21.9 million from $19.2 million for the fiscal year ended June 30, 2016, due primarily to increases in medical device revenues. Specifically, our largest customer accounted for an increase of $5.9 million in revenue during fiscal 2017. Offsetting this increase, sales to our former largest customer in the medical device segment decreased by approximately $2.1 million from $3.6 million in fiscal 2016 to $1.5 million in fiscal 2017.


Gross profit for the fiscal year ended June 30, 2017 increased $2.3 million, or 46%, to $7.2 million compared to $4.9 million for fiscal 2016.


Operating expenses (which include selling, general and administrative, and research and development expenses) for the fiscal year ended June 30, 2017 increased 8% to $4.5 million from $4.1 million in the prior fiscal year, reflecting increases in general and administrative expenses primarily related to bonus accruals and legal and professional fees.




 


Income from continuing operations for the fiscal year ended June 30, 2017 was $4.8 million compared to $1.1 million for fiscal 2016. Net income for the fiscal year ended June 30, 2017 was $5.1 million, or $1.25 per share, compared to $822,000, or $0.20 per share, for fiscal 2016.


Although the Company has released its earnings prior to the filing of its annual Form 10-K with the Securities and Exchange Commission, we are able to do this because we are a smaller reporting company and we have more time to do so at fiscal year-end. During our quarterly reporting periods we anticipate that our earnings releases will continue to be released at the same time as our Form 10-Q’s are filed with the Securities and Exchange Commission. We anticipate filing our Form 10-K with the Securities and Exchange Commission on September 14, 2017.


CEO Comments


Richard L (“Rick”) Van Kirk, the Company’s President and Chief Executive Officer, commented, “We are pleased with our fourth quarter and full year operating results as we continue to gain momentum. I would like to express my appreciation to the entire team here at Pro-Dex for their perseverance and efforts through some challenging years to get us to the point we are today. We were able to improve margins by in-sourcing certain machined parts and will continue to strive for cost savings through increasing production yields and continued investment in both equipment and personnel. We are excited about our most recent product launch, our new relationship with a startup technology company, and our continued ability to re-invest in our products and technology. We anticipate another profitable year in fiscal 2018 and expect to see increased spending in our research and development efforts as we plan to launch at least one new Pro-Dex branded product in late fiscal 2018.”


About Pro-Dex, Inc.:


Pro-Dex, Inc. specializes in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, spine, and maxocranial facial markets. We have patented adoptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. Pro-Dex also sells dental instruments and rotary air motors. Its Fineline Molds division manufactures plastic injection molding for a variety of industries. Pro-Dex's products are found in hospitals, dental offices, and medical engineering labs 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

(In thousands, except share data)


 

 

June 30,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,205

 

 

$

2,294

 

Investments

 

 

718

 

 

 

—

 

Accounts receivable, net of allowance for doubtful accounts of $3 and $20 at June 30, 2017 and 2016, respectively

 

 

3,538

 

 

 

1,469

 

Due from factor

 

 

—

 

 

 

1,419

 

Deferred costs

 

 

12

 

 

 

238

 

Assets held for sale

 

 

—

 

 

 

287

 

Other current receivables

 

 

86

 

 

 

91

 

Inventory

 

 

3,085

 

 

 

3,364

 

Prepaid expenses

 

 

277

 

 

 

129

 

Total current assets

 

 

11,921

 

 

 

9,291

 

Plant, equipment and leasehold improvements, net

 

 

1,429

 

 

 

1,222

 

Goodwill

 

 

112

 

 

 

112

 

Intangibles, net

 

 

320

 

 

 

451

 

Deferred income taxes, net

 

 

2,048

 

 

 

—

 

Notes receivable

 

 

450

 

 

 

—

 

Other assets

 

 

71

 

 

 

71

 

Total assets

 

$

16,351

 

 

$

11,147

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,159

 

 

$

841

 

Accrued liabilities

 

 

1,344

 

 

 

1,076

 

Deferred revenue

 

 

19

 

 

 

212

 

Income taxes payable

 

 

—

 

 

 

1

 

Note payable

 

 

26

 

 

 

26

 

Capital lease obligations

 

 

32

 

 

 

—

 

Total current liabilities

 

 

2,580

 

 

 

2,156

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Deferred rent

 

 

—

 

 

 

68

 

Notes and capital leases payable, net of current portion

 

 

61

 

 

 

46

 

Total non-current liabilities

 

 

61

 

 

 

114

 

Total liabilities

 

 

2,641

 

 

 

2,270

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock, no par value, 50,000,000 shares authorized; 4,025,193 and 4,052,987 shares issued and outstanding at June 30, 2017 and 2016, respectively

 

 

17,704

 

 

 

17,988

 

Accumulated other comprehensive income

 

 

33

 

 

 

—

 

Accumulated deficit

 

 

(4,027

)

 

 

(9,111

)

Total shareholders’ equity

 

 

13,710

 

 

 

8,877

 

Total liabilities and shareholders’ equity

 

$

16,351

 

 

$

11,147

 




 


PRO-DEX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


 

 

Three Months Ended
June 30,

 

 

Years Ended
June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(Unaudited)

 

 

 

 

 

 

 

Net sales 

 

$

5,597

 

 

$

4,990

 

 

$

21,943

 

 

$

19,189

 

Cost of sales 

 

 

3,606

 

 

 

3,713

 

 

 

14,757

 

 

 

14,271

 

Gross profit 

 

 

1,991

 

 

 

1,276

 

 

 

7,186

 

 

 

4,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses 

 

 

146

 

 

 

216

 

 

 

585

 

 

 

780

 

General and administrative expenses

 

 

635

 

 

 

476

 

 

 

2,529

 

 

 

1,882

 

Impairment of goodwill and intangible assets

 

 

—

 

 

 

—

 

 

 

113

 

 

 

245

 

Research and development costs

 

 

386

 

 

 

374

 

 

 

1,225

 

 

 

1,204

 

Total operating expenses 

 

 

1,167

 

 

 

1,066

 

 

 

4,452

 

 

 

4,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit 

 

 

824

 

 

 

210

 

 

 

2,734

 

 

 

807

 

Interest expense 

 

 

(2

)

 

 

(1

)

 

 

(12

)

 

 

(37

)

Interest and dividend income 

 

 

8

 

 

 

—

 

 

 

27

 

 

 

—

 

Gain from disposal of equipment

 

 

—

 

 

 

—

 

 

 

3

 

 

 

18

 

Gain from sale of Investment in Ramsey Property

 

 

—

 

 

 

—

 

 

 

—

 

 

 

340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

 

830

 

 

 

209

 

 

 

2,752

 

 

 

1,128

 

Income tax (expense) benefit 

 

 

(112

)

 

 

9

 

 

 

2,089

 

 

 

(25

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

718

 

 

 

200

 

 

 

4,841

 

 

 

1,103

 

Income (loss) from discontinued operations, net of income taxes 

 

 

(2

)

 

 

(11

)

 

 

243

 

 

 

(281

)

Net income 

 

$

716

 

 

$

189

 

 

$

5,084

 

 

$

822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.18

 

 

$

0.05

 

 

$

1.20

 

 

$

0.27

 

Income (loss) from discontinued operations

 

 

—

 

 

 

—

 

 

 

0.06

 

 

 

(0.07

)

Net income 

 

$

0.18

 

 

$

0.05

 

 

$

1.26

 

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.18

 

 

$

0.05

 

 

$

1.19

 

 

$

0.27

 

Income (loss) from discontinued operations

 

 

—

 

 

 

—

 

 

 

0.06

 

 

 

(0.07

)

Net income 

 

$

0.18

 

 

$

0.05

 

 

$

1.25

 

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

4,020,415

 

 

 

4,131,076

 

 

 

4,040,308

 

 

 

4,141,353

 

Diluted

 

 

4,057,117

 

 

 

4,177,439

 

 

 

4,077,575

 

 

 

4,173,556

 




 


PRO-DEX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


 

 

Years Ended

June 30,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

5,084

 

 

$

822

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

555

 

 

 

614

 

Gain on sale of OMS

 

 

(327

)

 

 

—

 

Gain on sale of investment in Ramsey

 

 

—

 

 

 

(340

)

Gain on sale or disposal of equipment

 

 

(3

)

 

 

(18

)

Impairment of goodwill and intangible assets

 

 

113

 

 

 

245

 

Share-based compensation

 

 

3

 

 

 

4

 

Deferred income tax benefit

 

 

(2,048

)

 

 

—

 

Allowance for doubtful accounts

 

 

(17

)

 

 

(16

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, due from factor and other current receivables

 

 

(633

)

 

 

(523

)

Deferred costs

 

 

226

 

 

 

615

 

Assets held for sale

 

 

(22

)

 

 

—

 

Inventory

 

 

279

 

 

 

737

 

Prepaid expenses and other assets

 

 

(299

)

 

 

(5

)

Accounts payable, accrued expenses and deferred rent

 

 

518

 

 

 

(1,288

)

Deferred revenue

 

 

(193

)

 

 

(382

)

Income taxes payable

 

 

(1

)

 

 

1

 

Net cash provided by operating activities

 

 

3,235

 

 

 

466

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of equipment and leasehold improvements

 

 

(606

)

 

 

(311

)

Proceeds from sale of OMS

 

 

636

 

 

 

—

 

Purchase of notes receivable

 

 

(450

)

 

 

—

 

Investment in Ramsey property and related notes receivable

 

 

—

 

 

 

(87

)

Proceeds from sale of investment in Ramsey

 

 

86

 

 

 

1,992

 

Proceeds from sale of equipment

 

 

3

 

 

 

18

 

Increase in intangibles

 

 

(32

)

 

 

(24

)

Purchase of investments

 

 

(663

)

 

 

—

 

Net cash provided by (used in) investing activities

 

 

(1,026

)

 

 

1,588

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Principal payments on capital lease and note payable

 

 

(57

)

 

 

(530

)

Proceeds from shares issued under ATM

 

 

48

 

 

 

—

 

Proceeds from note payable

 

 

—

 

 

 

500

 

Borrowings from Summit loan

 

 

600

 

 

 

1,689

 

Repayments on Summit loan

 

 

(600

)

 

 

(1,689

)

Repurchases of common stock

 

 

(312

)

 

 

(454

)

Proceeds from exercise of stock options and ESPP contributions

 

 

25

 

 

 

27

 

Net cash used in financing activities

 

 

(298

)

 

 

(457

)

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

1,911

 

 

 

1,597

 

Cash and cash equivalents, beginning of year

 

 

2,294

 

 

 

697

 

Cash and cash equivalents, end of year

 

$

4,205

 

 

$

2,294

 




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