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Datalink Corp. Reports Operating Results (10-Q)

August 13, 2010 | About:
10qk

10qk

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Datalink Corp. (DTLK) filed Quarterly Report for the period ended 2010-06-30.

Datalink Corp. has a market cap of $45 million; its shares were traded at around $3.4 with a P/E ratio of 170 and P/S ratio of 0.3. DTLK is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Gross Profit. Our total gross profit as a percentage of net sales decreased to 23.6% for the quarter ended June 30, 2010, as compared to 26.6% for the comparable quarter in 2009. Our total gross profit as a percentage of net sales decreased to 23.3% for the six months ended June 30, 2010, as compared to 26.6% for the comparable period in 2009. Product gross profit as a percentage of product sales decreased to 21.8% in the second quarter of 2010 from 25.5% for the comparable quarter in 2009. Product gross profit as a percentage of product sales decreased to 21.4% for the six months ended June 30, 2010 from 25.4% for the same period in 2009. Service gross profit as a percentage of service sales decreased to 26.7% for the second quarter of 2010 from 27.8% for the comparable quarter in 2009. Service gross profit as a percentage of service sales decreased to 26.3% for the six months ended June 30, 2010 from 27.8% for the same period in 2009.

Our service gross profit as a percentage of service sales for the three and six months ended June 30, 2010 decreased 1.1% and 1.5%, respectively, as compared to the same periods in 2009. This decrease is primarily due to $283,000 and $656,000 of Incentra-related acquisition accounting adjustments to reduce acquired maintenance contracts to fair value for the three and six months ended June 30, 2010, respectively. We expect these adjustments will continue to impact future quarters. Excluding these adjustments, service gross profit margin would have been 27.4% compared to reported of 27.8 % for the three months ended June 30, 2009 and 27.2% compared to reported of 27.8% for the six months ended June 30, 2009. We estimate that, taking into account the Incentra-related acquisition accounting adjustments, our service gross margins for the remainder of 2010 will be between 27% and 30%.

Sales and Marketing. Sales and marketing expenses include wages and commission paid to sales and marketing personnel, travel costs and advertising, promotion and hiring expenses. Sales and marketing expenses totaled $8.1 million, or 11.4% of net sales for the quarter ended June 30, 2010, compared to $5.3 million, or 12.0% of net sales for the second quarter in 2009. Sales and marketing expenses totaled $15.8 million, or 11.8% of net sales for the six months ended June 30, 2010, compared to $10.8 million, or 12.9% of net sales for the same period in 2009.

or 5.4% of net sales for the quarter ended June 30, 2010, compared to $2.8 million, or 6.5% of net sales for the second quarter in 2009. General and administrative expenses were $7.3 million, or 5.5% of net sales for the six months ended June 30, 2010, compared to $5.8 million, or 6.9% of net sales for the same period in 2009. Our general and administrative expenses have decreased as a percentage of net sales for both the three and six month periods ended June 30, 2010 as compared to the same periods in 2009. This decrease reflects the impact of a modest increase in expenses related to the Incentra acquisition to support a significant increase in revenues.

Engineering. Engineering expenses include employee wages, bonuses and travel, hiring and training expenses for our field and customer support engineers and technicians. Engineering expenses were $4.3 million, or 6.1% of net sales for the quarter ended June 30, 2010, compared to $3.0 million, or 6.8% of net sales for the second quarter in 2009. Engineering expenses were $8.3 million, or 6.2% of net sales for the six months ended June 30, 2010, compared to $5.8 million, or 6.9% of net sales for the same period in 2009.

Income Taxes. We had income tax benefit of $67,000 and income tax expense of $122,000 for the three months ended June 30, 2010 and 2009, respectively. We had income tax benefit of $706,000 and $99,000 for the six months ended June 30, 2010 and 2009, respectively. Our estimated effective tax rate for the three and six months ended June 30, 2010 was 108% and 44%, respectively. The effective tax rate has increased due to the effect of the permanent differences in relation to our projected income. Our estimated effective tax rate for 2009 was (55%). For the balance of 2010, we expect to report an income tax provision using an effective tax rate of approximately 44%.

Read the The complete Report

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