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Dynatronics Corp. Reports Operating Results (10-Q)

February 14, 2009 | About:
insider

Dynatronics Corp. (DYNT) filed Quarterly Report for the period ended 2008-12-31.

DYNATRONICS CORP. is involved in the design manufacture and sale of medical devices for therapeutic use by medical practitioners. Dynatronics Corp. has a market cap of $6.55 million; its shares were traded at around $0.4 with and P/S ratio of 0.2.

Highlight of Business Operations:

For the quarter ended December 31, 2008, the Company's sales were $8,718,893,

compared to $8,861,633 for the quarter ended December 31, 2007. Sales for the

six months ended December 31, 2008, were $16,715,042, compared to $16,753,063

for the six months ended December 31, 2007. Sales remained even in the current

period when compared with the prior year period, notwithstanding significant

turmoil in the credit and financial markets and the economic environment in the

United States during the three months ended December 31, 2008. These conditions

continued to deteriorate after December 31, 2008. We believe that one of the

reasons for the success in holding sales within two percent of the same period

in the prior year is the September 2008 introduction of our new product catalog

containing over 500 pages of products - more than double the size of the

Company's previous catalog. The expansion of our product offering is a direct

result of the acquisitions of six distributors completed in July 2007. The new

catalog is a major step in presenting the Company's new image to the market

after a year of assimilation and change. In conjunction with the new catalog, we

also implemented pricing incentives to reward customers for placing larger

orders.



For the quarter ended December 31, 2008, gross profit was $3,313,555, or 38.0%

of net sales, compared to $3,339,216, or 37.7% of net sales, for the quarter

ended December 31, 2007. Gross profit for the six months ended December 31, 2008

was $6,509,197, or 38.9% of net sales, compared to $6,271,528, or 37.4% of net

sales, for the six months ended December 31, 2007. Margins for the comparative

period in the prior fiscal year were negatively impacted (approximately 2.1

percentage points) because of a higher cost basis in inventory sold during the

period. This higher cost basis was the carrying cost of the inventory held by

the acquired dealers at the time of acquisition. Although the introduction of

the expanded catalog has helped maintain sales at the prior year levels, the new

catalog also has boosted sales of lower margin supplies and distributed goods

which have the effect of lowering the overall gross profit percentage. This

trend is expected to continue as demand for capital goods has softened in the

current challenging national economic environment.



Income tax provision for the quarter ended December 31, 2008 was $35,319

compared to an income tax benefit of $182,864 for the quarter ended December 31,

2007. The effective tax rate for the 2008 quarter was 39.3% compared to 35.1% in

2007. The higher effective tax rate for the quarter ended December 31, 2008

reflects franchise taxes required in certain states. Income tax benefit for the

six months ended December 31, 2008 was $16,559 compared to $579,904 for the

similar period of the prior year.



Net income for the quarter ended December 31, 2008 was $54,598 ($.00 per share),

compared to net loss of $338,792 ($.02 per share) for the quarter ended December

31, 2007. Net loss for the six months ended December 31, 2008 was $84,353 ($.01

per share), compared to a net loss of $1,050,995 ($.08 per share) for the six

months ended December 31, 2007. The primary components contributing to the

improvement and return to profitability in the current quarter were the sharp

reductions in SG&A expenses, together with lower R&D expenses, while maintaining

sales and gross profits at levels similar to the prior year's levels.



The Company has an $8,000,000 revolving line of credit with a commercial bank.

At December 31, 2008, we owed $6,208,338 on this line compared to $5,818,320 at

June 30, 2008. At December 31, 2008, the borrowing base was approximately $6.9

million, resulting in approximately $700,000 of borrowings available to the

Company under the line of credit. Interest on the line of credit is based on the

bank's prime rate plus 1%, which at December 31, 2008 equaled 4.25% per annum.

The line of credit is collateralized by accounts receivable and inventories as

well as a security interest in the Company's headquarters facility in Salt Lake

City, Utah. Borrowing limitations are based on approximately 45% of eligible

inventory and up to 80% of eligible accounts receivable. Interest payments on

the line are due monthly. The line of credit is renewable on October 31, 2009

and includes covenants requiring the Company to maintain certain financial

ratios. As of December 31, 2008, the Company was in compliance with its loan

covenants.



Any modifications to estimates of inventory valuation reserves are reflected in

the cost of sales within the statements of operations during the period in which

such modifications are determined necessary by management. At December 31, 2008

and June 30, 2008, our inventory valuation reserve, which established a new cost

basis, was $439,466 and $337,718, respectively, and our inventories totaled

$7,039,074 and $6,283,068 net of reserves, respectively.



Read the The complete Report

Rating: 2.0/5 (1 vote)

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