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Dynatronics Corp. Reports Operating Results (10-Q)

May 14, 2009 | About:
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Dynatronics Corp. (DYNT) filed Quarterly Report for the period ended 2009-03-31.

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 $8.9 million; its shares were traded at around $0.65 with and P/S ratio of 0.2.

Highlight of Business Operations:

For the quarter ended March 31, 2009 the Company's sales were

$7,633,419, compared to $7,781,871 for the quarter ended March 31, 2008. Sales

for the nine months ended March 31, 2009 were $24,348,461, compared to

$24,534,934 for the nine months ended March 31, 2008. Sales remained essentially

flat in the current period when compared with the prior year period,

notwithstanding significant turmoil in the credit and financial markets and the

general economic environment in the United States. We believe that the

introduction of our new product catalog in September 2008 contributed to the

success in holding sales during the fiscal third quarter within two percent of

the same period in the prior year. The new product catalog contains 437 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 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 March 31, 2009 gross profit was $2,844,426 or

37.3% of net sales, compared to $2,834,959 or 36.4% of net sales for the quarter

ended March 31, 2008. Gross profit for the nine months ended March 31, 2009 was

$9,353,623 or 38.4% of net sales, compared to $9,106,487 or 37.1% of net sales

for the nine months ended March 31, 2008. During the prior year nine-month

period, margins were diminished due to sales of higher basis inventory of the

six distributors acquired in 2007. That inventory was mostly liquidated during

the first half of fiscal year 2008, during the six months following the

acquisitions. Adjusting for the higher basis inventory, margins would have been

about 2 points higher for the nine-month period ended March 31, 2009. However,

the increase in gross margin percentage in the quarter ended March 31, 2009 over

the same period in the prior year is attributable primarily to price increases

implemented during the quarter ended December 31, 2008. The quarter ended March

31, 2009 was the first full quarter in which those price increases were

effective.



Net income for the quarter ended March 31, 2009 was $141,576 ($.01 per

share), compared to a net loss of $628,775 ($.05 per share) for the quarter

ended March 31, 2008. Net income for the nine months ended March 31, 2009 was

$57,223 ($.00 per share), compared to a net loss of $1,679,770 ($.12 per share)

for the nine months ended March 31, 2008. The primary components contributing to

the improvement in operating results and the return to profitability in the

current quarter were sales and gross margins remaining level with the prior year

and the sharp reductions in SG&A expenses and lower R&D expenses.



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

commercial bank. At March 31, 2009, we owed $5,684,566 on this line compared to

$5,818,320 at June 30, 2008. At March 31, 2009, the borrowing base was

approximately $6.6 million, resulting in approximately $900,000 available to the

Company on the line. Interest on the line of credit is based on the 90-day LIBOR

rate plus 4%, which at March 31, 2009 equaled 5.1% 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

March 31, 2009, the Company was in compliance with its loan covenants.



Long-term debt, net of current portion, totaled $2,855,689 at March 31,

2009, compared to $3,046,000 at June 30, 2008. Long-term debt is comprised

primarily of the mortgage loans on our office and manufacturing facilities in

Utah and Tennessee. The principal balance on the mortgage loans is approximately

$3.0 million with monthly principal and interest payments of $40,707.



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

March 31, 2009 and June 30, 2008, our inventory valuation reserve, which

established a new cost basis, was $425,071 and $337,718, respectively, and our

inventories totaled $6,569,912 and $6,283,068 net of reserves, respectively.



Read the The complete Report

Rating: 3.0/5 (1 vote)

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