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 $11.8 million; its shares were traded at around $0.86 with and P/S ratio of 0.3.
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
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.
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