Datalink Corp. (DTLK, Financial) filed Quarterly Report for the period ended 2009-09-30.
Datalink Corporation is an information storage architect. The company analyzes, designs, implements and supports information storage infrastructures that store, protect and provide continuous access to information. Datalink's specialized capabilities and solutions span storage area networks, network-attached storage, direct-attached storage and IP-based storage, using industry-leading hardware, software and technical services. Datalink Corp. has a market cap of $52.4 million; its shares were traded at around $4.05 with a P/E ratio of 135 and P/S ratio of 0.3.
General and Administrative. General and administrative expenses include wages for administrative personnel, professional fees, depreciation, communication expenses and rent and related facility expenses. General and administrative expenses were $3.3 million, or 7.7% of net sales for the quarter ended September 30, 2009, compared to $3.2 million, or 6.3% of net sales for the third quarter in 2008. General and administrative expenses were $9.1 million, or 7.2% of net sales for the nine months ended September 30, 2009, compared to $9.2 million or 6.2% of net sales for the comparable period in 2008.
General and administrative expenses increased $130,000 for the three months ended September 30, 2009, as compared to the same period in 2008. In the three months ended September 30, 2009 we experienced decrease in variable compensation of $212,000 due to our below plan performance and a decrease in travel and entertainment, training and communication expenses of $37,000, $178,000 and $87,000, respectively, due to cost reduction initiatives. However, we incurred a $624,000 charge for a severance agreement with our former president and chief executive officer. During the nine months ended September 30, 2009, our general and administrative expenses decreased $179,000 as compared to the same period in 2008. Although we incurred the severance agreement charge, we saved $205,000 by canceling our annual sales meeting and lowered our travel and entertainment, training and communication expenses by $126,000, $308,000 and $61,000, respectively, with our cost reduction initiatives.
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 $2.8 million, or 6.6% of net sales for the quarter ended September 30, 2009, compared to $2.8 million, or 5.6% of net sales for the third quarter in 2008. Engineering expenses were $8.6 million, or 6.8% of net sales for the nine months ended September 30, 2009, compared to $8.8 million, or 6.0% of net sales for the comparable period in 2008.
Earnings (Loss) from Operations. We had a loss from operations of $386,000 for the three months ended September 30, 2009 and earnings from operations of $1.8 million for the three months ended September 30, 2008. We had a loss from operations of $859,000 for the nine months ended September 30, 2009 and earnings from operations of $3.9 million for the nine months ended September 30, 2008. The loss from operations for the three and nine month periods ended September 30, 2009 is a result of a decrease in our revenues and margins due to the current economic downturn. The earnings from operations for the three and nine month periods ended September 30, 2008 is a result of higher revenues and margins with a limited increase in operating expenses.
Income Taxes. We had income tax benefit of $282,000 and income tax expense of $742,000 for the three months ended September 30, 2009 and 2008, respectively. We had income tax benefit of $381,000 for the nine months ended September 30, 2009 and income tax expense of $1.8 million for the nine months ended September 30, 2009. Our estimated effective tax rate for the third quarter of 2009 is 77%. Our estimated effective tax rate for 2008 was 40%. For the balance of 2009, we expect to report an income tax provision using an effective tax rate of approximately 61%.
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Datalink Corporation is an information storage architect. The company analyzes, designs, implements and supports information storage infrastructures that store, protect and provide continuous access to information. Datalink's specialized capabilities and solutions span storage area networks, network-attached storage, direct-attached storage and IP-based storage, using industry-leading hardware, software and technical services. Datalink Corp. has a market cap of $52.4 million; its shares were traded at around $4.05 with a P/E ratio of 135 and P/S ratio of 0.3.
Highlight of Business Operations:
Net Sales. Our total net sales decreased by $7.3 million for the three months ended September 30, 2009, or 14.5%, from $50.0 million for the comparable quarter in 2008. Our total net sales decreased by $21.1 million for the nine months ended September 30, 2009, or 14.3%, from $147.4 million for the comparable period in 2008. Our product sales decreased $6.4 million, or 22.3%, to $22.4 million for the three months ended September 30, 2009, from $28.8 million for the comparable quarter in 2008. Our product sales decreased $21.8 million for the nine months ended September 30, 2009, or 25.3%, from $86.4 million for the comparable period in 2008. Our service sales decreased $849,000, or 4.0%, to $20.3 million for the three months ended September 30, 2009 from $21.1 million for the comparable quarter in 2008. Our service sales increased $695,000, or 1.1%, to $61.7 million for the nine months ended September 30, 2009 from $61.0 million for the comparable period in 2008.General and Administrative. General and administrative expenses include wages for administrative personnel, professional fees, depreciation, communication expenses and rent and related facility expenses. General and administrative expenses were $3.3 million, or 7.7% of net sales for the quarter ended September 30, 2009, compared to $3.2 million, or 6.3% of net sales for the third quarter in 2008. General and administrative expenses were $9.1 million, or 7.2% of net sales for the nine months ended September 30, 2009, compared to $9.2 million or 6.2% of net sales for the comparable period in 2008.
General and administrative expenses increased $130,000 for the three months ended September 30, 2009, as compared to the same period in 2008. In the three months ended September 30, 2009 we experienced decrease in variable compensation of $212,000 due to our below plan performance and a decrease in travel and entertainment, training and communication expenses of $37,000, $178,000 and $87,000, respectively, due to cost reduction initiatives. However, we incurred a $624,000 charge for a severance agreement with our former president and chief executive officer. During the nine months ended September 30, 2009, our general and administrative expenses decreased $179,000 as compared to the same period in 2008. Although we incurred the severance agreement charge, we saved $205,000 by canceling our annual sales meeting and lowered our travel and entertainment, training and communication expenses by $126,000, $308,000 and $61,000, respectively, with our cost reduction initiatives.
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 $2.8 million, or 6.6% of net sales for the quarter ended September 30, 2009, compared to $2.8 million, or 5.6% of net sales for the third quarter in 2008. Engineering expenses were $8.6 million, or 6.8% of net sales for the nine months ended September 30, 2009, compared to $8.8 million, or 6.0% of net sales for the comparable period in 2008.
Earnings (Loss) from Operations. We had a loss from operations of $386,000 for the three months ended September 30, 2009 and earnings from operations of $1.8 million for the three months ended September 30, 2008. We had a loss from operations of $859,000 for the nine months ended September 30, 2009 and earnings from operations of $3.9 million for the nine months ended September 30, 2008. The loss from operations for the three and nine month periods ended September 30, 2009 is a result of a decrease in our revenues and margins due to the current economic downturn. The earnings from operations for the three and nine month periods ended September 30, 2008 is a result of higher revenues and margins with a limited increase in operating expenses.
Income Taxes. We had income tax benefit of $282,000 and income tax expense of $742,000 for the three months ended September 30, 2009 and 2008, respectively. We had income tax benefit of $381,000 for the nine months ended September 30, 2009 and income tax expense of $1.8 million for the nine months ended September 30, 2009. Our estimated effective tax rate for the third quarter of 2009 is 77%. Our estimated effective tax rate for 2008 was 40%. For the balance of 2009, we expect to report an income tax provision using an effective tax rate of approximately 61%.
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