Dynatronics Corp. (DYNT, Financial) filed Quarterly Report for the period ended 2010-03-31.
Dynatronics Corp. has a market cap of $13.19 million; its shares were traded at around $0.97 with a P/E ratio of 32.33 and P/S ratio of 0.41.
$3,115,263, or 37.8% of net sales, compared to $2,844,426, or 37.3% of net
sales, for the quarter ended March 31, 2009. Gross profit was $9,621,982, or
38.5% of net sales, for the nine months ended March 31, 2010, compared to
$9,353,623, or 38.4% of net sales, for the nine months ended March 31, 2009. The
increase in gross margin as a percentage of sales for the quarter ended March
31, 2010 is attributable to product mix more favorable to some of our
higher-margin medical devices, including the new V-Force device and our top
selling Solaris products, together with certain medical supply products and
treatment tables. As economic conditions gradually improve, demand for higher
margin capital products is expected to increase, which we expect would further
improve gross margins in future periods.
Selling, general, and administrative ("SG&A") expenses for the quarter
ended March 31, 2010 increased $390,622, or 17.3%, to $2,647,417, or 32.1% of
net sales compared to $2,256,795, or 29.6% of net sales, for the third quarter
ended March 31, 2009. SG&A expenses decreased $1,726, to $8,059,143, or 32.2% of
net sales, for the nine months ended March 31, 2010, from $8,060,869, or 33.1%
of net sales, for the nine months ended March 31, 2009. SG&A expenses in the
quarter ended March 31, 2009 benefited from a one-time reversal of an accrued
liability of $472,398 resulting from the cancellation of retirement benefits
previously provided by contract to two executive officers, Kelvyn Cullimore, Jr.
and Larry Beardall. This one time reversal had the effect of lowering operating
expenses for the quarter ended March 31, 2009 by an equivalent amount. The
benefits were cancelled when the employment agreements in which they were
granted were terminated in March 2009. Both executives subsequently entered into
new agreements with the Company in June 2009. The new agreements do not include
retirement benefits such as those that had been a part of the terminated
agreements.
Research and development ("R&D") expenses decreased $25,231, or 10.2%, to
$222,062 for the quarter ended March 31, 2010, from $247,293 for the quarter
ended March 31, 2009. R&D expenses also decreased as a percentage of net sales
for the quarter ended March 31, 2010, to 2.7 % from 3.2% of net sales for the
quarter ended March 31, 2009. R&D expenses decreased $130,128, or 16.8%, to
$644,912 for the nine months ended March 31, 2010, from $775,040 for the nine
months ended March 31, 2009. R&D costs are expensed as incurred. We expect to
continue our commitment to developing innovative products for the physical
medicine market in fiscal year 2010 and in future periods in order to position
us for growth. We anticipate that R&D expenses as a percentage of net sales and
in absolute terms will increase over the coming quarters based on the schedule
of new products currently under development. Current year decreases reflect a
strategy shift to outsourcing some R&D functions, thus eliminating some
personnel costs.
Pre-tax income for the quarter ended March 31, 2010, totaled $160,905
compared to $213,304 for the quarter ended March 31, 2009. As noted above, the
quarter ended March 31, 2009 included the one time gain related to the reversal
of $472,398 in accrued retirement liability. Pre-tax income for the nine months
ended March 31, 2010, increased to $612,881 compared to $112,393 for the nine
months ended March 31, 2009. This improvement in pre-tax income was a result of
higher sales and margins and lower R&D and interest expenses for the nine months
ended March 31, 2010 compared to the nine months ended March 31, 2009.
Net income for the quarter ended March 31, 2010 was $96,099, or $.01 per
share, compared to $141,576, or $.01 per share, for the quarter ended March 31,
2009. Net income increased to $353,022, or $.03 per share, for the nine months
ended March 31, 2010, compared to $57,223, or $.00 per share, for the nine
months ended March 31, 2009. The decrease in net income in the quarter ended
March 31, 2010 compared to the quarter ended March 31, 2009, is due to the
reversal of the accrual for retirement benefits described above. The results of
operations for the quarter and nine months ended March 31, 2009 included the
one-time gain related to the reversal of $472,398 in accrued retirement
liability described above. Factors contributing to the improvement in net income
for the nine months ended March 31, 2010 were improved sales and margins and the
reductions in R&D and interest expenses.
The outstanding balance on our line of credit with a bank decreased
$713,086, to $3,889,565 as of March 31, 2010, compared to $4,602,651 as of June
30, 2009, and $6,208,338 as of March 31, 2009. Interest on the line of credit is
based on the 90-day LIBOR rate (0.29% as of March 31, 2010) plus 4% with a
minimum interest rate of 4.5% per annum. The line of credit is collateralized by
accounts receivable and inventories, as well as a security interest in our
headquarters facility in Cottonwood Heights, Utah. Borrowing limitations are
based on approximately 45% of eligible inventory and up to 80% of eligible
accounts receivable, up to a maximum credit facility of $7,000,000. Interest
payments on the line are due monthly. As of March 31, 2010, the borrowing base
was approximately $6,142,000, resulting in approximately $2,250,000 available on
the line. The line of credit is renewable in December 2010 and includes
covenants requiring us to maintain certain financial ratios. As of March 31,
2010, we were in compliance with the loan covenants.
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Dynatronics Corp. has a market cap of $13.19 million; its shares were traded at around $0.97 with a P/E ratio of 32.33 and P/S ratio of 0.41.
Highlight of Business Operations:
Gross profit for the quarter ended March 31, 2010 increased by $270,837 to$3,115,263, or 37.8% of net sales, compared to $2,844,426, or 37.3% of net
sales, for the quarter ended March 31, 2009. Gross profit was $9,621,982, or
38.5% of net sales, for the nine months ended March 31, 2010, compared to
$9,353,623, or 38.4% of net sales, for the nine months ended March 31, 2009. The
increase in gross margin as a percentage of sales for the quarter ended March
31, 2010 is attributable to product mix more favorable to some of our
higher-margin medical devices, including the new V-Force device and our top
selling Solaris products, together with certain medical supply products and
treatment tables. As economic conditions gradually improve, demand for higher
margin capital products is expected to increase, which we expect would further
improve gross margins in future periods.
Selling, general, and administrative ("SG&A") expenses for the quarter
ended March 31, 2010 increased $390,622, or 17.3%, to $2,647,417, or 32.1% of
net sales compared to $2,256,795, or 29.6% of net sales, for the third quarter
ended March 31, 2009. SG&A expenses decreased $1,726, to $8,059,143, or 32.2% of
net sales, for the nine months ended March 31, 2010, from $8,060,869, or 33.1%
of net sales, for the nine months ended March 31, 2009. SG&A expenses in the
quarter ended March 31, 2009 benefited from a one-time reversal of an accrued
liability of $472,398 resulting from the cancellation of retirement benefits
previously provided by contract to two executive officers, Kelvyn Cullimore, Jr.
and Larry Beardall. This one time reversal had the effect of lowering operating
expenses for the quarter ended March 31, 2009 by an equivalent amount. The
benefits were cancelled when the employment agreements in which they were
granted were terminated in March 2009. Both executives subsequently entered into
new agreements with the Company in June 2009. The new agreements do not include
retirement benefits such as those that had been a part of the terminated
agreements.
Research and development ("R&D") expenses decreased $25,231, or 10.2%, to
$222,062 for the quarter ended March 31, 2010, from $247,293 for the quarter
ended March 31, 2009. R&D expenses also decreased as a percentage of net sales
for the quarter ended March 31, 2010, to 2.7 % from 3.2% of net sales for the
quarter ended March 31, 2009. R&D expenses decreased $130,128, or 16.8%, to
$644,912 for the nine months ended March 31, 2010, from $775,040 for the nine
months ended March 31, 2009. R&D costs are expensed as incurred. We expect to
continue our commitment to developing innovative products for the physical
medicine market in fiscal year 2010 and in future periods in order to position
us for growth. We anticipate that R&D expenses as a percentage of net sales and
in absolute terms will increase over the coming quarters based on the schedule
of new products currently under development. Current year decreases reflect a
strategy shift to outsourcing some R&D functions, thus eliminating some
personnel costs.
Pre-tax income for the quarter ended March 31, 2010, totaled $160,905
compared to $213,304 for the quarter ended March 31, 2009. As noted above, the
quarter ended March 31, 2009 included the one time gain related to the reversal
of $472,398 in accrued retirement liability. Pre-tax income for the nine months
ended March 31, 2010, increased to $612,881 compared to $112,393 for the nine
months ended March 31, 2009. This improvement in pre-tax income was a result of
higher sales and margins and lower R&D and interest expenses for the nine months
ended March 31, 2010 compared to the nine months ended March 31, 2009.
Net income for the quarter ended March 31, 2010 was $96,099, or $.01 per
share, compared to $141,576, or $.01 per share, for the quarter ended March 31,
2009. Net income increased to $353,022, or $.03 per share, for the nine months
ended March 31, 2010, compared to $57,223, or $.00 per share, for the nine
months ended March 31, 2009. The decrease in net income in the quarter ended
March 31, 2010 compared to the quarter ended March 31, 2009, is due to the
reversal of the accrual for retirement benefits described above. The results of
operations for the quarter and nine months ended March 31, 2009 included the
one-time gain related to the reversal of $472,398 in accrued retirement
liability described above. Factors contributing to the improvement in net income
for the nine months ended March 31, 2010 were improved sales and margins and the
reductions in R&D and interest expenses.
The outstanding balance on our line of credit with a bank decreased
$713,086, to $3,889,565 as of March 31, 2010, compared to $4,602,651 as of June
30, 2009, and $6,208,338 as of March 31, 2009. Interest on the line of credit is
based on the 90-day LIBOR rate (0.29% as of March 31, 2010) plus 4% with a
minimum interest rate of 4.5% per annum. The line of credit is collateralized by
accounts receivable and inventories, as well as a security interest in our
headquarters facility in Cottonwood Heights, Utah. Borrowing limitations are
based on approximately 45% of eligible inventory and up to 80% of eligible
accounts receivable, up to a maximum credit facility of $7,000,000. Interest
payments on the line are due monthly. As of March 31, 2010, the borrowing base
was approximately $6,142,000, resulting in approximately $2,250,000 available on
the line. The line of credit is renewable in December 2010 and includes
covenants requiring us to maintain certain financial ratios. As of March 31,
2010, we were in compliance with the loan covenants.
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