Dynatronics Announces Fiscal Year 2008 Operating Results
Increased Revenues. As a result of acquisitions concluded in the fourthquarter of fiscal year 2007 and the first quarter of fiscal year 2008, thecompany recorded significant revenue increases for the fourth quarter and fullfiscal year 2008. Sales for the fourth quarter ended June 30, 2008, increased63 percent to $8,057,572, compared to $4,939,425 in the same quarter of theprior year. For the year ended June 30, 2008, sales increased 83 percent to$32,592,507, compared to $17,837,104 in fiscal year 2007. With the completionof the acquisition of six of the company's top independent distributors onJune 30, 2007, and July 2, 2007, the company now has 36 direct sales repscovering 29 states across the country, in addition to a well-establisheddealer network.
"As we expected, in our first full year following the acquisitions, wenearly doubled our sales to approximately $32.6 million," stated Kelvyn H.Cullimore Jr., chairman and president of Dynatronics. "These acquisitions werecritical and necessary steps in response to the changes that have been takingplace in our industry. Unfortunately, the integration of these acquisitionstook a few months longer than expected and the final integration costs werehigher than projected."
Net Losses -- Impairment of Goodwill. Net loss for the quarter ended June30, 2008, was $6,764,001 ($.50 per share), compared to a net income of$214,943 ($.02 per share) in the fourth quarter of the prior year. For thefull fiscal year 2008, the company's net loss totaled $8,443,771 ($.62 pershare), compared to a net loss of $85,042 ($.01 per share) in fiscal year2007.
Included in the loss for the quarter and year ended June 30, 2008, is acharge of approximately $6.6 million related to the impairment of thecompany's goodwill assets. Applicable accounting standards require thecompany to impair its goodwill when the book value of the company's assetsexceeds the market value of the company. The lower price of the company'sstock on June 30, 2008 was the primary factor in triggering the impairment asthe company's market capitalization dropped below its book value. Most ofthat goodwill was associated with the acquisitions in 2007 and 2008, as wellas the 1996 acquisition of the company's Tennessee operations. This write-offis a non-cash adjustment.
Also included in the loss for fiscal year 2008 was more than $2 million inmostly acquisition related expenses related to the assimilation of theacquired dealers, including the expense of depleting acquired dealerinventories of Dynatronics products carried at wholesale cost rather thanDynatronics' manufactured cost base, reducing personnel and the associatedseverance costs, stock option expense, and duplicate SG&A overhead costs. Inaddition, the company recorded $768,000 of bad debt and inventory reservesduring the year.
Excluding the $6.6 million goodwill impairment, the $2 million in mostlyacquisition related expenses related to the assimilation of the acquireddealers and the $768,000 non-cash adjustments to bad debt and inventoryreserves, the company showed an operating loss of approximately $500,000. Webelieve additional expense reductions subsequent to the fiscal year estimatedto be over $250,000 annually should further improve operating results goingforward.
Outlook for Fiscal Year 2009. "With the costs of assimilation now behindus and the impairment and other adjustments required by accounting rulesbooked, we believe that we are positioned to capitalize on the strategic planswe set in place last year," said Cullimore.
"Several factors are expected to help us become profitable," Cullimorecontinued. "Increased sales and improved margins will be key. Theintroduction of our first consolidated catalog in September 2008 is expectedto give sales a strong boost going into the second quarter of the new fiscalyear. In addition, a new pricing strategy is expected to improve margins.This includes the first price increase for our core products in over 20 years.The new catalog not only showcases more than 12,000 products, but facilitatesa cohesive sales effort."
During fiscal year 2008, the company introduced the new Synergie Eliteline of aesthetic products. "This is the first major redesign of Dynatronics'popular cellulite reduction and microdermabrasion devices, which should bringrenewed interest to this high-margin product line," reported Kelvyn H.Cullimore Sr., vice chairman of Dynatronics.
With 36 direct sales representatives in 29 states, the company's presenceof direct sales professionals continues to grow. "Over the coming year we willfocus on bringing experienced distributors and dealers on board in areas whererepresentation was lost through market consolidation," stated Larry K.Beardall, executive vice president of sales and marketing. "The focus ofbringing on more dealers and sales representatives is expected to fueladditional growth in the next fiscal year."
During the process of assimilating its 2007-2008 acquisitions, the companyconsolidated eight distribution facilities into three distribution warehouses.This consolidation of facilities is expected to result in reductions in laborand overhead expenses in excess of $2.1 million annually.
Dynatronics has scheduled a conference call for investors on Monday,September 29, 2008, at 3:00 p.m. ET. Those wishing to participate should call800-839-9416 and use passcode 9321818.
A summary of the financial results for the three and twelve months endedJune 30, 2008, follows:
Dynatronics manufactures, markets and distributes advanced-technologymedical devices, orthopedic soft goods and supplies, treatment tables andrehabilitation equipment for the physical therapy, sports medicine,chiropractic, podiatry, plastic surgery, dermatology and other relatedmedical, cosmetic and aesthetic markets. More information regardingDynatronics is available at http://www.dynatronics.com.
This press release contains forward-looking statements. Those statementsinclude references to the company's expectations and similar statements.Actual results may vary from the views expressed in the forward-lookingstatements contained in this release. The development and sale of thecompany's products are subject to a number of risks and uncertainties,including, but not limited to, changes in the regulatory environment,competitive factors, inventory risks due to shifts in market demand,availability of financing at cost effective rates, and the risk factors listedfrom time to time in the company's SEC reports including, but not limited to,the report on Form 10-KSB for the year ended June 30, 2007, and its subsequentquarterly reports on Form 10-QSB. Forward-looking statements in this releaseinclude, but are not limited to all references to expected operating resultsin fiscal year 2009 under the caption "Outlook for Fiscal Year 2009."Summary Selected Financial Data Statement of Operations Highlights Three Months Ended Twelve Months Ended June 30, June 30, 2008 2007 2008 2007 Net sales $8,057,572 $4,939,425 $32,592,507 $17,837,104 Cost of sales 5,022,123 2,761,875 20,450,570 10,925,316 Gross profit 3,035,449 2,177,550 12,141,937 6,911,788 SG&A expenses 3,232,380 1,603,167 13,473,190 5,541,860 R&D expenses 283,749 339,038 1,354,743 1,492,774 Goodwill impairment 6,636,466 - 6,636,466 - Other expense, net 147,953 18,809 593,093 148,397 Net income (loss) before income taxes (7,265,099) 216,536 (9,915,555) (271,243) Income tax expense (benefit) (501,098) 1,593 (1,471,784) (186,201) Net income (loss) $(6,764,001) $214,943 $(8,443,771) $(85,042) Net income (loss) per share (diluted) $(.50) $.02 $(.62) $(.01) Balance Sheet Highlights June 30, June 30, 2008 2007 Cash $288,481 $1,301,105 Accounts Receivable 5,151,235 3,757,484 Inventories 6,283,068 5,313,984 Total current assets 12,981,686 11,651,927 Total assets $18,427,819 $18,567,616 Accounts payable $1,423,839 $1,241,030 Accrued expenses 500,145 287,773 Line of credit 5,818,320 250,000 Total current liabilities 8,660,803 3,535,536 Total liabilities 12,162,180 7,496,972 Total liabilities and equity $18,427,819 $18,567,616
SOURCE Dynatronics Corporation
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