Dynatronics Corporation (NASDAQ: DYNT) today announced results for its fiscal third quarter ended March 31, 2011.
Net income for the quarter ended March 31, 2011, increased 22 percent to $117,260 ($.01 per common share), compared to $96,099 ($.01 per common share) for the same quarter in the prior fiscal year. Sales for the quarter ended March 31, 2011, increased 1.8 percent to $8,383,842, compared to $8,235,060 for the quarter ended March 31, 2010.
Net income for the nine months ended March 31, 2011, was $202,112 ($.02 per common share), compared to $353,022 ($.03 per common share) for the same period in the prior fiscal year. Approximately $400,000 in increased R&D expenses primarily accounts for the lower profitability through nine months. Sales for the nine months ended March 31, 2011, were $24,502,477, compared to $25,018,960 for the similar period of the prior year. General weakness in the economy contributed to lower demand for capital equipment during the first half of the current fiscal year.
"Profits increased 22 percent for the quarter despite heavy R&D expenses," stated Kelvyn H. Cullimore Jr., chairman and president of Dynatronics. "Other than higher R&D expenses, we improved every other category including higher sales, better gross profit margins, slightly lower SG&A expense and lower interest expense. With several new products currently under development, our R&D expenses represent an investment in the future - an investment we believe will strengthen future profitability."
During the quarter, the company announced the signing of contracts with three group purchasing organizations (GPOs): Premier, Amerinet and First Choice. "These contracts began on March 1, 2011, so they did not contribute materially to sales this quarter," Cullimore explained. "However, we did begin the process of introducing GPO member facilities to Dynatronics' brand of products. The contracts with the GPOs represent a license to solicit business directly from the members of the respective GPOs. While the process of converting business to our brand will take time, management is optimistic about the potential of this new market segment."
Together, the three GPOs represent tens of thousands of clinics and hospitals around the nation, spending an estimated $50 million on physical medicine products annually.
"We are making good progress with the GPO members," stated Larry K. Beardall, executive vice-president of sales and marketing. "Several of them are opening accounts and starting to place orders for our products and services. We expect to announce specific progress soon regarding a large GPO member. Cultivating business through these GPO contracts and seeking additional contracts with other GPOs will be a major focal point for us over the coming years."
"We believe we are well positioned to benefit from our expansion into the GPO market," added Cullimore. "That expansion will have the most significant impact on delivering strong revenue growth and increasing operating margins over the next 12 months and beyond," he concluded.