UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (Date of earliest event reported): April 22, 2021
__________________________________________
Dynatronics Corporation
(Exact
name of registrant as specified in its charter)
__________________________________________
Utah
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0-12697
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87-0398434
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(State
or other jurisdiction of incorporation)
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Commission
File Number
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(IRS
Employer Identification Number)
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1200 Trapp Rd, Eagan, Minnesota
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55121
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(Address
of principal executive offices)
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(Zip
Code)
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(801) 568-7000
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(Registrant's
telephone number, including area code)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐ Pre-commencement communications
pursuant to Rule 14(d)-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
☐ Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common
stock, no par value
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DYNT
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The
Nasdaq Capital Market
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
Report includes forward-looking statements.
All statements other than statements of
historical facts contained in this Report,
including statements regarding our future results of
operations and financial position, business strategy and plans, and
our objectives for future operations,
are forward-looking statements. The words "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intend,"
"may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "will," "would" and similar expressions that
convey uncertainty of future events or outcomes are intended to
identify forward-looking statements, but the absence of
these words does not mean that a statement is
not forward-looking.
The forward-looking statements contained
in this Report are based on our current expectations and beliefs
concerning future developments and their potential effects on us.
Future developments affecting us may not be those that we have
anticipated.
These forward-looking statements involve a number of
risks, uncertainties (some of which are beyond our control) and
other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by
these forward-looking statements. These risks and
uncertainties include, but are not limited to, the uncertainty
regarding the impact or duration of the novel coronavirus COVID-19
("COVID-19") pandemic that is rapidly spreading globally and
adversely affecting communities and businesses, including ours, as
well as those factors described under the heading "Risk Factors" in
our filings with the Securities and Exchange Commission ("SEC"),
including our reports on Forms 10-K, 10-Q, 8-K and other filings
that we make with the SEC from time to time. Should one or more of
these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary in material
respects from those projected in
these forward-looking statements. We undertake no
obligation to update or revise
any forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be
required under applicable securities laws. These risks and others
described under "Risk Factors" may not be exhaustive.
By
their nature, forward-looking statements involve
risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. We caution
you that forward-looking statements are not
guarantees of future performance and that our actual results of
operations, financial condition and liquidity, and developments in
the industry in which we operate may differ materially from those
made in or suggested by
the forward-looking statements contained in this
Report. In addition, even if our results of operations, financial
condition and liquidity, and developments in the industry in which
we operate are consistent with
the forward-looking statements contained in this
Report, those results or developments may not be indicative of
results or developments in subsequent periods.
Item 2.02 Results of Operations and Financial
Condition
Dynatronics
Corporation (“Dynatronics” or “Company”)
hereby furnishes the information set forth in Item 8.01, below, and
in the press release attached hereto as Exhibit 99.1, the
information regarding its Fiscal Third and Fourth Quarter Outlook.
Such information is not being “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934 and is not to be
incorporated by reference into any filing of the registrant under
the Securities Act of 1933, whether made before or after the date
hereof, regardless of any general incorporation language in any
such filing, except as shall be expressly set forth by specific
reference in such a filing.
On
April 22, 2021, the Company issued a press release announcing the
strategic actions taken and expected to be taken with the objective
to improve the Company’s overall financial performance and
optimize the business. The Company also announced in the press
release its preliminary, unaudited sales results for third quarter
ended March 31, 2021 as well as an outlook for fiscal year 2022.
The full text of the press release is attached as Exhibit 99.1 and
is incorporated herein by reference, except for the information
regarding Fiscal Third and Fourth Quarter 2021 Outlook, which is
being furnished and not filed. A slide presentation regarding the
optimization plan is furnished herewith as Exhibit 99.2 to this
Report on Form 8-K and is incorporated into this Item 8.01 by
reference.
Elimination of third-party distributed products in physical therapy
and rehabilitation lines
As
detailed in the press release, the Company will focus on higher
margin manufactured products and optimize its offerings by
eliminating approximately 1,600 SKUs of low-margin, third-party
distributed products. As part of the optimization plan, the Company
will streamline sales exclusively to dealers while reducing
complexity and associated support costs.
Fiscal
Third and Fourth Quarter 2021 Outlook
The
Company announced that it expects third fiscal quarter ended March
31, 2021 net sales to be approximately $11.4 million compared to
$13.7 million in net sales in the third fiscal quarter of 2020. The
decrease in net sales for the quarter were due to the continued
impact of COVID-19 including reduced demand for our products,
reduced capacity and operating hours, supply chain disruptions, and
extended handling times. Extreme weather conditions also caused
production disruptions. Volatility due to the ongoing pandemic and
the optimization plan are expected to continue.
The
Company expects to incur approximately $1.2 million in
restructuring charges related to the optimization plan, of which
$0.4 million is expected to result in cash expenditures. The
Company expects to recognize the majority of these expenses during
the fourth quarter of fiscal year 2021.
The
above estimates have been prepared by and are the responsibility of
the Company's management. The Company has not yet completed its
closing process for the third quarter ended March 31, 2021. This
information is preliminary, has not been audited and is subject to
change upon completion of the Company's closing procedures.
Additional information and disclosure would be required for a more
complete understanding of the Company's financial position and
results of operations as of the fiscal quarter ended March 31,
2021. Moreover, even if the Company's actual results are consistent
with these preliminary estimates, this information may not be
indicative of results or developments that may be expected in
subsequent periods.
Fiscal Full-Year 2022 Outlook
The
Company anticipates that the elimination of distributed products
portfolio will result in an approximate $11 million in annual net
sales reduction for fiscal year 2022 compared to fiscal year 2021
but that the Company should experience higher annual gross margin,
operating income and EBITDA in fiscal year 2022 relative to fiscal
year 2021. In addition to the $1.75 million pending (gross) sale of
the former Tennessee manufacturing facility already announced, the
Company will not renew expiring facility leases in Michigan and
Texas and is actively working to reduce its Utah facility footprint
by approximately 75 percent. The combination of these facility
moves is expected to result in a forty percent reduction in square
footage under occupancy compared to the beginning of fiscal year
2021.
Item
9.01 Financial Statements and Exhibits
Exhibit Number
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Description
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Press
Release dated April 22, 2021
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Slide
Presentation on Optimization of Dynatronics Corporation dated April
22, 2021
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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DYNATRONICS
CORPORATION
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Date: April 22,
2021
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By:
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/s/ John
Krier
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Name;
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John
Krier
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Title:
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Chief Executive
Officer
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Dynatronics Corporation
Advances Business and Product Portfolio Optimization
Plan
Strategic actions announced today eliminate low-margin, distributed
products
EAGAN, MN / ACCESSWIRE / April 22, 2021 / Dynatronics
Corporation (NASDAQ:
DYNT), a leading manufacturer of athletic training, physical
therapy, and rehabilitation products, announces strategic actions
taken to improve the company’s overall financial performance
consistent with previously announced plans to optimize the
business.
"Today
marks a significant step towards a scalable and sustainable revenue
and growth model as well as higher margins for our business," said
John Krier, President and CEO of Dynatronics Corporation. “By
eliminating low-margin distributed products and associated support
costs within our physical therapy and rehabilitation lines, we will
focus exclusively and more effectively on leveraging our own
manufacturing capabilities and brands to better serve our
customers.”
Summary of Optimization Changes Announced Today
Drive Sales Growth and Better Partner with Customers
●
Eliminate
approximately 1,600 SKUs of low-margin, third-party distributed
products, which are unprofitable, low growth, and add
complexity.
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Focus sales and
marketing resources on products manufactured by
Dynatronics.
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Streamline sales
exclusively to dealers, thereby eliminating perceived competition
with customers from historic direct sales efforts.
Expand Margins and Profitability
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Focus on higher
margin, differentiated products manufactured by the
company.
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Consolidate support
functions to reflect this focus.
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Target significant
accretion to EBITDA and profitability through this
optimization.
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Strengthen balance
sheet via sustainable cash flow from operations, which can support
additional investment and/or M&A in target
markets.
Mr.
Krier continued, “Dynatronics is well-positioned for a return
to organic revenue growth, and improvements in margins and cash
flow in FY ‘22. We see opportunities for more rapid organic
growth in existing and adjacent markets. We are committed to
ongoing business model enhancements, including through potential
M&A transactions.”
The
company expects to record approximately $1.2 million in
restructuring charges, of which $0.4 million is expected to result
in cash expenditures. These costs will be incurred in its Q4 FY
’21 financial results.
Q3 and Q4 Fiscal Year 2021 Outlook
Q3 FY
‘21 sales are expected to be approximately $11.4 million
compared to $13.7 million in the same quarter in the prior year.
The company and its customers experienced severe weather
conditions, as well as continued challenges due to COVID-19
including reduced capacity and operating hours, supply chain
disruptions, and extended handling times. We expect some continued
volatility ahead due to the ongoing pandemic and the business
changes announced today.
Fiscal Full-Year 2022 Outlook
Most of these optimization
initiatives are projected to be completed before the start of our
FY ‘22 on July 1, 2021. Management estimates that the
elimination of low-margin, distributed products will result in an
approximately $11 million annual net sales reduction in FY
‘22 results relative to FY ‘21, but also expects that
the company will deliver higher annual gross margin, operating
income and EBITDA in FY ‘22 relative to FY
‘21.
In
addition to the $1.75 million pending (gross) sale of the former
Tennessee manufacturing facility, the company will not renew
expiring facility leases in Michigan and Texas and is actively
working to reduce its Utah facility footprint by approximately 75
percent. The combination of these facility moves is expected to
result in a 40 percent reduction in square footage under occupancy
compared to the beginning of FY ‘21.
About Dynatronics Corporation
Dynatronics
Corporation is a leading medical device company committed to
providing high-quality restorative products designed to accelerate
achieving optimal health. The company designs, manufactures, and
sells a broad range of products for clinical use in physical
therapy, rehabilitation, pain management, and athletic training.
Through its distribution channels, Dynatronics markets and sells to
orthopedists, physical therapists, chiropractors, athletic
trainers, sports medicine practitioners, clinics, hospitals, and
consumers. The company’s products are marketed under a
portfolio of high-quality, well-known industry brands including
Bird & Cronin®, Dynatron
Solaris®, Hausmann™,
Physician’s Choice®, and
PROTEAM™, among others. More information is available at
www.dynatronics.com.
Safe
Harbor Notification
This
press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Those statements
include references to the company’s expectations and similar
statements. Such forward-looking statements reflect the views of
management at the time such statements are made. These
statements include our statements regarding expected improvement in
overall performance, anticipated recovery in revenues, improvements
in cash flows and operating margins, rapid organic growth in
existing and adjacent markets, expected costs and expenditures
associated with the restructuring, outlook for fiscal year 2021
third and fourth quarters, estimated reductions in revenues
year-over-year in fiscal year 2022 operating results, expectations
that the company will deliver higher annual gross margins,
operating income and EBITDA in fiscal year 2022 compared to fiscal
year 2021, and expectations regarding reduction in occupied space
in fiscal year 2022, and uncertainties involving the impact of the
COVID-19 pandemic on the company’s results of operations and
financial condition, These forward-looking statements are subject
to a number of risks, uncertainties, estimates, and assumptions
that may cause actual results to differ materially from current
expectations. This financial information is preliminary, has
not been audited and is subject to change upon completion of the
company's closing procedures. Additional information and disclosure
would be required for a more complete understanding of the
company's financial position and results of operations as of the
fiscal quarter ended March 31, 2021. Moreover, even if the
company's actual results are consistent with these preliminary
estimates, this information may not be indicative of results or
developments that may be expected in subsequent periods. The
contents of this release should be considered in conjunction with
the risk factors, warnings, and cautionary statements that are
contained in the company’s annual, quarterly and other
reports filed with the Securities and Exchange Commission.
Dynatronics does not undertake to update its forward-looking
statements, whether as a result of new information, future events,
or otherwise.
EBITDA as used in this press release is a non-GAAP measure as
defined under the rules of the Securities and Exchange Commission.
We define EBITDA as net income (loss) before interest expense,
income taxes, depreciation and amortization.
Investor Contacts:
Dynatronics Corporation
Investor
Relations
Skyler
Black
(801)
676-7201
ir@dynatronics.com
Darrow Associates
Peter
Seltzberg, Managing Director
(516)
419-9915
pseltzberg@darrowir.com
For additional information, please visit: www.dynatronics.com
Connect
with Dynatronics on LinkedIn