Dynatronics Corporation (DYNT-NASDAQ)

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February 25, 2011 Issue

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Dynatronics Expects Solid Growth From Major GPO Contract Signings

Company Profile:

Dynatronics manufactures, markets and distributes advanced-technology medical devices, orthopedic soft goods and supplies, treatment tables and rehabilitation equipment for the physical therapy, sports medicine, chiropractic, podiatry, plastic surgery, dermatology and other related medical, cosmetic and aesthetic markets.

Kelvyn H. Cullimore Jr.
Chairman, President and CEO
Kelvyn H. Cullimore, Jr. was named Chairman of the Board of Directors in January 2005. He continues to serve as the Company's President & CEO, positions he has held since 1992. He has served as a Director of the Company and its predecessors since 1979. He currently serves on the board of directors for ITEC Attractions, Inc. (ITEC), an entertainment, restaurant and retail mall complex in Branson, MO. Additionally, he has served previously on the boards of a printing company, lumber company and travel agency. Mr. Cullimore is a member of the board of the Medical Device Manufacturer's Association, a national medical device trade association headquartered in Washington D.C. He also serves as the Mayor of Cottonwood Heights, Utah, a suburb of Salt Lake City where Dynatronics corporate headquarters are located. Mr. Cullimore graduated cum laude from Brigham Young University in 1980 with a degree in Financial and Estate Planning.

Healthcare
Medical Devices & Supplies
(DYNT-NASDAQ)

Dynatronics Corporation
7030 Park Centre Drive
Salt Lake City, UT 84121
Phone: 801-568-7000
 

Interview conducted by: Bud Wayne, Editorial Executive, CEOCFOinterviews.com, Published – February 25, 2011

CEOCFO: Mr. Cullimore, please tell us about Dynatronics give us some insight into the changes that are taking place at the company.
Mr. Cullimore: Dynatronics is a 30-year-old medical device company headquartered in Salt Lake City, Utah. We have six facilities around the country.

We made several acquisitions in the last few years, in which we expanded the scope of our distribution model. In addition to our network of independent dealers and distributors, we now have a direct sales force of over 50 salespeople across the nation. We are now one of only two companies in our industry that offer the services of a direct sales force to the market which we feel is pretty significant.
 

Probably the most exciting develop is a recent expansion from serving just the private practice segment of the market into the broader hospital and national account market segment. There are about six group purchasing organizations (GPOs), in the country who control the majority of sales into hospitals and national chains of clinics.  We have just announced the signing of two GPO contracts with Premier, one of the largest GPOs in the country, and Amerinet, another major GPO. These GPOs purchase an estimated $50 million annually in therapy equipment and supplies. With our direct sales force and broad product offering, we believe opening this door has been a critical step in fueling future growth.

CEOCFO: Sounds like the new GPO contracts represent a great opportunity for the company. What new products have you introduced recently?
Mr. Cullimore: Dynatronics has always been recognized as an innovator in the physical medicine industry. We have introduced new products over the last few years relating to vibration and oscillation therapy, which are used in pain management and rehabilitation. These products were popular in the European markets and we capitalized on them by introducing them to our domestic market.

More recently, we introduced a new product called “Stream” that helps clinics improve their efficiencies and profitability. Stream is a software service that enables practitioners to communicate with their patients. The software automatically sends out text messages to remind patients of their appointments. Research shows that one out of five patients forget to show up for their physical therapy appointments. These reminders have proven very successful at reducing patient “no shows” by 50 percent. The software also sends out text messages to patients whenever there is an open appointment for those wanting to see the practitioner at the earliest opening. In addition, marketing newsletters are emailed to patients to let them know of new treatments available at the clinics. It can also survey patients to get feedback on their recent visits. Statistics show that using Stream can generate over $100,000 of additional business for a clinic annually. It is a very beneficial tool that is unique to our market. This software generates a recurring revenue stream for Dynatronics and is just getting off the ground. We think that Stream could be a significant revenue source for us going forward.

CEOCFO: Tell us what sets your physical medicine products apart from your competitors. 

Mr. Cullimore: The physical medicine products that we sell to physical therapists, chiropractors, and sports medicine practitioners have been the focal point of the company for thirty years. Our manufactured products generate the most significant portion of our profitability. We have patented and proprietary features in our equipment, and enjoy a great reputation for high-quality equipment.

While we focus our sales efforts primarily on our branded manufactured products, we also offer a broad array of third party manufactured products through our direct sales force. In all, our catalog and online e-commerce website offer 12,000 different products, capable of supplying virtually all of the needs of clinics.

CEOCFO: What is your number one selling product right now?
Mr. Cullimore: Without question, it is our combination Electrotherapy and Ultrasound equipment. Our top-selling units offer combination therapies with multiple channels of electrotherapy, light therapy and ultrasound therapy all on the same device.

CEOCFO: What is the financial picture for Dynatronics today and do you have the funds in house to continue to develop products for future growth?
Mr. Cullimore: Dynatronics has been profitable 18 of the last 21 years. Despite the difficult economy, we have been able to generate profits over the last eight consecutive quarters. Over this same time period, we have been able to reduce borrowings on our line of credit by about $3.5 million. We have significant headroom on our line of credit to not only operate the company, but to take advantage of opportunities that might present themselves.

CEOCFO: In closing, what is the message you would like potential investors to consider regarding Dynatronics?
Mr. Cullimore: Probably the best way to express our confidence in the future and the confidence that an investor would want to have is to look at what we are doing as a company. We have been actively buying back our company stock because we believe that the stock is undervalued. We believe that there is significant potential for the future given the new GPO business, new products under development, as well the growth that we are anticipating with the Stream software. We believe the future is looking bright for the Company and its shareholders.

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We have just announced the signing of two GPO contracts with Premier, one of the largest GPOs in the country, and Amerinet, another major GPO. These GPOs purchase an estimated $50 million annually in therapy equipment and supplies. With our direct sales force and broad product offering, we believe opening this door has been a critical step in fueling future growth. - Kelvyn H. Cullimore Jr.