DAC Technologies’ Balance Sheet: Clean As A Whistle

DAC Technologies’ Balance Sheet: Clean As A Whistle post image

We discussed DAC Technologies’ (DAAT – $0.62) fourth quarter and year-end results in our previous newsletter, but we had to wait for the 10-K to be filed before we could give you our opinion on the Company’s balance sheet.

Balance sheet as of December 31, 2009

DAC Technologies has a clean balance sheet as it has a current ratio of 5.53, a book value of $0.95, shareholder equity of $5.5 million and NO long term debt. The Company has a $1,000,000 line of credit, collateralized by its inventory, with its local bank. The line of credit bears an interest rate of 6% and matures on April 10, 2011. At December 31, 2009, the Company didn’t have an outstanding balance on this line of credit.

12/31/09
12/31/08
Cash and Cash Equivalents
430,436
599,103
Accounts Receivable
929,082
495,718
Due From Factor
27,592
1,542,918
Inventories
4,479,347
2,742,563
Total Current Assets
5,931,867
5,483,389
Net Property and Equipment
276,859
266,011
Total Assets
6,681,976
6,179,986
Accounts Payable
776,093
795,136
Total Current Liabilities
1,072,590
1,107,814
Deferred Income Tax Liability
79,153
66,574
Total Liabilities
1,151,742
1,174,388
Total Stockholder Equity
5,530,234
5,005,598
Most important balance sheet data for the period ending December 31, 2009 versus December 31, 2008. Source: Company Filings

Accounts receivable on the Company’s balance sheet represents those receivables that have not yet been legally assigned to the factor. Due from factor represents the net equity the Company has in its assigned receivables reduced by any funds advanced by the factor.

The Company maintains a factoring agreement wherein it assigns its receivables (on a non-recourse basis). The factor performs all credit and collection functions, and assumes all risks associated with the collection of the receivables. The Company pays a fee of 65/100ths of 1% of the face value of each receivable for this service.

Another important change on the balance sheet are the Company’s inventories. They increased by $1,736,784 from 2008 to 2009, which was due to fourth quarter sales being less than what management had estimated. This additional inventory has been rolled over for sale into 2010 as it consists of products commonly sold to the Company’s major customers.

Shift In Sales

We really wanted you to see the graph below as it explains why DAC’s earnings went up by 55% in 2009 compared with 2008, while its revenues, in the same period, declined by 14%.

This can be fully attributed to management’s decision to concentrate on higher margin products like Gun Cleaning (GC&M) and Gun Safety (GS) items and discontinue selling items in the Hunting and Camping (H&C) and Household (HP) category on which they made little or no money.

We continue to like DAC Technologies and we believe this 6.8 P/E stock will move towards its fair value.

For important disclosures, please read our disclaimer.
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