Audiotech Healthcare Corp. had record revenues, operating cash flow and earnings for the year ended Sept. 30, 2010.

Total revenues for the fourth quarter ended Sept. 30, 2010, were $1,317,811, an increased of 3.7 per cent over the sales posted during the corresponding quarter of fiscal 2009 despite the negative impact of exchange rates on the results reported by the company's U.S. operations, and the amalgamation of the Calgary clinics in January, 2010.

Revenues from the Canadian operations posted a significant increase of 17.2 per cent, rising from $796,457 during the fourth quarter of fiscal 2009 to $933,238 during the current quarter. The increase is attributed to the growing contributions from the newer clinics as well as generally strong internal growth performance across the more mature clinics in the company's network. Sales from the U.S. clinics during the fourth quarter were $384,573, a decrease of 18.9 per cent over the same quarter in the prior fiscal year due in part to an unfavourable shift in exchange rates, and in part to the better than average performance in the comparative quarter. U.S. revenues were up as compared with the third quarter of fiscal 2010 when revenues of $369,195 were posted. Total revenues for the year ended Sept. 30, 2010, were $5,100,082, an increase of 2.5 per cent over the $4,977,662, reported during the prior fiscal year. Canadian sales surged 8.8 per cent whereas U.S. sales slipped 10.5 per cent for the reasons noted above.

Gross margins of 70.8 per cent during the fourth quarter continued to slightly exceed the long-term historical average. This compares with 69.3 per cent in fiscal 2009 and the long-term (trailing five fiscal years) average of 68.6 per cent. In management's opinion, the gross margin experienced during the quarter was within the expected range that would be anticipated with typical day-to-day minor variations in the mix of product sold as well as due to the maturing of some of the clinics opened during the past couple of years. Management expects gross margins to range from roughly 69 per cent to 71 per cent during fiscal 2011.

Direct clinic costs, which include selling and advertising costs, rent and clinic overheads, clinic labour costs, and amortization of audiology equipment, declined by 11.2 per cent during the fourth quarter of fiscal 2010 as compared with the same quarter a year ago. Reductions were achieved in all expense categories, due to the shift in exchange rates, cost control measures and as a result of the consolidation of the Calgary clinics into a single location. Direct clinic costs as a percentage of sales decreased significantly from 58.7 per cent in the fourth quarter of fiscal 2009 to 50.2 per cent during the current quarter. The same pattern is evident in the operating results for fiscal 2010, with direct clinic costs declining by just over 6 per cent.

General and administrative expenses totalled $129,576 for the fourth quarter, a decrease of 2 per cent from the $131,611 reported during the same period last year (excluding stock compensation expense). All costs were on budget with management's expectations. While the level of expenses was on par with the average level of expenses from fiscal 2009 and fiscal 2010, G&A costs as a percentage of sales continued to decline slightly, reaching 9.8 per cent of sales during the quarter (10.7 per cent for fiscal 2010, 10.8 per cent in fiscal 2009).

A minor net future income tax recovery of $1,352 was recorded during the fourth quarter and year ended Sept. 30, 2010. The majority of taxable income during the quarter and fiscal year was offset by the application of loss carryforwards. As a result, the loss carryforward balance remaining available to offset future taxable income is only roughly $12,000. It is therefore anticipated that the corporation will record a current income tax expense, beginning during the first quarter of fiscal 2011, that is commensurate with the effective statutory rate of approximately 28 per cent. It is expected that current income taxes will be partially offset by the recognition of future tax assets related to the amortization of property, equipment and goodwill in fiscal 2011.

The company is pleased to report net earnings of $139,445 or 1.05 cents per share for the fourth quarter of fiscal 2010. This compares with a loss of $17,539 during the corresponding quarter in fiscal 2009, and follows the record-setting earnings in the third quarter of $140,633 or 1.06 cents per share. The strong earnings growth is attributable to continued organic growth, the cost control initiatives implemented in fiscal 2009, a significant improvement in the performance of newer clinics (in example the Kelowna clinic reached profitability one quarter ahead of forecast) particularly during the second half of fiscal 2010, and the initial savings resulting from the amalgamation of the Calgary operations in January, 2010. For the year ended Sept. 30, 2010, total net earnings reached $354,075 or 2.7 cents per share compared with $3,344 or less than 0.1 cent during fiscal 2009.

As a result of a negative $15,592 cumulative translation adjustment resulting from the depreciation of the U.S. dollar in fiscal 2010, comprehensive income for the period was $338,483.

Operating cash flow for the fourth quarter of fiscal 2010 surged to a record $174,485. Operating cash flow increased 277 per cent over the fourth quarter of fiscal 2009. For fiscal 2010, operating cash flow reached $489,575 as compared with $252,287 during the same period a year earlier, an increase of 94 per cent.

As evidenced by the third and fourth quarter earnings and operating cash flow, significant progress has been made with respect to improving the profitability of the company's newer clinics. Furthermore, the amalgamation of the company's Calgary clinics earlier in 2010 has produced the anticipated cost savings, which have flowed directly to the bottom line. Additional annual savings of about $30,000 are anticipated once the lease on the former Calgary location is terminated. Management remains confident that the investments made in recent years to open new clinics have helped secure Audiotech as a dominant regional clinic operator in British Columbia, particularly outside of the Vancouver area, and that this positioning will result in a higher corporate valuation in the event that Audiotech is acquired by another entity in the current market consolidation cycle.