Daktronics, Inc. Announces Second Quarter Fiscal 2014 Results

BROOKINGS, S.D., Nov. 19, 2013 (GLOBE NEWSWIRE) -- Daktronics, Inc. (Nasdaq:DAKT) today reported fiscal 2014 second quarter net sales of $161.6 million and net income of $11.8 million, or $0.27 per diluted share, compared to net sales of $149.9 million and net income of $11.5 million, or $0.27 per diluted share, for the second quarter of fiscal 2013. Fiscal 2014 second quarter orders were $127.0 million compared to $110.3 million for the second quarter of fiscal 2013. Backlog at the end of the fiscal 2014 second quarter was $132 million, compared with a backlog of $128 million a year earlier and $167 million at the end of the first quarter of fiscal 2014.

Net sales, net income and earnings per share for the six months ended October 26, 2013 were $300.4 million, $17.5 million and $0.41 per diluted share, respectively. This compares to $282.8 million, $18.2 million and $0.43 per diluted share, respectively, for the same period in fiscal 2013.

Free cash flow, defined as cash provided by operations less net purchases of property and equipment, was $24.5 million for the first six months of fiscal 2014, compared to $29.8 million for the same period in fiscal 2013. Cash and marketable securities at the end of the second quarter of fiscal 2014 were $77.6 million, which compares to $64.7 million at the end of fiscal 2013 and $79.1 million at the end of the second quarter of fiscal 2013.

"We are pleased with our order level for the quarter and success in manufacturing, delivering, and installing a number of projects. Our resources were highly utilized as we achieved the highest level of sales in a quarter since fiscal 2009. Order bookings during the second quarter of fiscal 2014 increased 15 percent compared to last year same quarter. This allows us to enter into the third quarter with a higher backlog as compared to last year at this same time," said Reece Kurtenbach, president and chief executive officer.

Gross profit levels were lower compared to the second quarter of fiscal 2013 due to inherent variability in gross profit levels typical with large projects and a higher warranty percentage of sales as compared to the same period last year. Operating expenses in the second quarter of fiscal 2014 decreased by approximately one percent as a percentage of sales to 16 percent.

Orders
  • Orders in the Commercial business unit increased approximately 19 percent in the second quarter of fiscal 2014 compared to the second quarter of fiscal 2013. The increase in orders was primarily the result of improvements in the volume and size of projects in our large video contract business. During the quarter we booked three large video contracts totaling $4 million.  
  • Orders in the Live Events business unit increased approximately six percent compared to the second quarter of fiscal 2013. The increase in orders has been largely due to being awarded five orders for upgrade projects totaling $9.5 million for the quarter.  
  • Orders in the Schools and Theatres business unit declined by approximately two percent for the second quarter of fiscal 2014 compared to the same period in fiscal 2013. Although the number of video projects for high schools was about the same as last year, the average selling price this year was less.  
  • Orders in the Transportation business unit increased approximately 56 percent compared to the same period in fiscal 2013. Orders during the second quarter of fiscal 2014, included a $2.5 million order for our new full color Vanguard product introduced at the beginning of this fiscal year.  
  • Orders in the International business unit increased approximately 21 percent over the second quarter of fiscal 2013. During the second quarter of fiscal 2014 we were awarded nine projects for approximately $18 million for both commercial and sports large video projects.

Outlook

Reece Kurtenbach added, "We continue to see opportunities in the worldwide marketplace going into the second half of our fiscal year. There are a number of opportunities in the Live Events business unit for large video system replacements and in our International business unit for large sports and commercial type video systems applications. We believe our product line and systems delivery capabilities will provide us the ability to secure orders to support modest sales growth in fiscal 2014 and achieve improved financial performance for the second half of the year as compared to the second half of fiscal 2013. We continue to focus on our strategic goals to improve operating margins. Supplier and manufacturing quality are two key areas we will continue working on over the next quarters. In addition, we continue to select and work on initiatives across the company to increase gross profit margins and control operating expenses. Our product development team continues to focus on developing additional outdoor surface mount technology, software platforms, and upgrading our architectural lighting and media mesh product platforms."

Webcast Information

The company will host a conference call and webcast to discuss its financial results today at 10:00 am (Central Time). This call will be broadcast live at http://investor.daktronics.com and available for replay shortly after the event.

About Daktronics

Daktronics has strong leadership positions in, and is the world's largest supplier of, large screen video displays, electronic scoreboards, LED text and graphics displays, and related control systems. The company excels in the control of display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation, and video. Daktronics designs, manufactures, markets and services display systems for customers around the world in four domestic business units:  Live Events, Commercial, Schools and Theatres and Transportation, and one International business unit. For more information, visit the company's World Wide Web site at: http://www.daktronics.com, e-mail the company at investor@daktronics.com, call (605) 692-0200 or toll-free (800) 843-5843 in the United States or write to the company at 201 Daktronics Dr., PO Box 5128, Brookings, S.D. 57006-5128.

Safe Harbor Statement

Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and is intended to enjoy the protection of that Act.  These forward-looking statements reflect the Company's expectations or beliefs concerning future events. The Company cautions that these and similar statements involve risk and uncertainties which could cause actual results to differ materially from our expectations, including, but not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions and other risks noted in the Company's SEC filings, including its Annual Report on Form 10-K for its 2013 fiscal year.  Forward-looking statements are made in the context of information available as of the date stated. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
         
  Three Months Ended Six Months Ended
   October 26,  2013   October 27, 2012   October 26,  2013  October 27,  2012 
         
Net sales  $ 161,639  $ 149,871  $ 300,361  $ 282,790
Cost of goods sold  118,274  107,519  221,494  204,048
Gross profit  43,365  42,352  78,867  78,742
         
Operating expenses:        
Selling expense  13,304  12,796  26,922  25,876
General and administrative  6,804  6,850  14,103  13,431
Product design and development  5,692  5,845  11,681  11,866
   25,800  25,491  52,706  51,173
Operating income  17,565  16,861  26,161  27,569
         
Nonoperating income (expense):        
Interest income  312  348  655  779
Interest expense  (12)  (36)  (127)  (123)
Other income (expense), net  278  150  (114)  (30)
         
Income before income taxes  18,143  17,323  26,575  28,195
Income tax expense  6,353  5,776  9,066  9,970
Net income  $ 11,790  $ 11,547  $ 17,509  $ 18,225
         
Weighted average shares outstanding:        
Basic  42,709  42,163  42,639  42,138
Diluted  43,002  42,316  43,023  42,287
         
Earnings per share:        
Basic  $ 0.28  $ 0.27  $ 0.41  $ 0.43
Diluted  $ 0.27  $ 0.27  $ 0.41  $ 0.43
         
Cash dividend declared per share  $ 0.090 $ --  $ 0.210 $ 0.115
 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
     
  October 26,  2013  April 27,  2013 
   (unaudited)   
ASSETS    
CURRENT ASSETS:    
Cash, cash equivalents and restricted cash  $ 52,265  $ 40,676
Marketable securities  25,367  24,052
Accounts receivable, net  66,913  63,227
Inventories, net  51,308  49,045
Costs and estimated earnings in excess of billings  41,847  39,355
Current maturities of long-term receivables  5,839  4,807
Prepaid expenses and other assets  5,290  6,185
Deferred income taxes  12,355  12,755
Income tax receivables  2,012  46
Property and equipment and other assets held for sale  3,050  --
Total current assets  266,246  240,148
     
Long-term receivables, less current maturities  9,912  11,325
Goodwill  4,682  3,306
Intangibles, net  1,799  1,181
Advertising rights, net and other assets  702  772
Deferred income taxes  1,276  1,061
   18,371  17,645
PROPERTY AND EQUIPMENT:    
Land  2,363  1,497
Buildings  59,343  57,012
Machinery and equipment  68,003  65,600
Office furniture and equipment  16,112  16,118
Computer software and hardware  42,870  41,745
Equipment held for rental  868  868
Demonstration equipment  8,238  8,400
Transportation equipment  4,378  4,026
   202,175  195,266
Less accumulated depreciation  139,159  133,641
   63,016  61,625
TOTAL ASSETS  $ 347,633  $ 319,418
 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
     
  October 26,  2013  April 27,  2013 
   (unaudited)   
LIABILITIES AND SHAREHOLDERS' EQUITY    
CURRENT LIABILITIES:    
Accounts payable  $ 40,883  $ 38,651
Accrued expenses  26,464  24,331
Warranty obligations  14,699  13,933
Billings in excess of costs and estimated earnings  15,855  14,245
Customer deposits (billed or collected)  16,533  12,375
Deferred revenue (billed or collected)  8,509  9,112
Current portion of other long-term obligations  940  356
Income taxes payable  1,297  1,689
Total current liabilities  125,180  114,692
     
Long-term warranty obligations   12,048  11,213
Long-term deferred revenue (billed or collected)  5,787  4,424
Other long-term obligations, less current maturities  3,170  843
Total long-term liabilities  21,005  16,480
TOTAL LIABILITIES  146,185  131,172
     
SHAREHOLDERS' EQUITY:    
Common stock  40,341  37,429
Additional paid-in capital  28,606  27,194
Retained earnings  132,325  123,750
Treasury stock, at cost  (9)  (9)
Accumulated other comprehensive income (loss)  185  (118)
TOTAL SHAREHOLDERS' EQUITY  201,448  188,246
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 347,633 $ 319,418
 
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
  Six Months Ended
  October 26,  2013  October 27,  2012
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $ 17,509  $ 18,225
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation  7,190  7,717
Amortization  181  114
Amortization of premium/discount on marketable securities  116  93
Gain on sale of property and equipment  (76)  (11)
Share-based compensation  1,456  1,654
Excess tax benefits from share-based compensation  (19)  (13)
Provision for doubtful accounts  364  (187)
Deferred income taxes, net  186  (258)
Change in operating assets and liabilities  3,719  6,708
Net cash provided by operating activities  30,626  34,042
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment  (6,285)  (4,331)
Proceeds from sale of property and equipment  133  119
Purchases of marketable securities  (4,422)  (6,828)
Proceeds from sales or maturities of marketable securities  2,958  5,992
Acquistions, net of cash acquired  (1,298)  --
Net cash used in investing activities  (8,914)  (5,048)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments on notes payable  --  (982)
Proceeds from exercise of stock options  2,145  439
Excess tax benefits from share-based compensation  19  13
Principal payments on long-term obligations  (3,640)  --
Dividends paid  (8,934)  (4,832)
Net cash used in financing activities  (10,410)  (5,362)
     
EFFECT OF EXCHANGE RATE CHANGES ON CASH  306  39
NET INCREASE IN CASH AND CASH EQUIVALENTS  11,608  23,671
     
CASH AND CASH EQUIVALENTS:    
 Beginning of period  40,628  29,423
 End of period  $ 52,236  $ 53,094
 
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
         
  Three Months Ended Six Months Ended
  October 26,  2013  October 27,  2012   October 26, 2013  October 27,  2012 
Net Sales:        
Commercial  $ 44,973  $ 39,773  $ 78,674  $ 78,130
Live Events  58,175  50,604  113,252  95,113
Schools & Theatres  18,823  21,688  36,740  39,861
Transportation  15,238  17,571  28,280  34,167
International  24,430  20,235  43,415  35,519
   $ 161,639  $ 149,871  $ 300,361  $ 282,790
         
Orders:        
Commercial  $ 38,147  $ 32,035  $ 75,122  $ 76,634
Live Events  36,160  34,195  103,560  84,894
Schools & Theatres  14,142  14,465  33,693  37,923
Transportation  11,708  7,496  25,677  39,532
International  26,797  22,141  48,185  44,891
   $ 126,954  $ 110,332  $ 286,237  $ 283,874
     
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow    
(in thousands)    
(unaudited)    
     
  Six Months Ended
  October 26, 2013 October 27, 2012
Net cash provided by operating activities  $ 30,626  $ 34,042
Purchases of property and equipment  (6,285)  (4,331)
Proceeds from sales of property and equipment  133  119
Free cash flow  $ 24,474  $ 29,830

In evaluating its business, Daktronics considers and uses free cash flow as a key measure of its operating performance. The term free cash flow is not defined under U.S. generally accepted accounting principles ("GAAP") and is not a measure of operating income, cash flows from operating activities or other GAAP figures and should not be considered alternatives to those computations. Free cash flow is intended to provide information that may be useful for investors when assessing period to period results.
CONTACT: For more information contact:         INVESTOR RELATIONS:         Sheila Anderson, Chief Financial Officer         (605) 692-0200         Investor@daktronics.com

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