BROOKINGS, S.D., Aug. 23, 2016 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2017 first quarter net sales of $157.1 million, operating income of $8.0 million, and net income of $5.5 million, or $0.13 per diluted share, compared to net sales of $150.2 million, operating income of $6.1 million, and net income of $3.8 million, or $0.09 per diluted share, for the first quarter of fiscal 2016.  Fiscal 2017 first quarter orders were $175.2 million, compared to $165.1 million for the first quarter of fiscal 2016.  Backlog at the end of the fiscal 2017 first quarter was $197.9 million, compared with a backlog of $205.5 million a year earlier and $181.2 million at the end of the fourth quarter of fiscal 2016. 

Free cash flow, defined as cash provided from or used in operating activities less capital expenditures, was a positive $4.5 million for the first three months of fiscal 2017, as compared to a negative free cash flow of $17.2 million for the same period of fiscal 2016.  Net investment in property and equipment was $2.1 million for the first three months of fiscal 2017, as compared to $7.2 million for the first three months of fiscal 2016.  As previously announced on June 17, 2016, our board authorized a share repurchase program.  We repurchased approximately 0.3 million shares at an average price of $6.42 per share for a total use of cash of $1.8 million during the quarter.  Cash and marketable securities at the end of the first quarter of fiscal 2017 were $50.2 million, which compares to $60.8 million at the end of the first quarter of fiscal 2016 and $53.2 million at the end of fiscal 2016.

Orders for the first quarter of fiscal 2017 increased 6.1 percent as compared to the first quarter of fiscal 2016.  Orders increased in our Commercial, International, and High School Park and Recreation business units and decreased in Live Events and Transportation business units.  Commercial business unit orders were up compared to last year primarily due to the award of large projects in the spectacular niche and an increase in business in our national account niche.  International business unit orders increased primarily due to sports stadium project awards in Australia and the United Kingdom.  High School Park and Recreation orders increased due to strong market demand for video sporting applications which have larger average sale prices compared to scoring or message centers in this business unit.  Live Events orders were down compared to last year due to order timing differences of large projects.

Net sales increased by 4.6 percent in the first quarter of fiscal 2017 as compared to the first quarter of fiscal 2016 due to increases in our Live Event, High School Park and Recreation, and Transportation business units offset by decreases in International and Commercial business units.  Live Event sales increased mostly due to the timing of project schedules and work completed for football stadiums.  High School Park and Recreation sales increased as a result of the delivery of more video sporting projects this year as compared to last year.  Sales were down in the Commercial and International business units primarily due to the natural fluctuations caused by large project timing.

Gross profit percentage for the quarter increased as compared to last year due to a combination of higher sales volumes, lower warranty charges, and a change in sales mix with higher gross margins.

Operating expenses increased by 5.7 percent.  Selling expense increase was related to higher personnel costs and for the addition of a full quarter of expenses from ADFLOW, the company we acquired late in fiscal 2016.  General and administrative expense increased in professional fees, information technology maintenance, and personnel expenses.

Operating income as a percent of sales for the quarter increased to 5.1 percent as compared to the first quarter of fiscal 2016 of 4.1 percent.

Reece Kurtenbach, chairman, president and chief executive officer stated, "We are pleased with our first quarter of fiscal 2017 financial performance.  We achieved higher order volumes and operating income as compared to last year's first quarter.  Operationally, we were able to deliver on more of the backlog coming into the year than expected which created an increase in sales and improved gross profit margin.  High School Park and Recreation and Live Event business units contributed the most to this operating income improvement due to sports seasonality as we manufacture, deliver, and install projects for outdoor fall sports venues generally in the first and second quarters.  Significant sports related projects for the quarter included the Tampa Bay Buccaneers, Real Madrid, University of Mississippi, and Miami Dolphins Stadium.  We had lower volumes of sales activity in the International and Commercial business units causing operating margin declines quarter over quarter in these units.  Lower warranty expenses as a percentage of sales for the quarter also contributed to the improved operating margins."

Outlook

Kurtenbach added, "We are entering into the second quarter with a solid backlog and with a strong pipeline of opportunities.  Our teams are focused on winning orders in the ever expanding, yet competitive digital technology marketplace at prices that reflect our differentiated value.  As an experienced market provider, we focus on delivering industry leading digital systems and applications through robust design and delivery, lifetime support, and quality based on our customers' needs and priorities.  While we are pleased with the start of our fiscal year, we continue to observe customers delaying their purchasing decisions due to uncertain global macroeconomic factors.  Therefore, we are focused on managing our costs throughout the year through continuous improvement and careful execution of our processes.  We continue to strategically invest in product design and development for a number of customer solution areas and have a goal to accelerate developments for additional world-class solutions to capture a broader customer base in the growing digital global market."

Webcast InformationThe company will host a conference call and webcast to discuss its financial results today at 10:00 a.m. (CST).  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, High School Park and Recreation, and Transportation, and one International business unit.  For more information, visit the company's website at: www.daktronics.com, email 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., P.O. 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 2016 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  
    July 30,  2016   August 1,  2015  
           
Net sales   $ 157,146     $ 150,221    
Cost of goods sold   118,079     114,720    
Gross profit   39,067     35,501    
           
Operating expenses:          
Selling expense   15,259     14,264    
General and administrative   8,783     8,170    
Product design and development   7,043     6,968    
    31,085     29,402    
Operating income   7,982     6,099    
           
Nonoperating income (expense):          
Interest income   205     298    
Interest expense   (42 )   (62 )  
Other income (expense), net   (94 )   (443 )  
           
Income before income taxes   8,051     5,892    
Income tax expense   2,512     2,116    
Net income   $ 5,539     $ 3,776    
           
Weighted average shares outstanding:          
Basic   44,079     43,797    
Diluted   44,141     44,073    
           
Earnings per share:          
Basic   $ 0.13     $ 0.09    
Diluted   $ 0.13     $ 0.09    
           
Cash dividend declared per share   $ 0.10     $ 0.10    

Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets(in thousands)  
 
    July 30,  2016   April 30,  2016
    (unaudited)    
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents   $ 29,778     $ 28,328  
Restricted cash   193     198  
Marketable securities   20,200     24,672  
Accounts receivable, net   86,382     77,554  
Inventories, net   68,593     69,827  
Costs and estimated earnings in excess of billings   50,172     30,200  
Current maturities of long-term receivables   3,063     3,172  
Prepaid expenses and other assets   5,936     6,468  
Income tax receivables   762     4,812  
Total current assets   265,079     245,231  
         
Long-term receivables, less current maturities   3,543     3,866  
Goodwill   7,894     8,116  
Intangibles, net   7,012     7,721  
Investment in affiliates and other assets   2,521     2,414  
Deferred income taxes   9,418     9,437  
    30,388     31,554  
PROPERTY AND EQUIPMENT:        
Land   2,142     2,155  
Buildings   65,047     65,247  
Machinery and equipment   82,448     82,973  
Office furniture and equipment   5,563     14,746  
Computer software and hardware   49,238     48,917  
Equipment held for rental   374     374  
Demonstration equipment   7,991     8,026  
Transportation equipment   6,521     6,596  
    219,324     229,034  
Less accumulated depreciation   148,282     155,871  
    71,042     73,163  
TOTAL ASSETS   $ 366,509     $ 349,948  
         

Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued)(in thousands)
    July 30,  2016   April 30,  2016
    (unaudited)    
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable   50,605     43,441  
Accrued expenses   26,501     23,532  
Warranty obligations   15,450     16,564  
Billings in excess of costs and estimated earnings   12,467     10,361  
Customer deposits (billed or collected)   20,650     16,012  
Deferred revenue (billed or collected)   11,740     10,712  
Current portion of other long-term obligations   191     585  
Income taxes payable   191     310  
Total current liabilities   137,795     121,517  
         
Long-term warranty obligations   14,466     13,932  
Long-term deferred revenue (billed or collected)   5,388     5,603  
Other long-term obligations, less current maturities   4,860     4,059  
Long-term income tax payable   3,134     3,016  
Deferred income taxes   720     754  
Total long-term liabilities   28,568     27,364  
TOTAL LIABILITIES   166,363     148,881  
         
SHAREHOLDERS' EQUITY:        
Common stock   51,347     51,347  
Additional paid-in capital   36,059     35,351  
Retained earnings   118,405     117,276  
Treasury stock, at cost   (1,834 )   (9 )
Accumulated other comprehensive loss   (3,831 )   (2,898 )
TOTAL SHAREHOLDERS' EQUITY   200,146     201,067  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 366,509     $ 349,948  
         

Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows(in thousands)(unaudited)
    Three Months Ended
    July 30,  2016   August 1,  2015
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 5,539     $ 3,776  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation   4,193     4,020  
Amortization   398     35  
Amortization of premium/discount on marketable securities   9     33  
Loss (gain) on sale of property, equipment and other assets   31     (62 )
Share-based compensation   709     751  
Provision for doubtful accounts   7     160  
Deferred income taxes, net   3     (21 )
Change in operating assets and liabilities   (4,291 )   (18,763 )
Net cash provided by (used in) operating activities   6,598     (10,071 )
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (2,157 )   (7,232 )
Proceeds from sale of property, equipment and other assets   64     66  
Purchases of marketable securities   (2,394 )   (9,506 )
Proceeds from sales or maturities of marketable securities   6,856     9,497  
Acquisitions, net of cash acquired       (614 )
Net cash provided by (used in) investing activities   2,369     (7,789 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Payments on notes payable   (4 )   (9 )
Proceeds from exercise of stock options       562  
Principal payments on long-term obligations   (896 )   (8 )
Dividends paid   (4,409 )   (4,375 )
Payments for common shares repurchased   (1,825 )    
Net cash used in financing activities   (7,134 )   (3,830 )
         
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (383 )   (325 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   1,450     (22,015 )
         
CASH AND CASH EQUIVALENTS:        
Beginning of period   28,328     57,284  
End of period   $ 29,778     $ 35,269  
         

Daktronics, Inc. and Subsidiaries Net Sales and Orders by Business Unit(in thousands)(unaudited)
 
  Three Months Ended  
  July 30,  2016   August 1,  2015   DollarChange   PercentChange  
Net Sales:                
  Commercial $ 36,254     $ 43,210     $ (6,956 )   (16.1 )%  
  Live Events 60,633     47,922     $ 12,711     26.5 %  
  High School Park and Recreation 27,617     18,959     $ 8,658     45.7 %  
  Transportation 14,286     13,767     $ 519     3.8 %  
  International 18,356     26,363     $ (8,007 )   (30.4 )%  
  $ 157,146     $ 150,221     $ 6,925     4.6 %  
Orders:                
  Commercial $ 45,068     $ 34,957     $ 10,111     28.9 %  
  Live Events 52,880     60,740     $ (7,860 )   (12.9 )%  
  High School Park and Recreation 31,113     27,874     $ 3,239     11.6 %  
  Transportation 11,915     13,637     $ (1,722 )   (12.6 )%  
  International 34,192     27,864     $ 6,328     22.7 %  
  $ 175,168     $ 165,072     $ 10,096     6.1 %  

Reconciliation of Free Cash Flow(in thousands)(unaudited)
    Three Months Ended
    July 30,  2016   August 1,  2015
Net cash provided by (used in) operating activities   $ 6,598     $ (10,071 )
Purchases of property and equipment   (2,157 )   (7,232 )
Proceeds from sales of property and equipment   64     66  
Free cash flow   $ 4,505     $ (17,237 )
 

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.
For more information contact:INVESTOR RELATIONS:Sheila Anderson, Chief Financial Officer(605) 692-0200Investor@daktronics.com

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