BROOKINGS, S.D., Nov. 21, 2017 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2018 second quarter net sales of $169.3 million, operating income of $9.4 million, and net income of $7.1 million, or $0.16 per diluted share, compared to net sales of $170.0 million, operating income of $12.7 million, and net income of $9.0 million, or $0.20 per diluted share, for the second quarter of fiscal 2017.  Fiscal 2018 second quarter orders were $142.3 million, compared to $116.9 million for the second quarter of fiscal 2017.  Backlog at the end of the fiscal 2018 second quarter was $155 million, compared to a backlog of $142 million a year earlier and $184 million at the end of the first quarter of fiscal 2018. (1)

Net sales, operating income, net income, and earnings per share for the six months ended October 28, 2017, were $342.0 million, $21.2 million, $15.6 million, and $0.35 per diluted share, respectively.  This compares to $327.1 million, $20.6 million, $14.6 million, and $0.33 per diluted share, respectively, for the same period in fiscal 2017.

Cash provided by operating activities in the first six months of fiscal 2018 was $9.3 million, compared with cash provided by operating activities of $15.0 million in the same period last year.  Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a positive $3.6 million for the first six months of fiscal 2018, as compared to a positive free cash flow of $10.5 million for the same period of fiscal 2017.  Net investment in property and equipment was $5.7 million for the first six months of fiscal 2018, as compared to $4.6 million for the first six months of fiscal 2017.  Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2018 were $61.5 million, which compares to $52.2 million at the end of the second quarter of fiscal 2017 and $65.6 million at the end of fiscal 2017.

Orders for the second quarter of fiscal 2018 increased 21.7 percent as compared to the second quarter of fiscal 2017.  Orders increased in the Commercial, Live Events and International business units and decreased in the High School Park and Recreation and Transportation business units.  The timing of orders for large projects varies according to the needs of the customer and contributed to the increase in order volume.

Net sales were similar for the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017.  Net sales increased in the Live Events business unit, decreased in the Commercial and International business units, and remained relatively flat in the High School Park and Recreation and Transportation business units.  The increase in Live Events business unit was due to continued demand for upgraded or new solutions throughout venues for professional sports and colleges and universities.  The decrease in the Commercial business unit was primarily due to lower order volumes in our on-premise and spectacular niches.  The decline in net sales in the International business unit was primarily due to variability of project schedules.

Other financial comparables include, gross profit, as a percentage of net sales, was 25.2 percent for the second quarter of fiscal 2018 as compared to 26.1 percent a year earlier.  The decrease in gross profit percentage was primarily due to an increase in warranty charges.  Operating expenses for the second quarter of 2018 was $33.2 million, compared to $31.6 million for the second quarter of fiscal 2017.  The increase in total operating expenses was primarily attributable to an increase in product development activities.  Operating income as a percent of sales for the quarter decreased to 5.6 percent as compared to the second quarter of fiscal 2017 operating income of 7.5 percent.

Reece Kurtenbach, chairman, president and chief executive officer stated, "We capitalized on the strong backlog and pipeline of order opportunities coming into the second quarter of fiscal 2018.  The second quarter is traditionally one of our busiest quarters.  We were able to work through our backlog with a smooth flow through our factories, which facilitated successful on-site installations and commissioning of systems.  We were pleased with our second quarter sales and operational performance; however, profitability levels were impacted by an increase in warranty and maintenance agreement expenses.  During the quarter, we chose to provide additional coverage on product defects related to the issues previously discussed in fiscal 2016.  As expected, operating margin was impacted due to the planned increase in product development expenses for activities to accelerate the release of new and enhanced customer solutions.  Orders increased during the quarter as compared to a year earlier is not unusual due to the lumpy nature of our business.  Projects in major league baseball stadiums and the billboard niche contributed to this increase."

OutlookKurtenbach added, "We remain optimistic about the continued growth in the video display business over the long-term.  The use of digital canvases remains a cost viable method for businesses and organizations to entertain and inform audiences of their messages and brands.  To serve these businesses, we invest in developing solutions and services to help our customers achieve their goals while managing the business for long-term profitable growth."

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 DaktronicsDaktronics 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 StatementCautionary 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 2017 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.
For more information contact:
INVESTOR RELATIONS:
Sheila Anderson, Chief Financial Officer
(605) 692-0200
Investor@daktronics.com
 

 
Daktronics, Inc. and Subsidiaries Consolidated Statements of Operations(in thousands, except per share amounts)(unaudited)
    Three Months Ended   Six Months Ended
    October 28,  2017   October 29,  2016   October 28,  2017   October 29,  2016
                 
Net sales   $ 169,309     $ 169,992     $ 342,037     $ 327,138  
Cost of goods sold   126,705     125,684     254,787     243,763  
Gross profit   42,604     44,308     87,250     83,375  
                 
Operating expenses:                
Selling expense   15,350     15,891     30,289     31,150  
General and administrative   8,868     8,625     17,803     17,408  
Product design and development   8,948     7,126     17,995     14,169  
    33,166     31,642     66,087     62,727  
Operating income   9,438     12,666     21,163     20,648  
                 
Nonoperating income (expense):                
Interest income   151     171     362     376  
Interest expense   (47 )   (76 )   (133 )   (118 )
Other (expense) income, net   (87 )   149     58     55  
                 
Income before income taxes   9,455     12,910     21,450     20,961  
Income tax expense   2,323     3,889     5,889     6,401  
Net income   $ 7,132     $ 9,021     $ 15,561     $ 14,560  
                 
Weighted average shares outstanding:                
Basic   44,412     43,988     44,345     44,051  
Diluted   44,679     44,098     44,696     44,168  
                 
Earnings per share:                
Basic   $ 0.16     $ 0.21     $ 0.35     $ 0.33  
Diluted   $ 0.16     $ 0.20     $ 0.35     $ 0.33  
                 
Cash dividends declared per share   $ 0.07     $ 0.07     $ 0.14     $ 0.17  
                                 

 
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets(in thousands)  
  October 28,  2017   April 29,  2017
  (unaudited)    
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 39,699     $ 32,623  
Restricted cash 27     216  
Marketable securities 21,787     32,713  
Accounts receivable, net 108,719     78,846  
Inventories, net 70,436     66,486  
Costs and estimated earnings in excess of billings 31,302     36,403  
Current maturities of long-term receivables 1,964     2,274  
Prepaid expenses and other assets 7,566     7,553  
Income tax receivables 1,725     611  
Total current assets 283,225     257,725  
       
Long-term receivables, less current maturities 2,208     2,616  
Goodwill 8,190     7,812  
Intangibles, net 4,338     4,705  
Investment in affiliates and other assets 4,730     4,534  
Deferred income taxes 11,287     11,292  
  30,753     30,959  
PROPERTY AND EQUIPMENT:      
Land 2,134     2,099  
Buildings 66,863     65,935  
Machinery and equipment 86,875     84,189  
Office furniture and equipment 5,642     5,604  
Computer software and hardware 53,316     51,523  
Equipment held for rental 287     374  
Demonstration equipment 7,143     7,109  
Transportation equipment 7,508     7,108  
  229,768     223,941  
Less accumulated depreciation 164,549     157,192  
  65,219     66,749  
TOTAL ASSETS $ 379,197     $ 355,433  
       

 
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued)(in thousands)
  October 28,  2017   April 29,  2017
  (unaudited)    
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable $ 49,005     $ 51,499  
Accrued expenses 27,399     25,033  
Warranty obligations 15,400     13,578  
Billings in excess of costs and estimated earnings 16,561     10,897  
Customer deposits (billed or collected) 14,349     14,498  
Deferred revenue (billed or collected) 14,046     12,137  
Current portion of other long-term obligations 913     1,409  
Income taxes payable 1,334     1,544  
Total current liabilities 139,007     130,595  
       
Long-term warranty obligations 15,740     14,321  
Long-term deferred revenue (billed or collected) 6,835     5,434  
Other long-term obligations 2,333     2,848  
Long-term income tax payable 3,306     3,113  
Deferred income taxes 937     836  
Total long-term liabilities 29,151     26,552  
TOTAL LIABILITIES 168,158     157,147  
       
SHAREHOLDERS' EQUITY:      
Common stock 53,862     52,530  
Additional paid-in capital 39,034     38,004  
Retained earnings 123,330     113,967  
Treasury stock, at cost (1,834 )   (1,834 )
Accumulated other comprehensive loss (3,353 )   (4,381 )
TOTAL SHAREHOLDERS' EQUITY 211,039     198,286  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 379,197     $ 355,433  
               

 
Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows(in thousands)(unaudited)
    Six Months Ended
    October 28,  2017   October 29,  2016
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 15,561     $ 14,560  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:        
Depreciation and amortization   8,902     9,242  
Impairment of intangible assets       830  
(Gain) loss on sale of property, equipment and other assets   (1,221 )   33  
Share-based compensation   1,341     1,484  
Equity in loss of affiliate   191      
Provision for doubtful accounts   (21 )   962  
Deferred income taxes, net   81     (48 )
Change in operating assets and liabilities   (15,496 )   (12,049 )
Net cash provided by operating activities   9,338     15,014  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (7,735 )   (4,625 )
Proceeds from sale of property, equipment and other assets   2,000     72  
Purchases of marketable securities       (4,583 )
Proceeds from sales or maturities of marketable securities   10,802     11,328  
Purchases of equity investment   (607 )   (562 )
Net cash provided by investing activities   4,460     1,630  
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Payments on notes payable       (6 )
Proceeds from exercise of stock options   511     102  
Principal payments on long-term obligations   (1,027 )   (904 )
Dividends paid   (6,197 )   (7,482 )
Payments for common shares repurchased       (1,825 )
Tax payments related to RSU issuances   (311 )   (213 )
Net cash used in financing activities   (7,024 )   (10,328 )
         
EFFECT OF EXCHANGE RATE CHANGES ON CASH   113     (591 )
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   6,887     5,725  
         
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:        
Beginning of period   32,839     28,526  
End of period   $ 39,726     $ 34,251  
         

 
Daktronics, Inc. and Subsidiaries Net Sales and Orders by Business Unit(in thousands)(unaudited)
  Three Months Ended   Six Months Ended
  October 28,  2017   October 29,  2016   DollarChange   PercentChange   October 28,  2017   October 29,  2016   DollarChange   PercentChange
Net Sales:                              
  Commercial $ 34,377     $ 39,923     $ (5,546 )   (13.9 )%   $ 67,240     $ 76,177     $ (8,937 )   (11.7 )%
  Live Events 68,653     55,363     13,290     24.0     146,265     115,996     $ 30,269     26.1 %
  High School Park and Recreation 29,660     28,707     953     3.3     58,139     56,324     $ 1,815     3.2 %
  Transportation 16,476     16,101     375     2.3     35,388     30,387     $ 5,001     16.5 %
  International 20,143     29,898     (9,755 )   (32.6 )   35,005     48,254     $ (13,249 )   (27.5 )%
  $ 169,309     $ 169,992     $ (683 )   (0.4 )%   $ 342,037     $ 327,138     $ 14,899     4.6 %
Orders:                              
  Commercial $ 39,134     $ 36,663     $ 2,471     6.7 %   $ 69,071     $ 81,731     $ (12,660 )   (15.5 )%
  Live Events 43,730     31,050     12,680     40.8     105,335     83,930     $ 21,405     25.5 %
  High School Park and Recreation 14,737     15,764     (1,027 )   (6.5 )   46,917     46,877     $ 40     0.1 %
  Transportation 14,245     14,754     (509 )   (3.4 )   23,514     26,669     $ (3,155 )   (11.8 )%
  International 30,414     18,643     11,771     63.1     50,504     52,835     $ (2,331 )   (4.4 )%
  $ 142,260     $ 116,874     $ 25,386     21.7 %   $ 295,341     $ 292,042     $ 3,299     1.1 %
                                                           

 
Reconciliation of Free Cash Flow * (in thousands)(unaudited)
  Six Months Ended
  October 28,  2017   October 29,  2016
Net cash provided by operating activities $ 9,338     $ 15,014  
Purchases of property and equipment (7,735 )   (4,625 )
Proceeds from sales of property and equipment 2,000     72  
Free cash flow $ 3,603     $ 10,461  
 
*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.