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CST: 22/08/2019 03:11:14   

Daktronics, Inc. Announces Fiscal and Fourth Quarter 2019 Results

84 Days ago

BROOKINGS, S.D., May 29, 2019 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal and fourth quarter 2019 results.  Net sales, operating loss, net loss, and loss per share for the fiscal year ended April 27, 2019 were $569.7 million, $4.7 million, $1.0 million, and $0.02 per diluted share, respectively.  This compares to net sales of $610.5 million, operating income of $12.5 million, net income of $5.6 million and $0.12 earnings per diluted share for fiscal 2018.  Fiscal 2019 orders were $608.9 million compared to $583.5 million for fiscal 2018.

Daktronics reported fiscal 2019 fourth quarter net sales of $127.8 million, operating loss of $10.3 million, and net loss of $10.8 million, or $0.24 per diluted share, compared to net sales of $138.2 million, operating loss of $5.4 million, and net loss of $3.8 million, or $0.09 per diluted share, for the fourth quarter of fiscal 2018.  Fiscal 2019 fourth quarter orders were $162.5 million compared to $162.0 million for the fourth quarter of fiscal 2018.  Product backlog at the end of the fiscal 2019 fourth quarter was $202 million, compared to a backlog of $171 million a year earlier and $168 million at the end of the third quarter of fiscal 2019.

Cash flow provided by operating activities for the fiscal year ended April 27, 2019 was $29.5 million, compared to $30.4 million in fiscal 2018.  Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a positive $12.9 million for fiscal 2019, as compared to a positive free cash flow of $14.4 million for fiscal 2018.  Net investment in property and equipment was $16.7 million for fiscal 2019, as compared to $15.9 million for fiscal 2018.  Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2019 were $62.1 million, which compares to $64.3 million at the end of the fourth quarter of fiscal 2018.

Fourth Quarter Fiscal 2019 Consolidated Financial Results
Orders for the fourth quarter of fiscal 2019 were relatively flat as compared to the fourth quarter of fiscal 2018.  Orders increased in the Transportation, International, and Commercial business units and decreased in the Live Events and High School Park and Recreation business units.  The volatility of order timing for large projects and global accounts varies according to the needs of the customer and is the primary cause of the change in order volume.

Net sales for the fourth quarter of fiscal 2019 decreased by 7.5 percent as compared to the fourth quarter of fiscal 2018.  Net sales increased in the Commercial and Transportation business units and decreased in the Live Events, High School Park and Recreation, and International business units.  The change in sales primarily relates to fluctuations in the timing of order bookings and related conversion to sales.

Gross profit as a percentage of net sales was 19.1 percent for the fourth quarter of fiscal 2019 as compared to 21.6 percent a year earlier.  The decrease in gross profit percentage was primarily due to lower sales volumes, adjustments to business combination contingencies and claims, and increased commodity and tariff costs, partially offset by lower warranty charges.  Operating expense for the fourth quarter of 2019 was $34.7 million, compared to $35.2 million for the fourth quarter of fiscal 2018.  Operating loss as a percentage of sales was 8.0 percent for the fourth quarter of fiscal 2019 as compared to an operating loss as a percentage of sales of 3.9 percent for the fourth quarter of fiscal 2018.

The provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss, excluding unusual or infrequently occurring discrete items for the reporting period.  Our effective tax rate was 1.3 percent and 28.3 percent for the fourth quarter of fiscal 2019 and fiscal 2018, respectively.  The fiscal 2019 fourth quarter effective tax rate was significantly different from both prior year and the prior quarter's rate as we recorded lower tax benefits on the pre-tax book loss as compared to tax expenses relating to permanent non-deductible or partially deductible items.

Fiscal 2019 Consolidated Financial Results
Orders for fiscal 2019 increased by 4.4 percent as compared to fiscal 2018.  Orders increased in the Commercial, High School Park and Recreation, and Transportation business units.  Commercial orders increased primarily due to activity in the spectacular market in Times Square, Las Vegas, and other unique locations.  In addition, Commercial orders grew in the out-of-home ("OOH") segment as a result of higher demand for digital billboard replacements, new digital billboard installations, and to securing a multimillion-dollar OOH airport installation.  High School Park and Recreation orders grew as the market demand continued for video products and control system solutions as well as on-going success selling marquees and scoring systems.  Historically, video projects have a larger average selling price than traditional scoreboard sales in this business unit.  Transportation orders grew in both intelligent transportation systems and tolling applications as state transportation departments and private public partnerships continue to invest in technology to better inform travelers, manage transport systems, and collect revenues.  We had continued order success throughout most of our Live Event sports and entertainment markets but had lower order volume in professional sports as there were fewer projects in the market as well as strong competition.  International business unit orders were down due to the general variations in timing of large contracts and account-based order placements.

Net sales for fiscal 2019 decreased 6.7 percent as compared to fiscal 2018.  Net sales increased in the Commercial, Transportation, High School Park and Recreation, and International business units.  This change in sales correlates to order levels and to the timing of converting orders and backlog into sales.  The timing of order conversion is based on customer driven delivery schedules.  Live Events business unit sales declined for the same reasons as the decline in orders.

Gross profit as a percentage of net sales was 22.9 percent for fiscal 2019 as compared to 23.9 percent a year earlier.  Warranty as a percent of sales improved to 2.3 percent of sales as compared to 3.5 percent last year.  Operating expenses for fiscal 2019 were $135.0 million as compared to $133.2 million for fiscal 2018.  The increase in total operating expenses was primarily attributable to an increase in selling expenses.  Annual operating loss as a percentage of sales was 0.8 percent for fiscal 2019 as compared to an operating income as a percentage of sales of 2.0 percent for fiscal 2018.

The effective tax rate for fiscal 2019 was 80.6 percent as compared to 55.2 percent a year earlier.  Fiscal 2019 effective tax rate was significantly different from prior year as we recorded one-time benefits totaling $3.3 million for release of allowances and reserves offset by the costs of non-deductible items on pre-tax loss.  The effective tax rate for fiscal 2018 was impacted by significant changes to the U.S. tax code and the related write-down of deferred tax assets.  We estimate an effective tax rate of approximately 21 percent for fiscal 2020.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "As we entered into fiscal 2019, we focused on winning more orders and maintaining our product release velocity.  We achieved both.  Our order volume was the third highest level in our company's history, even though we had fewer multimillion-dollar projects as compared to other record years.  This high order level attained at lower project sizes is an indication of our ability to serve new and existing customers across global markets by offering a comprehensive suite of solutions and services.  The growth of our product and services offerings this year included the releases of control systems and new or enhanced lines of indoor high-resolution displays.

"Our financial results for fiscal 2019 were lower than anticipated.  Revenue and gross profit were lower in the second half of the year and were impacted by the timing of order bookings and the conversion to revenue due to our customers' schedules.  Global trade factors caused at least $6 million in additional expenses, including the increased price of certain commodities and tariff costs.  We incurred approximately $3 million of expenses for discrete project, litigation, and other claims during the year.  Our balance sheet remains strong.  We generated positive free cash flow for the year while investing over $17 million in manufacturing and information technology equipment and $36 million in product development.  These investments will provide on-going benefits well into the future."

Outlook
Kurtenbach continued, "We enter into fiscal 2020 with a strong backlog.  This backlog along with our broad and innovative product and technology portfolios, our global customer base, the replacement cycles in our business, and the continued market adoption of digital solutions positions us for growth.  During fiscal 2020, we will continue to serve a growing global customer base in commercial, sports and government markets.  Our focus in product development continues to remain on new technologies and advanced manufacturing techniques.  Finally, we are focused on carefully managing capacity and spend as we continue on our path to long-term profitable growth.  However, the current global tariff and trade environment continues to create cost headwinds on commodity and components used in the production of our solutions in the U.S. market.  Over the long-term, we believe the situation will stabilize and we will continue to work to minimize the impact."

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 be 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 2018 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   Twelve Months Ended
  April 27,
2019
  April 28,
2018
  April 27,
2019
  April 28,
2018
Net sales $ 127,755     $ 138,177     $ 569,704     $ 610,530  
Cost of sales 103,334     108,325     439,410     464,861  
Gross profit 24,421     29,852     130,294     145,669  
               
Operating expenses:              
Selling 16,608     17,200     64,648     62,760  
General and administrative 9,132     8,781     34,817     34,919  
Product design and development 8,946     9,236     35,557     35,530  
  34,686     35,217     135,022     133,209  
Operating (loss) income (10,265 )   (5,365 )   (4,728 )   12,460  
               
Nonoperating income (expense):              
Interest income 318     203     1,031     723  
Interest expense (74 )   (44 )   (160 )   (217 )
Other (expense) income, net (664 )   (108 )   (1,087 )   (537 )
               
(Loss) income before income taxes (10,685 )   (5,314 )   (4,944 )   12,429  
Income tax (benefit) expense 134     (1,504 )   (3,986 )   6,867  
Net (loss) income $ (10,819 )   $ (3,810 )   $ (958 )   $ 5,562  
               
Weighted average shares outstanding:              
Basic 45,139     44,569     44,926     44,457  
Diluted 45,139     44,569     44,926     44,873  
               
(Loss) earnings per share:              
Basic $ (0.24 )   $ (0.09 )   $ (0.02 )   $ 0.13  
Diluted $ (0.24 )   $ (0.09 )   $ (0.02 )   $ 0.12  
               
Cash dividends declared per share $ 0.07     $ 0.07     $ 0.28     $ 0.28  



Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(unaudited)
  April 27,
2019
  April 28,
2018
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 35,383     $ 29,727  
Restricted cash 359     28  
Marketable securities 26,344     34,522  
Accounts receivable, net 65,487     77,387  
Inventories 78,832     75,335  
Contract assets 33,704     30,968  
Current maturities of long-term receivables 2,300     1,752  
Prepaid expenses and other current assets 8,319     9,029  
Income tax receivables 1,087     5,385  
Property and equipment and other assets available for sale 1,858      
Total current assets 253,673     264,133  
       
Property and equipment, net 65,314     68,059  
Long-term receivables, less current maturities 1,214     1,641  
Goodwill 7,889     8,264  
Intangibles, net 4,906     3,682  
Investment in affiliates and other assets 5,052     5,091  
Deferred income taxes 11,168     7,930  
TOTAL ASSETS $ 349,216     $ 358,800  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable 44,873     48,845  
Contract liabilities 47,178     39,379  
Accrued expenses 32,061     28,533  
Warranty obligations 9,492     13,891  
Income taxes payable 468     660  
Total current liabilities 134,072     131,308  
       
Long-term warranty obligations 14,978     16,062  
Long-term contract liabilities 10,053     7,475  
Other long-term obligations 1,339     2,285  
Long-term income tax payable 578     3,440  
Deferred income taxes 533     614  
Total long-term liabilities 27,481     29,876  
TOTAL LIABILITIES 161,553     161,184  
       
SHAREHOLDERS' EQUITY:      
Common stock 57,699     54,731  
Additional paid-in capital 42,561     40,328  
Retained earnings 93,593     107,105  
Treasury stock, at cost (1,834 )   (1,834 )
Accumulated other comprehensive loss (4,356 )   (2,714 )
TOTAL SHAREHOLDERS' EQUITY 187,663     197,616  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 349,216     $ 358,800  
       


Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
    Year Ended
    April 27,
2019
  April 28,
2018
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net (loss) income   $ (958 )   $ 5,562  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:        
Depreciation and amortization   18,635     17,784  
Gain on sale of property, equipment and other assets   (441 )   (1,252 )
Share-based compensation   2,479     2,635  
Contingent consideration adjustment   286      
Equity in loss of affiliate   844     481  
Provision for doubtful accounts   194     140  
Deferred income taxes, net   (3,379 )   3,148  
Change in operating assets and liabilities   11,886     1,863  
Net cash provided by operating activities   29,546     30,361  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (17,268 )   (18,127 )
Proceeds from sales of property, equipment and other assets   607     2,179  
Purchases of marketable securities   (25,337 )   (17,438 )
Proceeds from sales or maturities of marketable securities   33,706     15,273  
Purchases of and loans to equity investment   (1,300 )   (1,450 )
Acquisitions, net of cash acquired   (2,250 )    
Net cash used in investing activities   (11,842 )   (19,563 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Principal payments on long-term obligations   (450 )   (1,046 )
Dividends paid   (12,554 )   (12,424 )
Proceeds from exercise of stock options   1,318     519  
Tax payments related to RSU issuances   (246 )   (311 )
Net cash used in financing activities   (11,932 )   (13,262 )
         
EFFECT OF EXCHANGE RATE CHANGES ON CASH   215     (620 )
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
  5,987     (3,084 )
         
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:        
Beginning of period   29,755     32,839  
End of period   $ 35,742     $ 29,755  
         



Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
  Three Months Ended   Twelve Months Ended
  April 27,
2019
  April 28,
2018
  Dollar
Change
  Percent
Change
  April 27,
2019
  April 28,
2018
  Dollar
Change
  Percent
Change
Net sales:                              
Commercial $ 35,036     $ 31,812     $ 3,224     10.1 %   $ 148,833     $ 134,535     $ 14,298     10.6 %
Live Events 36,386     44,901     (8,515 )   (19.0 )%   170,952     236,333     (65,381 )   (27.7 )%
High School Park and Recreation 16,689     18,025     (1,336 )   (7.4 )%   91,187     87,627     3,560     4.1 %
Transportation 13,767     13,001     766     5.9 %   64,391     59,578     4,813     8.1 %
International 25,877     30,438     (4,561 )   (15.0 )%   94,341     92,457     1,884     2.0 %
  $ 127,755     $ 138,177     $ (10,422 )   (7.5 )%   $ 569,704     $ 610,530     $ (40,826 )   (6.7 )%
Orders:                              
Commercial $ 38,955     $ 37,547     $ 1,408     3.7 %   $ 162,592     $ 135,363     $ 27,229     20.1 %
Live Events 50,414     57,790     (7,376 )   (12.8 )%   179,217     203,036     (23,819 )   (11.7 )%
High School Park and Recreation 24,211     26,875     (2,664 )   (9.9 )%   98,139     87,243     10,896     12.5 %
Transportation 18,323     12,426     5,897     47.5 %   73,059     50,581     22,478     44.4 %
International 30,582     27,335     3,247     11.9 %   95,873     107,244     (11,371 )   (10.6 )%
  $ 162,485     $ 161,973     $ 512     0.3 %   $ 608,880     $ 583,467     $ 25,413     4.4 %


Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands)
(unaudited)
  Twelve Months Ended
  April 27,
2019
  April 28,
2018
Net cash provided by operating activities $ 29,546     $ 30,361  
Purchases of property and equipment (17,268 )   (18,127 )
Proceeds from sales of property, equipment and other assets 607     2,179  
Free cash flow $ 12,885     $ 14,413  

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.

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