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CST: 22/11/2019 02:35:35   

Daktronics, Inc. Announces Third Quarter Fiscal 2019 Results

274 Days ago

BROOKINGS, S.D., Feb. 20, 2019 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2019 third quarter net sales of $115.1 million, operating loss of $7.5 million, and net loss of $3.3 million, or $0.07 per diluted share, compared to net sales of $130.3 million, operating loss of $3.3 million, and net loss of $6.2 million, or $0.14 per diluted share, for the third quarter of fiscal 2018.  Fiscal 2019 third quarter orders were $135.4 million, compared to $126.2 million for the third quarter of fiscal 2018.  Product order backlog at the end of the fiscal 2019 third quarter was $168 million, compared to a backlog of $151 million a year earlier and $150 million at the end of the second quarter of fiscal 2019.(1)

Net sales, operating income, net income, and earnings per share for the nine months ended January 26, 2019, were $441.9 million, $5.5 million, $9.9 million, and $0.22 per diluted share, respectively.  This compares to $472.4 million, $17.8 million, $9.4 million, and $0.21 per diluted share, respectively, for the same period in fiscal 2018.

Cash provided by operating activities in the first nine months of fiscal 2019 was $32.2 million, compared with cash provided by operating activities of $27.0 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 $18.4 million for the first nine months of fiscal 2019, as compared to a positive free cash flow of $18.2 million for the same period of fiscal 2018.  Net investment in property and equipment was $13.8 million for the first nine months of fiscal 2019, as compared to $8.8 million for the first nine months of fiscal 2018.  Cash, restricted cash, and marketable securities at the end of the third quarter of fiscal 2019 were $70.9 million, which compares to $73.0 million at the end of the third quarter of fiscal 2018 and $64.3 million at the end of fiscal 2018.

Orders for the third quarter of fiscal 2019 increased 7.4 percent as compared to the third quarter of fiscal 2018.  Orders increased in the Commercial, Live Events, and High School Park and Recreation business units, and decreased in the Transportation and International business units.

Net sales decreased by 11.7 percent in the third quarter of fiscal 2019 as compared to the third quarter of fiscal 2018.  Net sales increased in the Commercial, High School Park and Recreation, and Transportation business units, and decreased in the Live Events and International business units.  The increase in High School Park and Recreation business unit was primarily due to increased shipments of customized scoring systems and message centers as a result of increased market activity and the timing of customer demand.  Transportation sales increased primarily due to the variability of large order production timing caused by customer project schedules and an increase in demand for intelligent transportation systems.  Live Events sales decreased primarily due to the decrease of orders on a year to date basis.  International sales decreased as we had completed a number of Out-of-Home projects in the third quarter of fiscal 2018, with no similar sized projects in the third quarter of fiscal 2019.

Gross profit, as a percentage of net sales, decreased to 21.6 percent for the third quarter of fiscal 2019 as compared to 21.9 percent a year earlier.  Warranty as a percent of sales for the quarter decreased to 1.6 percent as compared to the third quarter of fiscal 2018 warranty as a percent of sales of 2.9 percent.  Operating expenses for the third quarter of fiscal 2019 were $32.4 million, compared to $31.9 million for the third quarter of fiscal 2018.  Operating loss as a percent of sales for the quarter decreased to 6.5 percent as compared to the third quarter of fiscal 2018 operating loss of 2.6 percent.  The tax benefit of $4.1 million for the third quarter of fiscal 2019 is primarily the result of the release of $2.8 million in unrecognized tax benefits related to a lapse of statute and the release of $0.5 million for a valuation allowance reversal related to foreign net operating loss carryforwards.  During the third quarter of fiscal 2018, we accounted for the revaluation of our deferred tax benefits due to the enactment of new U.S. tax laws creating a charge of $3.7 million.

Reece Kurtenbach, chairman, president and chief executive officer stated, “Our third quarter is historically lighter for sales and profits due to the seasonality of our sports business, construction cycles, and the decrease in production days due to holidays in the quarter.  We control costs where we can during this period; however, much of our costs are fixed in nature not allowing for large changes in expense structure during the quarter.  In addition, we had approximately $1.8 million of expenses for discrete project and litigation claims contributing to the quarter’s operating loss.  Our order bookings remain strong for the quarter and are up for the year.  Commercial orders for the quarter and year-to-date are up nicely for demand for spectacular and out-of-home solutions.  Live Events for the quarter was up nicely as we booked a large major league baseball order and a number of orders for summer and fall installations.  We continued to develop and release new technologies and products including high resolution applications and control system offerings.

(1) Backlog is not a measure defined by U.S. generally accepted accounting principles ("GAAP"), and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. For more information related to backlog, see Part I, Item 1. Business of our Annual Report on Form 10-K for the fiscal year ended April 28, 2018.

Outlook
Kurtenbach added, “We remain optimistic about our long-term outlook.  Our innovative product and technology portfolio positions us to capitalize on the growing market demand for digital canvases.  The current global tariff and trade environment has created cost headwinds on commodity and components used in the production of our solutions.  However, over the long-term, we believe the situation will stabilize and we will continue to work to minimize the impact.  Our teams continue to develop industry leading solutions and global sales channels to support long-term profitable growth.”

Webcast Information
The 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 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   Nine Months Ended
    January 26,
 2019
  January 27,
 2018
  January 26,
 2019
  January 27,
 2018
                 
Net sales   $ 115,069     $ 130,316     $ 441,949     $ 472,353  
Cost of sales   90,200     101,749     336,076     356,536  
Gross profit   24,869     28,567     105,873     115,817  
                 
Operating expenses:                
Selling   15,537     15,271     48,040     45,560  
General and administrative   8,574     8,335     25,685     26,138  
Product design and development   8,280     8,299     26,611     26,294  
    32,391     31,905     100,336     97,992  
Operating (loss) income   (7,522 )   (3,338 )   5,537     17,825  
                 
Nonoperating income (expense):                
Interest income   328     158     713     520  
Interest expense   (45 )   (40 )   (86 )   (173 )
Other (expense) income, net   (203 )   (487 )   (423 )   (429 )
                 
(Loss) income before income taxes   (7,442 )   (3,707 )   5,741     17,743  
Income tax (benefit) expense   (4,123 )   2,482     (4,120 )   8,371  
Net (loss) income   $ (3,319 )   $ (6,189 )   $ 9,861     $ 9,372  
                 
Weighted average shares outstanding:                
Basic   45,018     44,518     44,834     44,403  
Diluted   45,018     44,518     45,139     44,798  
                 
(Loss) earnings per share:                
Basic   $ (0.07 )   $ (0.14 )   $ 0.22     $ 0.21  
Diluted   $ (0.07 )   $ (0.14 )   $ 0.22     $ 0.21  
                 
Cash dividends declared per share   $ 0.07     $ 0.07     $ 0.21     $ 0.21  



 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands) 
 
  January 26,
 2019
  April 28,
 2018
  (unaudited)    
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 33,281     $ 29,727  
Restricted cash 26     28  
Marketable securities 37,596     34,522  
Accounts receivable, net 77,743     77,387  
Inventories 72,187     75,335  
Contract assets 26,542     30,968  
Current maturities of long-term receivables 1,998     1,752  
Prepaid expenses and other current assets 7,566     9,029  
Income tax receivables 5,772     5,385  
Property and equipment and other assets available for sale 1,893      
Total current assets 264,604     264,133  
       
Property and equipment, net 65,765     68,059  
Long-term receivables, less current maturities 1,247     1,641  
Goodwill 7,968     8,264  
Intangibles, net 5,429     3,682  
Investment in affiliates and other assets 5,422     5,091  
Deferred income taxes 8,317     7,930  
Total non-current assets 94,148     94,667  
TOTAL ASSETS $ 358,752     $ 358,800  
       



 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
 
  January 26,
 2019
  April 28,
 2018
  (unaudited)    
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable $ 35,117     $ 48,845  
Contract liabilities 48,745     39,379  
Accrued expenses 30,784     27,445  
Warranty obligations 11,283     13,891  
Current portion of other long-term obligations 1,199     1,088  
Income taxes payable 1,894     660  
Total current liabilities 129,022     131,308  
       
Long-term warranty obligations 15,370     16,062  
Long-term contract liabilities 9,814     7,475  
Other long-term obligations, less current portion 1,955     2,285  
Long-term income taxes payable 843     3,440  
Deferred income taxes 597     614  
Total long-term liabilities 28,579     29,876  
TOTAL LIABILITIES 157,601     161,184  
       
SHAREHOLDERS' EQUITY:      
Common stock 57,699     54,731  
Additional paid-in capital 41,949     40,328  
Retained earnings 107,563     107,105  
Treasury stock, at cost (1,834 )   (1,834 )
Accumulated other comprehensive loss (4,226 )   (2,714 )
TOTAL SHAREHOLDERS' EQUITY 201,151     197,616  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 358,752     $ 358,800  



 
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
    Nine Months Ended
    January 26,
 2019
  January 27,
 2018
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 9,861     $ 9,372  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   14,054     13,335  
Gain on sale of property, equipment and other assets   (130 )   (1,211 )
Share-based compensation   1,867     1,978  
Contingent consideration adjustment   (956 )    
Equity in loss of affiliate   392     401  
Provision for doubtful accounts   180     (55 )
Deferred income taxes, net   (445 )   3,429  
Change in operating assets and liabilities   7,364     (296 )
Net cash provided by operating activities   32,187     26,953  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (14,081 )   (10,865 )
Proceeds from sales of property, equipment and other assets   255     2,107  
Purchases of marketable securities   (25,337 )   (5,211 )
Proceeds from sales or maturities of marketable securities   22,341     13,751  
Purchases of equity investment   (854 )   (1,027 )
Acquisitions, net of cash acquired   (2,250 )    
Net cash used in investing activities   (19,926 )   (1,245 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from exercise of stock options   1,318     514  
Principal payments on long-term obligations   (440 )   (1,036 )
Dividends paid   (9,403 )   (9,311 )
Tax payments related to RSU issuances   (246 )   (311 )
Net cash used in financing activities   (8,771 )   (10,144 )
         
EFFECT OF EXCHANGE RATE CHANGES ON CASH   62     667  
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   3,552     16,231  
         
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:        
Beginning of period   29,755     32,839  
End of period   $ 33,307     $ 49,070  
         



Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
 
  Three Months Ended   Nine Months Ended
  January 26,
 2019
  January 27,
 2018
  Dollar
Change
  Percent
Change
  January 26,
 2019
  January 27,
 2018
  Dollar
Change
  Percent
Change
Net Sales:                              
  Commercial $ 37,159     $ 35,483     $ 1,676     4.7 %   $ 113,797     $ 102,723     $ 11,074     10.8 %
  Live Events 29,995     45,167     (15,172 )   (33.6 )   134,566     191,432     (56,866 )   (29.7 )
  High School Park and Recreation 14,798     11,463     3,335     29.1     74,498     69,602     4,896     7.0  
  Transportation 15,390     11,189     4,201     37.5     50,624     46,577     4,047     8.7  
  International 17,727     27,014     (9,287 )   (34.4 )   68,464     62,019     6,445     10.4  
  $ 115,069     $ 130,316     $ (15,247 )   (11.7 )%   $ 441,949     $ 472,353     $ (30,404 )   (6.4 )%
Orders:                              
  Commercial $ 41,114     $ 28,745     $ 12,369     43.0 %   $ 123,637     $ 97,816     $ 25,821     26.4 %
  Live Events 45,767     39,911     5,856     14.7     128,803     145,246     (16,443 )   (11.3 )
  High School Park and Recreation 17,034     13,451     3,583     26.6     73,928     60,368     13,560     22.5  
  Transportation 11,541     14,641     (3,100 )   (21.2 )   54,736     38,155     16,581     43.5  
  International 19,973     29,405     (9,432 )   (32.1 )   65,291     79,909     (14,618 )   (18.3 )
  $ 135,429     $ 126,153     $ 9,276     7.4 %   $ 446,395     $ 421,494     $ 24,901     5.9 %


 
Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
  Nine Months Ended
  January 26,
 2019
  January 27,
 2018
Net cash provided by operating activities $ 32,187     $ 26,953  
Purchases of property and equipment (14,081 )   (10,865 )
Proceeds from sales of property and equipment 255     2,107  
Free cash flow $ 18,361     $ 18,195  
               

*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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