Daktronics, Inc. Announces Second Quarter Fiscal 2014 Results

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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

Source:Daktronics