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Daktronics, Inc. Announces Third Quarter Fiscal 2014 Results

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BROOKINGS, S.D., Feb. 18, 2014 (GLOBE NEWSWIRE) -- Daktronics, Inc. (Nasdaq:DAKT) today reported fiscal 2014 third quarter net sales of $115.4 million, operating income of $3.6 million and net income of $2.9 million, or $0.07 per diluted share, compared to net sales of $111.1 million, operating income of $1.1 million and net income of $2.7 million, or $0.06 per diluted share, for the third quarter of fiscal 2013. Fiscal 2014 third quarter orders were $153.2 million compared to $134.3 million for the third quarter of fiscal 2013. Backlog at the end of the fiscal 2014 third quarter was $170 million, compared with a backlog of $149 million a year earlier and $132 million at the end of the second quarter of fiscal 2014.

Net sales, operating income, net income and earnings per share for the nine months ended January 25, 2014 were $415.7 million, $29.7 million, $20.4 million and $0.47 per diluted share, respectively. This compares to $393.8 million, $28.6 million, $20.9 million and $0.49 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 $30.0 million for the first nine months of fiscal 2014, compared to $26.6 million for the same period in fiscal 2013. Cash and marketable securities at the end of the third quarter of fiscal 2014 were $81.2 million, which compares to $64.7 million at the end of fiscal 2013 and $50.1 million at the end of the third quarter of fiscal 2013.

"We are pleased with our third quarter financial results for fiscal 2014. For the quarter, our order volume included a number of multi-million dollar video system orders in the Live Events and Commercial business units and included over $20 million of third-party advertising orders. Due to the cyclical nature of our sports business and outdoor construction season, our third quarter historically is our lowest performing quarter, however our overall sales and operating income levels improved over last year due to an increase in order activity," said Reece Kurtenbach, president and chief executive officer.

Gross profit levels were higher compared to the third quarter of fiscal 2013 due to increased utilization of manufacturing and services infrastructure and lower warranty expense as a percentage of sales as compared to the same period last year. Operating expenses in the third quarter of fiscal 2014 decreased by approximately one percent as a percentage of sales to 22 percent compared to 23 percent in the third quarter of fiscal 2013.

Orders

Order volumes can be cyclical based on sports and construction season with large multi-million dollar orders greatly impacting any one quarter. Orders convert to sales as we produce, ship, install, and service our customers based on delivery dates and factory capacity.

  • Orders in the Commercial business unit increased approximately 31 percent in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The increase in orders was primarily due to an increase in orders for digital billboards. In addition, we booked three large video contracts totaling $9.3 million.
  • Orders in the Live Events business unit increased approximately 49 percent in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The increase in orders is due to the award of three orders for video display systems in NFL stadiums totaling $47.7 million for the quarter.
  • Orders in the Schools and Theatres business unit increased by approximately eight percent for the third quarter of fiscal 2014 compared to the same period in fiscal 2013. The increase in orders was primarily the result of increased interest in larger video display systems for high schools.
  • Orders in the Transportation business unit declined approximately 58 percent for the third quarter of fiscal 2014 compared to the same period in fiscal 2013. The decrease in orders was primarily the result of the volatility in the timing of orders.
  • Orders in the International business unit decreased approximately 24 percent for the third quarter of fiscal 2014 over the third quarter of fiscal 2013. The decrease is due to the historic volatility in timing on large orders. We continue to see a pipeline of opportunities in the International business unit.

Outlook

Reece Kurtenbach added, "During the fourth quarter, we will begin production for the large NFL projects. These orders along with the strong backlog in other areas, provide us optimism we will finish the year with a modest growth in sales and operating income as compared to last fiscal year."

"We continue to see opportunities in the worldwide market place and are optimistic about future potential for sales in all markets. To continue to support forecasted demand, we have committed to an approximately $4 million manufacturing facility expansion expected to be completed by early fall 2014. The expansion will allow for increased capacity and flexibility for module production and assembly work. In addition, we recently completed the installation of additional manufacturing equipment to increase the through-hole video module capacity by three times its previous output in our Minnesota facility, ensuring project lead times meet customer expectations. We anticipate spending approximately $16 million in capital expenditures during fiscal 2014."

"Our teams are focused on delivering value to our customers. Our product development teams continue to drive forward our platform strategy by enhancing our display and control system platforms. We continue to focus on our goals to increase profitability by continuing to work on supplier and manufacturing quality, product reliability, and overall operational efficiencies in all areas."

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 Nine Months Ended
January 25, January 26, January 25, January 26,
2014 2013 2014 2013
Net sales $ 115,369 $ 111,050 $ 415,730 $ 393,840
Cost of goods sold 86,280 84,001 307,774 288,049
Gross profit 29,089 27,049 107,956 105,791
Operating expenses:
Selling expense 13,188 13,652 40,110 39,528
General and administrative 6,685 6,717 20,788 20,148
Product design and development 5,649 5,611 17,330 17,477
25,522 25,980 78,228 77,153
Operating income 3,567 1,069 29,728 28,638
Nonoperating income (expense):
Interest income 290 386 945 1,165
Interest expense (62) (28) (189) (151)
Other (expense) income, net (237) (193) (351) (224)
Income before income taxes 3,558 1,234 30,133 29,428
Income tax expense (benefit) 687 (1,476) 9,753 8,493
Net income $ 2,871 $ 2,710 $ 20,380 $ 20,935
Weighted average shares outstanding:
Basic 43,039 42,343 42,772 42,206
Diluted 43,613 42,539 43,397 42,447
Earnings per share:
Basic $ 0.07 $ 0.06 $ 0.48 $ 0.50
Diluted $ 0.07 $ 0.06 $ 0.47 $ 0.49
Cash dividend declared per share $ 0.090 $ 0.615 $ 0.300 $ 0.730
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
January 25, April 27,
2014 2013
(unaudited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted cash $ 55,940 $ 40,676
Marketable securities 25,290 24,052
Accounts receivable, net 66,320 63,227
Inventories, net 57,149 49,045
Costs and estimated earnings in excess of billings 32,139 39,355
Current maturities of long-term receivables 5,063 4,807
Prepaid expenses and other assets 5,690 6,185
Deferred income taxes 12,444 12,755
Income tax receivables 1,304 46
Total current assets 261,339 240,148
Long-term receivables, less current maturities 8,866 11,325
Goodwill 4,548 3,306
Intangibles, net 2,752 1,181
Advertising rights, net and other assets 641 772
Deferred income taxes 1,147 1,061
17,954 17,645
PROPERTY AND EQUIPMENT:
Land 2,356 1,497
Buildings 59,464 57,012
Machinery and equipment 70,143 65,600
Office furniture and equipment 16,106 16,118
Computer software and hardware 43,389 41,745
Equipment held for rental 868 868
Demonstration equipment 7,481 8,400
Transportation equipment 4,439 4,026
204,246 195,266
Less accumulated depreciation 141,570 133,641
62,676 61,625
TOTAL ASSETS $ 341,969 $ 319,418
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
January 25, April 27,
2014 2013
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 36,499 $ 38,651
Accrued expenses 21,651 24,331
Warranty obligations 13,618 13,933
Billings in excess of costs and estimated earnings 16,352 14,245
Customer deposits (billed or collected) 18,868 12,375
Deferred revenue (billed or collected) 8,584 9,112
Current portion of other long-term obligations 773 356
Income taxes payable 747 1,689
Total current liabilities 117,092 114,692
Long-term warranty obligations 12,054 11,213
Long-term deferred revenue (billed or collected) 5,874 4,424
Other long-term obligations, less current maturities 2,972 843
Total long-term liabilities 20,900 16,480
TOTAL LIABILITIES 137,992 131,172
SHAREHOLDERS' EQUITY:
Common stock 43,588 37,429
Additional paid-in capital 29,219 27,194
Retained earnings 131,322 123,750
Treasury stock, at cost (9) (9)
Accumulated other comprehensive loss (143) (118)
TOTAL SHAREHOLDERS' EQUITY 203,977 188,246
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 341,969 $ 319,418
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
January 25, January 26,
2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,380 $ 20,935
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 10,678 11,614
Amortization 274 171
Amortization of premium/discount on marketable securities 170 140
(Gain) loss on sale of property and equipment (90) 33
Share-based compensation 2,206 2,344
Excess tax benefits from share-based compensation (106) (61)
Provision for doubtful accounts (47) (197)
Deferred income taxes, net 619 (258)
Change in operating assets and liabilities 5,159 (1,466)
Net cash provided by operating activities 39,243 33,255
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (9,421) (6,799)
Proceeds from sale of property and equipment 182 175
Purchases of marketable securities (9,432) (13,301)
Proceeds from sales or maturities of marketable securities 8,000 12,820
Acquistions, net of cash acquired (1,298) --
Net cash used in investing activities (11,969) (7,105)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable -- (1,460)
Proceeds from exercise of stock options 4,607 1,146
Excess tax benefits from share-based compensation 106 61
Principal payments on long-term obligations (3,682) --
Dividends paid (12,808) (30,859)
Net cash used in financing activities (11,777) (31,112)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (211) 43
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,286 (4,919)
CASH AND CASH EQUIVALENTS:
Beginning of period 40,628 29,423
End of period $ 55,914 $ 24,504
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
January 25, January 26, January 25, January 26,
2014 2013 2014 2013
Net Sales:
Commercial $ 39,016 $ 30,997 $ 117,690 $ 109,127
Live Events 33,428 26,528 146,680 121,641
Schools & Theatres 11,010 11,778 47,750 51,639
Transportation 13,531 23,546 41,811 57,713
International 18,384 18,201 61,799 53,720
$ 115,369 $ 111,050 $ 415,730 $ 393,840
Orders:
Commercial $ 48,400 $ 36,988 $ 123,522 $ 113,622
Live Events 70,442 47,391 174,002 132,285
Schools & Theatres 10,976 10,183 44,669 48,106
Transportation 8,371 19,972 34,048 59,504
International 15,053 19,776 63,238 64,667
$ 153,242 $ 134,310 $ 439,479 $ 418,184
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands)
(unaudited)
Nine Months Ended
January 25, January 26,
2014 2013
Net cash provided by operating activities $ 39,243 $ 33,255
Purchases of property and equipment (9,421) (6,799)
Proceeds from sales of property and equipment 182 175
Free cash flow $ 30,004 $ 26,631

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

Source:Daktronics