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Daktronics, Inc. Announces Fourth Quarter and Fiscal 2016 Results

BROOKINGS, S.D., June 01, 2016 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2016 fourth quarter net sales of $138.5 million, operating loss of $3.7 million, and net loss of $2.9 million, or $(0.07) per diluted share, compared to net sales of $158.1 million, operating income of $7.0 million, and a net income of $3.8 million, or $0.09 per diluted share, for the fourth quarter of fiscal 2015. Fiscal 2016 fourth quarter orders were $143.2 million compared to $196.1 million for the fourth quarter of fiscal 2015. Backlog at the end of the fiscal 2016 fourth quarter was $181.2 million, compared to a backlog of $190.5 million a year earlier and $176.3 million at the end of the third quarter of fiscal 2016.

Net sales, operating income, net income, and earnings per share for the fiscal year ended April 30, 2016, were $570.2 million, $2.5 million, $2.1 million and $0.05 per diluted share, respectively. This compares to $615.9 million, $31.3 million, $20.9 million and $0.47 per diluted share, respectively, for fiscal 2015. Fiscal 2016 was a 52-week year and fiscal 2015 was a 53-week year. The extra week of fiscal 2015 fell within the first quarter, resulting in a 52-week versus a 53-week year end comparison.

Free cash flow, defined as cash provided from or used in operating activities less capital expenditures, was negative $3.6 million for fiscal 2016, as compared to a positive free cash flow of $35.4 million for fiscal 2015. Cash provided by operations was $13.3 million for fiscal 2016, compared to $53.2 million for fiscal 2015. Net investment in property and equipment was $16.9 million for fiscal 2016, as compared to $17.8 million for fiscal 2015. Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2016 were $53.2 million, which compares to $83.1 million at the end of the fourth quarter of fiscal 2015.

Sales and orders for the fourth quarter of fiscal 2016 decreased by 12.4 percent and 27.0 percent, respectively, as compared to the fourth quarter of fiscal 2015. The orders decline was due to International and Live Events multi-million dollar projects that were booked during the fourth quarter of fiscal 2015, while no orders of similar size occurred during the fourth quarter of fiscal 2016. Sales decreased primarily due to lighter International and Commercial billboard and spectacular demand. Operating loss was 2.6 percent of sales for the quarter due to increased warranty impact for the quarter and lower production levels.

Orders decreased in fiscal 2016 by $70.8 million as compared to fiscal 2015. International, Commercial and Live Events business unit orders declined during the year. The decline in International orders was due to the inherent timing volatility in the booking of large orders, various macroeconomic trends, and the competitive environment. Commercial business unit orders declined in spectacular and billboard niches due to a softening in customer demand and delaying commitments on large projects and programs. While Live Events orders declined by 2.6 percent, underlying demand remained strong considering fiscal 2015 orders included a significantly sized NFL stadium project with no similar sized project in fiscal 2016. Orders increased by 10.5 percent in High School Park and Recreation business unit due to increased video project sizes with higher average sales price and increased market demand. Transportation orders increased by 11.8 percent due to increased market demand with the passing of the federal highway funding bill. Finally, approximately 2.0 percent of the annual order decline was due to the additional week in fiscal 2015.

Sales for fiscal 2016 decreased 7.4 percent as compared to fiscal 2015. Approximately 2.0 percent of this decline is due to the decrease of one week in the fiscal 2016 year and the remaining decline was primarily due to decreases in sales in Live Events, Commercial, and International business units. Live Events declined due to the timing of customer deliveries extending beyond the fiscal year. The Commercial sales decline was driven by decreased customer demand in billboard and spectacular niches. Sales in the International business unit declined due to lower orders during the last half of the year.

Annual operating income as a percentage of sales decreased to 0.4 percent for fiscal 2016 as compared to 5.1 percent for fiscal 2015. The decline is primarily attributable to the impact of additional warranty expenses of 1.6 percent and an increase in operating expenses. The increase in operating expense dollars is due to additional activity in design areas and increases in personnel related and information technology costs.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "Fiscal 2016 was a challenging year for Daktronics. A warranty issue caused margin declines and high opportunity costs with time spent solving and correcting the issue. We believe we have accrued our best estimate for the most probable ultimate costs and we will continue to monitor over the coming year. We also experienced lower demand in some markets resulting in lower production rates through our infrastructure.

“While we had these challenges, we were also successful in a number of ways. Daktronics continues to be the world leader in market share in the video display industry. We were successful in winning and delivering orders to expanding sports and worldwide transportation markets and to global accounts. We launched a number of new solutions in the latter part of fiscal 2016, which we anticipate will positively impact fiscal 2017. In addition, we made progress on product enhancements to both meet specific customer needs and improve lifetime quality and reliability at lower overall cost to produce. Finally, we acquired a company during the year to expand our capabilities in the growing industry of digital media networks."

Outlook
Kurtenbach continued, “The marketplace we operate in continues to expand as digital technology becomes ever more prevalent. We are the most experienced market provider for video system design and delivery, lifetime support, and value to our customers. Global macroeconomic factors including low oil prices, strong U.S. dollar, slowing GDP, political instability and other uncertainties continue to affect customer purchasing decisions. This creates some uncertainty in the near-term outlook for orders; therefore, we expect modest growth in fiscal 2017 and we will carefully manage our spending.

"Strategically, we are accelerating activities to complete product developments for a number of customer solution areas. For example, we are investing in our control platform to allow customers to continue to experience our best-in-class control systems while lowering our ongoing development and support costs. We also continue to invest in the video processing applications for higher resolution displays. Finally, we are developing solutions to meet global demand for lower cost systems with performance targeted for certain applications. This will add to our product lineup and improve our ability to capture a broader customer base in this growing global market."

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, High School Park and Recreation and Transportation, and one International business unit. For more information, visit the company's website at: http://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 2015 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 Twelve Months Ended
April 30,
2016
May 2,
2015
April 30,
2016
May 2,
2015
Net sales$138,463 $158,086 $570,168 $615,942
Cost of goods sold110,487 122,849 449,149 471,363
Gross profit27,976 35,237 121,019 144,579
Operating expenses:
Selling expense15,939 14,558 58,812 57,963
General and administrative8,607 7,789 32,801 30,679
Product design and development7,085 5,879 26,911 24,652
31,631 28,226 118,524 113,294
Operating (loss) income(3,655) 7,011 2,495 31,285
Nonoperating income (expense):
Interest income193 294 987 1,119
Interest expense(25) (40) (228) (223)
Other (expense) income, net539 (280) (128) (498)
(Loss) income before income taxes(2,948) 6,985 3,126 31,683
Income tax (benefit) expense(18) 3,146 1,065 10,801
Net (loss) income$(2,930) $3,839 $2,061 $20,882
Weighted average shares outstanding:
Basic44,094 43,707 43,990 43,514
Diluted44,094 43,966 44,456 44,443
Earnings per share:
Basic$(0.07) $0.09 $0.05 $0.48
Diluted$(0.07) $0.09 $0.05 $0.47
Cash dividends declared per share$0.10 $0.10 $0.40 $0.40




Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
April 30,
2016
May 2,
2015
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$28,328 $57,284
Restricted cash198 496
Marketable securities24,672 25,346
Accounts receivable, net77,554 80,857
Inventories, net69,827 64,389
Costs and estimated earnings in excess of billings30,200 35,068
Current maturities of long-term receivables3,172 3,784
Prepaid expenses and other assets6,468 6,663
Deferred income taxes 10,640
Income tax receivables4,812 5,543
Total current assets245,231 290,070
Long-term receivables, less current maturities3,866 6,090
Goodwill9,208 5,269
Intangibles, net7,721 1,824
Investment in affiliates and other assets2,414 2,680
Deferred income taxes9,437 702
32,646 16,565
PROPERTY AND EQUIPMENT:
Land2,155 2,147
Buildings65,247 64,186
Machinery and equipment82,973 80,664
Office furniture and equipment14,746 15,823
Computer software and hardware48,917 51,083
Equipment held for rental374 803
Demonstration equipment8,026 7,299
Transportation equipment6,596 6,012
229,034 228,017
Less accumulated depreciation155,871 155,173
73,163 72,844
TOTAL ASSETS$351,040 $379,479




Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
April 30,
2016
May 2,
2015
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 43,441 52,747
Accrued expenses 23,532 26,063
Warranty obligations 16,564 11,838
Billings in excess of costs and estimated earnings 10,361 23,797
Customer deposits (billed or collected) 16,012 16,828
Deferred revenue (billed or collected) 10,712 9,524
Current portion of other long-term obligations 585 587
Income taxes payable 310 636
Total current liabilities 121,517 142,020
Long-term warranty obligations 13,932 14,643
Long-term deferred revenue (billed or collected) 5,603 3,914
Other long-term obligations, less current maturities 5,151 3,190
Long-term income tax payable 3,016 2,734
Deferred income taxes 754 939
Total long-term liabilities 28,456 25,420
TOTAL LIABILITIES 149,973 167,440
SHAREHOLDERS' EQUITY:
Common stock 51,347 48,960
Additional paid-in capital 35,351 32,693
Retained earnings 117,276 132,771
Treasury stock, at cost (9) (9)
Accumulated other comprehensive loss (2,898) (2,376)
TOTAL SHAREHOLDERS' EQUITY 201,067 212,039
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $351,040 $379,479




Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Year Ended
April 30,
2016
May 2,
2015
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,061 $20,882
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 16,561 14,764
Amortization 295 204
Amortization of premium/discount on marketable securities 87 168
Gain on sale of property and equipment (71) (1,207)
Share-based compensation 2,958 3,038
Excess tax benefits from share-based compensation (3) (38)
Gain on sale of equity investee (119)
Provision for doubtful accounts 481 (222)
Deferred income taxes, net 911 2,146
Change in operating assets and liabilities (9,886) 13,433
Net cash provided by operating activities 13,275 53,168
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (17,056) (21,837)
Proceeds from sales of property, equipment and other assets 152 4,037
Purchases of marketable securities (21,286) (15,653)
Proceeds from sales or maturities of marketable securities 21,862 15,532
Proceeds from sale of equity method investment 377
Acquisitions, net of cash acquired (7,867) (6,306)
Net cash used in investing activities (23,818) (24,227)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (38) (81)
Proceeds from exercise of stock options 610 2,513
Excess tax benefits from share-based compensation 3 38
Principal payments on long-term obligations (467) (1,163)
Dividends paid (17,556) (17,377)
Net cash used in financing activities (17,448) (16,070)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (965) (641)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (28,956) 12,230
CASH AND CASH EQUIVALENTS:
Beginning of period 57,284 45,054
End of period $28,328 $57,284




Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
April 30,
2016
May 2,
2015
Dollar
Change
Percent
Change
April 30,
2016
May 2,
2015
Dollar
Change
Percent
Change
Net sales:
Commercial$35,600 $44,321 $(8,721) (19.7)% $148,261 $165,793 $(17,532) (10.6)%
Live Events55,401 60,066 (4,665) (7.8)% 205,151 231,877 (26,726) (11.5)%
High School Park and
Recreation
15,883 12,532 3,351 26.7% 70,035 67,657 2,378 3.5%
Transportation13,490 13,526 (36) (0.3)% 52,249 48,333 3,916 8.1%
International18,089 27,641 (9,552) (34.6)% 94,472 102,282 (7,810) (7.6)%
$138,463 $158,086 $(19,623) (12.4)% $570,168 $615,942 $(45,774) (7.4)%
Orders:
Commercial$40,742 $44,606 $(3,864) (8.7)% $135,824 $170,209 $(34,385) (20.2)%
Live Events52,295 76,775 (24,480) (31.9)% 220,377 226,354 (5,977) (2.6)%
High School Park and
Recreation
20,925 14,494 6,431 44.4% 76,485 69,188 7,297 10.5%
Transportation14,099 13,860 239 1.7% 56,834 50,845 5,989 11.8%
International15,161 46,344 (31,183) (67.3)% 71,266 114,977 (43,711) (38.0)%
$143,222 $196,079 $(52,857) (27.0)% $560,786 $631,573 $(70,787) (11.2)%




Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands)
(unaudited)
Twelve Months Ended
April 30,
2016
May 2,
2015
Net cash provided by operating activities$13,275 $53,168
Purchases of property and equipment(17,056) (21,837)
Proceeds from sales of property, equipment and other assets152 4,037
Free cash flow$(3,629) $35,368

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.

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

Source:Daktronics, Inc.