Daktronics, Inc. Announces Third Quarter Fiscal 2014 Results

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| Source: Daktronics

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.
 

INVESTOR RELATIONS:
Sheila Anderson, Chief Financial Officer
(605) 692-0200