BROOKINGS, S.D., Nov. 21, 2018 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2019 second quarter net sales of $172.7 million, operating income of $9.0 million, and net income of $8.6 million, or $0.19 per diluted share, compared to net sales of $169.3 million, operating income of $9.4 million, and net income of $7.1 million, or $0.16 per diluted share, for the second quarter of fiscal 2018.  Fiscal 2019 second quarter orders were $151.4 million, compared to $142.3 million for the second quarter of fiscal 2018.  Product order backlog at the end of the fiscal 2019 second quarter was $150 million, compared to a backlog of $155 million a year earlier and $177 million at the end of the first quarter of fiscal 2019.(1)

Net sales, operating income, net income, and earnings per share for the six months ended October 27, 2018, were $326.9 million, $13.1 million, $13.2 million, and $0.29 per diluted share, respectively.  This compares to $342.0 million, $21.2 million, $15.6 million, and $0.35 per diluted share, respectively, for the same period in fiscal 2018.

Cash provided by operating activities in the first six months of fiscal 2019 was $22.6 million, compared with cash provided by operating activities of $9.3 million in the same period last year.  Cash flow from operating activities fluctuated due to changes in net operating assets and liabilities offset by decrease in net income.  Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a positive $12.9 million for the first six months of fiscal 2019, as compared to a positive free cash flow of $3.6 million for the same period of fiscal 2018.  Net investment in property and equipment was $9.7 million for the first six months of fiscal 2019, as compared to $5.7 million for the first six months of fiscal 2018.  Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2019 were $67.3 million, which compares to $61.5 million at the end of the second quarter of fiscal 2018 and $64.3 million at the end of fiscal 2018.

Orders for the second quarter of fiscal 2019 increased 6.4 percent as compared to the second quarter of fiscal 2018.  Orders increased in the Commercial, High School Park and Recreation, and Transportation business units, decreased in the International business unit, and remained relatively flat in the Live Events business unit.

Net sales increased by 2.0 percent in the second quarter of fiscal 2019 as compared to the second quarter of fiscal 2018.  Net sales increased in the Commercial, High School Park and Recreation, Transportation, and International business units, and decreased in the Live Events business unit.  The increase in the Commercial business unit was primarily due to the timing of large custom projects in the spectacular niche, increased order volumes in the on-premise niche, and an increase in the out-of-home niche shipments.  Live Events sales decreased primarily due to the decrease of orders on a year to date basis.

Gross profit, as a percentage of net sales, was relatively flat at 24.8 percent for the second quarter of fiscal 2019 as compared to 25.2 percent a year earlier.  Operating expenses for the second quarter of fiscal 2019 were $33.7 million, compared to $33.2 million for the second quarter of fiscal 2018.  Operating income as a percent of sales for the quarter decreased to 5.2 percent as compared to the second quarter of fiscal 2018 operating income of 5.6 percent.  In the first quarter of fiscal 2019, we recorded a tax benefit and in the second quarter we recorded a tax expense, which resulted in a zero-tax expense for year to date as our estimated effective tax rate is based on our estimate of permanent research and development tax credits which offsets the estimated tax expense for the year.

Reece Kurtenbach, chairman, president and chief executive officer stated, “The diversity of our end-markets and competitive solution portfolio enabled us to increase orders for the first half of the year.  Strong market demand continued for larger sized spectacular projects, larger sports systems in high schools, after-sale service offerings, and signage for transportation infrastructure.  And while the order volume was down for the first half of the year internationally, we were successful in winning transportation and global out-of-home advertising projects.  Fewer large project opportunities were available in Live Events so far this year, causing orders and related sales to be down on a year to date basis.  Warranty as a percent of sales for the quarter decreased to 2.5 percent as compared to the second quarter of fiscal 2018 warranty as a percent of sales of 3.9 percent.  However, this improvement was offset by higher commodity costs and increases in selling expenses.

(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, “As we enter into the second half of our fiscal year, we remain optimistic about our long-term outlook.  Our portfolio of innovative products and technologies positioned us to capitalize on the growing market demand for digital canvases.  In the short term, the current global tariff and trade environment has created cost headwinds on commodity and components used in the production of our solutions.  We continue to monitor the situation and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments.  Our teams are focused on the continued development of 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 Six Months Ended
  October 27,
 2018
 October 28,
 2017
 October 27,
 2018
 October 28,
 2017
         
Net sales $172,692  $169,309  $326,880  $342,037 
Cost of sales 129,935  126,705  245,876  254,787 
Gross profit 42,757  42,604  81,004  87,250 
         
Operating expenses:        
Selling 16,125  15,350  32,503  30,289 
General and administrative 8,574  8,868  17,111  17,803 
Product design and development 9,039  8,948  18,331  17,995 
  33,738  33,166  67,945  66,087 
Operating income 9,019  9,438  13,059  21,163 
         
Nonoperating income (expense):        
Interest income 188  151  385  362 
Interest expense (2) (47) (41) (133)
Other (expense) income, net (66) (87) (220) 58 
         
Income before income taxes 9,139  9,455  13,183  21,450 
Income tax expense 533  2,323  3  5,889 
Net income $8,606  $7,132  $13,180  $15,561 
         
Weighted average shares outstanding:        
Basic 44,780  44,412  44,717  44,345 
Diluted 44,950  44,679  44,994  44,696 
         
Earnings per share:        
Basic $0.19  $0.16  $0.29  $0.35 
Diluted $0.19  $0.16  $0.29  $0.35 
         
Cash dividends declared per share $0.07  $0.07  $0.14  $0.14 



Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)

 October 27,
 2018
 April 28,
 2018
 (unaudited)  
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$35,557  $29,727 
Restricted cash26  28 
Marketable securities31,721  34,522 
Accounts receivable, net92,194  77,387 
Inventories69,529  75,335 
Contract assets30,633  30,968 
Current maturities of long-term receivables1,305  1,752 
Prepaid expenses and other current assets8,172  9,029 
Income tax receivables6,015  5,385 
Total current assets275,152  264,133 
    
Property and equipment, net69,470  68,059 
Long-term receivables, less current maturities1,348  1,641 
Goodwill8,053  8,264 
Intangibles, net6,101  3,682 
Investment in affiliates and other assets5,623  5,091 
Deferred income taxes7,939  7,930 
Total non-current assets98,534  94,667 
TOTAL ASSETS$373,686  $358,800 
    



Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(continued)
(in thousands)

 October 27,
 2018
 April 28,
 2018
 (unaudited)  
LIABILITIES AND SHAREHOLDERS' EQUITY   
CURRENT LIABILITIES:   
Accounts payable$46,764  $48,845 
Contract liabilities47,198  39,379 
Accrued expenses29,717  27,445 
Warranty obligations13,009  13,891 
Current portion of other long-term obligations1,106  1,088 
Income taxes payable272  660 
Total current liabilities138,066  131,308 
    
Long-term warranty obligations15,709  16,062 
Long-term contract liabilities8,520  7,475 
Other long-term obligations, less current portion2,420  2,285 
Long-term income taxes payable3,623  3,440 
Deferred income taxes611  614 
Total long-term liabilities30,883  29,876 
TOTAL LIABILITIES168,949  161,184 
    
SHAREHOLDERS' EQUITY:   
Common stock55,608  54,731 
Additional paid-in capital41,345  40,328 
Retained earnings114,033  107,105 
Treasury stock, at cost(1,834) (1,834)
Accumulated other comprehensive loss(4,415) (2,714)
TOTAL SHAREHOLDERS' EQUITY204,737  197,616 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$373,686  $358,800 



Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

  Six Months Ended
  October 27,
 2018
 October 28,
 2017
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $13,180  $15,561 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 9,300  8,902 
Gain on sale of property, equipment and other assets (93) (1,221)
Share-based compensation 1,263  1,341 
Contingent consideration adjustment (956)  
Equity in loss of affiliate 265  191 
Provision for doubtful accounts 51  (21)
Deferred income taxes, net (85) 81 
Change in operating assets and liabilities (368) (15,496)
Net cash provided by operating activities 22,557  9,338 
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment (9,833) (7,735)
Proceeds from sales of property, equipment and other assets 182  2,000 
Purchases of marketable securities (9,209)  
Proceeds from sales or maturities of marketable securities 12,034  10,802 
Purchases of equity investment (854) (607)
Acquisitions, net of cash acquired (2,250)  
Net cash (used in) provided by investing activities (9,930) 4,460 
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercise of stock options 57  511 
Principal payments on long-term obligations (431) (1,027)
Dividends paid (6,252) (6,197)
Tax payments related to RSU issuances (246) (311)
Net cash used in financing activities (6,872) (7,024)
     
EFFECT OF EXCHANGE RATE CHANGES ON CASH 73  113 
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 5,828  6,887 
     
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:    
Beginning of period 29,755  32,839 
End of period $35,583  $39,726 
     


Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)

 Three Months Ended Six Months Ended
 October 27,
 2018
 October 28,
 2017
 Dollar
Change
 Percent
Change
 October 27,
 2018
 October 28,
 2017
 Dollar
Change
 Percent
Change
Net Sales:               
Commercial$46,069  $34,377  $11,692  34.0% $76,638  $67,240  $9,398  14.0%
Live Events55,099  68,653  (13,554) (19.7) 104,571  146,265  (41,694) (28.5)
High School Park and Recreation31,580  29,660  1,920  6.5  59,700  58,139  1,561  2.7 
Transportation18,077  16,476  1,601  9.7  35,234  35,388  (154) (0.4)
International21,867  20,143  1,724  8.6  50,737  35,005  15,732  44.9 
 $172,692  $169,309  $3,383  2.0% $326,880  $342,037  $(15,157) (4.4)%
Orders:               
Commercial$46,731  $39,134  $7,597  19.4% $82,523  $69,071  $13,452  19.5%
Live Events43,641  43,730  (89) (0.2) 83,036  105,335  (22,299) (21.2)
High School Park and Recreation18,445  14,737  3,708  25.2  56,894  46,917  9,977  21.3 
Transportation21,279  14,245  7,034  49.4  43,195  23,514  19,681  83.7 
International21,260  30,414  (9,154) (30.1) 45,318  50,504  (5,186) (10.3)
 $151,356  $142,260  $9,096  6.4% $310,966  $295,341  $15,625  5.3%


Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)

 Six Months Ended
 October 27,
 2018
 October 28,
 2017
Net cash provided by operating activities$22,557  $9,338 
Purchases of property and equipment(9,833) (7,735)
Proceeds from sales of property and equipment182  2,000 
Free cash flow$12,906  $3,603 

*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.