Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2019 third
quarter net sales of $115.1 million, operating loss of $7.5
million, and net loss of $3.3 million, or $0.07 per diluted share,
compared to net sales of $130.3 million, operating loss of $3.3
million, and net loss of $6.2 million, or $0.14 per diluted share,
for the third quarter of fiscal 2018. Fiscal 2019 third
quarter orders were $135.4 million, compared to $126.2 million for
the third quarter of fiscal 2018. Product order backlog at
the end of the fiscal 2019 third quarter was $168 million, compared
to a backlog of $151 million a year earlier and $150 million at the
end of the second quarter of fiscal 2019.(1)
Net sales, operating income, net income, and
earnings per share for the nine months ended January 26, 2019,
were $441.9 million, $5.5 million, $9.9 million, and $0.22 per
diluted share, respectively. This compares to $472.4 million,
$17.8 million, $9.4 million, and $0.21 per diluted share,
respectively, for the same period in fiscal 2018.
Cash provided by operating activities in the
first nine months of fiscal 2019 was $32.2 million, compared with
cash provided by operating activities of $27.0 million in the same
period last year. Free cash flow, defined as cash provided
from or used in operating activities less net investment in
property and equipment, was a positive $18.4 million for the first
nine months of fiscal 2019, as compared to a positive free cash
flow of $18.2 million for the same period of fiscal 2018. Net
investment in property and equipment was $13.8 million for the
first nine months of fiscal 2019, as compared to $8.8 million for
the first nine months of fiscal 2018. Cash, restricted cash,
and marketable securities at the end of the third quarter of fiscal
2019 were $70.9 million, which compares to $73.0 million at the end
of the third quarter of fiscal 2018 and $64.3 million at the end of
fiscal 2018.
Orders for the third quarter of fiscal 2019
increased 7.4 percent as compared to the third quarter of fiscal
2018. Orders increased in the Commercial, Live Events, and
High School Park and Recreation business units, and decreased in
the Transportation and International business units.
Net sales decreased by 11.7 percent in the third
quarter of fiscal 2019 as compared to the third quarter of fiscal
2018. Net sales increased in the Commercial, High School Park
and Recreation, and Transportation business units, and decreased in
the Live Events and International business units. The
increase in High School Park and Recreation business unit was
primarily due to increased shipments of customized scoring systems
and message centers as a result of increased market activity and
the timing of customer demand. Transportation sales increased
primarily due to the variability of large order production timing
caused by customer project schedules and an increase in demand for
intelligent transportation systems. Live Events sales
decreased primarily due to the decrease of orders on a year to date
basis. International sales decreased as we had completed a
number of Out-of-Home projects in the third quarter of fiscal 2018,
with no similar sized projects in the third quarter of fiscal
2019.
Gross profit, as a percentage of net sales,
decreased to 21.6 percent for the third quarter of fiscal 2019 as
compared to 21.9 percent a year earlier. Warranty as a
percent of sales for the quarter decreased to 1.6 percent as
compared to the third quarter of fiscal 2018 warranty as a percent
of sales of 2.9 percent. Operating expenses for the third
quarter of fiscal 2019 were $32.4 million, compared to $31.9
million for the third quarter of fiscal 2018. Operating loss
as a percent of sales for the quarter decreased to 6.5 percent as
compared to the third quarter of fiscal 2018 operating loss of 2.6
percent. The tax benefit of $4.1 million for the third
quarter of fiscal 2019 is primarily the result of the release of
$2.8 million in unrecognized tax benefits related to a lapse of
statute and the release of $0.5 million for a valuation allowance
reversal related to foreign net operating loss carryforwards.
During the third quarter of fiscal 2018, we accounted for the
revaluation of our deferred tax benefits due to the enactment of
new U.S. tax laws creating a charge of $3.7 million.
Reece Kurtenbach, chairman, president and chief
executive officer stated, “Our third quarter is historically
lighter for sales and profits due to the seasonality of our sports
business, construction cycles, and the decrease in production days
due to holidays in the quarter. We control costs where we can
during this period; however, much of our costs are fixed in nature
not allowing for large changes in expense structure during the
quarter. In addition, we had approximately $1.8 million of
expenses for discrete project and litigation claims contributing to
the quarter’s operating loss. Our order bookings remain
strong for the quarter and are up for the year. Commercial
orders for the quarter and year-to-date are up nicely for demand
for spectacular and out-of-home solutions. Live Events for
the quarter was up nicely as we booked a large major league
baseball order and a number of orders for summer and fall
installations. We continued to develop and release new
technologies and products including high resolution applications
and control system offerings.
(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.
OutlookKurtenbach added, “We
remain optimistic about our long-term outlook. Our innovative
product and technology portfolio positions us to capitalize on the
growing market demand for digital canvases. The current
global tariff and trade environment has created cost headwinds on
commodity and components used in the production of our
solutions. However, over the long-term, we believe the
situation will stabilize and we will continue to work to minimize
the impact. Our teams continue to develop industry leading
solutions and global sales channels to support long-term profitable
growth.”
Webcast InformationThe 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 DaktronicsDaktronics 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 StatementCautionary
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.
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For more information
contact: |
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INVESTOR RELATIONS: |
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Sheila Anderson, Chief Financial Officer |
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(605) 692-0200 |
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Investor@daktronics.com |
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Daktronics, Inc. and
SubsidiariesConsolidated Statements of
Operations(in thousands, except per share
amounts)(unaudited) |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 26, 2019 |
|
January 27, 2018 |
|
January 26, 2019 |
|
January 27, 2018 |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
115,069 |
|
|
$ |
130,316 |
|
|
$ |
441,949 |
|
|
$ |
472,353 |
|
Cost of sales |
|
90,200 |
|
|
101,749 |
|
|
336,076 |
|
|
356,536 |
|
Gross profit |
|
24,869 |
|
|
28,567 |
|
|
105,873 |
|
|
115,817 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Selling |
|
15,537 |
|
|
15,271 |
|
|
48,040 |
|
|
45,560 |
|
General
and administrative |
|
8,574 |
|
|
8,335 |
|
|
25,685 |
|
|
26,138 |
|
Product
design and development |
|
8,280 |
|
|
8,299 |
|
|
26,611 |
|
|
26,294 |
|
|
|
32,391 |
|
|
31,905 |
|
|
100,336 |
|
|
97,992 |
|
Operating (loss) income |
|
(7,522 |
) |
|
(3,338 |
) |
|
5,537 |
|
|
17,825 |
|
|
|
|
|
|
|
|
|
|
Nonoperating income
(expense): |
|
|
|
|
|
|
|
|
Interest
income |
|
328 |
|
|
158 |
|
|
713 |
|
|
520 |
|
Interest
expense |
|
(45 |
) |
|
(40 |
) |
|
(86 |
) |
|
(173 |
) |
Other
(expense) income, net |
|
(203 |
) |
|
(487 |
) |
|
(423 |
) |
|
(429 |
) |
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
(7,442 |
) |
|
(3,707 |
) |
|
5,741 |
|
|
17,743 |
|
Income
tax (benefit) expense |
|
(4,123 |
) |
|
2,482 |
|
|
(4,120 |
) |
|
8,371 |
|
Net (loss) income |
|
$ |
(3,319 |
) |
|
$ |
(6,189 |
) |
|
$ |
9,861 |
|
|
$ |
9,372 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
45,018 |
|
|
44,518 |
|
|
44,834 |
|
|
44,403 |
|
Diluted |
|
45,018 |
|
|
44,518 |
|
|
45,139 |
|
|
44,798 |
|
|
|
|
|
|
|
|
|
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(Loss) earnings per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
|
$ |
0.22 |
|
|
$ |
0.21 |
|
Diluted |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
|
$ |
0.22 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
per share |
|
$ |
0.07 |
|
|
$ |
0.07 |
|
|
$ |
0.21 |
|
|
$ |
0.21 |
|
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Daktronics, Inc. and
SubsidiariesConsolidated Balance
Sheets(in thousands) |
|
|
January 26, 2019 |
|
April 28, 2018 |
|
(unaudited) |
|
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ASSETS |
|
|
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CURRENT ASSETS: |
|
|
|
Cash and cash
equivalents |
$ |
33,281 |
|
|
$ |
29,727 |
|
Restricted cash |
26 |
|
|
28 |
|
Marketable securities |
37,596 |
|
|
34,522 |
|
Accounts
receivable, net |
77,743 |
|
|
77,387 |
|
Inventories |
72,187 |
|
|
75,335 |
|
Contract
assets |
26,542 |
|
|
30,968 |
|
Current
maturities of long-term receivables |
1,998 |
|
|
1,752 |
|
Prepaid
expenses and other current assets |
7,566 |
|
|
9,029 |
|
Income
tax receivables |
5,772 |
|
|
5,385 |
|
Property
and equipment and other assets available for sale |
1,893 |
|
|
— |
|
Total
current assets |
264,604 |
|
|
264,133 |
|
|
|
|
|
Property
and equipment, net |
65,765 |
|
|
68,059 |
|
Long-term
receivables, less current maturities |
1,247 |
|
|
1,641 |
|
Goodwill |
7,968 |
|
|
8,264 |
|
Intangibles, net |
5,429 |
|
|
3,682 |
|
Investment in affiliates and other assets |
5,422 |
|
|
5,091 |
|
Deferred
income taxes |
8,317 |
|
|
7,930 |
|
Total
non-current assets |
94,148 |
|
|
94,667 |
|
TOTAL ASSETS |
$ |
358,752 |
|
|
$ |
358,800 |
|
|
|
|
|
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Daktronics, Inc. and
SubsidiariesConsolidated Balance Sheets
(continued)(in thousands) |
|
|
January 26, 2019 |
|
April 28, 2018 |
|
(unaudited) |
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
CURRENT
LIABILITIES: |
|
|
|
Accounts payable |
$ |
35,117 |
|
|
$ |
48,845 |
|
Contract
liabilities |
48,745 |
|
|
39,379 |
|
Accrued
expenses |
30,784 |
|
|
27,445 |
|
Warranty
obligations |
11,283 |
|
|
13,891 |
|
Current
portion of other long-term obligations |
1,199 |
|
|
1,088 |
|
Income
taxes payable |
1,894 |
|
|
660 |
|
Total
current liabilities |
129,022 |
|
|
131,308 |
|
|
|
|
|
Long-term
warranty obligations |
15,370 |
|
|
16,062 |
|
Long-term
contract liabilities |
9,814 |
|
|
7,475 |
|
Other
long-term obligations, less current portion |
1,955 |
|
|
2,285 |
|
Long-term
income taxes payable |
843 |
|
|
3,440 |
|
Deferred
income taxes |
597 |
|
|
614 |
|
Total
long-term liabilities |
28,579 |
|
|
29,876 |
|
TOTAL LIABILITIES |
157,601 |
|
|
161,184 |
|
|
|
|
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SHAREHOLDERS'
EQUITY: |
|
|
|
Common
stock |
57,699 |
|
|
54,731 |
|
Additional paid-in capital |
41,949 |
|
|
40,328 |
|
Retained
earnings |
107,563 |
|
|
107,105 |
|
Treasury
stock, at cost |
(1,834 |
) |
|
(1,834 |
) |
Accumulated other comprehensive loss |
(4,226 |
) |
|
(2,714 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
201,151 |
|
|
197,616 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
358,752 |
|
|
$ |
358,800 |
|
|
Daktronics, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows(in thousands)(unaudited) |
|
|
|
Nine Months Ended |
|
|
January 26, 2019 |
|
January 27, 2018 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
9,861 |
|
|
$ |
9,372 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
14,054 |
|
|
13,335 |
|
Gain on
sale of property, equipment and other assets |
|
(130 |
) |
|
(1,211 |
) |
Share-based compensation |
|
1,867 |
|
|
1,978 |
|
Contingent consideration adjustment |
|
(956 |
) |
|
— |
|
Equity in
loss of affiliate |
|
392 |
|
|
401 |
|
Provision
for doubtful accounts |
|
180 |
|
|
(55 |
) |
Deferred
income taxes, net |
|
(445 |
) |
|
3,429 |
|
Change in
operating assets and liabilities |
|
7,364 |
|
|
(296 |
) |
Net cash provided by operating activities |
|
32,187 |
|
|
26,953 |
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Purchases
of property and equipment |
|
(14,081 |
) |
|
(10,865 |
) |
Proceeds
from sales of property, equipment and other assets |
|
255 |
|
|
2,107 |
|
Purchases
of marketable securities |
|
(25,337 |
) |
|
(5,211 |
) |
Proceeds
from sales or maturities of marketable securities |
|
22,341 |
|
|
13,751 |
|
Purchases
of equity investment |
|
(854 |
) |
|
(1,027 |
) |
Acquisitions, net of cash acquired |
|
(2,250 |
) |
|
— |
|
Net cash used in investing activities |
|
(19,926 |
) |
|
(1,245 |
) |
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds
from exercise of stock options |
|
1,318 |
|
|
514 |
|
Principal
payments on long-term obligations |
|
(440 |
) |
|
(1,036 |
) |
Dividends
paid |
|
(9,403 |
) |
|
(9,311 |
) |
Tax
payments related to RSU issuances |
|
(246 |
) |
|
(311 |
) |
Net cash used in financing activities |
|
(8,771 |
) |
|
(10,144 |
) |
|
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
62 |
|
|
667 |
|
NET INCREASE IN CASH,
CASH EQUIVALENTS AND RESTRICTED CASH |
|
3,552 |
|
|
16,231 |
|
|
|
|
|
|
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH: |
|
|
|
|
Beginning
of period |
|
29,755 |
|
|
32,839 |
|
End of
period |
|
$ |
33,307 |
|
|
$ |
49,070 |
|
|
|
|
|
|
Daktronics, Inc. and SubsidiariesNet
Sales and Orders by Business Unit(in
thousands)(unaudited) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
January 26, 2019 |
|
January 27, 2018 |
|
DollarChange |
|
PercentChange |
|
January 26, 2019 |
|
January 27, 2018 |
|
DollarChange |
|
PercentChange |
Net
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
$ |
37,159 |
|
|
$ |
35,483 |
|
|
$ |
1,676 |
|
|
4.7 |
% |
|
$ |
113,797 |
|
|
$ |
102,723 |
|
|
$ |
11,074 |
|
|
10.8 |
% |
Live Events |
29,995 |
|
|
45,167 |
|
|
(15,172 |
) |
|
(33.6 |
) |
|
134,566 |
|
|
191,432 |
|
|
(56,866 |
) |
|
(29.7 |
) |
High School Park
and Recreation |
14,798 |
|
|
11,463 |
|
|
3,335 |
|
|
29.1 |
|
|
74,498 |
|
|
69,602 |
|
|
4,896 |
|
|
7.0 |
|
Transportation |
15,390 |
|
|
11,189 |
|
|
4,201 |
|
|
37.5 |
|
|
50,624 |
|
|
46,577 |
|
|
4,047 |
|
|
8.7 |
|
International |
17,727 |
|
|
27,014 |
|
|
(9,287 |
) |
|
(34.4 |
) |
|
68,464 |
|
|
62,019 |
|
|
6,445 |
|
|
10.4 |
|
|
$ |
115,069 |
|
|
$ |
130,316 |
|
|
$ |
(15,247 |
) |
|
(11.7 |
)% |
|
$ |
441,949 |
|
|
$ |
472,353 |
|
|
$ |
(30,404 |
) |
|
(6.4 |
)% |
Orders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
$ |
41,114 |
|
|
$ |
28,745 |
|
|
$ |
12,369 |
|
|
43.0 |
% |
|
$ |
123,637 |
|
|
$ |
97,816 |
|
|
$ |
25,821 |
|
|
26.4 |
% |
Live Events |
45,767 |
|
|
39,911 |
|
|
5,856 |
|
|
14.7 |
|
|
128,803 |
|
|
145,246 |
|
|
(16,443 |
) |
|
(11.3 |
) |
High School Park
and Recreation |
17,034 |
|
|
13,451 |
|
|
3,583 |
|
|
26.6 |
|
|
73,928 |
|
|
60,368 |
|
|
13,560 |
|
|
22.5 |
|
Transportation |
11,541 |
|
|
14,641 |
|
|
(3,100 |
) |
|
(21.2 |
) |
|
54,736 |
|
|
38,155 |
|
|
16,581 |
|
|
43.5 |
|
International |
19,973 |
|
|
29,405 |
|
|
(9,432 |
) |
|
(32.1 |
) |
|
65,291 |
|
|
79,909 |
|
|
(14,618 |
) |
|
(18.3 |
) |
|
$ |
135,429 |
|
|
$ |
126,153 |
|
|
$ |
9,276 |
|
|
7.4 |
% |
|
$ |
446,395 |
|
|
$ |
421,494 |
|
|
$ |
24,901 |
|
|
5.9 |
% |
|
Reconciliation of Free Cash Flow*(in
thousands)(unaudited) |
|
Nine Months Ended |
|
January 26, 2019 |
|
January 27, 2018 |
Net cash provided by
operating activities |
$ |
32,187 |
|
|
$ |
26,953 |
|
Purchases of property
and equipment |
(14,081 |
) |
|
(10,865 |
) |
Proceeds from sales of
property and equipment |
255 |
|
|
2,107 |
|
Free cash
flow |
$ |
18,361 |
|
|
$ |
18,195 |
|
|
|
|
|
|
|
|
|
*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.
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