Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal and fourth
quarter 2019 results. Net sales, operating loss, net loss,
and loss per share for the fiscal year ended April 27, 2019
were $569.7 million, $4.7 million, $1.0 million, and $0.02 per
diluted share, respectively. This compares to net sales of
$610.5 million, operating income of $12.5 million, net income of
$5.6 million and $0.12 earnings per diluted share for fiscal
2018. Fiscal 2019 orders were $608.9 million compared to
$583.5 million for fiscal 2018.
Daktronics reported fiscal 2019 fourth quarter
net sales of $127.8 million, operating loss of $10.3 million, and
net loss of $10.8 million, or $0.24 per diluted share, compared to
net sales of $138.2 million, operating loss of $5.4 million, and
net loss of $3.8 million, or $0.09 per diluted share, for the
fourth quarter of fiscal 2018. Fiscal 2019 fourth
quarter orders were $162.5 million compared to $162.0 million for
the fourth quarter of fiscal 2018. Product backlog at the end
of the fiscal 2019 fourth quarter was $202 million, compared to a
backlog of $171 million a year earlier and $168 million at the end
of the third quarter of fiscal 2019.
Cash flow provided by operating activities for
the fiscal year ended April 27, 2019 was $29.5 million,
compared to $30.4 million in fiscal 2018. 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 fiscal 2019, as compared to a positive free cash flow
of $14.4 million for fiscal 2018. Net investment in property
and equipment was $16.7 million for fiscal 2019, as compared to
$15.9 million for fiscal 2018. Cash, restricted cash, and
marketable securities at the end of the fourth quarter of fiscal
2019 were $62.1 million, which compares to $64.3 million at the end
of the fourth quarter of fiscal 2018.
Fourth Quarter Fiscal 2019 Consolidated
Financial ResultsOrders for the fourth quarter of fiscal
2019 were relatively flat as compared to the fourth quarter of
fiscal 2018. Orders increased in the Transportation,
International, and Commercial business units and decreased in the
Live Events and High School Park and Recreation business
units. The volatility of order timing for large projects and
global accounts varies according to the needs of the customer and
is the primary cause of the change in order volume.
Net sales for the fourth quarter of fiscal 2019
decreased by 7.5 percent as compared to the fourth quarter of
fiscal 2018. Net sales increased in the Commercial and
Transportation business units and decreased in the Live Events,
High School Park and Recreation, and International business
units. The change in sales primarily relates to fluctuations
in the timing of order bookings and related conversion to
sales.
Gross profit as a percentage of net sales was
19.1 percent for the fourth quarter of fiscal 2019 as compared to
21.6 percent a year earlier. The decrease in gross profit
percentage was primarily due to lower sales volumes, adjustments to
business combination contingencies and claims, and increased
commodity and tariff costs, partially offset by lower warranty
charges. Operating expense for the fourth quarter of 2019 was
$34.7 million, compared to $35.2 million for the fourth quarter of
fiscal 2018. Operating loss as a percentage of sales was 8.0
percent for the fourth quarter of fiscal 2019 as compared to an
operating loss as a percentage of sales of 3.9 percent for the
fourth quarter of fiscal 2018.
The provision for income taxes during interim
reporting periods is calculated by applying an estimate of the
annual effective tax rate for the full fiscal year to income or
loss, excluding unusual or infrequently occurring discrete items
for the reporting period. Our effective tax rate was 1.3
percent and 28.3 percent for the fourth quarter of fiscal 2019 and
fiscal 2018, respectively. The fiscal 2019 fourth quarter
effective tax rate was significantly different from both prior year
and the prior quarter's rate as we recorded lower tax benefits on
the pre-tax book loss as compared to tax expenses relating to
permanent non-deductible or partially deductible items.
Fiscal 2019 Consolidated Financial
ResultsOrders for fiscal 2019 increased by 4.4 percent as
compared to fiscal 2018. Orders increased in the Commercial,
High School Park and Recreation, and Transportation business
units. Commercial orders increased primarily due to activity
in the spectacular market in Times Square, Las Vegas, and other
unique locations. In addition, Commercial orders grew in the
out-of-home ("OOH") segment as a result of higher demand for
digital billboard replacements, new digital billboard
installations, and to securing a multimillion-dollar OOH airport
installation. High School Park and Recreation orders grew as
the market demand continued for video products and control system
solutions as well as on-going success selling marquees and scoring
systems. Historically, video projects have a larger average
selling price than traditional scoreboard sales in this business
unit. Transportation orders grew in both intelligent
transportation systems and tolling applications as state
transportation departments and private public partnerships continue
to invest in technology to better inform travelers, manage
transport systems, and collect revenues. We had continued
order success throughout most of our Live Event sports and
entertainment markets but had lower order volume in professional
sports as there were fewer projects in the market as well as strong
competition. International business unit orders were down due
to the general variations in timing of large contracts and
account-based order placements.
Net sales for fiscal 2019 decreased 6.7 percent
as compared to fiscal 2018. Net sales increased in the
Commercial, Transportation, High School Park and Recreation, and
International business units. This change in sales correlates
to order levels and to the timing of converting orders and backlog
into sales. The timing of order conversion is based on
customer driven delivery schedules. Live Events business unit
sales declined for the same reasons as the decline in orders.
Gross profit as a percentage of net sales was
22.9 percent for fiscal 2019 as compared to 23.9 percent a year
earlier. Warranty as a percent of sales improved to 2.3
percent of sales as compared to 3.5 percent last year.
Operating expenses for fiscal 2019 were $135.0 million as compared
to $133.2 million for fiscal 2018. The increase in total
operating expenses was primarily attributable to an increase in
selling expenses. Annual operating loss as a percentage of
sales was 0.8 percent for fiscal 2019 as compared to an operating
income as a percentage of sales of 2.0 percent for fiscal 2018.
The effective tax rate for fiscal 2019 was 80.6
percent as compared to 55.2 percent a year earlier. Fiscal
2019 effective tax rate was significantly different from prior year
as we recorded one-time benefits totaling $3.3 million for release
of allowances and reserves offset by the costs of non-deductible
items on pre-tax loss. The effective tax rate for fiscal 2018
was impacted by significant changes to the U.S. tax code and the
related write-down of deferred tax assets. We estimate an
effective tax rate of approximately 21 percent for fiscal 2020.
Reece Kurtenbach, chairman, president and chief
executive officer, stated, "As we entered into fiscal 2019, we
focused on winning more orders and maintaining our product release
velocity. We achieved both. Our order volume was the
third highest level in our company's history, even though we had
fewer multimillion-dollar projects as compared to other record
years. This high order level attained at lower project sizes
is an indication of our ability to serve new and existing customers
across global markets by offering a comprehensive suite of
solutions and services. The growth of our product and
services offerings this year included the releases of control
systems and new or enhanced lines of indoor high-resolution
displays.
"Our financial results for fiscal 2019 were
lower than anticipated. Revenue and gross profit were lower
in the second half of the year and were impacted by the timing of
order bookings and the conversion to revenue due to our customers'
schedules. Global trade factors caused at least $6 million in
additional expenses, including the increased price of certain
commodities and tariff costs. We incurred approximately $3
million of expenses for discrete project, litigation, and other
claims during the year. Our balance sheet remains
strong. We generated positive free cash flow for the year
while investing over $17 million in manufacturing and information
technology equipment and $36 million in product development.
These investments will provide on-going benefits well into the
future."
OutlookKurtenbach continued,
"We enter into fiscal 2020 with a strong backlog. This
backlog along with our broad and innovative product and technology
portfolios, our global customer base, the replacement cycles in our
business, and the continued market adoption of digital solutions
positions us for growth. During fiscal 2020, we will continue
to serve a growing global customer base in commercial, sports and
government markets. Our focus in product development
continues to remain on new technologies and advanced manufacturing
techniques. Finally, we are focused on carefully managing
capacity and spend as we continue on our path to long-term
profitable growth. However, the current global tariff and
trade environment continues to create cost headwinds on commodity
and components used in the production of our solutions in the U.S.
market. Over the long-term, we believe the situation will
stabilize and we will continue to work to minimize the impact."
Webcast InformationThe 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 be 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.
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 |
|
Twelve Months Ended |
|
April 27,2019 |
|
April 28,2018 |
|
April 27,2019 |
|
April 28,2018 |
Net sales |
$ |
127,755 |
|
|
$ |
138,177 |
|
|
$ |
569,704 |
|
|
$ |
610,530 |
|
Cost of sales |
103,334 |
|
|
108,325 |
|
|
439,410 |
|
|
464,861 |
|
Gross profit |
24,421 |
|
|
29,852 |
|
|
130,294 |
|
|
145,669 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling |
16,608 |
|
|
17,200 |
|
|
64,648 |
|
|
62,760 |
|
General and administrative |
9,132 |
|
|
8,781 |
|
|
34,817 |
|
|
34,919 |
|
Product design and development |
8,946 |
|
|
9,236 |
|
|
35,557 |
|
|
35,530 |
|
|
34,686 |
|
|
35,217 |
|
|
135,022 |
|
|
133,209 |
|
Operating (loss) income |
(10,265 |
) |
|
(5,365 |
) |
|
(4,728 |
) |
|
12,460 |
|
|
|
|
|
|
|
|
|
Nonoperating income
(expense): |
|
|
|
|
|
|
|
Interest income |
318 |
|
|
203 |
|
|
1,031 |
|
|
723 |
|
Interest expense |
(74 |
) |
|
(44 |
) |
|
(160 |
) |
|
(217 |
) |
Other (expense) income, net |
(664 |
) |
|
(108 |
) |
|
(1,087 |
) |
|
(537 |
) |
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
(10,685 |
) |
|
(5,314 |
) |
|
(4,944 |
) |
|
12,429 |
|
Income tax (benefit) expense |
134 |
|
|
(1,504 |
) |
|
(3,986 |
) |
|
6,867 |
|
Net (loss) income |
$ |
(10,819 |
) |
|
$ |
(3,810 |
) |
|
$ |
(958 |
) |
|
$ |
5,562 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
45,139 |
|
|
44,569 |
|
|
44,926 |
|
|
44,457 |
|
Diluted |
45,139 |
|
|
44,569 |
|
|
44,926 |
|
|
44,873 |
|
|
|
|
|
|
|
|
|
(Loss) earnings per
share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.24 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.13 |
|
Diluted |
$ |
(0.24 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
Cash dividends declared per
share |
$ |
0.07 |
|
|
$ |
0.07 |
|
|
$ |
0.28 |
|
|
$ |
0.28 |
|
Daktronics, Inc. and
SubsidiariesConsolidated Balance
Sheets(in thousands) (unaudited) |
|
April 27,2019 |
|
April 28,2018 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
35,383 |
|
|
$ |
29,727 |
|
Restricted cash |
359 |
|
|
28 |
|
Marketable securities |
26,344 |
|
|
34,522 |
|
Accounts receivable, net |
65,487 |
|
|
77,387 |
|
Inventories |
78,832 |
|
|
75,335 |
|
Contract assets |
33,704 |
|
|
30,968 |
|
Current maturities of long-term receivables |
2,300 |
|
|
1,752 |
|
Prepaid expenses and other current assets |
8,319 |
|
|
9,029 |
|
Income tax receivables |
1,087 |
|
|
5,385 |
|
Property and equipment and other assets available for sale |
1,858 |
|
|
— |
|
Total current assets |
253,673 |
|
|
264,133 |
|
|
|
|
|
Property and equipment, net |
65,314 |
|
|
68,059 |
|
Long-term receivables, less current maturities |
1,214 |
|
|
1,641 |
|
Goodwill |
7,889 |
|
|
8,264 |
|
Intangibles, net |
4,906 |
|
|
3,682 |
|
Investment in affiliates and other assets |
5,052 |
|
|
5,091 |
|
Deferred income taxes |
11,168 |
|
|
7,930 |
|
TOTAL ASSETS |
$ |
349,216 |
|
|
$ |
358,800 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
44,873 |
|
|
48,845 |
|
Contract liabilities |
47,178 |
|
|
39,379 |
|
Accrued expenses |
32,061 |
|
|
28,533 |
|
Warranty obligations |
9,492 |
|
|
13,891 |
|
Income taxes payable |
468 |
|
|
660 |
|
Total current liabilities |
134,072 |
|
|
131,308 |
|
|
|
|
|
Long-term warranty obligations |
14,978 |
|
|
16,062 |
|
Long-term contract liabilities |
10,053 |
|
|
7,475 |
|
Other long-term obligations |
1,339 |
|
|
2,285 |
|
Long-term income tax payable |
578 |
|
|
3,440 |
|
Deferred income taxes |
533 |
|
|
614 |
|
Total long-term liabilities |
27,481 |
|
|
29,876 |
|
TOTAL LIABILITIES |
161,553 |
|
|
161,184 |
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
Common stock |
57,699 |
|
|
54,731 |
|
Additional paid-in capital |
42,561 |
|
|
40,328 |
|
Retained earnings |
93,593 |
|
|
107,105 |
|
Treasury stock, at cost |
(1,834 |
) |
|
(1,834 |
) |
Accumulated other comprehensive loss |
(4,356 |
) |
|
(2,714 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
187,663 |
|
|
197,616 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
349,216 |
|
|
$ |
358,800 |
|
|
|
|
|
Daktronics, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows(in thousands)(unaudited) |
|
|
Year Ended |
|
|
April 27,2019 |
|
April 28,2018 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
Net (loss) income |
|
$ |
(958 |
) |
|
$ |
5,562 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
18,635 |
|
|
17,784 |
|
Gain on sale of property, equipment and other assets |
|
(441 |
) |
|
(1,252 |
) |
Share-based compensation |
|
2,479 |
|
|
2,635 |
|
Contingent consideration adjustment |
|
286 |
|
|
— |
|
Equity in loss of affiliate |
|
844 |
|
|
481 |
|
Provision for doubtful accounts |
|
194 |
|
|
140 |
|
Deferred income taxes, net |
|
(3,379 |
) |
|
3,148 |
|
Change in operating assets and liabilities |
|
11,886 |
|
|
1,863 |
|
Net cash provided by operating activities |
|
29,546 |
|
|
30,361 |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
Purchases of property and equipment |
|
(17,268 |
) |
|
(18,127 |
) |
Proceeds from sales of property, equipment and other assets |
|
607 |
|
|
2,179 |
|
Purchases of marketable securities |
|
(25,337 |
) |
|
(17,438 |
) |
Proceeds from sales or maturities of marketable securities |
|
33,706 |
|
|
15,273 |
|
Purchases of and loans to equity investment |
|
(1,300 |
) |
|
(1,450 |
) |
Acquisitions, net of cash acquired |
|
(2,250 |
) |
|
— |
|
Net cash used in investing activities |
|
(11,842 |
) |
|
(19,563 |
) |
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
Principal payments on long-term obligations |
|
(450 |
) |
|
(1,046 |
) |
Dividends paid |
|
(12,554 |
) |
|
(12,424 |
) |
Proceeds from exercise of stock options |
|
1,318 |
|
|
519 |
|
Tax payments related to RSU issuances |
|
(246 |
) |
|
(311 |
) |
Net cash used in financing activities |
|
(11,932 |
) |
|
(13,262 |
) |
|
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
215 |
|
|
(620 |
) |
NET INCREASE (DECREASE) IN
CASH, CASH EQUIVALENTS ANDRESTRICTED CASH |
|
5,987 |
|
|
(3,084 |
) |
|
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
|
Beginning of period |
|
29,755 |
|
|
32,839 |
|
End of period |
|
$ |
35,742 |
|
|
$ |
29,755 |
|
|
|
|
|
|
Daktronics, Inc. and SubsidiariesNet Sales
and Orders by Business Unit(in thousands) (unaudited) |
|
Three Months Ended |
|
Twelve Months Ended |
|
April 27,2019 |
|
April 28,2018 |
|
Dollar Change |
|
Percent Change |
|
April 27,2019 |
|
April 28,2018 |
|
Dollar Change |
|
Percent Change |
Net
sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
$ |
35,036 |
|
|
$ |
31,812 |
|
|
$ |
3,224 |
|
|
10.1 |
% |
|
$ |
148,833 |
|
|
$ |
134,535 |
|
|
$ |
14,298 |
|
|
10.6 |
% |
Live Events |
36,386 |
|
|
44,901 |
|
|
(8,515 |
) |
|
(19.0 |
)% |
|
170,952 |
|
|
236,333 |
|
|
(65,381 |
) |
|
(27.7 |
)% |
High School Park and Recreation |
16,689 |
|
|
18,025 |
|
|
(1,336 |
) |
|
(7.4 |
)% |
|
91,187 |
|
|
87,627 |
|
|
3,560 |
|
|
4.1 |
% |
Transportation |
13,767 |
|
|
13,001 |
|
|
766 |
|
|
5.9 |
% |
|
64,391 |
|
|
59,578 |
|
|
4,813 |
|
|
8.1 |
% |
International |
25,877 |
|
|
30,438 |
|
|
(4,561 |
) |
|
(15.0 |
)% |
|
94,341 |
|
|
92,457 |
|
|
1,884 |
|
|
2.0 |
% |
|
$ |
127,755 |
|
|
$ |
138,177 |
|
|
$ |
(10,422 |
) |
|
(7.5 |
)% |
|
$ |
569,704 |
|
|
$ |
610,530 |
|
|
$ |
(40,826 |
) |
|
(6.7 |
)% |
Orders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
$ |
38,955 |
|
|
$ |
37,547 |
|
|
$ |
1,408 |
|
|
3.7 |
% |
|
$ |
162,592 |
|
|
$ |
135,363 |
|
|
$ |
27,229 |
|
|
20.1 |
% |
Live Events |
50,414 |
|
|
57,790 |
|
|
(7,376 |
) |
|
(12.8 |
)% |
|
179,217 |
|
|
203,036 |
|
|
(23,819 |
) |
|
(11.7 |
)% |
High School Park and Recreation |
24,211 |
|
|
26,875 |
|
|
(2,664 |
) |
|
(9.9 |
)% |
|
98,139 |
|
|
87,243 |
|
|
10,896 |
|
|
12.5 |
% |
Transportation |
18,323 |
|
|
12,426 |
|
|
5,897 |
|
|
47.5 |
% |
|
73,059 |
|
|
50,581 |
|
|
22,478 |
|
|
44.4 |
% |
International |
30,582 |
|
|
27,335 |
|
|
3,247 |
|
|
11.9 |
% |
|
95,873 |
|
|
107,244 |
|
|
(11,371 |
) |
|
(10.6 |
)% |
|
$ |
162,485 |
|
|
$ |
161,973 |
|
|
$ |
512 |
|
|
0.3 |
% |
|
$ |
608,880 |
|
|
$ |
583,467 |
|
|
$ |
25,413 |
|
|
4.4 |
% |
Reconciliation of Cash Flow Provided by Operating
Activities to Free Cash Flow(in thousands)(unaudited) |
|
Twelve Months Ended |
|
April 27,2019 |
|
April 28,2018 |
Net cash provided by operating activities |
$ |
29,546 |
|
|
$ |
30,361 |
|
Purchases of property and
equipment |
(17,268 |
) |
|
(18,127 |
) |
Proceeds from sales of
property, equipment and other assets |
607 |
|
|
2,179 |
|
Free cash flow |
$ |
12,885 |
|
|
$ |
14,413 |
|
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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