Daktronics, Inc. (NASDAQ-DAKT) (the “Company” or
“Daktronics”) today announced it has enhanced its financial
position by closing on a new 3-year $75 million senior secured
credit facility (the “New Senior Debt Facility”) with JPMorgan
Chase (“JPMorgan Chase”) maturing on May 11, 2026. In addition,
Daktronics announced it has closed a $25 million convertible debt
financing agreement (the “Junior Capital Financing”) with major
shareholder Alta Fox Capital Management, LLC (together with its
affiliates, “Alta Fox”). Daktronics’ Board of Directors (the
“Board”) believes the completion of these transactions provides the
Company with the working capital and liquidity needed to continue
executing its business plan and growth strategy.
JPMorgan Chase’s $75 million New Senior Debt
Facility has replaced the Company’s $35 million credit facility
with U. S. Bank National Association (“U.S. Bank”). As a result,
JPMorgan Chase is now the Company’s primary commercial bank. At
close, all obligations to U.S. Bank under the previous credit
arrangement were repaid; the Company did not need to borrow under
the New Senior Debt Facility to fund the repayment.
Howard I. Atkins, Chair of the Daktronics
Board’s Strategy and Financing Review Committee (the “Committee”)
said:
“We are pleased to have delivered on our
commitment to identify attractive financing for the Company, which
was the result of a comprehensive process. The Committee is
confident we and our advisors thoroughly explored all alternatives
and obtained the best possible outcome in terms of flexibility and
overall cost of capital. The New Senior Debt Facility and the
Junior Capital Financing provide the Company the financial
resources to serve our customers and build long-term value for our
shareholders.”
Reece Kurtenbach, Daktronics’ Chairman and CEO,
added:
“Daktronics continues to make positive progress
on several fronts. In addition to the financial flexibility these
new sources of capital provide, the management team continues to
implement operational and productivity improvement initiatives
intended to increase the Company’s profit margins and generate
additional cash from operations. We appreciate and are looking
forward to developing our new primary banking relationship with
JPMorgan Chase, a leading financial services firm with unmatched
global capabilities and deep expertise in corporate finance. We
also appreciate that Alta Fox has demonstrated its confidence in
Daktronics’ path forward by committing additional capital to the
Company. Alta Fox has been a collaborative partner and we thank
them for their support.”
Connor Haley, Founder and Managing Partner at
Alta Fox, added, “We are pleased to be able to provide capital to
Daktronics to help support the Company’s promising future. We
originally invested in Daktronics because we believe the Company
has a leading position in an industry with significant secular
tailwinds and meaningful earnings growth. With the Company’s
financial position now significantly improved, we look forward to
continuing to work constructively with the Board and management
team to unlock meaningful value for all Daktronics
stakeholders.”
Jefferies LLC served as financial advisor, and
Vinson & Elkins LLP and Winthrop & Weinstine, P.A. served
as legal counsel to Daktronics throughout the process.
Summary of Credit Facility with JPMorgan
ChaseThe Company entered into a credit agreement (the
“Credit Agreement”) providing for (i) a $60,000,000 revolver
commitment for which draws will be available up to the lesser of
such commitment and the amount of a borrowing base to be calculated
based on the accounts receivable and inventory of the Company and
(ii) a $15,000,000 delayed-draw term loan commitment for which a
single draw will be available equal to the lesser of such
commitment amount and 60% of the appraised value of the Company’s
real estate in Brookings, South Dakota. Both facilities mature on
May 11, 2026. Interest on the outstanding amounts is paid
quarterly, and the term loan amortizes on a 10-year schedule, with
the full amount due upon maturity. Interest on the revolving
borrowings accrues at a floating rate of SOFR + 2.5%-3.5%, and the
term loan accrues interest at a floating rate of SOFR + 3.5%-4.5%.
The loans are subject to compliance with a fixed charge coverage
ratio of 1.1:1.0 at all times that the term loan is outstanding.
The loans are also subject to other usual and customary covenants
(including debt, lien, distribution and investment restrictions).
Drawing on the delayed-draw term loan is subject to completion of
certain company real estate related conditions.
Summary of Convertible Note Terms with
Alta Fox Capital ManagementAlta Fox purchased from
Daktronics $25,000,000 in senior second lien secured convertible
promissory notes (the “Notes”), due on May 11, 2027. The Notes may
be converted into common stock at any time by Alta Fox, subject to
certain conditions, at a conversion price equal to $6.31. The
Company has the right to convert the Notes into common stock after
18 months following the issuance date of the Notes if the closing
sale price of the Company’s common stock has been equal to at least
150% of the conversion price in 19 of the last 20 consecutive
trading days. The Company has agreed to customary registration
rights with Alta Fox with respect to the resale of any shares of
common stock issued upon conversion. The Notes will bear interest
at a rate of 9% per annum. Daktronics has the option to pay up to
50% of each coupon in kind at the cost of a 100-basis point
increase per annum rate in any period where the in-kind option is
exercised. As a result of this financing agreement with Alta Fox,
the existing standstill agreement between the Company and Alta Fox
will extend to the day following the conclusion of the Company’s
2024 Annual Meeting of Shareholders.
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: This news release contains “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements reflect our current views with respect to
future events and financial performance. The words "may," "would,"
"could," "should," "will," "expect," "estimate," "anticipate,"
"believe," "intend," "plan," “project,” “potential,” “forecast” and
similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any or all forward-looking statements in this
release and in any public statements we make could be materially
different from actual results. Accordingly, we wish to caution
investors that any forward-looking statements made by or on behalf
of us are subject to uncertainties and other factors that could
cause actual results to differ materially from such statements.
Important factors that may cause actual results to differ
materially from those in the forward-looking statements include,
but are not limited to, the uncertainties related to market
conditions and the effect of the financing transactions described
herein; the Company’s potential need to seek additional strategic
alternatives, including seeking additional debt or equity capital
or other strategic transactions and/or measures; the Company’s
ability to finalize or fully execute actions and steps that would
be probable of mitigating the existence of “substantial doubt”
regarding the Company’s ability to continue as a going concern; the
Company’s ability to increase cash flow to support the Company’s
operating activities and fund its obligations and working capital
needs; and the other risk factors described more fully in the
Company’s Annual Report on Form 10-K for the fiscal year ended
April 30, 2022 and the Company’s Quarterly Reports on Form 10-Q for
the quarters ended July 30, 2022, October 29, 2022 and January 28,
2023 filed with the Securities and Exchange Commission, as well as
other publicly available information about the Company.
MEDIA RELATIONSJustin OchsnerPublic
Relations/MarketingTel 605-692-0200 Email
justin.ochsner@daktronics.com
INVESTOR RELATIONSSheila M. Anderson, Chief
Financial OfficerTel 605-692-0200Email Investor@daktronics.com
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