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| 8-K - 8-K - DAKTRONICS INC /SD/ | dakt-20140125_q3x8xkxer.htm |
Daktronics, Inc. Announces Third Quarter Fiscal 2014 Results
Brookings, S.D. – February 18, 2014 - 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.
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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 | Nine Months Ended | ||||||||||||||
January 25, 2014 | January 26, 2013 | January 25, 2014 | January 26, 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 dividends declared per share | $ | 0.090 | $ | 0.615 | $ | 0.300 | $ | 0.730 | |||||||
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Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands) | |||||||
January 25, 2014 | April 27, 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 | |||
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Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands) | |||||||
January 25, 2014 | April 27, 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 | |||
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Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) | ||||||||
Nine Months Ended | ||||||||
January 25, 2014 | January 26, 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 | ||||||
Acquisition, 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 | ||||
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Daktronics, Inc. and Subsidiaries Net Sales and Orders by Business Unit (in thousands) (unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
January 25, 2014 | January 26, 2013 | January 25, 2014 | January 26, 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, 2014 | January 26, 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.
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