UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 8-K
_____________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 24, 2015
Daktronics, Inc.
(Exact name of registrant as specified in its charter)
South Dakota | 0-23246 | 46-0306862 |
(State or other jurisdiction | (Commission | (I.R.S. Employer |
Incorporation or organization) | File Number) | Identification Number) |
201 Daktronics Drive
Brookings, SD 57006
(Address of principal executive office) (zip code)
(605) 692-0200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On November 24, 2015 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and six months ended October 31, 2015 of fiscal 2016. A copy of the press release is filed herewith as Exhibit 99.1 and is incorporated herein by reference.
The information furnished in this report, including the exhibit shall not be incorporated by reference into Daktronics’ filings with the Securities and Exchange Commission under the Securities Act of 1933 and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Securities Act of 1934.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits:
(d) Exhibits. The following exhibit is furnished as part of this Report:
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
DAKTRONICS, INC. | ||
By: /s/ Sheila M. Anderson | ||
Sheila M. Anderson, Chief Financial Officer | ||
Date: | November 24, 2015 | |
EXHIBIT INDEX
Daktronics, Inc. Announces Second Quarter Fiscal 2016 Results
Brookings, S.D. – November 24, 2015 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2016 second quarter net sales of $157.7 million, operating income of $5.6 million, and net income of $3.2 million, or $0.07 per diluted share, compared to net sales of $173.1 million, operating income of $12.2 million, and net income of $7.7 million, or $0.18 per diluted share, for the second quarter of fiscal 2015. Fiscal 2016 second quarter orders were $135.6 million, compared to $149.1 million for the second quarter of fiscal 2015. Backlog at the end of the fiscal 2016 second quarter was $184.2 million, compared with a backlog of $146.1 million a year earlier and $205.5 million at the end of the first quarter of fiscal 2016.
Net sales, operating income, net income, and earnings per share for the six months ended October 31, 2015, were $307.9 million, $11.7 million, $6.9 million, and $0.16 per diluted share, respectively. This compares to $339.7 million, $25.9 million, $16.5 million, and $0.38 per diluted share, respectively, for the same period in fiscal 2015. Fiscal 2016 is a 52-week year, and fiscal 2015 was a 53-week year. The extra week of fiscal 2015 fell within the first quarter, resulting in a 26-week versus a 27-week year-to-date comparison.
Free cash flow, defined as cash provided from or used in operating activities less capital expenditures, was a negative $19.6 million for the first six months of fiscal 2016, as compared to a positive free cash flow of $27.6 million for the same period of fiscal 2015. Net investment in property and equipment was $10.4 million for the first six months of fiscal 2016, as compared to $8.7 million for the first six months of fiscal 2015. Cash and marketable securities at the end of the second quarter of fiscal 2016 were $52.6 million, which compares to $83.7 million at the end of the second quarter of fiscal 2015 and $83.1 million at the end of fiscal 2015.
Overall order bookings decreased 9.1 percent in the second quarter of fiscal 2016 as compared to the second quarter of fiscal 2015. Variability in the timing of orders from the awards of large projects and from large accounts is inherent in our business. Live Events orders increased due to notable awards from the Miami Dolphins, the University of Mississippi, and Las Vegas Arena. Transportation business unit orders also increased with a notable project award from the New York City Metropolitan Transit Authority. Commercial on-premise orders increased with demand in petroleum market applications. Variability of timing of large orders caused the decrease in orders in the International business unit and in the billboard and spectacular niches of the Commercial business unit. High School Park and Recreation business unit orders were down due to decreases in standard scoring systems demand and lower average selling prices in video-related orders in the quarter as compared to last year.
Sales decreased by 8.9 percent in the second quarter of fiscal 2016 as compared to the second quarter of fiscal 2015. The Live Events and Commercial business units had the greatest impact on the quarterly sales comparisons. In Live Events, while we generated revenue on the completion of a record number of center-hung (arena) systems during the quarter, we chose to delay production on some orders in backlog to take advantage of newly released product enhancements. Last year, our production volumes and mix weighed more heavily toward college football and outdoor professional stadiums installations. Commercial sales declined primarily due to the timing variability in the spectaculars niche, which is based on large individual projects, and due to declines in billboard shipments this quarter as compared to last.
Gross profit percentage for the quarter declined primarily due to an additional warranty charge and lower sales margins in our Commercial business unit. During the quarter, we adjusted our warranty reserves by approximately $2 million due to a product issue primarily affecting out-of-home applications. Sales margins in the Commercial business unit also declined during the quarter due to market drivers on pricing. The overall gross profit decline was partially offset by improvements in gross profit percentages in our Live Events business due to a change in mix of business between comparative quarters and the non-recurrence of costs we incurred last year due to capacity constraints.
Operating expenses increased by approximately 4 percent due to higher levels of product design activity to develop new and enhanced solutions for our markets and increased personnel costs.
Free cash flow remained negative at the end of the quarter due to the increased use of cash in operations through the first six months of the fiscal year. Cash outflow from operations included additional inventory of piece part purchases and production of subassemblies for projected future deliveries and cash receipt timing differences in our large project-based business.
Reece Kurtenbach, chairman, president and chief executive officer stated, “Our second quarter profitability was impacted by the timing of the conversion of orders to sales and high warranty costs. Since we could maintain our delivery promises to customers, we chose to delay production during the quarter to take advantage of new designs with enhanced reliability features and expected lower production costs. We also committed resources to evaluate, plan, and execute on improving our customers' experience, which increased warranty expenses as we are committed to being a long-term world-class supplier.
"Our design and development teams continued development through the quarter across various products and technologies including a line of ultra-high resolution indoor products, a new family of outdoor products, and various developments for our global transportation markets.”
Outlook
Reece Kurtenbach added, “Although the financial performance for the first half of the year did not meet our expectations, we remain committed to achieving our financial goals over the long-term. Our backlog and market demand remains strong. Our order pipeline in the International, Live Events, and Transportation business units remains very active. Our order activity in the Commercial and High School Park and Recreation business units tends to be lower during our third quarter; however, we expect to see the typical increases for next spring and summer deliveries.
"Looking longer-term, we remain optimistic about future global sales opportunities and expansion in our business. Digital technology opportunities continue to develop. Our on-premise and out-of-home customers continue to turn to digital messaging solutions to advertise or communicate information to their audiences. Transportation solution customers turn to our displays to effectively communicate information to travelers or manage traffic flow across constrained travel infrastructure. Developers and venue owners in the Live Events, International, and spectacular niches continue to incorporate unique display systems at their facilities to help attract large, sustained audiences.
"To match the projected demand, we continue to focus on developing customer-centric solutions, using our industry knowledge to leverage our development, customer support, manufacturing, and process expertise. Improved profitability and product performance remain the focus of new solutions and enhanced product lines. We continue to drive our key initiatives forward to increase profitability by reducing costs as we improve our processes, products, and systems.”
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 2015 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 | Six Months Ended | |||||||||||||||
October 31, 2015 | November 1, 2014 | October 31, 2015 | November 1, 2014 | |||||||||||||
Net sales | $ | 157,668 | $ | 173,115 | $ | 307,889 | $ | 339,733 | ||||||||
Cost of goods sold | 122,155 | 132,238 | 236,875 | 255,453 | ||||||||||||
Gross profit | 35,513 | 40,877 | 71,014 | 84,280 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling expense | 14,825 | 14,665 | 29,089 | 29,711 | ||||||||||||
General and administrative | 8,116 | 7,820 | 16,286 | 15,757 | ||||||||||||
Product design and development | 6,975 | 6,150 | 13,943 | 12,953 | ||||||||||||
29,916 | 28,635 | 59,318 | 58,421 | |||||||||||||
Operating income | 5,597 | 12,242 | 11,696 | 25,859 | ||||||||||||
Nonoperating (expense) income: | ||||||||||||||||
Interest income | 266 | 275 | 564 | 575 | ||||||||||||
Interest expense | (28 | ) | (56 | ) | (90 | ) | (124 | ) | ||||||||
Other (expense) income, net | (231 | ) | (225 | ) | (674 | ) | (397 | ) | ||||||||
Income before income taxes | 5,604 | 12,236 | 11,496 | 25,913 | ||||||||||||
Income tax expense | 2,436 | 4,499 | 4,552 | 9,431 | ||||||||||||
Net income | $ | 3,168 | $ | 7,737 | $ | 6,944 | $ | 16,482 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 43,934 | 43,405 | 43,890 | 43,350 | ||||||||||||
Diluted | 44,113 | 43,798 | 44,255 | 43,926 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.07 | $ | 0.18 | $ | 0.16 | $ | 0.38 | ||||||||
Diluted | $ | 0.07 | $ | 0.18 | $ | 0.16 | $ | 0.38 | ||||||||
Cash dividend declared per share | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.20 | ||||||||
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Daktronics Inc. and Subsidiaries Consolidated Balance Sheets (in thousands) | |||||||
October 31, 2015 | May 2, 2015 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash, cash equivalents and restricted cash | $ | 27,655 | $ | 57,780 | |||
Marketable securities | 24,935 | 25,346 | |||||
Accounts receivable, net | 90,938 | 80,857 | |||||
Inventories, net | 69,441 | 64,389 | |||||
Costs and estimated earnings in excess of billings | 28,906 | 35,068 | |||||
Current maturities of long-term receivables | 3,143 | 3,784 | |||||
Prepaid expenses and other assets | 6,160 | 6,663 | |||||
Deferred income taxes | 10,452 | 10,640 | |||||
Income tax receivables | 6,635 | 5,543 | |||||
Total current assets | 268,265 | 290,070 | |||||
Long-term receivables, less current maturities | 5,160 | 6,090 | |||||
Goodwill | 5,371 | 5,269 | |||||
Intangibles, net | 1,721 | 1,824 | |||||
Investment in affiliates and other assets | 2,456 | 2,680 | |||||
Deferred income taxes | 721 | 702 | |||||
15,429 | 16,565 | ||||||
PROPERTY AND EQUIPMENT: | |||||||
Land | 2,139 | 2,147 | |||||
Buildings | 64,948 | 64,186 | |||||
Machinery and equipment | 85,113 | 80,664 | |||||
Office furniture and equipment | 15,827 | 15,823 | |||||
Computer software and hardware | 53,618 | 51,083 | |||||
Equipment held for rental | 803 | 803 | |||||
Demonstration equipment | 7,543 | 7,299 | |||||
Transportation equipment | 6,266 | 6,012 | |||||
236,257 | 228,017 | ||||||
Less accumulated depreciation | 161,513 | 155,173 | |||||
74,744 | 72,844 | ||||||
TOTAL ASSETS | $ | 358,438 | $ | 379,479 | |||
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Daktronics Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands) | |||||||
October 31, 2015 | May 2, 2015 | ||||||
(unaudited) | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | 44,182 | 52,747 | |||||
Accrued expenses | 25,992 | 26,063 | |||||
Warranty obligations | 13,486 | 11,838 | |||||
Billings in excess of costs and estimated earnings | 12,583 | 23,797 | |||||
Customer deposits (billed or collected) | 13,103 | 16,828 | |||||
Deferred revenue (billed or collected) | 11,501 | 9,524 | |||||
Current portion of other long-term obligations | 499 | 587 | |||||
Income taxes payable | 257 | 636 | |||||
Total current liabilities | 121,603 | 142,020 | |||||
Long-term warranty obligations | 14,978 | 14,643 | |||||
Long-term deferred revenue (billed or collected) | 3,958 | 3,914 | |||||
Other long-term obligations, less current maturities | 2,229 | 3,190 | |||||
Long-term income tax payable | 2,934 | 2,734 | |||||
Deferred income taxes | 1,389 | 939 | |||||
Total long-term liabilities | 25,488 | 25,420 | |||||
TOTAL LIABILITIES | 147,091 | 167,440 | |||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock | 49,570 | 48,960 | |||||
Additional paid-in capital | 33,971 | 32,693 | |||||
Retained earnings | 130,954 | 132,771 | |||||
Treasury stock, at cost | (9 | ) | (9 | ) | |||
Accumulated other comprehensive loss | (3,139 | ) | (2,376 | ) | |||
TOTAL SHAREHOLDERS' EQUITY | 211,347 | 212,039 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 358,438 | $ | 379,479 | |||
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Daktronics Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) | ||||||||
Six Months Ended | ||||||||
October 31, 2015 | November 1, 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 6,944 | $ | 16,482 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 8,186 | 7,377 | ||||||
Amortization | 70 | 124 | ||||||
Amortization of premium/discount on marketable securities | 58 | 91 | ||||||
Gain on sale of property, equipment and other assets | (50 | ) | (1,202 | ) | ||||
Share-based compensation | 1,503 | 1,564 | ||||||
Excess tax benefits from share-based compensation | (3 | ) | (31 | ) | ||||
Provision for doubtful accounts | 209 | (136 | ) | |||||
Deferred income taxes, net | 573 | 301 | ||||||
Change in operating assets and liabilities | (26,714 | ) | 11,764 | |||||
Net cash (used in) provided by operating activities | (9,224 | ) | 36,334 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (10,491 | ) | (12,699 | ) | ||||
Proceeds from sale of property, equipment and other assets | 105 | 4,001 | ||||||
Purchases of marketable securities | (13,780 | ) | (6,451 | ) | ||||
Proceeds from sales or maturities of marketable securities | 14,133 | 6,316 | ||||||
Acquisitions, net of cash acquired | (1,936 | ) | (5,915 | ) | ||||
Net cash used in investing activities | (11,969 | ) | (14,748 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments on notes payable | (27 | ) | (229 | ) | ||||
Proceeds from exercise of stock options | 610 | 1,010 | ||||||
Excess tax benefits from share-based compensation | 3 | 31 | ||||||
Principal payments on long-term obligations | (16 | ) | (930 | ) | ||||
Dividends paid | (8,760 | ) | (8,656 | ) | ||||
Net cash used in financing activities | (8,190 | ) | (8,774 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (441 | ) | (431 | ) | ||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (29,824 | ) | 12,381 | |||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of period | 57,284 | 45,054 | ||||||
End of period | $ | 27,460 | $ | 57,435 | ||||
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Daktronics Inc. and Subsidiaries Net Sales and Orders by Business Unit (in thousands) (unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
October 31, 2015 | November 1, 2014 | Dollar Change | Percent Change | October 31, 2015 | November 1, 2014 | Dollar Change | Percent Change | ||||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||||||||
Commercial | $ | 40,066 | $ | 43,928 | $ | (3,862 | ) | (8.8 | )% | $ | 83,276 | $ | 83,710 | $ | (434 | ) | (0.5 | )% | |||||||||||
Live Events | 50,761 | 62,641 | $ | (11,880 | ) | (19.0 | )% | 98,683 | 138,315 | $ | (39,632 | ) | (28.7 | )% | |||||||||||||||
High School Park and Recreation | 24,253 | 24,243 | $ | 10 | — | % | 43,212 | 44,354 | $ | (1,142 | ) | (2.6 | )% | ||||||||||||||||
Transportation | 13,294 | 12,015 | $ | 1,279 | 10.6 | % | 27,061 | 25,328 | $ | 1,733 | 6.8 | % | |||||||||||||||||
International | 29,294 | 30,288 | $ | (994 | ) | (3.3 | )% | 55,657 | 48,026 | $ | 7,631 | 15.9 | % | ||||||||||||||||
$ | 157,668 | $ | 173,115 | $ | (15,447 | ) | (8.9 | )% | $ | 307,889 | $ | 339,733 | $ | (31,844 | ) | (9.4 | )% | ||||||||||||
Orders: | |||||||||||||||||||||||||||||
Commercial | $ | 30,203 | $ | 44,503 | $ | (14,300 | ) | (32.1 | )% | $ | 65,160 | $ | 86,276 | $ | (21,116 | ) | (24.5 | )% | |||||||||||
Live Events | 64,267 | 46,216 | $ | 18,051 | 39.1 | % | 125,007 | 103,421 | $ | 21,586 | 20.9 | % | |||||||||||||||||
High School Park and Recreation | 12,555 | 13,520 | $ | (965 | ) | (7.1 | )% | 40,429 | 43,214 | $ | (2,785 | ) | (6.4 | )% | |||||||||||||||
Transportation | 16,697 | 12,161 | $ | 4,536 | 37.3 | % | 30,334 | 23,463 | $ | 6,871 | 29.3 | % | |||||||||||||||||
International | 11,873 | 32,702 | $ | (20,829 | ) | (63.7 | )% | 39,737 | 53,407 | $ | (13,670 | ) | (25.6 | )% | |||||||||||||||
$ | 135,595 | $ | 149,102 | $ | (13,507 | ) | (9.1 | )% | $ | 300,667 | $ | 309,781 | $ | (9,114 | ) | (2.9 | )% | ||||||||||||
Reconciliation of Free Cash Flow (in thousands) (unaudited) | |||||||
Six Months Ended | |||||||
October 31, 2015 | November 1, 2014 | ||||||
Net cash (used in) provided by operating activities | $ | (9,224 | ) | $ | 36,334 | ||
Purchases of property and equipment | (10,491 | ) | (12,699 | ) | |||
Proceeds from sales of property and equipment | 105 | 4,001 | |||||
Free cash flow | $ | (19,610 | ) | $ | 27,636 | ||
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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