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 22, 2016
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 22, 2016 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and six months ended October 29, 2016 of fiscal 2017. 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 22, 2016 | |
EXHIBIT INDEX
Daktronics, Inc. Announces Second Quarter Fiscal 2017 Results
Brookings, S.D. – November 22, 2016 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2017 second quarter net sales of $170.0 million, operating income of $12.7 million, and net income of $9.0 million, or $0.20 per diluted share, compared to 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, for the second quarter of fiscal 2016. Fiscal 2017 second quarter orders were $116.9 million, compared to $135.6 million for the second quarter of fiscal 2016. Backlog at the end of the fiscal 2017 second quarter was $142 million, compared with a backlog of $184 million a year earlier and $198 million at the end of the first quarter of fiscal 2017.
Net sales, operating income, net income, and earnings per share for the six months ended October 29, 2016, were $327.1 million, $20.6 million, $14.6 million, and $0.33 per diluted share, respectively. This compares to $307.9 million, $11.7 million, $6.9 million, and $0.16 per diluted share, respectively, for the same period in fiscal 2016.
Cash flow provided by operating activities in the first six months of fiscal 2017 was $15.0 million, compared with cash used of $9.0 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 $10.5 million for the first six months of fiscal 2017, as compared to a negative free cash flow of $19.4 million for the same period of fiscal 2016. Net investment in property and equipment was $4.6 million for the first six months of fiscal 2017, as compared to $10.4 million for the first six months of fiscal 2016. We repurchased approximately 0.3 million shares of common stock at an average price of $6.42 per share for a total use of cash of $1.8 million during the first six months of fiscal 2017. Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2017 were $52.2 million, which compares to $52.6 million at the end of the second quarter of fiscal 2016 and $53.2 million at the end of fiscal 2016.
Orders for the second quarter of fiscal 2017 decreased 13.8 percent as compared to the second quarter of fiscal 2016. Orders increased in our Commercial, International, and High School Park and Recreation business units and decreased in our Live Events and Transportation business units. Commercial business unit orders were up compared to last year primarily due to the award of several large projects in the spectacular niche and an increase in business in our on-premise and billboard niches. International business unit orders increased primarily due to a spectacular niche project awarded in Europe, billboard niche and sports stadium project awards in Australia. High School Park and Recreation orders increased due to strong market demand for video sporting applications which have larger average sale prices compared to scoring or message centers in this business unit. Live Events orders were down compared to last year due to order timing differences of large projects.
Net sales increased by 7.8 percent in the second quarter of fiscal 2017 as compared to the second quarter of fiscal 2016. High School Park and Recreation, Live Events, Transportation and International business unit’s sales all increased quarter over quarter primarily because of higher production rates of large projects due to natural large project volatility and an increase in customer demand as noted above. Commercial business unit sales were relatively flat.
Gross profit percentage for the quarter increased as compared to last year due to a combination of lower warranty charges, lower production costs, and sales mix.
Operating expenses increased by 5.8 percent in the second quarter of fiscal 2017 as compared to the second quarter of fiscal 2016. The increase in selling expense was primarily related to a bad debt charge which increased our percentage of selling expense to sales by 0.4 percent, and for the addition of a full quarter of expenses from ADFLOW, the company we acquired late in fiscal 2016. General and administrative expense increased in professional fees, information technology maintenance, and personnel expenses. Product development expenses increased primarily for personnel related expenses.
Operating income as a percent of sales for the quarter increased to 7.5 percent as compared to the second quarter of fiscal 2016 of 3.6 percent.
Reece Kurtenbach, chairman, president and chief executive officer stated, “We are pleased with our second quarter of fiscal 2017 financial performance. We achieved higher net sales and experienced improved profitability during the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016. Our sales levels improved with the timing of large project delivery and we saw increases in demand in the Commercial and International businesses. Our High School Park and Recreation business unit is having a great year, with orders up more than 25 percent during the quarter. A year ago, we were working through a warranty issue that took time, attention, and financial resources away from improving our business. This year, we have been able to return our focus to product development activities.
Outlook
Kurtenbach added, “The pipeline of order opportunities in the worldwide marketplace remains strong. While orders and backlog as compared to last year at this time are slightly down, we are optimistic about continued growth through the activity and interest in the worldwide marketplace for desired usage of digital technology. However, we recognize that there is uncertainty in the global macroeconomic picture; therefore, we are carefully managing our costs through continuous improvement and execution of our processes.
Our value statement sets us apart and we offer a broad range of solutions to meet our diverse customers' needs. We are strategically investing in product design and development for a number of customer solution areas and we have a goal to accelerate development of world-class solutions to capture a broader customer base in the growing digital global market."
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 2016 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.
-- END --
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 29, 2016 | October 31, 2015 | October 29, 2016 | October 31, 2015 | |||||||||||||
Net sales | $ | 169,992 | $ | 157,668 | $ | 327,138 | $ | 307,889 | ||||||||
Cost of goods sold | 125,684 | 122,155 | 243,763 | 236,875 | ||||||||||||
Gross profit | 44,308 | 35,513 | 83,375 | 71,014 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling expense | 15,891 | 14,825 | 31,150 | 29,089 | ||||||||||||
General and administrative | 8,625 | 8,116 | 17,408 | 16,286 | ||||||||||||
Product design and development | 7,126 | 6,975 | 14,169 | 13,943 | ||||||||||||
31,642 | 29,916 | 62,727 | 59,318 | |||||||||||||
Operating income | 12,666 | 5,597 | 20,648 | 11,696 | ||||||||||||
Nonoperating income (expense): | ||||||||||||||||
Interest income | 171 | 266 | 376 | 564 | ||||||||||||
Interest expense | (76 | ) | (28 | ) | (118 | ) | (90 | ) | ||||||||
Other income (expense), net | 149 | (231 | ) | 55 | (674 | ) | ||||||||||
Income before income taxes | 12,910 | 5,604 | 20,961 | 11,496 | ||||||||||||
Income tax expense | 3,889 | 2,436 | 6,401 | 4,552 | ||||||||||||
Net income | $ | 9,021 | $ | 3,168 | $ | 14,560 | $ | 6,944 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 43,988 | 43,934 | 44,051 | 43,890 | ||||||||||||
Diluted | 44,098 | 44,113 | 44,168 | 44,255 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.21 | $ | 0.07 | $ | 0.33 | $ | 0.16 | ||||||||
Diluted | $ | 0.20 | $ | 0.07 | $ | 0.33 | $ | 0.16 | ||||||||
Cash dividends declared per share | $ | 0.07 | $ | 0.10 | $ | 0.17 | $ | 0.20 | ||||||||
-- MORE --
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands) | |||||||
October 29, 2016 | April 30, 2016 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 34,045 | $ | 28,328 | |||
Restricted cash | 205 | 198 | |||||
Marketable securities | 17,904 | 24,672 | |||||
Accounts receivable, net | 90,421 | 77,554 | |||||
Inventories, net | 63,632 | 69,827 | |||||
Costs and estimated earnings in excess of billings | 43,354 | 30,200 | |||||
Current maturities of long-term receivables | 3,068 | 3,172 | |||||
Prepaid expenses and other assets | 7,533 | 6,468 | |||||
Income tax receivables | 229 | 4,812 | |||||
Total current assets | 260,391 | 245,231 | |||||
Long-term receivables, less current maturities | 3,202 | 3,866 | |||||
Goodwill | 7,712 | 8,116 | |||||
Intangibles, net | 5,718 | 7,721 | |||||
Investment in affiliates and other assets | 2,136 | 2,414 | |||||
Deferred income taxes | 9,412 | 9,437 | |||||
28,180 | 31,554 | ||||||
PROPERTY AND EQUIPMENT: | |||||||
Land | 2,100 | 2,155 | |||||
Buildings | 65,039 | 65,247 | |||||
Machinery and equipment | 83,206 | 82,973 | |||||
Office furniture and equipment | 5,570 | 14,746 | |||||
Computer software and hardware | 49,894 | 48,917 | |||||
Equipment held for rental | 374 | 374 | |||||
Demonstration equipment | 7,714 | 8,026 | |||||
Transportation equipment | 6,912 | 6,596 | |||||
220,809 | 229,034 | ||||||
Less accumulated depreciation | 151,671 | 155,871 | |||||
69,138 | 73,163 | ||||||
TOTAL ASSETS | $ | 357,709 | $ | 349,948 | |||
-- MORE --
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands) | |||||||
October 29, 2016 | April 30, 2016 | ||||||
(unaudited) | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | 44,796 | 43,441 | |||||
Accrued expenses | 25,270 | 23,532 | |||||
Warranty obligations | 15,110 | 16,564 | |||||
Billings in excess of costs and estimated earnings | 8,338 | 10,361 | |||||
Customer deposits (billed or collected) | 14,020 | 16,012 | |||||
Deferred revenue (billed or collected) | 12,514 | 10,712 | |||||
Current portion of other long-term obligations | 442 | 585 | |||||
Income taxes payable | 2,385 | 310 | |||||
Total current liabilities | 122,875 | 121,517 | |||||
Long-term warranty obligations | 14,740 | 13,932 | |||||
Long-term deferred revenue (billed or collected) | 5,504 | 5,603 | |||||
Other long-term obligations, less current maturities | 4,451 | 4,059 | |||||
Long-term income tax payable | 3,184 | 3,016 | |||||
Deferred income taxes | 708 | 754 | |||||
Total long-term liabilities | 28,587 | 27,364 | |||||
TOTAL LIABILITIES | 151,462 | 148,881 | |||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock | 51,449 | 51,347 | |||||
Additional paid-in capital | 36,622 | 35,351 | |||||
Retained earnings | 124,353 | 117,276 | |||||
Treasury stock, at cost | (1,834 | ) | (9 | ) | |||
Accumulated other comprehensive loss | (4,343 | ) | (2,898 | ) | |||
TOTAL SHAREHOLDERS' EQUITY | 206,247 | 201,067 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 357,709 | $ | 349,948 | |||
-- MORE --
Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) | ||||||||
Six Months Ended | ||||||||
October 29, 2016 | October 31, 2015 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 14,560 | $ | 6,944 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 9,242 | 8,314 | ||||||
Impairment loss of intangible assets | 830 | — | ||||||
Loss (gain) on sale of property, equipment and other assets | 33 | (50 | ) | |||||
Share-based compensation | 1,484 | 1,503 | ||||||
Provision for doubtful accounts | 962 | 209 | ||||||
Deferred income taxes, net | (48 | ) | 573 | |||||
Change in operating assets and liabilities | (12,057 | ) | (26,487 | ) | ||||
Net cash provided by (used in) operating activities | 15,006 | (8,994 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (4,625 | ) | (10,491 | ) | ||||
Proceeds from sale of property, equipment and other assets | 72 | 105 | ||||||
Purchases of marketable securities | (4,583 | ) | (13,780 | ) | ||||
Proceeds from sales or maturities of marketable securities | 11,328 | 14,133 | ||||||
Acquisitions, net of cash acquired | (562 | ) | (1,936 | ) | ||||
Net cash provided by (used in) investing activities | 1,630 | (11,969 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments on notes payable | (6 | ) | (27 | ) | ||||
Proceeds from exercise of stock options | 102 | 610 | ||||||
Principal payments on long-term obligations | (904 | ) | (16 | ) | ||||
Dividends paid | (7,482 | ) | (8,760 | ) | ||||
Payments for common shares repurchased | (1,825 | ) | — | |||||
Tax payments related to RSU issuances | (213 | ) | (227 | ) | ||||
Net cash used in financing activities | (10,328 | ) | (8,420 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (591 | ) | (441 | ) | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 5,717 | (29,824 | ) | |||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of period | 28,328 | 57,284 | ||||||
End of period | $ | 34,045 | $ | 27,460 | ||||
-- MORE --
Daktronics, Inc. and Subsidiaries Net Sales and Orders by Business Unit (in thousands) (unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
October 29, 2016 | October 31, 2015 | Dollar Change | Percent Change | October 29, 2016 | October 31, 2015 | Dollar Change | Percent Change | ||||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||||||||
Commercial | $ | 39,923 | $ | 40,066 | $ | (143 | ) | (0.4 | )% | $ | 76,177 | $ | 83,276 | $ | (7,099 | ) | (8.5 | )% | |||||||||||
Live Events | 55,363 | 50,761 | $ | 4,602 | 9.1 | % | 115,996 | 98,683 | $ | 17,313 | 17.5 | % | |||||||||||||||||
High School Park and Recreation | 28,707 | 24,253 | $ | 4,454 | 18.4 | % | 56,324 | 43,212 | $ | 13,112 | 30.3 | % | |||||||||||||||||
Transportation | 16,101 | 13,294 | $ | 2,807 | 21.1 | % | 30,387 | 27,061 | $ | 3,326 | 12.3 | % | |||||||||||||||||
International | 29,898 | 29,294 | $ | 604 | 2.1 | % | 48,254 | 55,657 | $ | (7,403 | ) | (13.3 | )% | ||||||||||||||||
$ | 169,992 | $ | 157,668 | $ | 12,324 | 7.8 | % | $ | 327,138 | $ | 307,889 | $ | 19,249 | 6.3 | % | ||||||||||||||
Orders: | |||||||||||||||||||||||||||||
Commercial | $ | 36,663 | $ | 30,203 | $ | 6,460 | 21.4 | % | $ | 81,731 | $ | 65,160 | $ | 16,571 | 25.4 | % | |||||||||||||
Live Events | 31,050 | 64,267 | $ | (33,217 | ) | (51.7 | )% | 83,930 | 125,007 | $ | (41,077 | ) | (32.9 | )% | |||||||||||||||
High School Park and Recreation | 15,764 | 12,555 | $ | 3,209 | 25.6 | % | 46,877 | 40,429 | $ | 6,448 | 15.9 | % | |||||||||||||||||
Transportation | 14,754 | 16,697 | $ | (1,943 | ) | (11.6 | )% | 26,669 | 30,334 | $ | (3,665 | ) | (12.1 | )% | |||||||||||||||
International | 18,643 | 11,873 | $ | 6,770 | 57.0 | % | 52,835 | 39,737 | $ | 13,098 | 33.0 | % | |||||||||||||||||
$ | 116,874 | $ | 135,595 | $ | (18,721 | ) | (13.8 | )% | $ | 292,042 | $ | 300,667 | $ | (8,625 | ) | (2.9 | )% | ||||||||||||
Reconciliation of Free Cash Flow (in thousands) (unaudited) | |||||||
Six Months Ended | |||||||
October 29, 2016 | October 31, 2015 | ||||||
Net cash provided by (used in) operating activities | $ | 15,006 | $ | (8,994 | ) | ||
Purchases of property and equipment | (4,625 | ) | (10,491 | ) | |||
Proceeds from sales of property and equipment | 72 | 105 | |||||
Free cash flow | $ | 10,453 | $ | (19,380 | ) | ||
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.
-- END --