Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): February 20, 2018

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Daktronics, Inc.
(Exact name of registrant as specified in its charter)

South Dakota
0-23246
46-0306862
(State or Other Jurisdiction of
(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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Section 2 - Financial Information

Item 2.02     Results of Operations and Financial Condition.
 
On February 20, 2018 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and nine months ended January 27, 2018 of fiscal 2018.  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:

    99.1 Press Release dated February 20, 2018 issued by Registrant regarding third quarter fiscal 2018 results.
 
 
 
 
 





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:
February 20, 2018
 
 
 
 





EXHIBIT INDEX

Exhibit No.
Description
 
 




Exhibit


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Daktronics, Inc. Announces Third Quarter Fiscal 2018 Results

Brookings, S.D. – February 20, 2018 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2018 third quarter net sales of $130.3 million, operating loss of $3.3 million, and net loss of $6.2 million, or $0.14 per diluted share, compared to net sales of $115.7 million, operating loss of $6.9 million, and net loss of $5.1 million, or $0.12 per diluted share, for the third quarter of fiscal 2017Fiscal 2018 third quarter orders were $126.2 million, compared to $143.3 million for the third quarter of fiscal 2017. Backlog at the end of the fiscal 2018 third quarter was $151 million, compared to a backlog of $170 million a year earlier and $155 million at the end of the second quarter of fiscal 2018.(1)
  
In December 2017, the U.S. enacted the Tax Cuts and Jobs Act that provided significant changes to the U.S. tax code. As a result, we have recorded a provisional reduction to our net deferred tax asset and impacts of deemed repatriation of foreign earnings of $4.3 million. This resulted in a corresponding increase to income tax expense and an impact to earnings per share of approximately $0.10 for the quarter ended January 27, 2018. We have accounted for the impacts of the Act to the extent a reasonable estimate could be made and will continue to refine our estimates throughout the measurement period or until the accounting is complete. We expect our effective tax rate for the fourth quarter to be approximately 30% and looking ahead to fiscal 2019, we estimate an effective tax rate of approximately 21%.

Net sales, operating income, net income, and earnings per share for the nine months ended January 27, 2018, were $472.4 million, $17.8 million, $9.4 million, and $0.21 per diluted share, respectively. This compares to $442.9 million, $13.7 million, $9.4 million, and $0.21 per diluted share, respectively, for the same period in fiscal 2017.

Cash provided by operating activities in the first nine months of fiscal 2018 was $27.0 million, compared with cash provided by operating activities of $45.4 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 $18.2 million for the first nine months of fiscal 2018, as compared to a positive free cash flow of $38.8 million for the same period of fiscal 2017. Net investment in property and equipment was $8.8 million for the first nine months of fiscal 2018, as compared to $6.5 million for the first nine months of fiscal 2017. Cash, restricted cash, and marketable securities at the end of the third quarter of fiscal 2018 were $73.0 million, which compares to $76.6 million at the end of the third quarter of fiscal 2017 and $65.6 million at the end of fiscal 2017.

Orders for the third quarter of fiscal 2018 decreased 12 percent as compared to the third quarter of fiscal 2017. Orders increased in the International business unit and decreased in the Commercial, Live Events, High School Park and Recreation and Transportation business units. The timing of orders for large projects varies according to the needs of the customer and contributed to the decrease in order volume.

Net sales increased by 12.6 percent in the third quarter of fiscal 2018 as compared to the third quarter of fiscal 2017. Net sales increased in the Live Events, Transportation, and International business units, decreased in the High School Park and Recreation business unit, and remained relatively flat in the Commercial business unit. The increase in Live Events business unit was primarily impacted by projects for professional and spring baseball facilities renovation and construction project timeliness. The increase in the Transportation business unit was primarily due to higher delivery needs from state transportation authorities during the quarter this year as compared to last year. The increase in net sales in the International business unit was due to increased Out-of-Home market demand and timing of projects. The decrease in the High School Park and Recreation business unit was primarily due to the lower mix of large video project sales as compared to the same period last year.

Gross profit, as a percentage of net sales, was 21.9 percent for the third quarter of fiscal 2018 as compared to 20.1 percent a year earlier. The increase in gross profit percentage was primarily due to higher sales volumes and improved productivity. Operating expenses for the third quarter of 2018 were $31.9 million, compared to $30.2 million for the third quarter of fiscal 2017. The increase in total operating expenses was primarily attributable to an increase in product development activities. Operating loss as a percent of sales for the quarter decreased to 2.6 percent as compared to the third quarter of fiscal 2017 operating loss of 6.0 percent.

Reece Kurtenbach, chairman, president and chief executive officer stated, “We are having a successful year through the third quarter. Our sales, gross profit, and operating income have all increased year over year. The third quarter is historically lighter for sales and profits due to the seasonality of our sports business, construction cycles, and the decrease in production days due to holidays. We were able to capitalize on our backlog and other order opportunities which is reflected in our increase in sales, and gross profit; however, we experienced an operating loss for the quarter. Operating expenses continued to be impacted by the planned increase in product development expenses for activities to accelerate the release of new and enhanced customer solutions. Orders decreasing during the quarter as compared to a year earlier is not unusual due to the lumpy nature of our business.”

Outlook
Kurtenbach added, “We remain optimistic about the continued growth in the video display business over the long-term. The demand for digital canvases remains strong as a desirable method for businesses and organizations to entertain and inform audiences of their messages and brands. To serve these businesses, we continue to invest in developing a robust pipeline of innovative new products and technologies.”

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 2017 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
 
 
 
 
 


(1) Backlog is not a measure defined by U.S. generally accepted accounting principles ("GAAP"), and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. For more information related to backlog, see Part I, Item 1. Business of our Annual Report on Form 10-K for the fiscal year ended April 29, 2017.




Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
January 27,
2018
 
January 28,
2017
 
January 27,
2018
 
January 28,
2017
 
 
 
 
 
 
 
 
 
Net sales
 
$
130,316

 
$
115,719

 
$
472,353

 
$
442,857

Cost of goods sold
 
101,749

 
92,403

 
356,536

 
336,166

Gross profit
 
28,567

 
23,316

 
115,817

 
106,691

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 

 
 

Selling expense
 
15,271

 
14,678

 
45,560

 
45,828

General and administrative
 
8,335

 
8,599

 
26,138

 
26,007

Product design and development
 
8,299

 
6,973

 
26,294

 
21,142

 
 
31,905

 
30,250

 
97,992

 
92,977

Operating (loss) income
 
(3,338
)
 
(6,934
)
 
17,825

 
13,714

 
 
 
 
 
 
 
 
 
Nonoperating income (expense):
 
 

 
 

 
 

 
 

Interest income
 
158

 
183

 
520

 
559

Interest expense
 
(40
)
 
(56
)
 
(173
)
 
(174
)
Other (expense) income, net
 
(487
)
 
(305
)
 
(429
)
 
(250
)
 
 

 


 


 


(Loss) income before income taxes
 
(3,707
)
 
(7,112
)
 
17,743

 
13,849

Income tax expense (benefit)
 
2,482

 
(1,985
)
 
8,371

 
4,416

Net (loss) income
 
$
(6,189
)
 
$
(5,127
)
 
$
9,372

 
$
9,433

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
44,518

 
44,102

 
44,403

 
44,071

Diluted
 
44,518

 
44,102

 
44,798

 
44,206

 
 
 
 
 
 
 
 
 
(Loss) earnings per share:
 
 

 
 

 
 

 
 

Basic
 
$
(0.14
)
 
$
(0.12
)
 
$
0.21

 
$
0.21

Diluted
 
$
(0.14
)
 
$
(0.12
)
 
$
0.21

 
$
0.21

 
 
 
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.07

 
$
0.07

 
$
0.21

 
$
0.24




















Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)

 
January 27,
2018
 
April 29,
2017
 
(unaudited)
 
 
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
49,042

 
$
32,623

Restricted cash
28

 
216

Marketable securities
23,937

 
32,713

Accounts receivable, net
76,104

 
78,846

Inventories, net
70,451

 
66,486

Costs and estimated earnings in excess of billings
32,449

 
36,403

Current maturities of long-term receivables
2,199

 
2,274

Prepaid expenses and other assets
7,333

 
7,553

Income tax receivables
2,726

 
611

Total current assets
264,269

 
257,725

 
 
 
 
Long-term receivables, less current maturities
1,948

 
2,616

Goodwill
8,469

 
7,812

Intangibles, net
4,174

 
4,705

Investment in affiliates and other assets
4,888

 
4,534

Deferred income taxes
7,983

 
11,292

 
27,462

 
30,959

PROPERTY AND EQUIPMENT:
 

 
 

Land
2,172

 
2,099

Buildings
67,340

 
65,935

Machinery and equipment
88,143

 
84,189

Office furniture and equipment
5,799

 
5,604

Computer software and hardware
51,980

 
51,523

Equipment held for rental
287

 
374

Demonstration equipment
7,044

 
7,109

Transportation equipment
7,647

 
7,108

 
230,412

 
223,941

Less accumulated depreciation
166,117

 
157,192

 
64,295

 
66,749

TOTAL ASSETS
$
356,026

 
$
355,433

 
 
 
 









Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
 
January 27,
2018
 
April 29,
2017
 
(unaudited)
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 

Accounts payable
$
40,309

 
$
51,499

Accrued expenses
27,578

 
25,033

Warranty obligations
13,291

 
13,578

Billings in excess of costs and estimated earnings
14,424

 
10,897

Customer deposits (billed or collected)
10,288

 
14,498

Deferred revenue (billed or collected)
13,906

 
12,137

Current portion of other long-term obligations
1,000

 
1,409

Income taxes payable
532

 
1,544

Total current liabilities
121,328

 
130,595

 
 
 
 
Long-term warranty obligations
15,909

 
14,321

Long-term deferred revenue (billed or collected)
6,916

 
5,434

Other long-term obligations
2,795

 
2,848

Long-term income tax payable
3,679

 
3,113

Deferred income taxes
984

 
836

Total long-term liabilities
30,283

 
26,552

TOTAL LIABILITIES
151,611

 
157,147

 
 
 
 
SHAREHOLDERS' EQUITY:
 

 
 

Common stock
54,725

 
52,530

Additional paid-in capital
39,671

 
38,004

Retained earnings
114,028

 
113,967

Treasury stock, at cost
(1,834
)
 
(1,834
)
Accumulated other comprehensive loss
(2,175
)
 
(4,381
)
TOTAL SHAREHOLDERS' EQUITY
204,415

 
198,286

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
356,026

 
$
355,433



 







Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Nine Months Ended
 
 
January 27,
2018
 
January 28,
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
9,372

 
$
9,433

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
13,335

 
13,941

Impairment of intangible assets
 

 
830

(Gain) loss on sale of property, equipment and other assets
 
(1,211
)
 
23

Share-based compensation
 
1,978

 
2,204

Equity in loss of affiliate
 
401

 
78

Provision for doubtful accounts
 
(55
)
 
898

Deferred income taxes, net
 
3,429

 
(286
)
Change in operating assets and liabilities
 
(296
)
 
18,266

Net cash provided by operating activities
 
26,953

 
45,387

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 

 
 

Purchases of property and equipment
 
(10,865
)
 
(6,709
)
Proceeds from sale of property, equipment and other assets
 
2,107

 
166

Purchases of marketable securities
 
(5,211
)
 
(18,098
)
Proceeds from sales or maturities of marketable securities
 
13,751

 
14,594

Purchases of equity investment
 
(1,027
)
 
(1,374
)
Net cash used in investing activities
 
(1,245
)
 
(11,421
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 

 
 

Payments on notes payable
 

 
(8
)
Proceeds from exercise of stock options
 
514

 
343

Principal payments on long-term obligations
 
(1,036
)
 
(912
)
Dividends paid
 
(9,311
)
 
(10,566
)
Payments for common shares repurchased
 

 
(1,825
)
Tax payments related to RSU issuances
 
(311
)
 
(261
)
Net cash used in financing activities
 
(10,144
)
 
(13,229
)
 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
667

 
(680
)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
16,231

 
20,057

 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
 
 

 
 

Beginning of period
 
32,839

 
28,526

End of period
 
$
49,070

 
$
48,583

 
 
 
 
 









Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
 
Three Months Ended
 
Nine Months Ended
 
January 27,
2018
 
January 28,
2017
 
Dollar Change
 
Percent Change
 
January 27,
2018
 
January 28,
2017
 
Dollar Change
 
Percent Change
Net Sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
$
35,483

 
$
36,165

 
$
(682
)
 
(1.9
)%
 
$
102,723

 
$
112,342

 
$
(9,619
)
 
(8.6
)%
    Live Events
45,167

 
41,036

 
4,131

 
10.1

 
191,432

 
157,032

 
$
34,400

 
21.9
 %
    High School Park and Recreation
11,463

 
12,653

 
(1,190
)
 
(9.4
)
 
69,602

 
68,977

 
$
625

 
0.9
 %
    Transportation
11,189

 
9,130

 
2,059

 
22.6

 
46,577

 
39,517

 
$
7,060

 
17.9
 %
    International
27,014

 
16,735

 
10,279

 
61.4

 
62,019

 
64,989

 
$
(2,970
)
 
(4.6
)%
 
$
130,316

 
$
115,719

 
$
14,597

 
12.6
 %
 
$
472,353

 
$
442,857

 
$
29,496

 
6.7
 %
Orders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
$
28,745

 
$
32,595

 
$
(3,850
)
 
(11.8
)%
 
$
97,816

 
$
114,326

 
$
(16,510
)
 
(14.4
)%
    Live Events
39,911

 
51,590

 
(11,679
)
 
(22.6
)
 
145,246

 
135,520

 
$
9,726

 
7.2
 %
    High School Park and Recreation
13,451

 
14,178

 
(727
)
 
(5.1
)
 
60,368

 
61,055

 
$
(687
)
 
(1.1
)%
    Transportation
14,641

 
19,621

 
(4,980
)
 
(25.4
)
 
38,155

 
46,290

 
$
(8,135
)
 
(17.6
)%
    International
29,405

 
25,329

 
4,076

 
16.1

 
79,909

 
78,164

 
$
1,745

 
2.2
 %
 
$
126,153

 
$
143,313

 
$
(17,160
)
 
(12.0
)%
 
$
421,494

 
$
435,355

 
$
(13,861
)
 
(3.2
)%



Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
 
Nine Months Ended
 
January 27,
2018
 
January 28,
2017
Net cash provided by operating activities
$
26,953

 
$
45,387

Purchases of property and equipment
(10,865
)
 
(6,709
)
Proceeds from sales of property and equipment
2,107

 
166

Free cash flow
$
18,195

 
$
38,844


*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.