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): August 21, 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 August 21, 2018 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three months ended July 28, 2018 of fiscal 2019.  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 August 21, 2018 issued by Registrant regarding first quarter fiscal 2019 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:
August 21, 2018
 
 
 
 





EXHIBIT INDEX

Exhibit No.
Description
 
 




Exhibit


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Daktronics, Inc. Announces First Quarter Fiscal 2019 Results

Brookings, S.D. – August 21, 2018 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2019 first quarter net sales of $154.2 million, operating income of $4.0 million, and net income of $4.6 million, or $0.10 per diluted share, compared to net sales of $172.7 million, operating income of $11.7 million, and net income of $8.4 million, or $0.19 per diluted share, for the first quarter of fiscal 2018Fiscal 2019 first quarter orders were $159.6 million, compared to $153.1 million for the first quarter of fiscal 2018. Product order backlog at the end of the fiscal 2019 first quarter was $177 million, compared to a backlog of $184 million a year earlier and $171 million at the end of the fourth quarter of fiscal 2018.(1)
  
Cash used in operating activities in the first three months of fiscal 2019 was $10.3 million, compared with cash used in operating activities of $4.9 million in the same period last year. Cash flow from operating activities fluctuated due to a rise in accounts receivable, contract assets, and inventories corresponding with the seasonality of our business. Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a negative $14.9 million for the first three months of fiscal 2019, as compared to a negative free cash flow of $8.9 million for the same period of fiscal 2018. Net investment in property and equipment was $4.6 million for the first three months of fiscal 2019, as compared to $4.0 million for the first three months of fiscal 2018. Cash, restricted cash, and marketable securities at the end of the first quarter of fiscal 2019 were $43.3 million, which compares to $52.1 million at the end of the first quarter of fiscal 2018 and $64.3 million at the end of fiscal 2018.

Orders for the first quarter of fiscal 2019 increased 4.3 percent as compared to the first quarter of fiscal 2018. Orders increased in the Commercial, High School Park and Recreation, Transportation, and International business units and decreased in the Live Events business unit.

Net sales decreased by 10.7 percent in the first quarter of fiscal 2019 as compared to the first quarter of fiscal 2018. Net sales increased in the International business unit, decreased in the Commercial, Live Events, and Transportation business units, and remained relatively flat in the High School Park and Recreation business unit. The increase in International business unit was primarily due to the timing of projects and buildable backlog coming into the quarter. Live Events sales decreased as we had completed a number of NFL stadiums in 2018, with no similar sized projects in the first quarter of 2019.

Gross profit, as a percentage of net sales, was 24.8 percent for the first quarter of fiscal 2019 as compared to 25.8 percent a year earlier. The decrease in gross profit percentage was primarily due to lower sales volumes over relatively fixed infrastructure costs, partly offset by lower warranty expenses. Operating expenses for the first quarter of 2019 were $34.2 million, compared to $32.9 million for the first quarter of fiscal 2018. The increase in total operating expenses was primarily attributable to an increase in variable selling expenses. Operating income as a percent of sales for the quarter decreased to 2.6 percent as compared to the first quarter of fiscal 2018 operating income of 6.8 percent. We recorded a tax benefit during the quarter for estimated tax credits exceeding estimated tax expense.

Reece Kurtenbach, chairman, president and chief executive officer stated, “As expected, first quarter sales were less than the first quarter of 2018 and reflect the financial fluctuations caused by the timing of large projects. Year to date orders have increased over last year, and we achieved a respectable gross profit margin on this level of business. During the quarter, we installed several of the new generation of narrow pixel pitch products for high resolution indoor applications. We continue to invest in broadening our narrow pixel pitch product line and control solutions. Our pipeline of innovative new products and technologies is poised to meet the growing market demand for digital canvases.”

Outlook
Kurtenbach added, “While we remain optimistic about long-term growth in the digital display industry, most of us are aware the current global tariff and trade environment is very dynamic. The current financial impact to us is related to the volatility in pricing and demand of aluminum, electrical, and other components. We would expect some of the measures being contemplated by various governments could have a financial impact in future quarters. We will continue to monitor the situation and take action as necessary. We are focused on winning more orders and continuing our velocity in product development, as well as quality and reliability programs. In addition, we are carefully managing our operational spend as we continue on our path to long-term profitable growth.”

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 2018 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 28, 2018.




Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended
 
 
July 28,
2018
 
July 29,
2017
 
 
 
 
 
Net sales
 
$
154,188

 
$
172,728

Cost of sales
 
115,941

 
128,082

Gross profit
 
38,247

 
44,646

 
 
 
 
 
Operating expenses:
 
 

 
 

Selling
 
16,378

 
14,939

General and administrative
 
8,537

 
8,935

Product design and development
 
9,292

 
9,047

 
 
34,207

 
32,921

Operating income
 
4,040

 
11,725

 
 
 
 
 
Nonoperating income (expense):
 
 

 
 

Interest income
 
197

 
211

Interest expense
 
(39
)
 
(86
)
Other (expense) income, net
 
(154
)
 
145

 
 

 


Income before income taxes
 
4,044

 
11,995

Income tax (benefit) expense
 
(530
)
 
3,566

Net income
 
$
4,574

 
$
8,429

 
 
 
 
 
Weighted average shares outstanding:
 
 

 
 

Basic
 
44,638

 
44,244

Diluted
 
44,831

 
44,461

 
 
 
 
 
Earnings per share:
 
 

 
 

Basic
 
$
0.10

 
$
0.19

Diluted
 
$
0.10

 
$
0.19

 
 
 
 
 
Cash dividends declared per share
 
$
0.07

 
$
0.07




















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

 
July 28,
2018
 
April 28,
2018
 
(unaudited)
 
 
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
15,915

 
$
29,727

Restricted cash
26

 
28

Marketable securities
27,352

 
34,522

Accounts receivable, net
100,362

 
77,387

Inventories
78,983

 
75,335

Contract assets
41,283

 
30,968

Current maturities of long-term receivables
1,435

 
1,752

Prepaid expenses and other assets
7,712

 
9,029

Income tax receivables
6,280

 
5,385

Total current assets
279,348

 
264,133

 
 
 
 
Long-term receivables, less current maturities
1,552

 
1,641

Goodwill
8,115

 
8,264

Intangibles, net
6,729

 
3,682

Investment in affiliates and other assets
5,248

 
5,091

Deferred income taxes
7,938

 
7,930

 
29,582

 
26,608

PROPERTY AND EQUIPMENT:
 

 
 

Land
2,142

 
2,161

Buildings
67,776

 
67,773

Machinery and equipment
94,841

 
93,439

Office furniture and equipment
5,987

 
5,878

Computer software and hardware
53,117

 
53,004

Equipment held for rental
287

 
287

Demonstration equipment
6,971

 
7,035

Transportation equipment
7,675

 
7,632

Property and equipment
238,796

 
237,209

Less accumulated depreciation
171,506

 
169,150

 
67,290

 
68,059

TOTAL ASSETS
$
376,220

 
$
358,800

 
 
 
 









Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
 
July 28,
2018
 
April 28,
2018
 
(unaudited)
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 

Accounts payable
$
48,726

 
$
48,845

Contract liabilities
50,629

 
39,379

Accrued expenses
30,778

 
27,445

Warranty obligations
13,468

 
13,891

Current portion of other long-term obligations
2,453

 
1,088

Income taxes payable
360

 
660

Total current liabilities
146,414

 
131,308

 
 
 
 
Long-term warranty obligations
15,777

 
16,062

Long-term contract liabilities
8,073

 
7,475

Other long-term obligations
2,307

 
2,285

Long-term income tax payable
3,599

 
3,440

Deferred income taxes
604

 
614

Total long-term liabilities
30,360

 
29,876

TOTAL LIABILITIES
176,774

 
161,184

 
 
 
 
SHAREHOLDERS' EQUITY:
 

 
 

Common stock
55,608

 
54,731

Additional paid-in capital
40,979

 
40,328

Retained earnings
108,559

 
107,105

Treasury stock, at cost
(1,834
)
 
(1,834
)
Accumulated other comprehensive loss
(3,866
)
 
(2,714
)
TOTAL SHAREHOLDERS' EQUITY
199,446

 
197,616

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
376,220

 
$
358,800



 







Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Three Months Ended
 
 
July 28,
2018
 
July 29,
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
4,574

 
$
8,429

Adjustments to reconcile net income to net cash used in operating activities:
 
 

 
 

Depreciation and amortization
 
4,488

 
4,460

Gain on sale of property, equipment and other assets
 
(69
)
 
(17
)
Share-based compensation
 
651

 
672

Equity in loss of affiliate
 
134

 
85

Provision for doubtful accounts
 
(29
)
 
14

Deferred income taxes, net
 
(65
)
 
30

Change in operating assets and liabilities
 
(19,944
)
 
(18,580
)
Net cash used in operating activities
 
(10,260
)
 
(4,907
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 

 
 

Purchases of property and equipment
 
(4,727
)
 
(4,092
)
Proceeds from sales of property, equipment and other assets
 
106

 
63

Purchases of marketable securities
 
(1,986
)
 

Proceeds from sales or maturities of marketable securities
 
9,181

 
7,643

Purchases of equity investment
 
(426
)
 
(607
)
Acquisitions, net of cash acquired
 
(2,250
)
 

Net cash (used in) provided by investing activities
 
(102
)
 
3,007

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 

 
 

Borrowings on notes payable
 
3,000

 

Payments on notes payable
 
(3,000
)
 

Proceeds from exercise of stock options
 
57

 
211

Principal payments on long-term obligations
 
(458
)
 
(1,018
)
Dividends paid
 
(3,121
)
 
(3,094
)
Net cash used in financing activities
 
(3,522
)
 
(3,901
)
 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
70

 
52

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
(13,814
)
 
(5,749
)
 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
 
 

 
 

Beginning of period
 
29,755

 
32,839

End of period
 
$
15,941

 
$
27,090

 
 
 
 
 









Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
 
Three Months Ended
 
July 28,
2018
 
July 29,
2017
 
Dollar Change
 
Percent Change
Net Sales:
 
 
 
 
 
 
 
    Commercial
$
30,569

 
$
32,863

 
$
(2,294
)
 
(7.0
)%
    Live Events
49,472

 
77,612

 
(28,140
)
 
(36.3
)
    High School Park and Recreation
28,120

 
28,479

 
(359
)
 
(1.3
)
    Transportation
17,157

 
18,912

 
(1,755
)
 
(9.3
)
    International
28,870

 
14,862

 
14,008

 
94.3

 
$
154,188

 
$
172,728

 
$
(18,540
)
 
(10.7
)%
Orders:
 
 
 
 
 
 
 
    Commercial
$
35,792

 
$
29,937

 
$
5,855

 
19.6
 %
    Live Events
39,395

 
61,605

 
(22,210
)
 
(36.1
)
    High School Park and Recreation
38,449

 
32,180

 
6,269

 
19.5

    Transportation
21,916

 
9,269

 
12,647

 
136.4

    International
24,058

 
20,090

 
3,968

 
19.8

 
$
159,610

 
$
153,081

 
$
6,529

 
4.3
 %



Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
 
Three Months Ended
 
July 28,
2018
 
July 29,
2017
Net cash used in operating activities
$
(10,260
)
 
$
(4,907
)
Purchases of property and equipment
(4,727
)
 
(4,092
)
Proceeds from sales of property and equipment
106

 
63

Free cash flow
$
(14,881
)
 
$
(8,936
)

*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.