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): November 21, 2018
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 November 21, 2018 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and six months ended October 27, 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:
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 21, 2018 | |
EXHIBIT INDEX
Daktronics, Inc. Announces Second Quarter Fiscal 2019 Results
Brookings, S.D. – November 21, 2018 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2019 second quarter net sales of $172.7 million, operating income of $9.0 million, and net income of $8.6 million, or $0.19 per diluted share, compared to net sales of $169.3 million, operating income of $9.4 million, and net income of $7.1 million, or $0.16 per diluted share, for the second quarter of fiscal 2018. Fiscal 2019 second quarter orders were $151.4 million, compared to $142.3 million for the second quarter of fiscal 2018. Product order backlog at the end of the fiscal 2019 second quarter was $150 million, compared to a backlog of $155 million a year earlier and $177 million at the end of the first quarter of fiscal 2019.(1)
Net sales, operating income, net income, and earnings per share for the six months ended October 27, 2018, were $326.9 million, $13.1 million, $13.2 million, and $0.29 per diluted share, respectively. This compares to $342.0 million, $21.2 million, $15.6 million, and $0.35 per diluted share, respectively, for the same period in fiscal 2018.
Cash provided by operating activities in the first six months of fiscal 2019 was $22.6 million, compared with cash provided by operating activities of $9.3 million in the same period last year. Cash flow from operating activities fluctuated due to changes in net operating assets and liabilities offset by decrease in net income. Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a positive $12.9 million for the first six months of fiscal 2019, as compared to a positive free cash flow of $3.6 million for the same period of fiscal 2018. Net investment in property and equipment was $9.7 million for the first six months of fiscal 2019, as compared to $5.7 million for the first six months of fiscal 2018. Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2019 were $67.3 million, which compares to $61.5 million at the end of the second quarter of fiscal 2018 and $64.3 million at the end of fiscal 2018.
Orders for the second quarter of fiscal 2019 increased 6.4 percent as compared to the second quarter of fiscal 2018. Orders increased in the Commercial, High School Park and Recreation, and Transportation business units, decreased in the International business unit, and remained relatively flat in the Live Events business unit.
Net sales increased by 2.0 percent in the second quarter of fiscal 2019 as compared to the second quarter of fiscal 2018. Net sales increased in the Commercial, High School Park and Recreation, Transportation, and International business units, and decreased in the Live Events business unit. The increase in the Commercial business unit was primarily due to the timing of large custom projects in the spectacular niche, increased order volumes in the on-premise niche, and an increase in the out-of-home niche shipments. Live Events sales decreased primarily due to the decrease of orders on a year to date basis.
Gross profit, as a percentage of net sales, was relatively flat at 24.8 percent for the second quarter of fiscal 2019 as compared to 25.2 percent a year earlier. Operating expenses for the second quarter of fiscal 2019 were $33.7 million, compared to $33.2 million for the second quarter of fiscal 2018. Operating income as a percent of sales for the quarter decreased to 5.2 percent as compared to the second quarter of fiscal 2018 operating income of 5.6 percent. In the first quarter of fiscal 2019, we recorded a tax benefit and in the second quarter we recorded a tax expense, which resulted in a zero-tax expense for year to date as our estimated effective tax rate is based on our estimate of permanent research and development tax credits which offsets the estimated tax expense for the year.
Reece Kurtenbach, chairman, president and chief executive officer stated, “The diversity of our end-markets and competitive solution portfolio enabled us to increase orders for the first half of the year. Strong market demand continued for larger sized spectacular projects, larger sports systems in high schools, after-sale service offerings, and signage for transportation infrastructure. And while the order volume was down for the first half of the year internationally, we were successful in winning transportation and global out-of-home advertising projects. Fewer large project opportunities were available in Live Events so far this year, causing orders and related sales to be down on a year to date basis. Warranty as a percent of sales for the quarter decreased to 2.5 percent as compared to the second quarter of fiscal 2018 warranty as a percent of sales of 3.9 percent. However, this improvement was offset by higher commodity costs and increases in selling expenses.
Outlook
Kurtenbach added, “As we enter into the second half of our fiscal year, we remain optimistic about our long-term outlook. Our portfolio of innovative products and technologies positioned us to capitalize on the growing market demand for digital canvases. In the short term, the current global tariff and trade environment has created cost headwinds on commodity and components used in the production of our solutions. We continue to monitor the situation and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments. Our teams are focused on the continued development of industry leading solutions and global sales channels to support 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 | Six Months Ended | |||||||||||||||
October 27, 2018 | October 28, 2017 | October 27, 2018 | October 28, 2017 | |||||||||||||
Net sales | $ | 172,692 | $ | 169,309 | $ | 326,880 | $ | 342,037 | ||||||||
Cost of sales | 129,935 | 126,705 | 245,876 | 254,787 | ||||||||||||
Gross profit | 42,757 | 42,604 | 81,004 | 87,250 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling | 16,125 | 15,350 | 32,503 | 30,289 | ||||||||||||
General and administrative | 8,574 | 8,868 | 17,111 | 17,803 | ||||||||||||
Product design and development | 9,039 | 8,948 | 18,331 | 17,995 | ||||||||||||
33,738 | 33,166 | 67,945 | 66,087 | |||||||||||||
Operating income | 9,019 | 9,438 | 13,059 | 21,163 | ||||||||||||
Nonoperating income (expense): | ||||||||||||||||
Interest income | 188 | 151 | 385 | 362 | ||||||||||||
Interest expense | (2 | ) | (47 | ) | (41 | ) | (133 | ) | ||||||||
Other (expense) income, net | (66 | ) | (87 | ) | (220 | ) | 58 | |||||||||
Income before income taxes | 9,139 | 9,455 | 13,183 | 21,450 | ||||||||||||
Income tax expense | 533 | 2,323 | 3 | 5,889 | ||||||||||||
Net income | $ | 8,606 | $ | 7,132 | $ | 13,180 | $ | 15,561 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 44,780 | 44,412 | 44,717 | 44,345 | ||||||||||||
Diluted | 44,950 | 44,679 | 44,994 | 44,696 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.19 | $ | 0.16 | $ | 0.29 | $ | 0.35 | ||||||||
Diluted | $ | 0.19 | $ | 0.16 | $ | 0.29 | $ | 0.35 | ||||||||
Cash dividends declared per share | $ | 0.07 | $ | 0.07 | $ | 0.14 | $ | 0.14 | ||||||||
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands) | |||||||
October 27, 2018 | April 28, 2018 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 35,557 | $ | 29,727 | |||
Restricted cash | 26 | 28 | |||||
Marketable securities | 31,721 | 34,522 | |||||
Accounts receivable, net | 92,194 | 77,387 | |||||
Inventories | 69,529 | 75,335 | |||||
Contract assets | 30,633 | 30,968 | |||||
Current maturities of long-term receivables | 1,305 | 1,752 | |||||
Prepaid expenses and other current assets | 8,172 | 9,029 | |||||
Income tax receivables | 6,015 | 5,385 | |||||
Total current assets | 275,152 | 264,133 | |||||
Property and equipment, net | 69,470 | 68,059 | |||||
Long-term receivables, less current maturities | 1,348 | 1,641 | |||||
Goodwill | 8,053 | 8,264 | |||||
Intangibles, net | 6,101 | 3,682 | |||||
Investment in affiliates and other assets | 5,623 | 5,091 | |||||
Deferred income taxes | 7,939 | 7,930 | |||||
Total non-current assets | 98,534 | 94,667 | |||||
TOTAL ASSETS | $ | 373,686 | $ | 358,800 | |||
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands) | |||||||
October 27, 2018 | April 28, 2018 | ||||||
(unaudited) | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 46,764 | $ | 48,845 | |||
Contract liabilities | 47,198 | 39,379 | |||||
Accrued expenses | 29,717 | 27,445 | |||||
Warranty obligations | 13,009 | 13,891 | |||||
Current portion of other long-term obligations | 1,106 | 1,088 | |||||
Income taxes payable | 272 | 660 | |||||
Total current liabilities | 138,066 | 131,308 | |||||
Long-term warranty obligations | 15,709 | 16,062 | |||||
Long-term contract liabilities | 8,520 | 7,475 | |||||
Other long-term obligations, less current portion | 2,420 | 2,285 | |||||
Long-term income taxes payable | 3,623 | 3,440 | |||||
Deferred income taxes | 611 | 614 | |||||
Total long-term liabilities | 30,883 | 29,876 | |||||
TOTAL LIABILITIES | 168,949 | 161,184 | |||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock | 55,608 | 54,731 | |||||
Additional paid-in capital | 41,345 | 40,328 | |||||
Retained earnings | 114,033 | 107,105 | |||||
Treasury stock, at cost | (1,834 | ) | (1,834 | ) | |||
Accumulated other comprehensive loss | (4,415 | ) | (2,714 | ) | |||
TOTAL SHAREHOLDERS' EQUITY | 204,737 | 197,616 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 373,686 | $ | 358,800 | |||
Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) | ||||||||
Six Months Ended | ||||||||
October 27, 2018 | October 28, 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 13,180 | $ | 15,561 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 9,300 | 8,902 | ||||||
Gain on sale of property, equipment and other assets | (93 | ) | (1,221 | ) | ||||
Share-based compensation | 1,263 | 1,341 | ||||||
Contingent consideration adjustment | (956 | ) | — | |||||
Equity in loss of affiliate | 265 | 191 | ||||||
Provision for doubtful accounts | 51 | (21 | ) | |||||
Deferred income taxes, net | (85 | ) | 81 | |||||
Change in operating assets and liabilities | (368 | ) | (15,496 | ) | ||||
Net cash provided by operating activities | 22,557 | 9,338 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (9,833 | ) | (7,735 | ) | ||||
Proceeds from sales of property, equipment and other assets | 182 | 2,000 | ||||||
Purchases of marketable securities | (9,209 | ) | — | |||||
Proceeds from sales or maturities of marketable securities | 12,034 | 10,802 | ||||||
Purchases of equity investment | (854 | ) | (607 | ) | ||||
Acquisitions, net of cash acquired | (2,250 | ) | — | |||||
Net cash (used in) provided by investing activities | (9,930 | ) | 4,460 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from exercise of stock options | 57 | 511 | ||||||
Principal payments on long-term obligations | (431 | ) | (1,027 | ) | ||||
Dividends paid | (6,252 | ) | (6,197 | ) | ||||
Tax payments related to RSU issuances | (246 | ) | (311 | ) | ||||
Net cash used in financing activities | (6,872 | ) | (7,024 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 73 | 113 | ||||||
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 5,828 | 6,887 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||||||||
Beginning of period | 29,755 | 32,839 | ||||||
End of period | $ | 35,583 | $ | 39,726 | ||||
Daktronics, Inc. and Subsidiaries Net Sales and Orders by Business Unit (in thousands) (unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
October 27, 2018 | October 28, 2017 | Dollar Change | Percent Change | October 27, 2018 | October 28, 2017 | Dollar Change | Percent Change | ||||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||||||||
Commercial | $ | 46,069 | $ | 34,377 | $ | 11,692 | 34.0 | % | $ | 76,638 | $ | 67,240 | $ | 9,398 | 14.0 | % | |||||||||||||
Live Events | 55,099 | 68,653 | (13,554 | ) | (19.7 | ) | 104,571 | 146,265 | (41,694 | ) | (28.5 | ) | |||||||||||||||||
High School Park and Recreation | 31,580 | 29,660 | 1,920 | 6.5 | 59,700 | 58,139 | 1,561 | 2.7 | |||||||||||||||||||||
Transportation | 18,077 | 16,476 | 1,601 | 9.7 | 35,234 | 35,388 | (154 | ) | (0.4 | ) | |||||||||||||||||||
International | 21,867 | 20,143 | 1,724 | 8.6 | 50,737 | 35,005 | 15,732 | 44.9 | |||||||||||||||||||||
$ | 172,692 | $ | 169,309 | $ | 3,383 | 2.0 | % | $ | 326,880 | $ | 342,037 | $ | (15,157 | ) | (4.4 | )% | |||||||||||||
Orders: | |||||||||||||||||||||||||||||
Commercial | $ | 46,731 | $ | 39,134 | $ | 7,597 | 19.4 | % | $ | 82,523 | $ | 69,071 | $ | 13,452 | 19.5 | % | |||||||||||||
Live Events | 43,641 | 43,730 | (89 | ) | (0.2 | ) | 83,036 | 105,335 | (22,299 | ) | (21.2 | ) | |||||||||||||||||
High School Park and Recreation | 18,445 | 14,737 | 3,708 | 25.2 | 56,894 | 46,917 | 9,977 | 21.3 | |||||||||||||||||||||
Transportation | 21,279 | 14,245 | 7,034 | 49.4 | 43,195 | 23,514 | 19,681 | 83.7 | |||||||||||||||||||||
International | 21,260 | 30,414 | (9,154 | ) | (30.1 | ) | 45,318 | 50,504 | (5,186 | ) | (10.3 | ) | |||||||||||||||||
$ | 151,356 | $ | 142,260 | $ | 9,096 | 6.4 | % | $ | 310,966 | $ | 295,341 | $ | 15,625 | 5.3 | % | ||||||||||||||
Reconciliation of Free Cash Flow* (in thousands) (unaudited) | |||||||
Six Months Ended | |||||||
October 27, 2018 | October 28, 2017 | ||||||
Net cash provided by operating activities | $ | 22,557 | $ | 9,338 | |||
Purchases of property and equipment | (9,833 | ) | (7,735 | ) | |||
Proceeds from sales of property and equipment | 182 | 2,000 | |||||
Free cash flow | $ | 12,906 | $ | 3,603 | |||
*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.