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, 2019
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, 2019 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and nine months ended January 26, 2019 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: | February 20, 2019 | |
EXHIBIT INDEX
Daktronics, Inc. Announces Third Quarter Fiscal 2019 Results
Brookings, S.D. – February 20, 2019 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2019 third quarter net sales of $115.1 million, operating loss of $7.5 million, and net loss of $3.3 million, or $0.07 per diluted share, compared to 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, for the third quarter of fiscal 2018. Fiscal 2019 third quarter orders were $135.4 million, compared to $126.2 million for the third quarter of fiscal 2018. Product order backlog at the end of the fiscal 2019 third quarter was $168 million, compared to a backlog of $151 million a year earlier and $150 million at the end of the second quarter of fiscal 2019.(1)
Net sales, operating income, net income, and earnings per share for the nine months ended January 26, 2019, were $441.9 million, $5.5 million, $9.9 million, and $0.22 per diluted share, respectively. This compares to $472.4 million, $17.8 million, $9.4 million, and $0.21 per diluted share, respectively, for the same period in fiscal 2018.
Cash provided by operating activities in the first nine months of fiscal 2019 was $32.2 million, compared with cash provided by operating activities of $27.0 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 $18.4 million for the first nine months of fiscal 2019, as compared to a positive free cash flow of $18.2 million for the same period of fiscal 2018. Net investment in property and equipment was $13.8 million for the first nine months of fiscal 2019, as compared to $8.8 million for the first nine months of fiscal 2018. Cash, restricted cash, and marketable securities at the end of the third quarter of fiscal 2019 were $70.9 million, which compares to $73.0 million at the end of the third quarter of fiscal 2018 and $64.3 million at the end of fiscal 2018.
Orders for the third quarter of fiscal 2019 increased 7.4 percent as compared to the third quarter of fiscal 2018. Orders increased in the Commercial, Live Events, and High School Park and Recreation business units, and decreased in the Transportation and International business units.
Net sales decreased by 11.7 percent in the third quarter of fiscal 2019 as compared to the third quarter of fiscal 2018. Net sales increased in the Commercial, High School Park and Recreation, and Transportation business units, and decreased in the Live Events and International business units. The increase in High School Park and Recreation business unit was primarily due to increased shipments of customized scoring systems and message centers as a result of increased market activity and the timing of customer demand. Transportation sales increased primarily due to the variability of large order production timing caused by customer project schedules and an increase in demand for intelligent transportation systems. Live Events sales decreased primarily due to the decrease of orders on a year to date basis. International sales decreased as we had completed a number of Out-of-Home projects in the third quarter of fiscal 2018, with no similar sized projects in the third quarter of fiscal 2019.
Gross profit, as a percentage of net sales, decreased to 21.6 percent for the third quarter of fiscal 2019 as compared to 21.9 percent a year earlier. Warranty as a percent of sales for the quarter decreased to 1.6 percent as compared to the third quarter of fiscal 2018 warranty as a percent of sales of 2.9 percent. Operating expenses for the third quarter of fiscal 2019 were $32.4 million, compared to $31.9 million for the third quarter of fiscal 2018. Operating loss as a percent of sales for the quarter decreased to 6.5 percent as compared to the third quarter of fiscal 2018 operating loss of 2.6 percent. The tax benefit of $4.1 million for the third quarter of fiscal 2019 is primarily the result of the release of $2.8 million in unrecognized tax benefits related to a lapse of statute and the release of $0.5 million for a valuation allowance reversal related to foreign net operating loss carryforwards. During the third quarter of fiscal 2018, we accounted for the revaluation of our deferred tax benefits due to the enactment of new U.S. tax laws creating a charge of $3.7 million.
Reece Kurtenbach, chairman, president and chief executive officer stated, “Our 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 in the quarter. We control costs where we can during this period; however, much of our costs are fixed in nature not allowing for large changes in expense structure during the quarter. In addition, we had approximately $1.8 million of expenses for discrete project and litigation claims contributing to the quarter’s operating loss. Our order bookings remain strong for the quarter and are up for the year. Commercial orders for the quarter and year-to-date are up nicely for demand for spectacular and out-of-home solutions. Live Events for the quarter was up nicely as we booked a large major league baseball order and a number of orders for summer and fall installations. We continued to develop and release new technologies and products including high resolution applications and control system offerings.
Outlook
Kurtenbach added, “We remain optimistic about our long-term outlook. Our innovative product and technology portfolio positions us to capitalize on the growing market demand for digital canvases. The current global tariff and trade environment has created cost headwinds on commodity and components used in the production of our solutions. However, over the long-term, we believe the situation will stabilize and we will continue to work to minimize the impact. Our teams continue to develop 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 | Nine Months Ended | |||||||||||||||
January 26, 2019 | January 27, 2018 | January 26, 2019 | January 27, 2018 | |||||||||||||
Net sales | $ | 115,069 | $ | 130,316 | $ | 441,949 | $ | 472,353 | ||||||||
Cost of sales | 90,200 | 101,749 | 336,076 | 356,536 | ||||||||||||
Gross profit | 24,869 | 28,567 | 105,873 | 115,817 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling | 15,537 | 15,271 | 48,040 | 45,560 | ||||||||||||
General and administrative | 8,574 | 8,335 | 25,685 | 26,138 | ||||||||||||
Product design and development | 8,280 | 8,299 | 26,611 | 26,294 | ||||||||||||
32,391 | 31,905 | 100,336 | 97,992 | |||||||||||||
Operating (loss) income | (7,522 | ) | (3,338 | ) | 5,537 | 17,825 | ||||||||||
Nonoperating income (expense): | ||||||||||||||||
Interest income | 328 | 158 | 713 | 520 | ||||||||||||
Interest expense | (45 | ) | (40 | ) | (86 | ) | (173 | ) | ||||||||
Other (expense) income, net | (203 | ) | (487 | ) | (423 | ) | (429 | ) | ||||||||
(Loss) income before income taxes | (7,442 | ) | (3,707 | ) | 5,741 | 17,743 | ||||||||||
Income tax (benefit) expense | (4,123 | ) | 2,482 | (4,120 | ) | 8,371 | ||||||||||
Net (loss) income | $ | (3,319 | ) | $ | (6,189 | ) | $ | 9,861 | $ | 9,372 | ||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 45,018 | 44,518 | 44,834 | 44,403 | ||||||||||||
Diluted | 45,018 | 44,518 | 45,139 | 44,798 | ||||||||||||
(Loss) earnings per share: | ||||||||||||||||
Basic | $ | (0.07 | ) | $ | (0.14 | ) | $ | 0.22 | $ | 0.21 | ||||||
Diluted | $ | (0.07 | ) | $ | (0.14 | ) | $ | 0.22 | $ | 0.21 | ||||||
Cash dividends declared per share | $ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 | ||||||||
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands) | |||||||
January 26, 2019 | April 28, 2018 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 33,281 | $ | 29,727 | |||
Restricted cash | 26 | 28 | |||||
Marketable securities | 37,596 | 34,522 | |||||
Accounts receivable, net | 77,743 | 77,387 | |||||
Inventories | 72,187 | 75,335 | |||||
Contract assets | 26,542 | 30,968 | |||||
Current maturities of long-term receivables | 1,998 | 1,752 | |||||
Prepaid expenses and other current assets | 7,566 | 9,029 | |||||
Income tax receivables | 5,772 | 5,385 | |||||
Property and equipment and other assets available for sale | 1,893 | — | |||||
Total current assets | 264,604 | 264,133 | |||||
Property and equipment, net | 65,765 | 68,059 | |||||
Long-term receivables, less current maturities | 1,247 | 1,641 | |||||
Goodwill | 7,968 | 8,264 | |||||
Intangibles, net | 5,429 | 3,682 | |||||
Investment in affiliates and other assets | 5,422 | 5,091 | |||||
Deferred income taxes | 8,317 | 7,930 | |||||
Total non-current assets | 94,148 | 94,667 | |||||
TOTAL ASSETS | $ | 358,752 | $ | 358,800 | |||
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands) | |||||||
January 26, 2019 | April 28, 2018 | ||||||
(unaudited) | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 35,117 | $ | 48,845 | |||
Contract liabilities | 48,745 | 39,379 | |||||
Accrued expenses | 30,784 | 27,445 | |||||
Warranty obligations | 11,283 | 13,891 | |||||
Current portion of other long-term obligations | 1,199 | 1,088 | |||||
Income taxes payable | 1,894 | 660 | |||||
Total current liabilities | 129,022 | 131,308 | |||||
Long-term warranty obligations | 15,370 | 16,062 | |||||
Long-term contract liabilities | 9,814 | 7,475 | |||||
Other long-term obligations, less current portion | 1,955 | 2,285 | |||||
Long-term income taxes payable | 843 | 3,440 | |||||
Deferred income taxes | 597 | 614 | |||||
Total long-term liabilities | 28,579 | 29,876 | |||||
TOTAL LIABILITIES | 157,601 | 161,184 | |||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock | 57,699 | 54,731 | |||||
Additional paid-in capital | 41,949 | 40,328 | |||||
Retained earnings | 107,563 | 107,105 | |||||
Treasury stock, at cost | (1,834 | ) | (1,834 | ) | |||
Accumulated other comprehensive loss | (4,226 | ) | (2,714 | ) | |||
TOTAL SHAREHOLDERS' EQUITY | 201,151 | 197,616 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 358,752 | $ | 358,800 | |||
Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) | ||||||||
Nine Months Ended | ||||||||
January 26, 2019 | January 27, 2018 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 9,861 | $ | 9,372 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 14,054 | 13,335 | ||||||
Gain on sale of property, equipment and other assets | (130 | ) | (1,211 | ) | ||||
Share-based compensation | 1,867 | 1,978 | ||||||
Contingent consideration adjustment | (956 | ) | — | |||||
Equity in loss of affiliate | 392 | 401 | ||||||
Provision for doubtful accounts | 180 | (55 | ) | |||||
Deferred income taxes, net | (445 | ) | 3,429 | |||||
Change in operating assets and liabilities | 7,364 | (296 | ) | |||||
Net cash provided by operating activities | 32,187 | 26,953 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (14,081 | ) | (10,865 | ) | ||||
Proceeds from sales of property, equipment and other assets | 255 | 2,107 | ||||||
Purchases of marketable securities | (25,337 | ) | (5,211 | ) | ||||
Proceeds from sales or maturities of marketable securities | 22,341 | 13,751 | ||||||
Purchases of equity investment | (854 | ) | (1,027 | ) | ||||
Acquisitions, net of cash acquired | (2,250 | ) | — | |||||
Net cash used in investing activities | (19,926 | ) | (1,245 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from exercise of stock options | 1,318 | 514 | ||||||
Principal payments on long-term obligations | (440 | ) | (1,036 | ) | ||||
Dividends paid | (9,403 | ) | (9,311 | ) | ||||
Tax payments related to RSU issuances | (246 | ) | (311 | ) | ||||
Net cash used in financing activities | (8,771 | ) | (10,144 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 62 | 667 | ||||||
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 3,552 | 16,231 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||||||||
Beginning of period | 29,755 | 32,839 | ||||||
End of period | $ | 33,307 | $ | 49,070 | ||||
Daktronics, Inc. and Subsidiaries Net Sales and Orders by Business Unit (in thousands) (unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
January 26, 2019 | January 27, 2018 | Dollar Change | Percent Change | January 26, 2019 | January 27, 2018 | Dollar Change | Percent Change | ||||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||||||||
Commercial | $ | 37,159 | $ | 35,483 | $ | 1,676 | 4.7 | % | $ | 113,797 | $ | 102,723 | $ | 11,074 | 10.8 | % | |||||||||||||
Live Events | 29,995 | 45,167 | (15,172 | ) | (33.6 | ) | 134,566 | 191,432 | (56,866 | ) | (29.7 | ) | |||||||||||||||||
High School Park and Recreation | 14,798 | 11,463 | 3,335 | 29.1 | 74,498 | 69,602 | 4,896 | 7.0 | |||||||||||||||||||||
Transportation | 15,390 | 11,189 | 4,201 | 37.5 | 50,624 | 46,577 | 4,047 | 8.7 | |||||||||||||||||||||
International | 17,727 | 27,014 | (9,287 | ) | (34.4 | ) | 68,464 | 62,019 | 6,445 | 10.4 | |||||||||||||||||||
$ | 115,069 | $ | 130,316 | $ | (15,247 | ) | (11.7 | )% | $ | 441,949 | $ | 472,353 | $ | (30,404 | ) | (6.4 | )% | ||||||||||||
Orders: | |||||||||||||||||||||||||||||
Commercial | $ | 41,114 | $ | 28,745 | $ | 12,369 | 43.0 | % | $ | 123,637 | $ | 97,816 | $ | 25,821 | 26.4 | % | |||||||||||||
Live Events | 45,767 | 39,911 | 5,856 | 14.7 | 128,803 | 145,246 | (16,443 | ) | (11.3 | ) | |||||||||||||||||||
High School Park and Recreation | 17,034 | 13,451 | 3,583 | 26.6 | 73,928 | 60,368 | 13,560 | 22.5 | |||||||||||||||||||||
Transportation | 11,541 | 14,641 | (3,100 | ) | (21.2 | ) | 54,736 | 38,155 | 16,581 | 43.5 | |||||||||||||||||||
International | 19,973 | 29,405 | (9,432 | ) | (32.1 | ) | 65,291 | 79,909 | (14,618 | ) | (18.3 | ) | |||||||||||||||||
$ | 135,429 | $ | 126,153 | $ | 9,276 | 7.4 | % | $ | 446,395 | $ | 421,494 | $ | 24,901 | 5.9 | % | ||||||||||||||
Reconciliation of Free Cash Flow* (in thousands) (unaudited) | |||||||
Nine Months Ended | |||||||
January 26, 2019 | January 27, 2018 | ||||||
Net cash provided by operating activities | $ | 32,187 | $ | 26,953 | |||
Purchases of property and equipment | (14,081 | ) | (10,865 | ) | |||
Proceeds from sales of property and equipment | 255 | 2,107 | |||||
Free cash flow | $ | 18,361 | $ | 18,195 | |||
*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.