Daktronics, Inc. Announces Second Quarter Fiscal 2010 Results
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* Net sales and net income decline 32% and 60%, respectively, compared
to fiscal 2009 second quarter
* Free cash flow of $23 million generated year-to-date
* Operating margin of 8% on better-than-expected gross profit and lower
operating costs
BROOKINGS, S.D., Nov. 24, 2009 (GLOBE NEWSWIRE) -- Daktronics, Inc. (Nasdaq:DAKT) today reported fiscal 2010 second quarter net sales of $115.4 million and net income of $4.8 million, or $0.12 per diluted share, compared to net sales of $169.7 million and net income of $12.2 million, or $0.30 per diluted share, for the second quarter of fiscal 2009. Backlog at the end of the fiscal 2010 second quarter was approximately $90 million, compared with a backlog of approximately $134 million a year earlier and $113 million at the end of the first quarter of fiscal 2010.
Net sales, net income and earnings per share for the six months ended October 31, 2009 were $228.8 million, $6.3 million and $0.15 per diluted share, respectively. This compares to $330.9 million, $21.9 million and $0.53 per diluted share, respectively, for the same period in fiscal 2009.
As previously announced, the first quarter of fiscal 2010 contained the customary 13 weeks as compared to the first quarter of fiscal 2009, which contained 14 weeks. As a result, fiscal 2009 contained 53 weeks as compared to 52 weeks for fiscal 2010.
"Our second quarter is typically our strongest quarter for revenue and our lightest quarter for orders due to the seasonality of the sports business. This seasonality, along with the impact of the holiday season, makes the third quarter typically the weakest quarter for revenue," said Jim Morgan, president and chief executive officer. "In our Live Events business unit, it appears that some of the larger baseball orders we had some optimism on one quarter ago may be pushed out or not happen, but that could still change. The Live Events business is characterized by large transactions that can cause swings in quarterly bookings. On the positive side, we recently announced a contract to provide display systems for the new Amway Center, home of the NBA's Orlando Magic. This will be a showcase for our technology and capabilities, demonstrating our industry leadership in successfully designing, building, and servicing large, sophisticated display systems. The scope and magnitude of the project are also indicative of the continuing interest of sports venues in having a 'wow factor' in their display systems, and the resulting increase in transaction sizes."
Morgan continued, "Our International business unit orders were up nicely over the first quarter of fiscal 2010. Included in orders for the second quarter of fiscal 2010 was a notable project in excess of $3 million for an NBA style arena in Guangzhau, China. Our international pipeline has improved in the first half of fiscal 2010, and we are expecting the improvements in the International business unit to continue. However, like Live Events, our International business is subject to fluctuations due to the timing of large orders. Orders in our Schools and Theatres business unit for the second quarter of fiscal 2010 were up 32 percent over the same quarter of fiscal 2009, which we attribute to shorter lead times for our display products and increased traction in our Vortek hoists.
"Orders in our Commercial business unit were up slightly over the first quarter of fiscal 2010. We are cautiously optimistic that this trend will continue given what we have in our pipeline. Finally, our Transportation business unit orders are somewhat weaker than expected due to competitive factors and lower levels of opportunities. We are seeing some larger opportunities in the transportation pipeline and are hopeful that we will begin to see a pickup in that market," added Morgan.
Morgan continued, "Because of the seasonality of our markets and the fewer number of working days in our third quarter, we have over the past five fiscal years averaged a decline of approximately 14 percent in third quarter net sales versus second quarter net sales. Due to the level of orders booked in the second quarter of fiscal 2010 and the expected bookings early in the third quarter of fiscal 2010, we expect the sequential decline in the third quarter of fiscal 2010 will be greater than the average of 15 percent."
"We believe that we have been executing well in continuing to drive down our cost infrastructure. This has been a challenging time as we continue to reduce personnel costs and other discretionary spending. We are working to make our cost structure more variable and to streamline internal processes so we can retain more of the cost reductions as we come out of this downturn. A large part of the decrease has been achieved through lower payroll and lower benefit costs. While we believe that the payroll decreases are sustainable, we expect benefit costs to increase on a sequential basis. We continue to focus on reducing our overall cost structure so that when sales expand, we achieve greater leverage to our operating income," said Morgan.
Morgan continued, "We expect the dollars invested in product development to be relatively flat in the third fiscal quarter of 2010 compared to second quarter of fiscal 2010, although our long-term target is to stay between four and five percent of revenue. We are on schedule for the release of our new outdoor video display product, our DVX series, in the fourth quarter. The DVX series offers outstanding image quality with improved manufacturability, increased commonality, improved reliability, and overall improved functionality at a reduced cost. We are very excited about the launch of the DVX series product."
"Our gross profit margins were better than expected as we closed out and completed some of the larger projects. We also saw lower warranty and manufacturing costs," said Bill Retterath, chief financial officer. "Moving into the third and fourth quarter of fiscal 2010, we expect lower gross profit margins resulting from competitive factors and the lower sales levels."
Retterath continued, "We are pleased with our free cash flow levels year-to-date. Free cash flow, defined as cash provided by operations less net purchases of property and equipment, is $23.4 million for the six months ended October 31, 2009, compared to a negative $0.9 million one year ago. This was driven by significantly lower levels of inventory and receivables. This is partly due to a reduced level of business activity, but also to our lean initiatives and improvements in operations, which are ongoing."
Morgan concluded, "I want to take this opportunity to thank all of our employees for their efforts in these challenging times. We have a great team here at Daktronics, and we remain diligent in our efforts to come out of this downturn much stronger, financially and operationally, than when we entered the downturn. We continue to aggressively pursue orders, cost reduction opportunities, and product and market development initiatives, with the overall objectives of maximizing long-term cash flow and being positioned to realize operating margin leverage when the economy stabilizes."
Webcast Information
The company will host a conference call and webcast to discuss its financial results today at 10:00 am (Central Time). 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 Sport, Business, Schools and Theatres and Transportation segments. For more information, visit the company's World Wide Web site at: http://www.daktronics.com, e-mail 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., PO Box 5128 Brookings, S.D. 57006-5128.
The Daktronics logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5476
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 expectation, including, but not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts, and other risks noted in the company's SEC filings, including its Annual Report on Form 10-K for its 2009 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.
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
-------------------- --------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
2009 2008 2009 2008
--------- --------- --------- ---------
Net Sales $ 115,362 $ 169,697 $ 228,815 $ 330,926
Cost of goods sold 81,800 121,486 165,183 237,367
--------- --------- --------- ---------
Gross profit 33,562 48,211 63,632 93,559
--------- --------- --------- ---------
Operating expenses:
Selling 12,888 15,526 27,255 31,890
General and
administrative 5,959 7,554 12,493 15,236
Product design and
development 5,534 5,286 11,404 11,833
--------- --------- --------- ---------
24,381 28,366 51,152 58,959
--------- --------- --------- ---------
Operating income 9,181 19,845 12,480 34,600
--------- --------- --------- ---------
Nonoperating income
(expense):
Interest income 379 511 753 1,047
Interest expense (63) (57) (110) (164)
Other income
(expense), net (711) (1,334) (1,313) (1,679)
--------- --------- --------- ---------
Income before
income taxes 8,786 18,965 11,810 33,804
Income tax expense 3,937 6,768 5,529 11,881
--------- --------- --------- ---------
Net income $ 4,849 $ 12,197 $ 6,281 $ 21,923
========= ========= ========= =========
Weighted average
shares outstanding
Basic 40,831 40,478 40,795 40,440
--------- --------- --------- ---------
Diluted 41,002 41,221 41,106 41,286
Earnings per share:
Basic $ 0.12 $ 0.30 $ 0.15 $ 0.54
--------- --------- --------- ---------
Diluted $ 0.12 $ 0.30 $ 0.15 $ 0.53
========= ========= ========= =========
Cash dividend paid
per share $ -- $ -- $ 0.095 $ 0.090
========= ========= ========= =========
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
October 31,
2009 May 2,
(unaudited) 2009
---------- ----------
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted cash $ 57,755 $ 37,584
Accounts receivable, less allowance for
doubtful accounts 48,517 61,412
Inventories 41,946 51,400
Costs and estimated earnings in excess
of billings 25,525 27,541
Current maturities on long-term receivables 6,673 7,962
Prepaid expenses and other 5,681 5,587
Deferred income taxes 15,283 15,017
Income tax receivable 324 --
Property and equipment available for sale 250 470
---------- ----------
Total current assets 201,954 206,973
---------- ----------
Advertising rights, net 1,688 2,392
Long-term receivables, less current maturities 14,009 15,879
Investments in affiliates 430 2,541
Goodwill 4,658 4,549
Intangible and other assets 4,212 2,804
Deferred income taxes 391 311
---------- ----------
25,388 28,476
---------- ----------
PROPERTY AND EQUIPMENT:
Land 1,204 1,204
Buildings 50,918 50,810
Machinery and equipment 52,324 50,013
Office furniture and equipment 53,266 52,369
Equipment held for rental 2,695 2,423
Demonstration equipment 8,780 8,021
Transportation equipment 4,662 5,115
---------- ----------
173,849 169,955
Less accumulated depreciation 90,403 80,528
---------- ----------
83,446 89,427
---------- ----------
TOTAL ASSETS $ 310,788 $ 324,876
========== ==========
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
October 31,
2009 May 2,
(unaudited) 2009
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,541 $ 30,273
Accrued expenses and warranty obligations 32,023 35,548
Current maturities of long-term debt and
marketing obligations 479 367
Billings in excess of costs and
estimated earnings 8,537 13,769
Customer deposits 10,427 10,007
Deferred revenue (billed or collected) 7,061 6,669
Income taxes payable 422 2,935
---------- ----------
Total current liabilities 80,490 99,568
---------- ----------
Long-term debt, less current maturities 13 23
Long-term marketing obligations,
less current maturities 538 759
Long-term warranty obligations,
less current maturities 4,324 4,805
Deferred income taxes 4,996 4,948
Long-term deferred revenue
(billed or collected) 3,348 2,862
---------- ----------
Total long-term liabilities 13,219 13,397
---------- ----------
TOTAL LIABILITIES 93,709 112,965
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock 28,943 27,872
Additional paid-in capital 15,610 13,898
Retained earnings 173,113 170,705
Treasury stock, at cost (9) (9)
Accumulated other comprehensive loss (578) (555)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 217,079 211,911
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 310,788 $ 324,876
========== ==========
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
----------------------
October 31, November 1,
2009 2008
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,281 $ 21,923
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 11,123 11,872
Amortization 157 157
Gain on sale of property and equipment (26) (977)
Stock-based compensation 1,712 1,594
Equity in losses of affiliate 1,347 1,266
Provision for doubtful accounts (269) 69
Loss on sale of equity investee 231 --
Deferred income taxes, net (299) (191)
Net change in operating assets
and liabilities 9,400 (20,021)
---------- ----------
Net cash provided by operating activities 29,657 15,692
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,247) (16,569)
Loans to equity investees -- (500)
Purchase of receivables from
equity investee, net (306) --
Proceeds from sale of property and equipment 104 2,947
Proceeds from sale of equity
method investments 535 --
---------- ----------
Net cash used in investing activities (5,914) (14,122)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on notes payable (13) (546)
Proceeds from exercise of stock options 207 578
Excess tax benefits from stock-based
compensation -- 159
Dividend paid (3,874) (3,635)
---------- ----------
Net cash used in financing activities (3,680) (3,444)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (201) 237
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 19,862 (1,637)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 36,501 9,325
---------- ----------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 56,363 $ 7,688
========== ==========
Daktronics, Inc. and Subsidiaries
Sales and Orders By Market
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
-------------------- --------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
2009 2008 2009 2008
--------- --------- --------- ---------
Net Sales
Commercial $ 24,873 $ 47,794 $ 48,108 $ 96,184
Live Events 48,949 78,403 102,844 141,491
Schools & Theatres 18,766 22,680 37,200 39,661
Transportation 10,590 8,727 23,220 18,299
International 12,184 12,093 17,443 35,291
--------- --------- --------- ---------
Total Net Sales $ 115,362 $ 169,697 $ 228,815 $ 330,926
========= ========= ========= =========
Orders
Commercial $ 22,546 $ 38,962 $ 43,663 $ 89,672
Live Events 37,102 61,157 81,450 120,322
Schools & Theatres 16,172 12,281 37,796 36,642
Transportation 8,234 7,761 16,070 17,920
International 12,694 11,798 23,708 24,673
--------- --------- --------- ---------
Total Orders $ 96,748 $ 131,959 $ 202,687 $ 289,229
========= ========= ========= =========
CONTACT: Daktronics, Inc.
INVESTOR RELATIONS:
Bill Retterath, Chief Financial Officer
(605) 692-0200
Investor@daktronics.com
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