Daktronics, Inc.
Nov 23, 2010

Daktronics, Inc. Announces Second Quarter Fiscal 2011 Results

BROOKINGS, S.D., Nov. 23, 2010 (GLOBE NEWSWIRE) -- Daktronics, Inc. (Nasdaq:DAKT) today reported fiscal 2011 second quarter net sales of $126.9 million and net income of $7.0 million, or $0.17 per diluted share, compared to net sales of $115.4 million and net income of $4.8 million, or $0.12 per diluted share, for the second quarter of fiscal 2010. Backlog at the end of the 2011 second quarter was approximately $121 million, compared with a backlog of approximately $90 million a year earlier and $144 million at the end of the first quarter of fiscal 2011.

Net sales, net income and earnings per share for the six months ended October 30, 2010 were $227.4 million, $9.5 million and $0.23 per diluted share, respectively. This compares to $228.8 million, $6.3 million and $0.15 per diluted share, respectively, for the same period in fiscal 2010.

Free cash flow, defined as cash provided by operations less net purchases of property and equipment, was $25.2 million in the first half of fiscal 2011, compared to $23.5 million in the first half of fiscal 2010. Cash on hand at the end of the second quarter of fiscal 2011 was $66.8 million.

"We are pleased with the second quarter results," said Jim Morgan, president and chief executive officer. "We entered the quarter with a healthy backlog, and we executed well on that backlog. One of our concerns that we expressed last quarter was that parts shortages might affect our execution during the quarter, but overall our suppliers came through well for us. It was a very busy quarter and I want to thank all of our employees for their dedicated efforts in serving our customers and meeting critical deadlines.

"It is noteworthy that our backlog is significantly larger going into third quarter than it was a year ago," continued Morgan. "Unlike last year, there are projects moving forward in professional baseball for this coming season, and we have had good success to date in winning our share of those projects. The backlog number does not include three contracts for professional baseball facilities totaling more than $10 million that were booked in the third quarter of fiscal 2011. In addition, we have two additional contracts with a combined value of approximately $10 million which are in the contract negotiation phase. Our new DVX video product, along with our new Show Control software front-end, has been very well received in the industry, and we believe it has been a positive factor in these wins."

Morgan added, "Recent communication with our major customers in outdoor advertising, along with their public statements, have reinforced our expectations that our digital billboard business will increase in calendar 2011. Accordingly, we are expecting orders for digital billboards to continue ramping up in third quarter. The market's reception to our Series 4000 digital billboard technology remains very positive. Our transportation business continues with a strong backlog and is performing well. We have started to deliver against the $25 million New Jersey Turnpike procurement contract, which includes approximately $8 million in firm orders.

"Our International business unit had an excellent quarter for orders, with the largest and most noteworthy order being a $10 million display system for a new arena in Mexico City. It will include one of the largest center hung displays in the world and a 686 foot wide architectural lighting display on the exterior of the building. Our pipeline for international opportunities continues to be strong," said Morgan.

"Interest in our architectural lighting technology continues to drive opportunities, including a recently booked order for Target Field, home of the Minnesota Twins. This order includes a 100-foot tower in right field utilizing our ProPixel® LED lighting strips, in addition to an auxiliary video board. We continue to see architectural lighting technology as a new area of growth for our business," continued Morgan. 

"Gross profit percentage came in lower than the first quarter of fiscal 2011 as a result of higher warranty reserves," said Bill Retterath, chief financial officer. "This offset the gains that we achieved on leveraging our fixed costs on higher sales. We expect a decrease in gross margin percent in the third quarter of fiscal 2011 compared to second quarter due to lower revenues and continued pricing pressure."

Morgan concluded, "The third quarter is typically our lowest quarter for revenues for the year, due both to the seasonality of our sports business and the additional holidays in the quarter. With the backlog being significantly higher than it was at this time last fiscal year, we expect net sales will increase significantly in the third quarter of fiscal 2011 compared to the third quarter of last fiscal year. It is great to see baseball showing signs of recovery, and that, along with the increase in commercial and international activity, gives us a positive outlook for the next couple of quarters. Beyond that, our outlook is positive if the economic recovery remains on track. We have ongoing efforts in product development to improve our products while reducing costs to manufacture. Executing on these development efforts will be a key to improving gross profit margins, as the competitive environment remains keen. 

"Our focus continues to be on winning orders to continue to grow the top line, while at the same time continuing to reduce costs by improving our processes across the company, and further reducing the manufactured costs of our products through leveraging a global supply chain and product development initiatives. At the same time, we continue initiatives to improve reliability and quality, maintain a high level of on-time delivery, and strengthen our after-sales service delivery. We will continue to focus on free cash flow, with our priorities for cash being funding operations, including developing new and improved product offerings, expanding markets for existing products, and investing in business process improvement initiatives to create shareholder value over time," said Morgan.

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 four domestic business units: Live Events, Commercial, Schools and Theatres and Transportation and one International business unit. 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 are 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, parts shortages and longer lead times, fluctuations in margins, the introduction of new products and technology, and other risks noted in the company's SEC filings, including its Annual Report on Form 10-K for its 2010 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 Operations 
(in thousands, except per share amounts)
(unaudited)
         
 Three Months EndedSix Months Ended
 October 30,
2010
October 31,
2009
October 30,
2010
 October 31,
2009
         
Net sales $ 126,919 $ 115,362 $ 227,421 $ 228,815
Cost of goods sold  94,102  81,800  168,017  165,183
Gross profit  32,817  33,562  59,404  63,632
         
Operating expenses:        
Selling  12,600  12,888  24,936  27,255
General and administrative  5,624  5,959  11,212  12,493
Product design and development  4,561  5,534  9,114  11,404
   22,785  24,381  45,262  51,152
Operating income  10,032  9,181  14,142  12,480
         
Nonoperating income (expense):        
Interest income  383  379  838  753
Interest expense  (41)  (63)  (77)  (110)
Other income (expense), net  167  (711)  262  (1,313)
         
Income before income taxes  10,541  8,786  15,165  11,810
Income tax expense  3,534  3,937  5,715  5,529
Net income $ 7,007 $ 4,849 $ 9,450 $ 6,281
         
Weighted average shares outstanding:        
Basic  41,387  40,962  41,440  40,926
Diluted  41,647  41,277  41,788  41,239
         
Earnings per share:        
Basic $ 0.17 $ 0.12 $ 0.23 $ 0.15
Diluted $ 0.17 $ 0.12 $ 0.23 $ 0.15
         
Cash dividends paid per share $ 0.50 $ -- $ 0.60 $ 0.095
 
 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets 
(in thousands)
     
 October 30,
2010
(unaudited)
May 1,
2010
ASSETS    
     
CURRENT ASSETS:    
Cash, cash equivalents and restricted cash $ 66,802 $ 64,867
Accounts receivable, less allowance for doubtful accounts  52,744  45,018
Inventories  42,594  35,673
Costs and estimated earnings in excess of billings  24,432  25,233
Current maturities of long-term receivables  5,766  6,232
Prepaid expenses and other  4,635  5,838
Deferred income taxes  12,800  12,578
Income tax receivables  4,574  7,444
Property and equipment available for sale  182  182
Total current assets  214,529  203,065
     
Advertising rights, net  859  1,348
Long-term receivables, less current maturities  14,135  13,458
Goodwill  3,305  3,323
Intangible and other assets  3,093  3,710
Deferred income taxes  63  62
   21,455  21,901
PROPERTY AND EQUIPMENT:    
Land  1,471  1,471
Buildings  55,174  55,353
Machinery and equipment  55,429  54,058
Office furniture and equipment  51,276  53,831
Equipment held for rental  1,056  1,630
Demonstration equipment  8,587  8,969
Transportation equipment  3,577  4,256
   176,570  179,568
Less accumulated depreciation  102,933  98,683
   73,637  80,885
TOTAL ASSETS $ 309,621 $ 305,851
 
 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued) 
(in thousands)
     
 October 30,
2010
(unaudited)
May 1,
2010
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
CURRENT LIABILITIES:    
Accounts payable $ 27,902 $ 23,149
Accrued expenses and warranty obligations  37,886  33,443
Current maturities of long-term debt and marketing obligations  407  322
Billings in excess of costs and estimated earnings   14,145  13,105
Customer deposits  10,981  9,348
Deferred revenue (billed or collected)  7,773  7,766
Income taxes payable  723  361
Total current liabilities  99,817  87,494
     
Long-term marketing obligations, less current maturities  568  600
Long-term warranty obligations and other payables  4,181  4,229
Deferred income taxes  2,667  2,167
Long-term deferred revenue (billed or collected)  7,530  4,308
Total long-term liabilities  14,946  11,304
TOTAL LIABILITIES  114,763  98,798
     
SHAREHOLDERS' EQUITY:    
Common stock  31,310  29,936
Additional paid-in capital  19,493  17,731
Retained earnings  144,499  159,842
Treasury stock, at cost  (9)  (9)
Accumulated other comprehensive loss  (435)  (447)
TOTAL SHAREHOLDERS' EQUITY  194,858  207,053
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 309,621 $ 305,851
 
 
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows 
(in thousands)
(unaudited)
     
 Six Months Ended
 October 30,
2010
October 31,
2009
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net Income $ 9,450 $ 6,281
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation  9,777  11,123
Amortization  152  157
Loss on sale of equity investee  --  231
(Gain)/loss on sale of property and equipment  33  (26)
Stock-based compensation  1,733  1,712
Equity in losses of affiliate  36  1,347
Provision for doubtful accounts  249  (269)
Deferred income taxes, net  278  (299)
Change in operating assets and liabilities  6,426  9,400
Net cash provided by operating activities  28,134  29,657
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment  (3,195)  (6,247)
(Loans)/repayments to/from related parties of equity investees, net  (36)  --
(Purchase)/receipts of receivables from equity investees, net  518  (306)
Proceeds from insurance recoveries of property and equipment  114  --
Proceeds from sale of equity method investments  --  535
Proceeds from sale of property and equipment  168  104
Net cash used in investing activities  (2,431)  (5,914)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Principal payments on long-term debt  (14)  (13)
Proceeds from exercise of stock options  660  207
Excess tax benefits from stock-based compensation  30  --
Dividend paid  (24,794)  (3,874)
Net cash used in financing activities  (24,118)  (3,680)
     
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS  1  (201)
     
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  1,586  19,862
     
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD  63,603  36,501
     
CASH AND CASH EQUIVALENTS END OF PERIOD $ 65,189 $ 56,363
 
 
Daktronics, Inc. and Subsidiaries
Net Sales and Orders By Business Unit
(in thousands)
(unaudited)
         
 Three Months EndedSix Months Ended
  October 30,
2010
October 31,
2009
October 30,
2010
 October 31,
2009
Net Sales        
Commercial $ 31,879 $ 24,873 $ 55,010 $ 48,108
Live Events  44,025  48,949  84,708  102,844
Schools & Theatres  21,351  18,766  37,999  37,200
Transportation  11,482  10,590  19,028  23,220
International  18,182  12,184  30,676  17,443
Total Net Sales $ 126,919 $ 115,362 $ 227,421 $ 228,815
         
Orders        
Commercial $ 25,666 $ 22,546 $ 58,712 $ 43,663
Live Events  26,864  37,102  64,000  81,450
Schools & Theatres  14,030  16,172  35,602  37,796
Transportation  9,408  8,234  21,036  16,070
International  26,211  12,694  39,691  23,708
Total Orders $ 102,179 $ 96,748 $ 219,041 $ 202,687
CONTACT:  Daktronics

          Investor Relations:

          Bill Retterath, Chief Financial Officer

          (605) 692-0200 

          Investor@daktronics.com