Daktronics, Inc.
DAKTRONICS INC /SD/ (Form: 8-K, Received: 11/21/2017 13:26:09)



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, 2017

DAKLOGOA05A09.JPG

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, 2017 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and six months ended October 28, 2017 of fiscal 2018 .  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 November 21, 2017 issued by Registrant regarding second quarter fiscal 2018 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:
November 21, 2017
 
 
 
 





EXHIBIT INDEX

Exhibit No.
Description
 
 






DAKLOGOA05A09.JPG
Daktronics, Inc. Announces Second Quarter Fiscal 2018 Results

Brookings, S.D. – November 21, 2017 - Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2018 second quarter 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, compared to net sales of $170.0 million , operating income of $12.7 million , and net income of $9.0 million , or $0.20 per diluted share, for the second quarter of fiscal 2017 Fiscal 2018 second quarter orders were $142.3 million , compared to $116.9 million for the second quarter of fiscal 2017 . Backlog at the end of the fiscal 2018 second quarter was $155 million , compared to a backlog of $142 million a year earlier and $184 million at the end of the first quarter of fiscal 2018 . (1)
  
Net sales, operating income, net income, and earnings per share for the six months ended October 28, 2017, were $342.0 million , $21.2 million , $15.6 million , and $0.35 per diluted share, respectively. This compares to $327.1 million , $20.6 million , $14.6 million , and $0.33 per diluted share, respectively, for the same period in fiscal 2017.

Cash provided by operating activities in the first six months of fiscal 2018 was $9.3 million , compared with cash provided by operating activities of $15.0 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 $3.6 million for the first six months of fiscal 2018 , as compared to a positive free cash flow of $10.5 million for the same period of fiscal 2017 . Net investment in property and equipment was $5.7 million for the first six months of fiscal 2018 , as compared to $4.6 million for the first six months of fiscal 2017 . Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2018 were $61.5 million , which compares to $52.2 million at the end of the second quarter of fiscal 2017 and $65.6 million at the end of fiscal 2017 .

Orders for the second quarter of fiscal 2018 increased 21.7 percent as compared to the second quarter of fiscal 2017. Orders increased in the Commercial, Live Events and International business units and decreased in the High School Park and Recreation and Transportation business units. The timing of orders for large projects varies according to the needs of the customer and contributed to the increase in order volume.

Net sales were similar for the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017. Net sales increased in the Live Events business unit, decreased in the Commercial and International business units, and remained relatively flat in the High School Park and Recreation and Transportation business units. The increase in Live Events business unit was due to continued demand for upgraded or new solutions throughout venues for professional sports and colleges and universities. The decrease in the Commercial business unit was primarily due to lower order volumes in our on-premise and spectacular niches. The decline in net sales in the International business unit was primarily due to variability of project schedules.

Other financial comparables include, gross profit, as a percentage of net sales, was 25.2 percent for the second quarter of fiscal 2018 as compared to 26.1 percent a year earlier. The decrease in gross profit percentage was primarily due to an increase in warranty charges. Operating expenses for the second quarter of 2018 was $33.2 million, compared to $31.6 million for the second quarter of fiscal 2017. The increase in total operating expenses was primarily attributable to an increase in product development activities. Operating income as a percent of sales for the quarter decreased to 5.6 percent as compared to the second quarter of fiscal 2017 operating income of 7.5 percent.

Reece Kurtenbach, chairman, president and chief executive officer stated, “We capitalized on the strong backlog and pipeline of order opportunities coming into the second quarter of fiscal 2018. The second quarter is traditionally one of our busiest quarters. We were able to work through our backlog with a smooth flow through our factories, which facilitated successful on-site installations and commissioning of systems. We were pleased with our second quarter sales and operational performance; however, profitability levels were impacted by an increase in warranty and maintenance agreement expenses. During the quarter, we chose to provide additional coverage on product defects related to the issues previously discussed in fiscal 2016. As expected, operating margin was impacted due to the planned increase in product development expenses for activities to accelerate the release of new and enhanced customer solutions. Orders increased during the quarter as compared to a year earlier is not unusual due to the lumpy nature of our business. Projects in major league baseball stadiums and the billboard niche contributed to this increase.”

Outlook
Kurtenbach added, “We remain optimistic about the continued growth in the video display business over the long-term. The use of digital canvases remains a cost viable method for businesses and organizations to entertain and inform audiences of their messages and brands. To serve these businesses, we invest in developing solutions and services to help our customers achieve their goals while managing the business for 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 2017 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 amount s. 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 29, 2017.




Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
October 28,
2017
 
October 29,
2016
 
October 28,
2017
 
October 29,
2016
 
 
 
 
 
 
 
 
 
Net sales
 
$
169,309

 
$
169,992

 
$
342,037

 
$
327,138

Cost of goods sold
 
126,705

 
125,684

 
254,787

 
243,763

Gross profit
 
42,604

 
44,308

 
87,250

 
83,375

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 

 
 

Selling expense
 
15,350

 
15,891

 
30,289

 
31,150

General and administrative
 
8,868

 
8,625

 
17,803

 
17,408

Product design and development
 
8,948

 
7,126

 
17,995

 
14,169

 
 
33,166

 
31,642

 
66,087

 
62,727

Operating income
 
9,438

 
12,666

 
21,163

 
20,648

 
 
 
 
 
 
 
 
 
Nonoperating income (expense):
 
 

 
 

 
 

 
 

Interest income
 
151

 
171

 
362

 
376

Interest expense
 
(47
)
 
(76
)
 
(133
)
 
(118
)
Other (expense) income, net
 
(87
)
 
149

 
58

 
55

 
 

 


 


 


Income before income taxes
 
9,455

 
12,910

 
21,450

 
20,961

Income tax expense
 
2,323

 
3,889

 
5,889

 
6,401

Net income
 
$
7,132

 
$
9,021

 
$
15,561

 
$
14,560

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
44,412

 
43,988

 
44,345

 
44,051

Diluted
 
44,679

 
44,098

 
44,696

 
44,168

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 

 
 

 
 

 
 

Basic
 
$
0.16

 
$
0.21

 
$
0.35

 
$
0.33

Diluted
 
$
0.16

 
$
0.20

 
$
0.35

 
$
0.33

 
 
 
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.07

 
$
0.07

 
$
0.14

 
$
0.17




















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

 
October 28,
2017
 
April 29,
2017
 
(unaudited)
 
 
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
39,699

 
$
32,623

Restricted cash
27

 
216

Marketable securities
21,787

 
32,713

Accounts receivable, net
108,719

 
78,846

Inventories, net
70,436

 
66,486

Costs and estimated earnings in excess of billings
31,302

 
36,403

Current maturities of long-term receivables
1,964

 
2,274

Prepaid expenses and other assets
7,566

 
7,553

Income tax receivables
1,725

 
611

Total current assets
283,225

 
257,725

 
 
 
 
Long-term receivables, less current maturities
2,208

 
2,616

Goodwill
8,190

 
7,812

Intangibles, net
4,338

 
4,705

Investment in affiliates and other assets
4,730

 
4,534

Deferred income taxes
11,287

 
11,292

 
30,753

 
30,959

PROPERTY AND EQUIPMENT:
 

 
 

Land
2,134

 
2,099

Buildings
66,863

 
65,935

Machinery and equipment
86,875

 
84,189

Office furniture and equipment
5,642

 
5,604

Computer software and hardware
53,316

 
51,523

Equipment held for rental
287

 
374

Demonstration equipment
7,143

 
7,109

Transportation equipment
7,508

 
7,108

 
229,768

 
223,941

Less accumulated depreciation
164,549

 
157,192

 
65,219

 
66,749

TOTAL ASSETS
$
379,197

 
$
355,433

 
 
 
 









Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets  (continued)
(in thousands)
 
October 28,
2017
 
April 29,
2017
 
(unaudited)
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 

Accounts payable
$
49,005

 
$
51,499

Accrued expenses
27,399

 
25,033

Warranty obligations
15,400

 
13,578

Billings in excess of costs and estimated earnings
16,561

 
10,897

Customer deposits (billed or collected)
14,349

 
14,498

Deferred revenue (billed or collected)
14,046

 
12,137

Current portion of other long-term obligations
913

 
1,409

Income taxes payable
1,334

 
1,544

Total current liabilities
139,007

 
130,595

 
 
 
 
Long-term warranty obligations
15,740

 
14,321

Long-term deferred revenue (billed or collected)
6,835

 
5,434

Other long-term obligations
2,333

 
2,848

Long-term income tax payable
3,306

 
3,113

Deferred income taxes
937

 
836

Total long-term liabilities
29,151

 
26,552

TOTAL LIABILITIES
168,158

 
157,147

 
 
 
 
SHAREHOLDERS' EQUITY:
 

 
 

Common stock
53,862

 
52,530

Additional paid-in capital
39,034

 
38,004

Retained earnings
123,330

 
113,967

Treasury stock, at cost
(1,834
)
 
(1,834
)
Accumulated other comprehensive loss
(3,353
)
 
(4,381
)
TOTAL SHAREHOLDERS' EQUITY
211,039

 
198,286

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
379,197

 
$
355,433



 







Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Six Months Ended
 
 
October 28,
2017
 
October 29,
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
15,561

 
$
14,560

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 

 
 

Depreciation and amortization
 
8,902

 
9,242

Impairment of intangible assets
 

 
830

(Gain) loss on sale of property, equipment and other assets
 
(1,221
)
 
33

Share-based compensation
 
1,341

 
1,484

Equity in loss of affiliate
 
191

 

Provision for doubtful accounts
 
(21
)
 
962

Deferred income taxes, net
 
81

 
(48
)
Change in operating assets and liabilities
 
(15,496
)
 
(12,049
)
Net cash provided by operating activities
 
9,338

 
15,014

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 

 
 

Purchases of property and equipment
 
(7,735
)
 
(4,625
)
Proceeds from sale of property, equipment and other assets
 
2,000

 
72

Purchases of marketable securities
 

 
(4,583
)
Proceeds from sales or maturities of marketable securities
 
10,802

 
11,328

Purchases of equity investment
 
(607
)
 
(562
)
Net cash provided by investing activities
 
4,460

 
1,630

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 

 
 

Payments on notes payable
 

 
(6
)
Proceeds from exercise of stock options
 
511

 
102

Principal payments on long-term obligations
 
(1,027
)
 
(904
)
Dividends paid
 
(6,197
)
 
(7,482
)
Payments for common shares repurchased
 

 
(1,825
)
Tax payments related to RSU issuances
 
(311
)
 
(213
)
Net cash used in financing activities
 
(7,024
)
 
(10,328
)
 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
113

 
(591
)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
6,887

 
5,725

 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
 
 

 
 

Beginning of period
 
32,839

 
28,526

End of period
 
$
39,726

 
$
34,251

 
 
 
 
 









Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
 
Three Months Ended
 
Six Months Ended
 
October 28,
2017
 
October 29,
2016
 
Dollar Change
 
Percent Change
 
October 28,
2017
 
October 29,
2016
 
Dollar Change
 
Percent Change
Net Sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
$
34,377

 
$
39,923

 
$
(5,546
)
 
(13.9
)%
 
$
67,240

 
$
76,177

 
$
(8,937
)
 
(11.7
)%
    Live Events
68,653

 
55,363

 
13,290

 
24.0

 
146,265

 
115,996

 
$
30,269

 
26.1
 %
    High School Park and Recreation
29,660

 
28,707

 
953

 
3.3

 
58,139

 
56,324

 
$
1,815

 
3.2
 %
    Transportation
16,476

 
16,101

 
375

 
2.3

 
35,388

 
30,387

 
$
5,001

 
16.5
 %
    International
20,143

 
29,898

 
(9,755
)
 
(32.6
)
 
35,005

 
48,254

 
$
(13,249
)
 
(27.5
)%
 
$
169,309

 
$
169,992

 
$
(683
)
 
(0.4
)%
 
$
342,037

 
$
327,138

 
$
14,899

 
4.6
 %
Orders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
$
39,134

 
$
36,663

 
$
2,471

 
6.7
 %
 
$
69,071

 
$
81,731

 
$
(12,660
)
 
(15.5
)%
    Live Events
43,730

 
31,050

 
12,680

 
40.8

 
105,335

 
83,930

 
$
21,405

 
25.5
 %
    High School Park and Recreation
14,737

 
15,764

 
(1,027
)
 
(6.5
)
 
46,917

 
46,877

 
$
40

 
0.1
 %
    Transportation
14,245

 
14,754

 
(509
)
 
(3.4
)
 
23,514

 
26,669

 
$
(3,155
)
 
(11.8
)%
    International
30,414

 
18,643

 
11,771

 
63.1

 
50,504

 
52,835

 
$
(2,331
)
 
(4.4
)%
 
$
142,260

 
$
116,874

 
$
25,386

 
21.7
 %
 
$
295,341

 
$
292,042

 
$
3,299

 
1.1
 %



Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
 
Six Months Ended
 
October 28,
2017
 
October 29,
2016
Net cash provided by operating activities
$
9,338

 
$
15,014

Purchases of property and equipment
(7,735
)
 
(4,625
)
Proceeds from sales of property and equipment
2,000

 
72

Free cash flow
$
3,603

 
$
10,461


*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.