Daktronics, Inc. Announces Fourth Quarter and Fiscal 2016 Results

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Jun 1, 2016

BROOKINGS, S.D., June 01, 2016 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2016 fourth quarter net sales of $138.5 million, operating loss of $3.7 million, and net loss of $2.9 million, or $(0.07) per diluted share, compared to net sales of $158.1 million, operating income of $7.0 million, and a net income of $3.8 million, or $0.09 per diluted share, for the fourth quarter of fiscal 2015.  Fiscal 2016 fourth quarter orders were $143.2 million compared to $196.1 million for the fourth quarter of fiscal 2015.  Backlog at the end of the fiscal 2016 fourth quarter was $181.2 million, compared to a backlog of $190.5 million a year earlier and $176.3 million at the end of the third quarter of fiscal 2016.

Net sales, operating income, net income, and earnings per share for the fiscal year ended April 30, 2016, were $570.2 million, $2.5 million, $2.1 million and $0.05 per diluted share, respectively.  This compares to $615.9 million, $31.3 million, $20.9 million and $0.47 per diluted share, respectively, for fiscal 2015.  Fiscal 2016 was a 52-week year and fiscal 2015 was a 53-week year.  The extra week of fiscal 2015 fell within the first quarter, resulting in a 52-week versus a 53-week year end comparison.

Free cash flow, defined as cash provided from or used in operating activities less capital expenditures, was negative $3.6 million for fiscal 2016, as compared to a positive free cash flow of $35.4 million for fiscal 2015.  Cash provided by operations was $13.3 million for fiscal 2016, compared to $53.2 million for fiscal 2015.  Net investment in property and equipment was $16.9 million for fiscal 2016, as compared to $17.8 million for fiscal 2015.  Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2016 were $53.2 million, which compares to $83.1 million at the end of the fourth quarter of fiscal 2015.

Sales and orders for the fourth quarter of fiscal 2016 decreased by 12.4 percent and 27.0 percent, respectively, as compared to the fourth quarter of fiscal 2015.  The orders decline was due to International and Live Events multi-million dollar projects that were booked during the fourth quarter of fiscal 2015, while no orders of similar size occurred during the fourth quarter of fiscal 2016.  Sales decreased primarily due to lighter International and Commercial billboard and spectacular demand.  Operating loss was 2.6 percent of sales for the quarter due to increased warranty impact for the quarter and lower production levels.

Orders decreased in fiscal 2016 by $70.8 million as compared to fiscal 2015.  International, Commercial and Live Events business unit orders declined during the year.  The decline in International orders was due to the inherent timing volatility in the booking of large orders, various macroeconomic trends, and the competitive environment.  Commercial business unit orders declined in spectacular and billboard niches due to a softening in customer demand and delaying commitments on large projects and programs.  While Live Events orders declined by 2.6 percent, underlying demand remained strong considering fiscal 2015 orders included a significantly sized NFL stadium project with no similar sized project in fiscal 2016.  Orders increased by 10.5 percent in High School Park and Recreation business unit due to increased video project sizes with higher average sales price and increased market demand.  Transportation orders increased by 11.8 percent due to increased market demand with the passing of the federal highway funding bill.  Finally, approximately 2.0 percent of the annual order decline was due to the additional week in fiscal 2015.

Sales for fiscal 2016 decreased 7.4 percent as compared to fiscal 2015.  Approximately 2.0 percent of this decline is due to the decrease of one week in the fiscal 2016 year and the remaining decline was primarily due to decreases in sales in Live Events, Commercial, and International business units.  Live Events declined due to the timing of customer deliveries extending beyond the fiscal year.  The Commercial sales decline was driven by decreased customer demand in billboard and spectacular niches.  Sales in the International business unit declined due to lower orders during the last half of the year.

Annual operating income as a percentage of sales decreased to 0.4 percent for fiscal 2016 as compared to 5.1 percent for fiscal 2015.  The decline is primarily attributable to the impact of additional warranty expenses of 1.6 percent and an increase in operating expenses.  The increase in operating expense dollars is due to additional activity in design areas and increases in personnel related and information technology costs.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "Fiscal 2016 was a challenging year for Daktronics.  A warranty issue caused margin declines and high opportunity costs with time spent solving and correcting the issue. We believe we have accrued our best estimate for the most probable ultimate costs and we will continue to monitor over the coming year.  We also experienced lower demand in some markets resulting in lower production rates through our infrastructure.

"While we had these challenges, we were also successful in a number of ways.  Daktronics continues to be the world leader in market share in the video display industry. We were successful in winning and delivering orders to expanding sports and worldwide transportation markets and to global accounts.  We launched a number of new solutions in the latter part of fiscal 2016, which we anticipate will positively impact fiscal 2017.  In addition, we made progress on product enhancements to both meet specific customer needs and improve lifetime quality and reliability at lower overall cost to produce.  Finally, we acquired a company during the year to expand our capabilities in the growing industry of digital media networks."

Kurtenbach continued, "The marketplace we operate in continues to expand as digital technology becomes ever more prevalent.  We are the most experienced market provider for video system design and delivery, lifetime support, and value to our customers. Global macroeconomic factors including low oil prices, strong U.S. dollar, slowing GDP, political instability and other uncertainties continue to affect customer purchasing decisions.  This creates some uncertainty in the near-term outlook for orders; therefore, we expect modest growth in fiscal 2017 and we will carefully manage our spending.

"Strategically, we are accelerating activities to complete product developments for a number of customer solution areas.  For example, we are investing in our control platform to allow customers to continue to experience our best-in-class control systems while lowering our ongoing development and support costs.  We also continue to invest in the video processing applications for higher resolution displays.  Finally, we are developing solutions to meet global demand for lower cost systems with performance targeted for certain applications.  This will add to our product lineup and improve our ability to capture a broader customer base in this growing global market."

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, High School Park and Recreation and Transportation, and one International business unit.  For more information, visit the company's website at: http://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 2015 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)
 Three Months Ended Twelve Months Ended
 April 30,
 May 2,
 April 30,
 May 2,
Net sales$138,463  $158,086  $570,168  $615,942 
Cost of goods sold110,487  122,849  449,149  471,363 
Gross profit27,976  35,237  121,019  144,579 
Operating expenses:       
Selling expense15,939  14,558  58,812  57,963 
General and administrative8,607  7,789  32,801  30,679 
Product design and development7,085  5,879  26,911  24,652 
 31,631  28,226  118,524  113,294 
Operating (loss) income(3,655) 7,011  2,495  31,285 
Nonoperating income (expense):       
Interest income193  294  987  1,119 
Interest expense(25) (40) (228) (223)
Other (expense) income, net539  (280) (128) (498)
(Loss) income before income taxes(2,948) 6,985  3,126  31,683 
Income tax (benefit) expense(18) 3,146  1,065  10,801 
Net (loss) income$(2,930) $3,839  $2,061  $20,882 
Weighted average shares outstanding:       
Basic44,094  43,707  43,990  43,514 
Diluted44,094  43,966  44,456  44,443 
Earnings per share:       
Basic$(0.07) $0.09  $0.05  $0.48 
Diluted$(0.07) $0.09  $0.05  $0.47 
Cash dividends declared per share$0.10  $0.10  $0.40  $0.40 

 Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
 April 30,
 May 2,
Cash and cash equivalents$28,328  $57,284 
Restricted cash198  496 
Marketable securities24,672  25,346 
Accounts receivable, net77,554  80,857 
Inventories, net69,827  64,389 
Costs and estimated earnings in excess of billings30,200  35,068 
Current maturities of long-term receivables3,172  3,784 
Prepaid expenses and other assets6,468  6,663 
Deferred income taxes  10,640 
Income tax receivables4,812  5,543 
Total current assets245,231  290,070 
Long-term receivables, less current maturities3,866  6,090 
Goodwill9,208  5,269 
Intangibles, net7,721  1,824 
Investment in affiliates and other assets2,414  2,680 
Deferred income taxes9,437  702 
 32,646  16,565 
Land2,155  2,147 
Buildings65,247  64,186 
Machinery and equipment82,973  80,664 
Office furniture and equipment14,746  15,823 
Computer software and hardware48,917  51,083 
Equipment held for rental374  803 
Demonstration equipment8,026  7,299 
Transportation equipment6,596  6,012 
 229,034  228,017 
Less accumulated depreciation155,871  155,173 
 73,163  72,844 
TOTAL ASSETS$351,040  $379,479 

Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
  April 30,
 May 2,
Accounts payable 43,441  52,747 
Accrued expenses 23,532  26,063 
Warranty obligations 16,564  11,838 
Billings in excess of costs and estimated earnings 10,361  23,797 
Customer deposits (billed or collected) 16,012  16,828 
Deferred revenue (billed or collected) 10,712  9,524 
Current portion of other long-term obligations 585  587 
Income taxes payable 310  636 
Total current liabilities 121,517  142,020 
Long-term warranty obligations 13,932  14,643 
Long-term deferred revenue (billed or collected) 5,603  3,914 
Other long-term obligations, less current maturities 5,151  3,190 
Long-term income tax payable 3,016  2,734 
Deferred income taxes 754  939 
Total long-term liabilities 28,456  25,420 
TOTAL LIABILITIES 149,973  167,440 
Common stock 51,347  48,960 
Additional paid-in capital 35,351  32,693 
Retained earnings 117,276  132,771 
Treasury stock, at cost (9) (9)
Accumulated other comprehensive loss (2,898) (2,376)

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
  Year Ended
  April 30,
 May 2,
Net income $2,061  $20,882 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 16,561  14,764 
Amortization 295  204 
Amortization of premium/discount on marketable securities 87  168 
Gain on sale of property and equipment (71) (1,207)
Share-based compensation 2,958  3,038 
Excess tax benefits from share-based compensation (3) (38)
Gain on sale of equity investee (119)  
Provision for doubtful accounts 481  (222)
Deferred income taxes, net 911  2,146 
Change in operating assets and liabilities (9,886) 13,433 
Net cash provided by operating activities 13,275  53,168 
Purchases of property and equipment (17,056) (21,837)
Proceeds from sales of property, equipment and other assets 152  4,037 
Purchases of marketable securities (21,286) (15,653)
Proceeds from sales or maturities of marketable securities 21,862  15,532 
Proceeds from sale of equity method investment 377   
Acquisitions, net of cash acquired (7,867) (6,306)
Net cash used in investing activities (23,818) (24,227)
Payments on notes payable (38) (81)
Proceeds from exercise of stock options 610  2,513 
Excess tax benefits from share-based compensation 3  38 
Principal payments on long-term obligations (467) (1,163)
Dividends paid (17,556) (17,377)
Net cash used in financing activities (17,448) (16,070)
Beginning of period 57,284  45,054 
End of period $28,328  $57,284 

Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
 Three Months Ended Twelve Months Ended
 April 30,
 May 2,
 April 30,
 May 2,
Net sales:               
Commercial$35,600  $44,321  $(8,721) (19.7)% $148,261  $165,793  $(17,532) (10.6)%
Live Events55,401  60,066  (4,665) (7.8)% 205,151  231,877  (26,726) (11.5)%
High School Park and
15,883  12,532  3,351  26.7% 70,035  67,657  2,378  3.5%
Transportation13,490  13,526  (36) (0.3)% 52,249  48,333  3,916  8.1%
International18,089  27,641  (9,552) (34.6)% 94,472  102,282  (7,810) (7.6)%
 $138,463  $158,086  $(19,623) (12.4)% $570,168  $615,942  $(45,774) (7.4)%
Commercial$40,742  $44,606  $(3,864) (8.7)% $135,824  $170,209  $(34,385) (20.2)%
Live Events52,295  76,775  (24,480) (31.9)% 220,377  226,354  (5,977) (2.6)%
High School Park and
20,925  14,494  6,431  44.4% 76,485  69,188  7,297  10.5%
Transportation14,099  13,860  239  1.7% 56,834  50,845  5,989  11.8%
International15,161  46,344  (31,183) (67.3)% 71,266  114,977  (43,711) (38.0)%
 $143,222  $196,079  $(52,857) (27.0)% $560,786  $631,573  $(70,787) (11.2)%

Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands)
 Twelve Months Ended
 April 30,
 May 2,
Net cash provided by operating activities$13,275  $53,168 
Purchases of property and equipment(17,056) (21,837)
Proceeds from sales of property, equipment and other assets152  4,037 
Free cash flow$(3,629) $35,368 

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.

For more information contact:
Sheila Anderson, Chief Financial Officer
(605) 692-0200