Daktronics, Inc. Announces Second Quarter Fiscal 2021 Results
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For the six months ended
Fiscal 2021 is a 52-week year and fiscal 2020 was a 53-week year; therefore, the six months ended
Cash generated by operating activities in the first six months of fiscal 2021 was
Orders for the second quarter of fiscal 2021 decreased 10.2 percent as compared to the second quarter of fiscal 2020 and decreased 23.9 percent as compared to the first six months of fiscal 2020. Each business unit's order volume was lower in fiscal 2021 due to lower market activity from the resulting economic and business impacts of the COVID-19 pandemic and related timing of large contract orders which cause lumpiness.
Net sales decreased by 27.2 percent in the second quarter of fiscal 2021 as compared to the second quarter of fiscal 2020 and 23.7 percent as compared to the first six months of fiscal 2020. Net sales decreased in all business units for the same reasons causing order booking declines and due to varied timing in the related conversion to sales based on customer project schedules.
Gross profit as a percentage of net sales was 26.2 percent for the second quarter of fiscal 2021 as compared to 22.9 percent a year earlier. The improved gross profit rate is a result of the mix of service agreement sales in second quarter fiscal 2021 as compared to the second quarter of fiscal 2020, we believe this higher gross profit level will not be sustained in future quarters. In addition, during the second quarter of fiscal 2020, we experienced higher project delivery costs and tariff related expenses, decreasing the gross profit rate in that period.
Operating expenses for the second quarter of fiscal 2021 were
The effective tax rate expense for the second quarter of fiscal 2021 was 41.1 percent compared to an effective tax rate benefit of 63.8 percent for the second quarter of fiscal 2020. Our fiscal 2021 year-to-date effective rate expense was 26.2 percent compared to fiscal 2020 year-to-date effective benefit of 14.6 percent. The change in the effective tax rate year-over-year was driven primarily by a decrease in tax credits and other permanent differences as a percentage of estimated current fiscal year pre-tax income.
Outlook
Kurtenbach added, "We believe the audiovisual industry fundamentals will drive long-term growth for our business, but the near-term outlook shows contraction and greater volatility overall. We are focused on promoting our value to new and existing markets, while managing our cost structure to meet the uncertain demand. Even though we face a challenging fiscal 2021, we are working to emerge as a stronger organization and to be positioned to capitalize on the recovery from this pandemic."
About
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 and orders, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation and other risks described in the company's
(1) Backlog is not a measure defined by
For more information contact: |
INVESTOR RELATIONS: |
Tel (605) 692-0200 |
Investor@daktronics.com |
Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) |
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Three Months Ended | Six Months Ended | ||||||||||||||
2020 |
2019 |
2020 |
2019 |
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Net sales | $ | 127,367 | $ | 174,911 | $ | 271,011 | $ | 355,167 | |||||||
Cost of sales | 94,053 | 134,824 | 201,936 | 269,575 | |||||||||||
Gross profit | 33,314 | 40,087 | 69,075 | 85,592 | |||||||||||
Operating expenses: | |||||||||||||||
Selling | 12,654 | 16,177 | 24,210 | 34,474 | |||||||||||
General and administrative | 7,264 | 8,965 | 14,388 | 18,058 | |||||||||||
Product design and development | 6,737 | 10,121 | 14,269 | 20,621 | |||||||||||
26,655 | 35,263 | 52,867 | 73,153 | ||||||||||||
Operating income | 6,659 | 4,824 | 16,208 | 12,439 | |||||||||||
Nonoperating (expense) income: | |||||||||||||||
Interest income | 66 | 162 | 151 | 431 | |||||||||||
Interest expense | (84 | ) | (31 | ) | (157 | ) | (66 | ) | |||||||
Other (expense) income, net | (837 | ) | (514 | ) | (1,464 | ) | (321 | ) | |||||||
Income before income taxes | 5,804 | 4,441 | 14,738 | 12,483 | |||||||||||
Income tax expense (benefit) | 2,388 | (2,833 | ) | 3,855 | (1,821 | ) | |||||||||
Net income | $ | 3,416 | $ | 7,274 | $ | 10,883 | $ | 14,304 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 44,893 | 45,115 | 44,808 | 45,114 | |||||||||||
Diluted | 44,977 | 45,267 | 44,947 | 45,361 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.08 | $ | 0.16 | $ | 0.24 | $ | 0.32 | |||||||
Diluted | $ | 0.08 | $ | 0.16 | $ | 0.24 | $ | 0.32 | |||||||
Cash dividends declared per share | $ | — | $ | 0.05 | $ | — | $ | 0.10 |
Consolidated Balance Sheets (in thousands) |
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2020 |
2020 |
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(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 69,836 | $ | 40,398 | |||
Restricted cash | 3,617 | 14 | |||||
Marketable securities | 983 | 1,230 | |||||
Accounts receivable, net | 74,682 | 72,577 | |||||
Inventories | 71,428 | 86,803 | |||||
Contract assets | 26,707 | 35,467 | |||||
Current maturities of long-term receivables | 2,439 | 3,519 | |||||
Prepaid expenses and other current assets | 7,650 | 9,629 | |||||
Income tax receivables | 129 | 548 | |||||
Property and equipment and other assets available for sale | 1,953 | 1,817 | |||||
Total current assets | 259,424 | 252,002 | |||||
Property and equipment, net | 64,475 | 67,484 | |||||
Long-term receivables, less current maturities | 594 | 1,114 | |||||
8,050 | 7,743 | ||||||
Intangibles, net | 2,702 | 3,354 | |||||
Investment in affiliates and other assets | 24,943 | 27,683 | |||||
Deferred income taxes | 13,323 | 13,271 | |||||
Total non-current assets | 114,087 | 120,649 | |||||
TOTAL ASSETS | $ | 373,511 | $ | 372,651 | |||
Consolidated Balance Sheets (continued) (in thousands) |
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2020 |
2020 |
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(unaudited) | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 37,274 | $ | 47,834 | |||
Contract liabilities | 47,107 | 50,897 | |||||
Accrued expenses | 32,681 | 36,626 | |||||
Warranty obligations | 10,383 | 9,764 | |||||
Income taxes payable | 2,949 | 844 | |||||
Total current liabilities | 130,394 | 145,965 | |||||
Long-term warranty obligations | 16,217 | 15,860 | |||||
Long-term contract liabilities | 10,741 | 10,707 | |||||
Other long-term obligations | 24,586 | 22,105 | |||||
Long-term income taxes payable | 697 | 582 | |||||
Deferred income taxes | 471 | 452 | |||||
Total long-term liabilities | 52,712 | 49,706 | |||||
TOTAL LIABILITIES | 183,106 | 195,671 | |||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock | 60,010 | 60,010 | |||||
Additional paid-in capital | 45,575 | 44,627 | |||||
Retained earnings | 95,973 | 85,090 | |||||
(7,297 | ) | (7,470 | ) | ||||
Accumulated other comprehensive loss | (3,856 | ) | (5,277 | ) | |||
TOTAL SHAREHOLDERS' EQUITY | 190,405 | 176,980 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 373,511 | $ | 372,651 |
Consolidated Statements of Cash Flows (in thousands) (unaudited) |
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Six Months Ended | |||||||
2020 |
2019 |
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CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 10,883 | $ | 14,304 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 8,564 | 8,724 | |||||
(Gain) loss on sale of property, equipment and other assets | (162 | ) | 30 | ||||
Share-based compensation | 1,047 | 1,184 | |||||
Equity in loss of affiliates | 1,145 | 241 | |||||
Provision for doubtful accounts | 153 | (535 | ) | ||||
Deferred income taxes, net | 2 | (64 | ) | ||||
Change in operating assets and liabilities | 18,343 | (34,156 | ) | ||||
Net cash provided by (used in) operating activities | 39,975 | (10,272 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (5,776 | ) | (9,768 | ) | |||
Proceeds from sales of property, equipment and other assets | 341 | 149 | |||||
Proceeds from sales or maturities of marketable securities | 247 | 22,775 | |||||
Purchases of and loans to equity investment | (903 | ) | (896 | ) | |||
Net cash (used in) provided by investing activities | (6,091 | ) | 12,260 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Principal payments on long-term obligations | (220 | ) | (1,931 | ) | |||
Dividends paid | — | (4,500 | ) | ||||
Payments for common shares repurchased | — | (1,682 | ) | ||||
Tax payments related to RSU issuances | (125 | ) | (199 | ) | |||
Net cash used in financing activities | (345 | ) | (8,312 | ) | |||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (498 | ) | (94 | ) | |||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 33,041 | (6,418 | ) | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||
Beginning of period | 40,412 | 35,742 | |||||
End of period | $ | 73,453 | $ | 29,324 | |||
(in thousands) (unaudited) |
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Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
2020 |
2019 |
Dollar Change |
Percent Change |
2020 |
2019 |
Dollar Change |
Percent Change |
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Commercial | $ | 30,356 | $ | 39,651 | $ | (9,295 | ) | (23.4 | )% | $ | 64,862 | $ | 83,686 | $ | (18,824 | ) | (22.5 | )% | |||||||||||
Live Events | 37,822 | 59,319 | (21,497 | ) | (36.2 | ) | 89,296 | 118,625 | (29,329 | ) | (24.7 | ) | |||||||||||||||||
27,578 | 30,193 | (2,615 | ) | (8.7 | ) | 56,521 | 60,658 | (4,137 | ) | (6.8 | ) | ||||||||||||||||||
Transportation | 15,323 | 20,330 | (5,007 | ) | (24.6 | ) | 29,821 | 39,348 | (9,527 | ) | (24.2 | ) | |||||||||||||||||
International | 16,288 | 25,418 | (9,130 | ) | (35.9 | ) | 30,511 | 52,850 | (22,339 | ) | (42.3 | ) | |||||||||||||||||
$ | 127,367 | $ | 174,911 | $ | (47,544 | ) | (27.2 | )% | $ | 271,011 | $ | 355,167 | $ | (84,156 | ) | (23.7 | )% | ||||||||||||
Orders: | |||||||||||||||||||||||||||||
Commercial | $ | 32,590 | $ | 43,513 | $ | (10,923 | ) | (25.1 | )% | $ | 58,123 | $ | 82,161 | $ | (24,038 | ) | (29.3 | )% | |||||||||||
Live Events | 40,684 | 41,008 | (324 | ) | (0.8 | ) | 82,544 | 107,977 | (25,433 | ) | (23.6 | ) | |||||||||||||||||
20,117 | 22,853 | (2,736 | ) | (12.0 | ) | 48,216 | 53,405 | (5,189 | ) | (9.7 | ) | ||||||||||||||||||
Transportation | 11,633 | 16,992 | (5,359 | ) | (31.5 | ) | 24,722 | 39,207 | (14,485 | ) | (36.9 | ) | |||||||||||||||||
International | 30,642 | 26,756 | 3,886 | 14.5 | 44,214 | 55,835 | (11,621 | ) | (20.8 | ) | |||||||||||||||||||
$ | 135,666 | $ | 151,122 | $ | (15,456 | ) | (10.2 | )% | $ | 257,819 | $ | 338,585 | $ | (80,766 | ) | (23.9 | )% |
Reconciliation of Free Cash Flow* (in thousands) (unaudited) |
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Six Months Ended | |||||||
2020 |
2019 |
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Net cash provided by (used in) operating activities | $ | 39,975 | $ | (10,272 | ) | ||
Purchases of property and equipment | (5,776 | ) | (9,768 | ) | |||
Proceeds from sales of property and equipment | 341 | 149 | |||||
Free cash flow | $ | 34,540 | $ | (19,891 | ) |
*In evaluating its business,
Source: Daktronics, Inc.