UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): May 30, 2007
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) | ||||||
331
32ndAvenue
Brookings, SD 57006
(Address of principal executive
office) (zip code)
(605) 697-4000
(Registrant's telephone number,
including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Item 2.02 Results of Operations and Financial Condition
On May 30, 2007, Daktronics, Inc. (the “Registrant”) issued a press release announcing financial results for the fourth quarter ending April 28, 2007. 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.
Item 9.01 Financial Statements and Exhibits:
(c) Exhibits. The following exhibit is furnished as part of this Report:
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/ William R. Retterath |
| William R.Retterath, Chief Financial Officer |
Date: May 30, 2007
EXHIBIT INDEX
| Exhibit No. Description | |
| 99.1 News Release dated May 30, 2007 issued by Daktronics,Inc. |
EXHIBIT 99.1
Daktronics, Inc.
Announces Fourth Quarter and Fiscal 2007 Results
Financial Highlights Include:
| • | Q4 net sales exceed previously revised estimates |
| • | Net income meets revised estimates |
| • | Strong finish on orders sets stage for start of fiscal 2008 |
| • | Full year 2007 net sales up 40 percent from prior year |
Brookings, S.D. — May 30, 2007 — Daktronics, Inc. (Nasdaq — DAKT), one of the world’s largest suppliers of electronic scoreboards, computer-programmable displays, and large screen video displays and control systems, today reported fiscal 2007 fourth quarter net sales of $110.8 million, up nearly 23 percent from net sales of $90.2 million in the prior year period. Consistent with the company’s pre-release dated April, 5, 2007, fourth quarter net income was $3.5 million, or $0.09 per diluted share, compared with fiscal 2006 fourth quarter net income of $7.1 million, or $0.17 per diluted share. Backlog at the end of the fiscal 2007 fourth quarter was approximately $127 million, compared with a backlog of approximately $93 million at the end of the fourth quarter of fiscal 2006.
For the full year 2007, net sales totaled $433.2 million, a 40 percent increase from net sales of $309.4 million in fiscal 2006. Net income in fiscal 2007 totaled $24.4 million, or $0.59 per diluted share, up more than 16 percent from net income of $21.0 million, or $0.52 per diluted share, in fiscal 2006.
“We are very pleased with our overall performance in fiscal 2007,” said Jim Morgan, president and chief executive officer. “We finished the year very strong in both revenues and orders despite a slow start in the fourth quarter which caused us to revise our estimates mid-quarter. April was a great month for us as we were able to close more orders than we had expected, and manufacturing came through with an outstanding performance. We are seeing the benefits of our lean manufacturing program, which was definitely a factor in the strong finish.”
Morgan continued, “The 40 percent growth in net sales is a superb accomplishment, especially following a 34 percent net sales growth in fiscal 2006, nearly doubling our net sales over a two year span. I want to thank all of our employees for their efforts toward accomplishing this growth. It is evidence of the investments we have made in additional capacity over the past couple of years, and we also believe it is indicative of our strong position in the marketplace.
“During April, we were able to book a record level of orders in the digital billboard niche, as some orders came in earlier than we expected. We believe that we strengthened our position in this market as we added a number of customers during the quarter and improved our position with existing customers. Finally, we booked two noteworthy orders for professional hockey facilities totaling more than $15 million and an order for a collegiate football facility exceeding $9 million, demonstrating the trend of increasing order sizes at premier facilities,” continued Morgan.
Morgan added, “The ramp-up to date of our Redwood Falls facility, where we are manufacturing our Galaxy product, exceeded our expectations. We will continue to invest in that plant in the first quarter of fiscal 2008 to increase the capacity for growth we foresee in our Galaxy and our digital gas price product lines. We also made progress in shortening lead times, which we expect will have a positive effect on booking orders going forward.”
Morgan said, “Our gross profit margin was slightly less than anticipated due in part to additional warranty and inventory write downs during the quarter. We believe a gross profit margin of 30 percent is achievable in fiscal year 2008, subject to the uncertainties of mix, timing of orders, and other factors as discussed in our public filings.”
Daktronics reported that it was able to generate over $15 million in operating cash flow for fiscal 2007. Significant capital expenditures are anticipated for fiscal 2008, including completion of its new building in Brookings, information systems investments, and the addition of metal and paint capabilities in Redwood Falls. “Our Brookings and Sioux Falls factories, for the most part, have the equipment necessary to get through the year,” continued Morgan. “We are projecting capital expenditures for fiscal 2008 to total approximately $50 million. While this is down from fiscal 2007, it will still put some pressure on free cash flow generation. Long term, our goal is to increase cash flow from operations to invest in the business and to continue to provide a return to shareholders.”
Daktronics reported total operating expenses of $89.7 million for the full year fiscal 2007, a 44 percent increase from total operating expenses of $62.3 million in fiscal 2006. The rise was primarily attributable to a $13.9 million increase in year-over-year selling expenses, to $54.0 million, in order to support the higher sales levels in fiscal 2007 and the anticipated growth in fiscal 2008. General and administrative expenses totaled $20.0 million in fiscal 2007, a $9.0 million increase from the prior year.
“We remain challenged by the level of our selling and general and administrative costs which increased faster than revenues during the year. We have taken steps to address this, including implementing a cap on additions to our non-manufacturing staff through the first quarter of fiscal 2008, at which time we will reevaluate our position. We believe that we have many of the people in place to carry us through fiscal year 2008. We expect that fiscal 2008 will see operating margin improving during the year due to the steps we are taking,” continued Morgan.
Business Outlook
The company is providing financial guidance for the first quarter and fiscal 2008. Daktronics expects that net sales for the first quarter of fiscal 2008 will be in the range of $120 to $130 million and net earnings will be in the range of $0.09 to $0.16 per share. As in the past, this guidance is subject to a number of factors that could cause this to vary.
Morgan concluded, “I am excited by the momentum that we are generating as we enter fiscal 2008 and our prospects for the year. We expect that fiscal 2008 will see order growth well in excess of 15 percent. Depending on our success in winning our share of a number of large projects to be awarded during the year, our success in further penetration of the billboard market and our expansion internationally, we could see order growth well in excess of 20 percent. Due to the timing of several anticipated large projects bookings, orders may exceed sales for the year, thereby increasing backlog.”
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 one of the world’s largest suppliers of, electronic scoreboards, computer-programmable displays, and large screen video displays and control systems. The company excels in the control of large 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 and transportation applications. 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) 697-4000 or toll-free (800) 843-5843 in the PlaceTypePlaceTypeUnited States or write to the company at PlaceTypePlaceType331 32nd Ave. PO Box 5128 PlaceTypeBrookings, PlaceTypeS.D. PlaceType57006-5128.
Safe Harbor Statement
Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements reflecting the Company’s expectations or beliefs concerning future events, which could materially affect company performance in the future. The Company cautions that these and similar statements involve risks and uncertainties, including 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 which may cause actual results to differ materially. 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.
INVESTOR RELATIONS:
Bill Retterath, Chief Financial Officer
(605) 697-4000
Investor@daktronics.com
Financial tables are included on the following pages.
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands,
except earnings per share)
(unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 28, | April 29, | April 28, | April 29, | ||||||||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||||||||||
| Net sales | $ | 110,787 | $ | 90,173 | $ | 433,201 | $ | 309,370 | |||||||||
| Cost of goods sold | 78,408 | 62,637 | 306,604 | 215,296 | |||||||||||||
| Gross profit | 32,379 | 27,536 | 126,597 | 94,074 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling | 15,381 | 10,699 | 54,047 | 40,104 | |||||||||||||
| General and administrative | 6,421 | 3,198 | 20,008 | 10,983 | |||||||||||||
| Product design and development | 4,461 | 3,048 | 15,627 | 11,172 | |||||||||||||
| 26,263 | 16,945 | 89,682 | 62,259 | ||||||||||||||
| Operating income | 6,116 | 10,591 | 36,915 | 31,815 | |||||||||||||
| Nonoperating income (expense): | |||||||||||||||||
| Interest income (expense), net | (60 | ) | 496 | 1,086 | 1,702 | ||||||||||||
| Other income (expense), net | (615 | ) | 254 | (1,219 | ) | 152 | |||||||||||
| Income before income taxes | 5,441 | 11,341 | 36,782 | 33,669 | |||||||||||||
| Income tax expense | 1,920 | 4,237 | 12,355 | 12,708 | |||||||||||||
| Net income | $ | 3,521 | $ | 7,104 | $ | 24,427 | $ | 20,961 | |||||||||
| Weighted average number of fully | |||||||||||||||||
| diluted shares and common | |||||||||||||||||
| equivalent shares | 41,348 | 40,952 | 41,311 | 40,506 | |||||||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.09 | $ | 0.18 | $ | 0.62 | $ | 0.54 | |||||||||
| Diluted | $ | 0.09 | $ | 0.17 | $ | 0.59 | $ | 0.52 | |||||||||
| Cash dividend paid per share | $ | – | $ | – | $ | 0.06 | $ | 0.05 | |||||||||
Daktronics, Inc. and Subsidiaries
Consolidated Balance
Sheets
(in thousands)
| April 28, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2007 | April 29, | |||||||
| (unaudited) |
2006 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 2,590 | $ | 26,921 | ||||
| Marketable securities | — | 8,310 | ||||||
| Accounts receivable, less allowance for doubtful accounts | 56,692 | 46,019 | ||||||
| Inventories | 45,835 | 31,045 | ||||||
| Costs and estimated earnings in excess of billings | 22,314 | 17,375 | ||||||
| Current maturities of long-term receivables | 6,831 | 4,476 | ||||||
| Prepaid expenses and other | 5,044 | 2,522 | ||||||
| Deferred income taxes | 7,897 | 6,213 | ||||||
| Income taxes receivable | 731 | 97 | ||||||
| Rental equipment available for sale | 188 | 286 | ||||||
| Total current assets | 148,122 | 143,264 | ||||||
| Advertising rights, net | 3,830 | 3,112 | ||||||
| Long-term receivables, less current maturities | 11,211 | 8,756 | ||||||
| Investments in affiliates | 8,762 | 582 | ||||||
| Goodwill | 4,408 | 2,706 | ||||||
| Intangible and other assets | 3,391 | 636 | ||||||
| Deferred income taxes | — | 232 | ||||||
| 31,602 | 16,024 | |||||||
| PROPERTY AND EQUIPMENT: | ||||||||
| Land | 3,275 | 1,223 | ||||||
| Buildings | 36,822 | 20,470 | ||||||
| Machinery and equipment | 38,420 | 22,332 | ||||||
| Office furniture and equipment | 37,520 | 22,926 | ||||||
| Equipment held for rental | 2,600 | 2,182 | ||||||
| Demonstration equipment | 5,939 | 4,899 | ||||||
| Transportation equipment | 6,669 | 4,863 | ||||||
| 131,245 | 78,895 | |||||||
| Less accumulated depreciation | 45,119 | 38,336 | ||||||
| 86,126 | 40,559 | |||||||
| TOTAL ASSETS | $ | 265,850 | $ | 199,847 | ||||
Daktronics, Inc. and Subsidiaries
Consolidated Balance
Sheets (continued)
(in thousands)
| April 28, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2007 | April 29, | |||||||
| (unaudited) |
2006 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Notes payable, bank | $ | 24,615 | $ | — | ||||
| Accounts payable | 26,094 | 20,506 | ||||||
| Accrued expenses and warranty obligations | 21,849 | 15,396 | ||||||
| Current maturities of long-term debt and marketing obligations | 1,002 | 491 | ||||||
| Billings in excess of costs and estimated earnings | 18,293 | 19,760 | ||||||
| Customer deposits | 5,857 | 7,777 | ||||||
| Deferred revenue | 5,333 | 3,849 | ||||||
| Income taxes payable | 39 | 555 | ||||||
| Total current liabilities | 103,082 | 68,334 | ||||||
| Long-term debt, less current maturities | 592 | 131 | ||||||
| Long-term marketing obligations, less current maturities | 473 | 574 | ||||||
| Long-term warranty obligations and other payables | 5,366 | 3,864 | ||||||
| Deferred income taxes | 2,629 | 1,599 | ||||||
| 9,060 | 6,168 | |||||||
| TOTAL LIABILITIES | 112,142 | 74,502 | ||||||
| SHAREHOLDERS' EQUITY: | ||||||||
| Common stock | 21,954 | 19,551 | ||||||
| Additional paid-in capital | 7,431 | 3,480 | ||||||
| Retained earnings | 124,469 | 102,381 | ||||||
| Treasury stock, at cost | (9 | ) | (9 | ) | ||||
| Accumulated other comprehensive | (137 | ) | (58 | ) | ||||
| TOTAL SHAREHOLDERS' EQUITY | 153,708 | 125,345 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 265,850 | $ | 199,847 | ||||
Daktronics, Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
| Years Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| April 28, | April 29, | ||||||||||
| 2007 | 2006 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 24,427 | $ | 20,961 | |||||||
| Adjustments to reconcile net income to net cash provided | |||||||||||
| by operating activities: | |||||||||||
| Depreciation | 13,298 | 8,915 | |||||||||
| Amortization | 503 | 55 | |||||||||
| Gain on sale of property and equipment | (148 | ) | (65 | ) | |||||||
| Stock-based compensation | 2,095 | — | |||||||||
| Equity in earnings and losses of investments in affiliates | 2,027 | — | |||||||||
| Provision for doubtful accounts | 239 | 281 | |||||||||
| Deferred income taxes, net | (422 | ) | (2,421 | ) | |||||||
| Change in operating assets and liabilities | (27,413 | ) | 4,191 | ||||||||
| Net cash provided by operating activities | 14,606 | 31,917 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchase of property and equipment | (58,743 | ) | (18,919 | ) | |||||||
| Cash consideration paid for investment in affiliates at equity | (13,779 | ) | (165 | ) | |||||||
| Sales (purchases) of marketable securities, net | 8,309 | (205 | ) | ||||||||
| Proceeds from sale of property and equipment | 215 | 331 | |||||||||
| Net cash used in investing activities | (63,998 | ) | (18,958 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Dividend paid | (2,339 | ) | (1,917 | ) | |||||||
| Excess tax benefits from stock-based compensation | 1,411 | — | |||||||||
| Principal payments on long-term debt | (102 | ) | (913 | ) | |||||||
| Net borrowings (payments) on notes payable | 24,615 | (88 | ) | ||||||||
| Proceeds from exercise of stock options and warrants | 1,565 | 1,186 | |||||||||
| Net cash provided (used) in financing activities | 25,150 | (1,732 | ) | ||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (89 | ) | (267 | ) | |||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (24,331 | ) | 10,960 | ||||||||
| CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD | 26,921 | 15,961 | |||||||||
| CASH AND CASH EQUIVALENTS END OF PERIOD | $ | 2,590 | $ | 26,921 | |||||||