SEC Filing | Daktronics, Inc.

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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 1937

Date of Report (Date of earliest event reported): October 31, 2009

Daktronics, Inc.

(Exact name of registrant as specified in its charter)

South Dakota	0-23246	46-0306862
(State or other jurisdiction	(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.)

Item 2.02 Results of Operations and Financial Condition

On November 24, 2009, Daktronics, Inc. (the “Registrant”) issued a press release announcing financial results for the fiscal 2010 second quarter ending October 31, 2009. 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.

99.1 News Release dated November 24, 2009 issued by Registrant regarding second quarter fiscal 2010 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/ William R. Retterath
	William R. Retterath, Chief Financial Officer
Date: November 24, 2009

EXHIBIT INDEX

Exhibit No.	Description
99.1	News Release dated November 24, 2009 issued by Daktronics, Inc.

a85fy10q2.htm

Daktronics, Inc. Announces Second Quarter Fiscal 2010 Results

• Net sales and net income decline 32% and 60%, respectively, compared to fiscal 2009 second quarter

• Free cash flow of $23 million generated year-to-date

• Operating margin of 8% on better-than-expected gross profit and lower operating costs

Brookings, S.D. – November 24, 2009 – Daktronics, Inc. (Nasdaq - DAKT) today reported fiscal 2010 second quarter net sales of $115.4 million and net income of $4.8 million, or $0.12 per diluted share, compared to net sales of $169.7 million and net income of $12.2 million, or $0.30 per diluted share, for the second quarter of fiscal 2009. Backlog at the end of the fiscal 2010 second quarter was approximately $90 million, compared with a backlog of approximately $134 million a year earlier and $113 million at the end of the first quarter of fiscal 2010.

Net sales, net income and earnings per share for the six months ended October 31, 2009 were $228.8 million, $6.3 million and $0.15 per diluted share, respectively. This compares to $330.9 million, $21.9 million and $0.53 per diluted share, respectively, for the same period in fiscal 2009.

As previously announced, the first quarter of fiscal 2010 contained the customary 13 weeks as compared to the first quarter of fiscal 2009, which contained 14 weeks. As a result, fiscal 2009 contained 53 weeks as compared to 52 weeks for fiscal 2010.

“Our second quarter is typically our strongest quarter for revenue and our lightest quarter for orders due to the seasonality of the sports business. This seasonality, along with the impact of the holiday season, makes the third quarter typically the weakest quarter for revenue,” said Jim Morgan, president and chief executive officer. “In our Live Events business unit, it appears that some of the larger baseball orders we had some optimism on one quarter ago may be pushed out or not happen, but that could still change. The Live Events business is characterized by large transactions that can cause swings in quarterly bookings. On the positive side, we recently announced a contract to provide display systems for the new Amway Center, home of the NBA’s Orlando Magic. This will be a showcase for our technology and capabilities, demonstrating our industry leadership in successfully designing, building, and servicing large, sophisticated display systems. The scope and magnitude of the project are also indicative of the continuing interest of sports venues in having a “wow factor” in their display systems, and the resulting increase in transaction sizes.”

Morgan continued, “Our International business unit orders were up nicely over the first quarter of fiscal 2010. Included in orders for the second quarter of fiscal 2010 was a notable project in excess of $3 million for an NBA style arena in Guangzhau, China. Our international pipeline has improved in the first half of fiscal 2010, and we are expecting the improvements in the International business unit to continue. However, like Live Events, our International business is subject to fluctuations due to the timing of large orders. Orders in our Schools and Theatres business unit for the second quarter of fiscal 2010 were up 32 percent over the same quarter of fiscal 2009, which we attribute to shorter lead times for our display products and increased traction in our Vortek hoists.

“Orders in our Commercial business unit were up slightly over the first quarter of fiscal 2010. We are cautiously optimistic that this trend will continue given what we have in our pipeline. Finally, our Transportation business unit orders are somewhat weaker than expected due to competitive factors and lower levels of opportunities. We are seeing some larger opportunities in the transportation pipeline and are hopeful that we will begin to see a pickup in that market,” added Morgan.

Morgan continued, “Because of the seasonality of our markets and the fewer number of working days in our third quarter, we have over the past five fiscal years averaged a decline of approximately 14 percent in third quarter net sales versus second quarter net sales. Due to the level of orders booked in the second quarter of fiscal 2010 and the expected bookings early in the third quarter of fiscal 2010, we expect the sequential decline in the third quarter of fiscal 2010 will be greater than the average of 15 percent.”

“We believe that we have been executing well in continuing to drive down our cost infrastructure. This has been a challenging time as we continue to reduce personnel costs and other discretionary spending. We are working to make our cost structure more variable and to streamline internal processes so we can retain more of the cost reductions as we come out of this downturn. A large part of the decrease has been achieved through lower payroll and lower benefit costs. While we believe that the payroll decreases are sustainable, we expect benefit costs to increase on a sequential basis. We continue to focus on reducing our overall cost structure so that when sales expand, we achieve greater leverage to our operating income,” said Morgan.

Morgan continued, “We expect the dollars invested in product development to be relatively flat in the third fiscal quarter of 2010 compared to second quarter of fiscal 2010, although our long-term target is to stay between four and five percent of revenue. We are on schedule for the release of our new outdoor video display product, our DVX series, in the fourth quarter. The DVX series offers outstanding image quality with improved manufacturability, increased commonality, improved reliability, and overall improved functionality at a reduced cost. We are very excited about the launch of the DVX series product.”

“Our gross profit margins were better than expected as we closed out and completed some of the larger projects. We also saw lower warranty and manufacturing costs,” said Bill Retterath, chief financial officer. “Moving into the third and fourth quarter of fiscal 2010, we expect lower gross profit margins resulting from competitive factors and the lower sales levels.”

Retterath continued, “We are pleased with our free cash flow levels year-to-date. Free cash flow, defined as cash provided by operations less net purchases of property and equipment, is $23.4 million for the six months ended October 31, 2009, compared to a negative $0.9 million one year ago. This was driven by significantly lower levels of inventory and receivables. This is partly due to a reduced level of business activity, but also to our lean initiatives and improvements in operations, which are ongoing.”

Morgan concluded, “I want to take this opportunity to thank all of our employees for their efforts in these challenging times. We have a great team here at Daktronics, and we remain diligent in our efforts to come out of this downturn much stronger, financially and operationally, than when we entered the downturn. We continue to aggressively pursue orders, cost reduction opportunities, and product and market development initiatives, with the overall objectives of maximizing long-term cash flow and being positioned to realize operating margin leverage when the economy stabilizes.”

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 Sport, Business, Schools and Theatres and Transportation segments. 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.

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 expectation, including, but not limited to, 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, including its Annual Report on Form 10-K for its 2009 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.

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For more information contact:

INVESTOR RELATIONS:

Bill Retterath, Chief Financial Officer

(605) 692-0200

Investor@daktronics.com

Financial tables are included on the following pages

Daktronics, Inc. and Subsidiaries

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	October 31,			November 1,			October 31,			November 1,
	2009			2008			2009			2008

Net Sales	$	115,362		$	169,697		$	228,815		$	330,926
Cost of goods sold		81,800			121,486			165,183			237,367
Gross profit		33,562			48,211			63,632			93,559

Operating expenses:
Selling		12,888			15,526			27,255			31,890
General and administrative		5,959			7,554			12,493			15,236
Product design and development		5,534			5,286			11,404			11,833
		24,381			28,366			51,152			58,959
Operating income		9,181			19,845			12,480			34,600

Nonoperating income (expense):
Interest income		379			511			753			1,047
Interest expense		(63	)		(57	)		(110	)		(164	)
Other income (expense), net		(711	)		(1,334	)		(1,313	)		(1,679	)

Income before income taxes		8,786			18,965			11,810			33,804
Income tax expense		3,937			6,768			5,529			11,881
Net income	$	4,849		$	12,197		$	6,281		$	21,923

Weighted average shares outstanding
Basic		40,831			40,478			40,795			40,440
Diluted		41,002			41,221			41,106			41,286

Earnings per share:
Basic	$	0.12		$	0.30		$	0.15		$	0.54
Diluted	$	0.12		$	0.30		$	0.15		$	0.53

Cash dividend paid per share	$	-		$	-		$	0.095		$	0.090

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Daktronics, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)

	October 31,
	2009		May 2,
	(unaudited)		2009
ASSETS

CURRENT ASSETS:
Cash, cash equivalents and restricted cash	$	57,755	$	37,584
Accounts receivable, less allowance for doubtful accounts		48,517		61,412
Inventories		41,946		51,400
Costs and estimated earnings in excess of billings		25,525		27,541
Current maturities on long-term receivables		6,673		7,962
Prepaid expenses and other		5,681		5,587
Deferred income taxes		15,283		15,017
Income tax receivable		324		-
Property and equipment available for sale		250		470
Total current assets		201,954		206,973

Advertising rights, net		1,688		2,392
Long-term receivables, less current maturities		14,009		15,879
Investments in affiliates		430		2,541
Goodwill		4,658		4,549
Intangible and other assets		4,212		2,804
Deferred income taxes		391		311
		25,388		28,476
PROPERTY AND EQUIPMENT:
Land		1,204		1,204
Buildings		50,918		50,810
Machinery and equipment		52,324		50,013
Office furniture and equipment		53,266		52,369
Equipment held for rental		2,695		2,423
Demonstration equipment		8,780		8,021
Transportation equipment		4,662		5,115
		173,849		169,955
Less accumulated depreciation		90,403		80,528
		83,446		89,427
TOTAL ASSETS	$	310,788	$	324,876

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Daktronics, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

(in thousands)

	October 31,
	2009			May 2,
	(unaudited)			2009
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	21,541		$	30,273
Accrued expenses and warranty obligations		32,023			35,548
Current maturities of long-term debt and marketing obligations		479			367
Billings in excess of costs and estimated earnings		8,537			13,769
Customer deposits		10,427			10,007
Deferred revenue (billed or collected)		7,061			6,669
Income taxes payable		422			2,935
Total current liabilities		80,490			99,568

Long-term debt, less current maturities		13			23
Long-term marketing obligations, less current maturities		538			759
Long-term warranty obligations, less current maturities		4,324			4,805
Deferred income taxes		4,996			4,948
Long-term deferred revenue (billed or collected)		3,348			2,862
Total long-term liabilities		13,219			13,397
TOTAL LIABILITIES		93,709			112,965

SHAREHOLDERS' EQUITY:
Common stock		28,943			27,872
Additional paid-in capital		15,610			13,898
Retained earnings		173,113			170,705
Treasury stock, at cost		(9	)		(9	)
Accumulated other comprehensive loss		(578	)		(555	)
TOTAL SHAREHOLDERS' EQUITY		217,079			211,911
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	310,788		$	324,876

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Daktronics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	October 31,			November 1,
	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	6,281		$	21,923
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation		11,123			11,872
Amortization		157			157
Gain on sale of property and equipment		(26	)		(977	)
Stock-based compensation		1,712			1,594
Equity in losses of affiliate		1,347			1,266
Provision for doubtful accounts		(269	)		69
Loss on sale of equity investee		231			-
Deferred income taxes, net		(299	)		(191	)
Net change in operating assets and liabilities		9,400			(20,021	)
Net cash provided by operating activities		29,657			15,692

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(6,247	)		(16,569	)
Loans to equity investees		-			(500	)
Purchase of receivables from equity investee, net		(306	)		-
Proceeds from sale of property and equipment		104			2,947
Proceeds from sale of equity method investments		535			-
Net cash used in investing activities		(5,914	)		(14,122	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on notes payable		(13	)		(546	)
Proceeds from exercise of stock options		207			578
Excess tax benefits from stock-based compensation		-			159
Dividend paid		(3,874	)		(3,635	)
Net cash used in financing activities		(3,680	)		(3,444	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS		(201	)		237

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		19,862			(1,637	)

CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD		36,501			9,325

CASH AND CASH EQUIVALENTS END OF PERIOD	$	56,363		$	7,688

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Daktronics, Inc. and Subsidiaries

Sales and Orders By Market

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	October 31,		November 1,		October 31,		November 1,
	2009		2008		2009		2008
Net Sales
Commercial	$	24,873	$	47,794	$	48,108	$	96,184
Live Events		48,949		78,403		102,844		141,491
Schools & Theatres		18,766		22,680		37,200		39,661
Transportation		10,590		8,727		23,220		18,299
International		12,184		12,093		17,443		35,291
Total Net Sales	$	115,362	$	169,697	$	228,815	$	330,926

Orders
Commercial	$	22,546	$	38,962	$	43,663	$	89,672
Live Events		37,102		61,157		81,450		120,322
Schools & Theatres		16,172		12,281		37,796		36,642
Transportation		8,234		7,761		16,070		17,920
International		12,694		11,798		23,708		24,673
Total Orders	$	96,748	$	131,959	$	202,687	$	289,229

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