Daktronics, Inc. (Nasdaq: DAKT) today reported fiscal 2008 third quarter
net sales of $118.2 million and net income of $5.4 million, or $0.13 per
diluted share, compared with third quarter net sales of $106.7 million
and net income of $7.0 million, or $0.17 per diluted share for the third
quarter of fiscal 2007. Backlog at the end of the third quarter was
approximately $138 million, compared with a backlog of approximately $98
million at the end of the third quarter of fiscal 2007, and $119 million
at the end of the second quarter of fiscal 2008.
Net sales, net income and earnings per share for the nine months ending
January 26, 2008, were $370.6 million, $20.5 million and $0.49 per
diluted share, respectively, compared to $322.4 million, $20.9 million
and $0.51 per diluted share, respectively, for the same period in fiscal
2007.
"The fact that we exceeded our top line
estimates is indicative that our focus on streamlining manufacturing is
on track as we were able to respond to the opportunity during the
quarter,” said Jim Morgan, chief executive
officer. Order bookings for the quarter were also strong and are up more
than 20 percent for the fiscal year. Our net income is down for both the
quarter and year to date on higher net sales, emphasizing the need to
take additional steps to get the business operating at the levels it
should for the long-term.”
Morgan continued, "In the Live Events segment,
orders for the quarter included three large professional sports
facilities contracts totaling more than $40 million, plus a verbal
commitment on a university sports facility in excess of $9 million. Our
pipeline is strong, and we expect to end the year with a strong backlog
in this area.”
Morgan added, "Sales in the Commercial segment
for the third quarter of fiscal 2008 were up 35% over the same quarter
of fiscal 2007 as both of our commercial factories performed very well.
For the year, revenues are up 40%. This revenue growth is led by the
digital billboard business. The reseller and national accounts business
remain strong as well.” "Our Schools and Theatres segment, along with
the transportation segment, continued to perform as expected and remain
solid businesses with good long-term growth expectations. The quarter
included a multi-million
Dollar Vortek hoist system order, which was
very exciting for our new Vortek business.” "Our International saw sales grow more than
20 percent for the third quarter. More importantly, with our backlog and
some orders that we consider highly probable, we are expecting the
fourth quarter to be a record revenue quarter for international. We are
very pleased to be working with JCDecaux on its first major rollout of
digital billboards in Europe. It would appear that Europe is poised for
growth in digital billboards. We have been investing in our
infrastructure in Europe for the past four years, and we expect our
operating margins to improve there as our revenues grow,”
said Morgan.
"Our gross margins were strong prior to
taking into account higher than expected warranty costs during the
quarter, which exceeded $1.0 million”, said
Bill Retterath, chief financial officer. "These
excess costs were incurred on a few installations primarily related to
new or unique products or design changes. They are also indicative of
our commitment to customer satisfaction. We expect some limited pressure
on gross margins in the fourth quarter as a result of the larger sports
projects we booked recently.”
Retterath added, "Operating expenses were
more than expected for the quarter. We had higher than expected costs on
health insurance and other payroll related items along with higher
professional fees. We have taken additional steps to right size the
organization from an operating expense perspective but have more work to
do. In the last month, we eliminated a significant number of open
positions in an effort to curtail the rate of hiring, and we expect to
eliminate more open positions in the next few weeks. Offsetting this, we
still need to invest in areas that are critical to our growth
expectations, with a focus on process and system improvements to operate
more efficiently in the future.” "Non-operating income included extra interest
costs related to sales tax audits concluded during the quarter, a $2.8
million gain on the sale of our interest in Arena Media Networks and a
larger than expected loss on our share of earnings in FuelCast Networks
as we expanded the network and saw sales less than expected. We expect
this to turn around in calendar year 2008 as FuelCast further develops
its advertising revenues,” concluded
Retterath.
Business Outlook
The company is providing financial guidance for the fourth quarter of
fiscal 2008. Daktronics expects that net sales for the fourth quarter of
fiscal 2008 will be in the range of $130 million to $138 million and net
earnings will be in the range of $0.12 to $0.19 per share. As in the
past, this guidance is subject to a number of factors that could cause
it to vary.
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 Theaters 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) 697-4000 or toll-free (800) 843-5843 in the United States or
write to the company at 331 32nd Ave. 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 are 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 2007 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 Income (in thousands, except per share amounts) (unaudited)
Three Months Ended
Nine Months Ended January 26,
January 27, January 26,
January 27, 2008 2007 2008 2007
Net sales
$
118,201
$
106,731
$
370,560
$
322,414
Cost of goods sold
83,019
74,375
259,299
228,196
Gross profit
35,182
32,356
111,261
94,218
Operating expenses:
Selling
16,379
13,692
46,385
38,666
General and administrative
6,868
5,231
19,304
13,587
Product design and development
4,943
3,611
14,965
11,166
28,190
22,534
80,654
63,419
Operating income
6,992
9,822
30,607
30,799
Nonoperating income (expense):
Interest income
448
304
1,295
1,459
Interest expense
(515
)
(232
)
(1,265
)
(313
)
Other income (expense), net
2,015
(63
)
1,510
(604
)
Income before income taxes
8,940
9,831
32,147
31,341
Income tax expense
3,557
2,804
11,643
10,435
Net income
$
5,383
$
7,027
$
20,504
$
20,906
Weighted average shares outstanding:
Basic
39,936
39,290
39,832
39,148
Diluted
41,266
41,479
41,380
41,304
Earnings per share:
Basic
$
0.13
$
0.18
$
0.51
$
0.53
Diluted
$
0.13
$
0.17
$
0.49
$
0.51
Cash dividend paid per share
$
-
$
-
$
0.07
$
0.06
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands)
January 26, 2008 April 28, (unaudited) 2007 ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
3,379
$
2,590
Restricted cash
738
--
Accounts receivable, less allowance for doubtful accounts
66,187
56,692
Inventories
52,305
45,835
Costs and estimated earnings in excess of billings
24,875
22,314
Current maturities of long-term receivables
8,293
6,831
Prepaid expenses and other
4,108
5,044
Deferred income taxes
8,073
7,761
Income taxes receivable
--
731
Rental equipment available for sale
--
188
Total current assets
167,958
147,986
Advertising rights, net
3,454
3,830
Long-term receivables, less current maturities
15,999
11,211
Investments in affiliates
3,797
8,762
Goodwill
4,733
4,408
Intangible and other assets
3,178
3,391
Deferred income taxes
--
136
31,161
31,738
PROPERTY AND EQUIPMENT:
Land
3,275
3,275
Buildings
48,055
36,822
Machinery and equipment
44,954
38,420
Office furniture and equipment
43,872
37,520
Equipment held for rental
3,625
2,600
Demonstration equipment
7,482
5,939
Transportation equipment
6,360
6,669
157,623
131,245
Less accumulated depreciation
58,901
45,119
98,722
86,126
TOTAL ASSETS
$
297,841
$
265,850
Daktronics, Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands)
January 26, 2008 April 28, (Unaudited) 2007 LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Notes payable, bank
$
13,414
$
24,615
Accounts payable
33,562
26,094
Accrued expenses and warranty obligations
27,282
21,849
Current maturities of long-term debt and marketing obligations
1,039
1,002
Billings in excess of costs and estimated earnings
21,476
18,293
Customer deposits
10,675
5,857
Deferred revenue
7,269
5,333
Income taxes payable
196
39
Total current liabilities
114,913
103,082
Long-term debt, less current maturities
70
592
Long-term marketing obligations, less current maturities
662
473
Long-term warranty obligations and other payables
3,201
5,366
Deferred income taxes
2,629
2,629
6,562
9,060
TOTAL LIABILITIES
121,475
112,142
SHAREHOLDERS’ EQUITY:
Common stock
24,942
21,954
Additional paid-in capital
9,637
7,431
Retained earnings
142,202
124,469
Treasury stock, at cost
(9
)
(9
)
Accumulated other comprehensive loss
(406
)
(137
)
TOTAL SHAREHOLDERS’ EQUITY
176,366
153,708
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
297,841
$
265,850
Daktronics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited)
Nine Months Ended January 26, 2008
January 27, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
20,504
$
20,906
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation
15,389
8,835
Amortization
236
371
(Gain) loss on sale of property and equipment
(11
)
4
Gain on sale of equity investment
(2,878
)
Stock-based compensation
1,939
1,457
Equity in earnings and losses of affiliates
1,604
1,275
Provision for doubtful accounts
363
(166
)
Deferred income taxes, net
(176
)
(694
)
Change in operating assets and liabilities
(1,535
)
(22,105
)
Net cash provided by operating activities
35,435
9,883
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(28,372
)
(46,576
)
Cash consideration paid for equity method investments
(750
)
(13,800
)
Proceeds from sale of equity investment
7,000
Sales of marketable securities, net
8,310
Proceeds from sale of property and equipment
425
62
Net cash used in investing activities
(21,697
)
(52,004
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable
104,108
35,387
Payments on notes payable
(115,308
)
(16,170
)
Proceeds from exercise of stock options and warrants
1,639
1,083
Excess tax benefits from stock-based compensation
324
926
Principal (payments) proceeds on long-term debt
(538
)
(69
)
Dividend paid
(2,770
)
(2,339
)
Net cash (used) provided in financing activities
(12,545
)
18,818
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(404
)
(127
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
789
(23,430
)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD
2,590
26,921
CASH AND CASH EQUIVALENTS END OF PERIOD
$
3.379
$
3,491
Daktronics, Inc. and Subsidiaries Sales and Orders By Segment (in thousands) (unaudited)
Three Months Ended
Nine Months Ended January 26,
January 27, January 26,
January 27, 2008 2007 2008 2007
Net sales
Commercial
$
51,667
$
38,173
$
134,918
$
96,626
Live Events
32,547
39,878
127,922
138,171
Schools & Theatres
12,431
12,157
49,104
38,783
Transportation
8,751
5,919
26,879
18,821
International
12,805
10,604
31,737
30,013
Net Sales
$
118,201
$
106,731
$
370,560
$
322,414
Orders
Commercial
$
41,087
$
29,747
$
127,256
$
113,897
Live Events
65,201
26,349
148,240
127,864
Schools & Theatres
11,579
7,998
47,977
32,920
Transportation
9,144
8,791
24,269
22,301
International
11,108
5,178
36,053
22,306
Segment Operating Income
$
138,119
$
78,063
$
383,795
$
319,288
