Daktronics (DAKT) 8-K Daktronics, Inc. Announces Fourth Quarter and Fiscal 2011 Results

Daktronics, Inc. Announces Fourth Quarter and Fiscal 2011 Results

• Net sales increase 24% compared to fiscal 2010 fourth quarter

• Fiscal year net sales increase 12% compared to fiscal 2010

• Backlog increases to $131 million compared to $127 million one year ago

Brookings, S.D. – June 1, 2011 - Daktronics, Inc. (Nasdaq - DAKT) today reported fiscal 2011 fourth quarter net sales of $114.4 million and net income of $3.0 million, or $0.07 per diluted share, compared to net sales of $92.0 million and a net loss of ($4.9 million), or ($0.12) per diluted share, for the fourth quarter of fiscal 2010.  Backlog at the end of the fiscal 2011 fourth quarter was approximately $131 million, compared with a backlog of approximately $127 million a year earlier and $128 million at the end of the third quarter of fiscal 2011.

Net sales, net income and earnings per share for the fiscal year ended April 30, 2011 were $441.7 million, $14.2 million and $0.34 per diluted share, respectively. This compares to $393.2 million, ($7.0 million) and ($0.17) per diluted share, respectively, for the same period in fiscal 2010.

Free cash flow, defined as cash provided by operations less net purchases of property and equipment, was $32.2 million through the fourth quarter of fiscal 2011, compared to $27.8 million through the same period one year ago.  Cash and marketable securities at the end of the fourth quarter of fiscal 2011 were $78.8 million.

“We closed out fiscal year 2011 with continued strong performance in the two business units that have been leading our recovery from the slowdown of the past couple of years,” said Jim Morgan, president and chief executive officer.  “Orders increased 23 percent year over year in our Commercial business unit and 38 percent year over year in our International business unit.  We continue to see constraints to growth in our Live Events and Schools and Theaters business units, which were the last parts of our business to enter into the economic downturn. We saw an improvement in gross margins on new orders booked during the quarter, which we attribute to better cost performance of our new generation products.”

Business Highlights

·   Sales in the Commercial business unit continued to grow, led by increased orders for digital billboards. Orders in the reseller portion of the Commercial business unit were up approximately 14 percent for the fiscal year and included two orders for Times Square totaling approximately $3 million booked in the fourth quarter of fiscal 2011.

·   Orders in the Live Events business unit were highlighted by an order of approximately $7 million for the new Barclays Center Arena in Brooklyn, New York, future home of the Brooklyn Nets.  The company also went live with four new display systems in major league baseball this season as previously announced.  The new systems highlighted the home openers for the Texas Rangers, Milwaukee Brewers, Houston Astros and Philadelphia Phillies.

·   Orders in the Schools and Theatres business unit for the fourth quarter of fiscal 2011 were flat versus one year ago, with a trend toward larger transactions involving video displays.

·   The International business unit continued to expand as orders increased to $17 million in the fourth quarter of fiscal 2011, despite some orders being pushed out into the first quarter of fiscal 2012.  Orders for the fourth quarter of fiscal 2011 were highlighted by a multi-million dollar display system for a theater on the Gran Via in Madrid, Spain.

·   Orders in the Transportation business unit, although strong, were down from the level one year ago as a result of the exceptionally large order bookings in the fourth quarter of fiscal 2010.  During the fourth quarter of fiscal 2011, net sales increased significantly as our transportation factory increased throughput to work down the backlog.

Outlook

Morgan added, “As we look forward, we continue to see opportunities for growth in our Commercial business unit, led by strength in digital billboards and the acceptance in the marketplace of our new 4000 series billboard product and our new GalaxyPro display, which is primarily used for on premise advertising.   The International pipeline remains strong, coming off a record year for orders in that business unit.  Our Transportation business continues to perform well and carries a large backlog into fiscal 2012.  We see our Live Events business remaining relatively flat in fiscal 2012, with the uncertainty of the large projects always a factor in the business. Our Schools and Theaters business faces some uncertainty due to tightening of school budgets, although the effect of that on the business is hard to quantify because displays are funded to a large extent by advertising and sponsorship dollars. We believe that we will see an improvement in gross profit margins in large video display projects as a result of the cost effectiveness of our new DVX video product offerings and ongoing cost reduction programs, although gross profit can fluctuate quarter-to-quarter.

“There is an increasing level of interest in our architectural lighting and display products, and we see an opportunity for significant growth in this new area over the next few years.  Our internet protocol television (IPTV) offering for large sports facilities is also getting increasing interest as facilities become aware of its capabilities for fan experience and revenue generation.  Our most recent installation for the Texas Rangers in Arlington, Texas includes a network of 800 LCD screens, along with a number of LED video displays centrally controlled by our Show Control system,” continued Morgan.

Strategy

“Our focus continues to be on winning orders to continue to grow the top line, while at the same time continuing to reduce costs by improving our processes across the company and further reducing the manufactured costs of our products through leveraging a global supply chain and product development initiatives.  At the same time, we continue initiatives to improve reliability and quality, maintain a high level of on-time delivery, and strengthen our after-sales service delivery.  We will continue to focus on free cash flow, with our priorities for cash being funding operations, including developing new and improved product offerings, expanding markets for existing products, and investing in business process improvement initiatives to create shareholder value over time,” concluded Morgan.

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, Schools and Theatres and Transportation, and one International business unit. 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 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 2010 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 Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Twelve Months Ended
	April 30,			May 1,			April 30,			May 1,
	2011			2010			2011			2010
Net sales	$	114,387		$	91,964		$	441,676		$	393,185
Cost of goods sold		85,949			71,817			330,192			298,629
Gross profit		28,438			20,147			111,484			94,556
Operating expenses:
Selling expense		12,471			13,837			49,555			54,253
General and administrative		6,194			6,184			23,453			25,199
Product design and development		5,162			5,361			18,949			21,920
Gain on insurance proceeds		-			-			-			(1,496	)
Goodwill impairment		-			-			-			1,410
		23,827			25,382			91,957			101,286
Operating income (loss)		4,611			(5,235	)		19,527			(6,730	)
Nonoperating income (expense):
Interest income		540			385			1,921			1,514
Interest expense		(66	)		(21	)		(184	)		(170	)
Other income (expense), net		58			(1,179	)		877			(2,756	)
Income (loss) before income taxes		5,143			(6,050	)		22,141			(8,142	)
Income tax expense (benefit)		2,180			(1,151	)		7,897			(1,153	)
Net income (loss)	$	2,963		$	(4,899	)	$	14,244		$	(6,989	)
Weighted average shares outstanding:
Basic		41,632			41,049			41,422			40,908
Diluted		42,007			41,049			42,277			40,908
Earnings (loss) per share:
Basic		0.07			(0.12	)		0.34			(0.17	)
Diluted	$	0.07		$	(0.12	)	$	0.34		$	(0.17	)
Cash dividend paid per share	$	-		$	-		$	0.60		$	0.095

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Daktronics, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)

	April 30,
	2011		May 1,
	(unaudited)		2010
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted cash	$	55,854	$	64,867
Marketable securities		22,943		-
Accounts receivable, less allowance for doubtful accounts		61,778		45,018
Inventories		46,889		35,673
Costs and estimated earnings in excess of billings		24,193		25,233
Current maturities of long-term receivables		5,343		6,232
Prepaid expenses and other assets		6,253		5,838
Deferred income taxes		9,640		12,578
Income tax receivables		4,870		7,444
Property and equipment available for sale		59		182
Total current assets		237,822		203,065
Advertising rights, net		525		1,348
Long-term receivables, less current maturities		13,558		13,458
Goodwill		3,384		3,323
Intangible and other assets		2,512		3,710
Deferred income taxes		180		62
		20,159		21,901
PROPERTY AND EQUIPMENT:
Land		1,497		1,471
Buildings		55,457		55,353
Machinery and equipment		58,233		54,058
Office furniture and equipment		53,402		53,831
Equipment held for rental		1,283		1,630
Demonstration equipment		8,086		8,969
Transportation equipment		3,688		4,256
		181,646		179,568
Less accumulated depreciation		111,780		98,683
		69,866		80,885
TOTAL ASSETS	$	327,847	$	305,851

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Daktronics, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

(in thousands)

	April 30,
	2011			May 1,
	(unaudited)			2010
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable	$	2,316		$	-
Accounts payable		29,223			23,149
Accrued expenses and warranty obligations		36,222			33,443
Billings in excess of costs and estimated earnings		20,284			13,105
Customer deposits		11,288			9,348
Deferred revenue (billed or collected)		8,770			7,766
Current maturities of long-term debt and marketing obligations		273			322
Income tax payable		1,281			361
Total current liabilities		109,657			87,494
Long-term marketing obligations, less current maturities		662			600
Long-term warranty obligations and other payables		9,856			4,229
Deferred income taxes		11			2,167
Long-term deferred revenue (billed or collected)		4,559			4,308
Total long-term liabilities		15,088			11,304
TOTAL LIABILITIES		124,745			98,798
SHAREHOLDERS' EQUITY:
Common stock		32,670			29,936
Additional paid-in capital		21,149			17,731
Retained earnings		149,291			159,842
Treasury stock, at cost		(9	)		(9	)
Accumulated other comprehensive (income)/loss		1			(447	)
TOTAL SHAREHOLDERS' EQUITY		203,102			207,053
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	327,847		$	305,851

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Daktronics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Year Ended
	April 30,			May 1,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	14,244		$	(6,989	)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation		19,354			21,945
Amortization		287			315
Amortization of premium/discount on marketable securities		48			-
Gain on sale of property and equipment		(62	)		(982	)
Stock-based compensation		3,370			3,762
Equity in losses of affiliates		36			2,535
Impairment of goodwill		-			1,410
Loss on sale of equity investees		-			230
Provision for doubtful accounts		(37	)		421
Deferred income taxes, net		663			(95	)
Change in operating assets and liabilities		3,443			21,232
Net cash provided by operating activities		41,346			43,784
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(9,386	)		(16,121	)
(Purchases)/sales of marketable securities, net		(23,035	)		-
Insurance recoveries on property and equipment		187			3,213
Proceeds from sale of property and equipment		238			181
Other investing activities, net		2,110			(372	)
Net cash used in investing activities		(29,886	)		(13,099	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable		2,316			-
Proceeds from exercise of stock options		1,352			365
Excess tax benefits from stock-based compensation		122			71
Principal payments on long-term debt		(28	)		(27	)
Dividends paid		(24,794	)		(3,874	)
Net cash used in financing activities		(21,032	)		(3,465	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		277			(118	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(9,295	)		27,102
CASH AND CASH EQUIVALENTS:
Beginning of period		63,603			36,501
End of period	$	54,308		$	63,603

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Daktronics, Inc. and Subsidiaries

Net Sales and Orders By Business Unit

(in thousands)

(unaudited)

	Three Months Ended				Twelve Months Ended
	April 30,		May 1,		April 30,		May 1,
	2011		2010		2011		2010
Net Sales:
Commercial	$	28,755	$	22,849	$	112,515	$	91,860
Live Events		40,726		33,611		161,572		159,229
Schools & Theatres		12,639		13,353		62,310		62,878
Transportation		15,125		9,174		45,215		40,481
International		17,142		12,977		60,064		38,737
Total net sales	$	114,387	$	91,964	$	441,676	$	393,185
Orders:
Commercial	$	31,335	$	28,278	$	115,820	$	93,833
Live Events		42,054		41,779		152,851		155,509
Schools & Theatres		14,222		14,418		61,995		62,493
Transportation		11,426		20,495		43,878		45,968
International		16,634		15,146		65,318		47,482
Total orders	$	115,671	$	120,116	$	439,862	$	405,285

Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow

(in thousands)

(unaudited)

	Twelve Months Ended
	April 30,				May 1,
	2011				2010
Net cash provided by operating activities		$	41,346			$	43,784
Purchase of property and equipment			(9,386	)			(16,121	)
Proceeds from sale of property and equipment			238				181
Free cash flow		$	32,198			$	27,844

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.

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