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Daktronics, Inc. (DAKT) Announces First Quarter Fiscal 2011 Results

BROOKINGS, S.D., Aug. 24, 2010 (GLOBE NEWSWIRE) — Daktronics, Inc. (Nasdaq:DAKT) today reported fiscal 2011 first quarter net sales of $100.5 million and net income of $2.4 million, or $0.06 per diluted share, compared to net sales of $113.5 million and net income of $1.4 million, or $0.03 per diluted share, for the first quarter of fiscal 2010. Backlog at the end of the 2011 first quarter was approximately $144 million, compared with a backlog of approximately $113 million a year earlier and $127 million at the end of the fourth quarter of fiscal 2010.

Free cash flow, defined as cash provided by operations, less net purchases of property and equipment, was $11.9 million in the first quarter of fiscal 2011, compared to $3.8 million in the first quarter of fiscal 2010. Cash on hand at the end of the first quarter of fiscal 2011 was $71.8 million.

“We were pleased with the order performance for the quarter,” said Jim Morgan, president and chief executive officer. “Although orders tend to be lumpy, especially for our large contract business, a look at orders over the most recent two fiscal quarters compared to the same quarters a year ago show increases in the Commercial, International and Transportation business units, while the Live Events and Schools and Theaters business units have declined over that time. It appears that the business units that turned down first with the economic decline are the first to show signs of recovery. Live Events is especially dependent on large contracts, which tend to have a longer sales cycle. The net result is that total orders for the company are up for the most recent two fiscal quarters compared to the same two fiscal quarters a year ago. Subject to the general uncertainties of the economy, it seems that we might be through the worst of the downturn for our business.”

Morgan continued, “We are pleased to report that we received a significant order from a major outdoor advertising company that had not placed significant orders with us during the previous 12 months. This is indicative of the fact that digital boards are providing an attractive return-on-investment for the outdoor advertising companies, which encourages them to continue to invest in digital. It also represents the positive response we have had to our new Series 4000 digital billboard technology, which we announced at the end of fiscal 2010. During the last six weeks, we also booked two orders for our architectural lighting technology – one for a new construction commercial project in Hong Kong and the other for an existing office building in Minneapolis. We are excited about the growth opportunities for this new technology. The order for Hong Kong was booked in our second quarter of fiscal 2011, as was the previously announced order for Miller Park, home of the Milwaukee Brewers. Therefore, these orders are not included in our reported backlog numbers, but they give us a nice start on orders for our second fiscal quarter. Orders in our Schools and Theaters business unit included a number of transactions over $500,000 each, which offset a decline in smaller standard product orders. A number of these larger orders were facilitated by our sports marketing group, which assists the schools in procuring the necessary funding through sponsorships.”

“Our operating expenses were down more than 26% from the first quarter of fiscal 2009, the quarter preceding the downturn in our business, and down 16% from the first quarter of fiscal 2010, as a result of our cost reduction efforts,” said Bill Retterath, chief financial officer. “We expect our non-manufacturing cost structure to remain generally flat, while our manufacturing costs will fluctuate with volumes. Operating expenses could be up slightly in the second quarter of fiscal 2011. This would be due to some unusually low costs in the first quarter of fiscal 2011 and the inherent variability quarter to quarter in the amount of engineering work applied to contracts, and hence cost of goods sold, as opposed to product development which gets applied to operating expenses.

“Gross profit percentage was higher as compared to the fourth quarter of fiscal 2010 as a result of lower warranty and reduced inventory write down costs, combined with better plant utilization due to higher sales,” continued Retterath. “Given the current pricing environment, and based on the orders in our backlog, we anticipate continued pressure on gross profit margins. We will continue our efforts at reducing our costs of delivering a high quality product to our customers on a timely basis. We are seeing some parts shortages in the industry, resulting in longer lead times from our suppliers, especially with electronic parts. This can cause higher costs due to expediting and rearranging manufacturing schedules. It could also negatively impact sales in the second quarter of fiscal 2011.”

Morgan concluded, “Looking forward, a significant portion of our backlog remains scheduled beyond our second quarter; however, we expect net sales to rise slightly in second quarter compared to the first quarter of fiscal 2011. Our focus remains the same and includes increasing order bookings, reducing costs throughout our value streams, improving reliability and quality, maintaining a high level of on-time delivery, and strengthening our after sales service delivery. This includes an increased focus on strategic sourcing initiatives by leveraging a global supply chain. 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.”

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 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:, e-mail the company at, 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.

The Daktronics logo is available at

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, parts shortages and longer lead times, fluctuations in margins, the introduction of new products and technology, 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.

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended
July 31, August 1,
2010 2009
Net sales $100,503 $113,453
Cost of goods sold 73,915 83,383
Gross profit 26,588 30,070
Operating expenses:
Selling 12,338 14,368
General and administrative 5,588 6,534
Product design and development 4,553 5,870
22,479 26,772
Operating income 4,109 3,298
Nonoperating income (expense):
Interest income 455 375
Interest expense (36) (47)
Other income (expense), net 95 (602)
Income before income taxes 4,623 3,024
Income tax expense 2,181 1,592
Net income $2,442 $1,432
Weighted average shares outstanding:
Basic 41,629 40,759
Diluted 41,861 41,073
Earnings per share:
Basic $0.06 $0.04
Diluted $0.06 $0.03
Cash dividend paid per share $0.10 $0.095
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
July 31,
2010 May 1,
(unaudited) 2010
Cash, cash equivalents and restricted cash $71,827 $64,867
Accounts receivable, less allowance for

doubtful accounts

49,917 45,018
Inventories 43,957 35,673
Costs and estimated earnings in excess of


25,479 25,233
Current maturities of long-term receivables 7,787 6,232
Prepaid expenses and other 5,033 5,838
Deferred income taxes 12,580 12,578
Income tax receivables 588 7,444
Property and equipment available for sale 182 182
Total current assets 217,350 203,065
Advertising rights, net 1,139 1,348
Long-term receivables, less current


14,440 13,458
Goodwill 3,295 3,323
Intangible and other assets 3,400 3,710
Deferred income taxes 62 62
22,336 21,901
Land 1,471 1,471
Buildings 55,210 55,353
Machinery and equipment 54,789 54,058
Office furniture and equipment 53,403 53,831
Equipment held for rental 1,369 1,630
Demonstration equipment 8,639 8,969
Transportation equipment 3,748 4,256
178,629 179,568
Less accumulated depreciation 101,506 98,683
77,123 80,885
TOTAL ASSETS $316,809 $305,851
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
July 31,
2010 May 1,
(unaudited) 2010
Accounts payable $30,468 $23,149
Accrued expenses and warranty obligations 30,551 33,443
Current maturities of long-term debt and

marketing obligations

249 322
Billings in excess of costs and estimated earnings 15,136 13,105
Customer deposits 14,198 9,348
Deferred revenue (billed or collected) 7,023 7,766
Income taxes payable 640 361
Total current liabilities 98,265 87,494
Long-term marketing obligations, less current maturities 705 600
Long-term warranty obligations, less current maturities 4,015 4,229
Deferred income taxes 2,167 2,167
Long-term deferred revenue (billed or collected) 4,428 4,308
Total long-term liabilities 11,315 11,304
TOTAL LIABILITIES 109,580 98,798
Common stock 30,961 29,936
Additional paid-in capital 18,568 17,731
Retained earnings 158,163 159,842
Treasury stock, at cost (9) (9)
Accumulated other comprehensive loss (454) (447)
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended
July 31, August 1,
2010 2009
Net income $2,442 $1,432
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 4,995 5,637
Amortization 79 79
Loss on sale of equity investment 231
Gain on sale of property and equipment (72) (25)
Stock-based compensation 827 880
Equity in losses of affiliate 714
Provision for doubtful accounts (10) (308)
Deferred income taxes, net (1) (66)
Change in operating assets and liabilities 5,347 (2,241)
Net cash provided by operating activities 13,607 6,333
Purchase of property and equipment (1,670) (2,559)
Loans to related parties of equity investees, net (1,792)
Purchase of receivables from equity investees, net (306)
Proceeds from insurance recoveries of property

and equipment

Proceeds from sale of equity method investments 535
Proceeds from sale of property and equipment 145 61
Net cash used in investing activities (3,203) (2,269)
Proceeds from exercise of stock options 310 34
Excess tax benefits from stock-based compensation 10
Principal advances on long-term debt 2,775
Dividend paid (4,121) (3,873)
Net cash used in financing activities (3,801) (1,064)
Daktronics, Inc. and Subsidiaries
Net Sales and Orders By Business Unit
(in thousands)
Three Months Ended
July 31, August 1,
2010 2009
Net sales:
Commercial $23,133 $23,235
Live Events 40,683 53,894
Schools & Theatres 16,648 18,435
Transportation 7,545 12,630
International 12,494 5,259
Total net sales $100,503 $113,453
Commercial $33,047 $21,117
Live Events 37,137 44,347
Schools & Theatres 21,571 21,624
Transportation 11,628 7,836
International 13,479 11,015
Total orders $116,862 $105,939
CONTACT:  Daktronics, Inc.
          Investor Relations:
          Bill Retterath, Chief Financial Officer
          (605) 692-0200

Tuesday, August 24th, 2010 Uncategorized