8-K
DAKTRONICS INC /SD/ (DAKT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): August 26, 2020
Daktronics, Inc.
(Exact Name of Registrant as Specified in Charter)
| South Dakota | 0-23246 | 46-0306862 |
|---|---|---|
| (State or Other Jurisdiction of | (Commission | (I.R.S. Employer |
| Incorporation) | File Number) | Identification No.) |
201 Daktronics Drive
Brookings, SD 57006
(Address of Principal Executive Offices, and Zip Code)
(605) 692-0200
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, No Par Value | DAKT | NASDAQ Global Select Market |
| Preferred Stock Purchase Rights | DAKT | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On August 26, 2020 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three months ended August 1, 2020 of fiscal 2021. 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.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits:
(d) 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/ Sheila M. Anderson | ||
| Sheila M. Anderson, Chief Financial Officer | ||
| Date: | August 26, 2020 |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated August 26, 2020 issued by Registrant regarding first quarter fiscal 2021 results. |
Exhibit
Daktronics, Inc. Announces First Quarter Fiscal 2021 Results
Brookings, S.D., August 26, 2020 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2021 first quarter results. Daktronics reported fiscal 2021 first quarter net sales of $143.6 million, operating income of $9.5 million, and net income of $7.5 million, and earnings per diluted share of $0.17. This compares to net sales of $180.3 million, operating income of $7.6 million, and net income of $7.0 million, or $0.16 per diluted share, for the first quarter of fiscal 2020. Fiscal 2021 first quarter orders were $122.2 million, compared to $187.5 million for the first quarter of fiscal 2020. Product order backlog at the end of the fiscal 2021 first quarter was $192 million, compared to $207 million a year earlier and $212 million at the end of the fourth quarter of fiscal 2021.^(1)^
Fiscal 2021 is a 52-week year and fiscal 2020 was a 53-week year; therefore, the three months ended August 1, 2020 contains operating results for 13 weeks while the three months ended August 3, 2019 contained operating results for 14 weeks. Sales, orders, and other results of operations were impacted due to the additional week of operations.
Cash generated by operating activities in the first three months of fiscal 2021 was $8.5 million, compared to cash consumed of $18.2 million in operating activities in the first three months of fiscal 2020. During 2020, cash flow from operating activities fluctuated due to a rise in accounts receivable, contract assets, and inventories corresponding with the seasonality of our business. Free cash flow, defined as cash provided by or used in operating activities less net investment in property and equipment, was a positive $5.5 million for the first three months of fiscal 2021, as compared to a negative $24.0 million for the same period of fiscal 2020. Net investment in property and equipment was $3.1 million for the first three months of fiscal 2021, as compared to $5.8 million for the first three months of fiscal 2020. Cash, restricted cash, and marketable securities at the end of the first quarter of fiscal 2021 were $45.9 million, which compares to $33.0 million at the end of the first quarter of fiscal 2020 and $41.6 million at the end of fiscal 2020.
Orders for the first quarter of fiscal 2021 decreased 34.8 percent as compared to the first quarter of fiscal 2020. For comparison, orders paced at $9.4 million per week during the first quarter of fiscal 2021 as compared to $13.4 million during the same time last year. Each business unit's order volume was lower in fiscal 2021 because of the additional week in first quarter of fiscal 2020, timing of large contract orders which cause lumpiness, and due to lower market activity in light of the COVID-19 pandemic.
Net sales decreased by 20.3 percent in the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020. Net sales decreased in all business units. The change in sales primarily relates to fluctuations in the timing of order bookings, and related conversion to sales. Some shipping and on-site delays continue to be caused by COVID-19 related work restrictions or customer delays in readiness for their applications.
Gross profit as a percentage of net sales was 24.9 percent for the first quarter of fiscal 2021 as compared to 25.2 percent a year earlier. Operating expenses for the first quarter of fiscal 2021 were $26.2 million, compared to $37.9 million for the first quarter of fiscal 2020, or a decrease of 30.8 percent. Approximately $2.7 million of this decrease is due to the additional week during the first quarter of fiscal 2020. The remaining declines are attributed to our focus on managing our expenses to expected order volumes. Overall operating expenses were attributed to lower personnel costs offset by severance costs for reductions in force, lower travel and entertainment activities, and lowered marketing and convention events. Operating income as a percent of sales for the quarter was 6.6 percent as compared to 4.2 percent during the first quarter of fiscal 2020.
The effective tax rate for the first quarter of fiscal 2021 was 16.4 percent compared to an effective tax rate of 12.6 percent for the first quarter of fiscal 2020.
Reece Kurtenbach, chairman, president and chief executive officer stated, "During the first quarter of fiscal 2021, our customers reduced their spend on audio-visual systems as they worked through the economic and business implications of COVID-19. We took corresponding action to reduce our operating expenses to align with expected order and sales declines. These actions along with reduced investments in capital assets and suspension of dividends and share repurchases helped us maintain stability in liquidity and our cash position."
Outlook
Kurtenbach added, "We believe the audio-visual industry fundamentals will drive long-term growth for our business, but the near-term outlook shows contraction and greater volatility overall. We expect our customers will continue to have disruptions in revenues caused by COVID-19 throughout the current fiscal year. We are focused on promoting our value to new and existing markets, while managing our cost structure to meet the uncertain demand. Even though we face a challenging fiscal 2021, we intend to emerge as a stronger organization."
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, High School Park and Recreation, and Transportation, and one International business unit. For more information, visit the company's website at: www.daktronics.com, email 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., P.O. 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 and orders, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation and other risks described in the company's SEC filings, including its Annual Report on Form 10-K for its 2020 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.
-- END --
| For more information contact: |
|---|
| INVESTOR RELATIONS: |
| Sheila M. Anderson, Chief Financial Officer |
| Tel (605) 692-0200 |
| Investor@daktronics.com |
(1) Backlog is not a measure defined by U.S. generally accepted accounting principles ("GAAP"), and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. For more information related to backlog, see Part I, Item 1. Business of our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.
| Daktronics, Inc. and Subsidiaries<br><br>Consolidated Statements of Operations<br><br>(in thousands, except per share amounts)<br><br>(unaudited) | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended | ||||||
| August 1, <br>2020 | August 3, <br>2019 | |||||
| Net sales | $ | 143,644 | $ | 180,256 | ||
| Cost of sales | 107,883 | 134,751 | ||||
| Gross profit | 35,761 | 45,505 | ||||
| Operating expenses: | ||||||
| Selling | 11,556 | 18,297 | ||||
| General and administrative | 7,124 | 9,093 | ||||
| Product design and development | 7,532 | 10,500 | ||||
| 26,212 | 37,890 | |||||
| Operating income | 9,549 | 7,615 | ||||
| Nonoperating (expense) income: | ||||||
| Interest income | 85 | 269 | ||||
| Interest expense | (73 | ) | (35 | ) | ||
| Other (expense) income, net | (627 | ) | 193 | |||
| Income before income taxes | 8,934 | 8,042 | ||||
| Income tax expense | 1,467 | 1,012 | ||||
| Net income | $ | 7,467 | $ | 7,030 | ||
| Weighted average shares outstanding: | ||||||
| Basic | 44,654 | 45,089 | ||||
| Diluted | 44,751 | 45,261 | ||||
| Earnings per share: | ||||||
| Basic | $ | 0.17 | $ | 0.16 | ||
| Diluted | $ | 0.17 | $ | 0.16 | ||
| Cash dividends declared per share | $ | — | $ | 0.05 |
| Daktronics, Inc. and Subsidiaries<br><br>Consolidated Balance Sheets<br><br>(in thousands) | ||||
|---|---|---|---|---|
| August 1, <br>2020 | May 2, <br>2020 | |||
| (unaudited) | ||||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | $ | 44,609 | $ | 40,398 |
| Restricted cash | 96 | 14 | ||
| Marketable securities | 1,230 | 1,230 | ||
| Accounts receivable, net | 88,608 | 72,577 | ||
| Inventories | 81,435 | 86,803 | ||
| Contract assets | 33,261 | 35,467 | ||
| Current maturities of long-term receivables | 3,306 | 3,519 | ||
| Prepaid expenses and other current assets | 7,595 | 9,629 | ||
| Income tax receivables | 260 | 548 | ||
| Property and equipment and other assets available for sale | 1,966 | 1,817 | ||
| Total current assets | 262,366 | 252,002 | ||
| Property and equipment, net | 66,059 | 67,484 | ||
| Long-term receivables, less current maturities | 739 | 1,114 | ||
| Goodwill | 8,048 | 7,743 | ||
| Intangibles, net | 3,070 | 3,354 | ||
| Investment in affiliates and other assets | 26,526 | 27,683 | ||
| Deferred income taxes | 13,312 | 13,271 | ||
| Total non-current assets | 117,754 | 120,649 | ||
| TOTAL ASSETS | $ | 380,120 | $ | 372,651 |
| Daktronics, Inc. and Subsidiaries<br><br>Consolidated Balance Sheets (continued)<br><br>(in thousands) | ||||||
|---|---|---|---|---|---|---|
| August 1, <br>2020 | May 2, <br>2020 | |||||
| (unaudited) | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Accounts payable | $ | 48,255 | $ | 47,834 | ||
| Contract liabilities | 50,159 | 50,897 | ||||
| Accrued expenses | 33,941 | 36,626 | ||||
| Warranty obligations | 10,648 | 9,764 | ||||
| Income taxes payable | 1,107 | 844 | ||||
| Total current liabilities | 144,110 | 145,965 | ||||
| Long-term warranty obligations | 16,412 | 15,860 | ||||
| Long-term contract liabilities | 10,715 | 10,707 | ||||
| Other long-term obligations | 21,469 | 22,105 | ||||
| Long-term income taxes payable | 723 | 582 | ||||
| Deferred income taxes | 469 | 452 | ||||
| Total long-term liabilities | 49,788 | 49,706 | ||||
| TOTAL LIABILITIES | 193,898 | 195,671 | ||||
| SHAREHOLDERS' EQUITY: | ||||||
| Common stock | 60,010 | 60,010 | ||||
| Additional paid-in capital | 45,192 | 44,627 | ||||
| Retained earnings | 92,557 | 85,090 | ||||
| Treasury stock, at cost | (7,297 | ) | (7,470 | ) | ||
| Accumulated other comprehensive loss | (4,240 | ) | (5,277 | ) | ||
| TOTAL SHAREHOLDERS' EQUITY | 186,222 | 176,980 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 380,120 | $ | 372,651 |
| Daktronics, Inc. and Subsidiaries<br><br>Consolidated Statements of Cash Flows<br><br>(in thousands)<br><br>(unaudited) | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended | ||||||
| August 1, <br>2020 | August 3, <br>2019 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income | $ | 7,467 | $ | 7,030 | ||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
| Depreciation and amortization | 4,337 | 4,383 | ||||
| Loss on sale of property, equipment and other assets | (53 | ) | (26 | ) | ||
| Share-based compensation | 539 | 643 | ||||
| Equity in loss of affiliates | 529 | 118 | ||||
| Provision for doubtful accounts | 1 | 5 | ||||
| Deferred income taxes, net | (4 | ) | (40 | ) | ||
| Change in operating assets and liabilities | (4,271 | ) | (30,331 | ) | ||
| Net cash provided by (used in) operating activities | 8,545 | (18,218 | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (3,155 | ) | (5,856 | ) | ||
| Proceeds from sales of property, equipment and other assets | 86 | 73 | ||||
| Proceeds from sales or maturities of marketable securities | — | 14,510 | ||||
| Purchases of and loans to equity investment | (492 | ) | (455 | ) | ||
| Net cash (used in) provided by investing activities | (3,561 | ) | 8,272 | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Principal payments on long-term obligations | (210 | ) | (1,221 | ) | ||
| Dividends paid | — | (2,250 | ) | |||
| Payments for common shares repurchased | (1,187 | ) | ||||
| Net cash used in financing activities | (210 | ) | (4,658 | ) | ||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (481 | ) | (37 | ) | ||
| NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 4,293 | (14,641 | ) | |||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||||||
| Beginning of period | 40,412 | 35,742 | ||||
| End of period | $ | 44,705 | $ | 21,101 |
| Daktronics, Inc. and Subsidiaries<br><br>Net Sales and Orders by Business Unit<br><br>(in thousands)<br><br>(unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | |||||||||
| August 1, <br>2020 | August 3, <br>2019 | Dollar Change | Percent Change | ||||||
| Net Sales: | |||||||||
| Commercial | $ | 34,506 | $ | 44,035 | $ | (9,529 | ) | (21.6 | )% |
| Live Events | 51,474 | 59,306 | (7,832 | ) | (13.2 | ) | |||
| High School Park and Recreation | 28,943 | 30,465 | (1,522 | ) | (5.0 | ) | |||
| Transportation | 14,498 | 19,018 | (4,520 | ) | (23.8 | ) | |||
| International | 14,223 | 27,432 | (13,209 | ) | (48.2 | ) | |||
| $ | 143,644 | $ | 180,256 | $ | (36,612 | ) | (20.3 | )% | |
| Orders: | |||||||||
| Commercial | $ | 25,533 | $ | 38,648 | $ | (13,115 | ) | (33.9 | )% |
| Live Events | 41,860 | 66,969 | (25,109 | ) | (37.5 | ) | |||
| High School Park and Recreation | 28,099 | 30,552 | (2,453 | ) | (8.0 | ) | |||
| Transportation | 13,089 | 22,215 | (9,126 | ) | (41.1 | ) | |||
| International | 13,572 | 29,079 | (15,507 | ) | (53.3 | ) | |||
| $ | 122,153 | $ | 187,463 | $ | (65,310 | ) | (34.8 | )% | |
| Reconciliation of Free Cash Flow*<br><br>(in thousands)<br><br>(unaudited) | |||||||||
| --- | --- | --- | --- | --- | --- | --- | |||
| Three Months Ended | |||||||||
| August 1, <br>2020 | August 3, <br>2019 | ||||||||
| Net cash provided by (used in) operating activities | $ | 8,545 | $ | (18,218 | ) | ||||
| Purchases of property and equipment | (3,155 | ) | (5,856 | ) | |||||
| Proceeds from sales of property and equipment | 86 | 73 | |||||||
| Free cash flow | $ | 5,476 | $ | (24,001 | ) |
*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.