OREANDA-NEWS. Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2017 fourth quarter net sales of $143.7 million, operating income of $1.7 million, and net income of $0.9 million, or $0.02 per diluted share, compared to net sales of $138.5 million, operating loss of $3.7 million, and a net loss of $2.9 million, or $0.07 per diluted share, for the fourth quarter of fiscal 2016.  Fiscal 2017 fourth quarter orders were $178.1 million compared to $143.2 million for the fourth quarter of fiscal 2016.  Backlog at the end of the fiscal 2017 fourth quarter was $203 million, compared to a backlog of $181 million a year earlier and $170 million at the end of the third quarter of fiscal 2017.

Net sales, operating income, net income, and earnings per share for the fiscal year ended April 29, 2017, were $586.5 million, $15.4 million, $10.3 million and $0.23 per diluted share, respectively.  This compares to $570.2 million, $2.5 million, $2.1 million and $0.05 per diluted share, respectively, for fiscal 2016.  Fiscal 2017 orders were $613.5 million compared to $560.8 million for fiscal 2016.

Cash flow provided by operating activities for the fiscal year ended April 29, 2017 was $39.6 million, compared to $13.6 million in fiscal 2016.  Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a positive $31.1 million for fiscal 2017, as compared to a negative free cash flow of $3.3 million for fiscal 2016.  Net investment in property and equipment was $8.5 million for fiscal 2017, as compared to $16.9 million for fiscal 2016.  We repurchased approximately 0.3 million shares of common stock at an average price of $6.42 per share for a total use of cash of $1.8 million during fiscal 2017.  Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2017 were $65.6 million, which compares to $53.2 million at the end of the fourth quarter of fiscal 2016.

Fourth Quarter Fiscal 2017 Consolidated Financial Results
Orders for the fourth quarter of fiscal 2017 increased by 24.4 percent as compared to the fourth quarter of fiscal 2016.  Orders increased in the Live Events, High School Park and Recreation, and Transportation business units, decreased in the Commercial business unit, and remained relatively flat in the International business unit.  The timing of orders for large projects varies according to the needs of the customer, which was the primary cause of the increase in order volume quarter over quarter. 

Net sales for the fourth quarter of fiscal 2017 increased by 3.8 percent as compared to the fourth quarter of fiscal 2016.  Net sales increased in the Live Events and International business units, decreased in the High School Park and Recreation business, and remained relatively flat in the Commercial and Transportation business units quarter over quarter.  Live Events net sales increased as a result of work completed on National Hockey League and other minor league stadiums.  International net sales increased due to increased sales of sports and spectacular projects.  High School Park and Recreation net sales decreased due to order timing.

Operating income as a percentage of sales increased to 1.2 percent for the fourth quarter of fiscal 2017 as compared to an operating loss as a percentage of sales of 2.6 percent for the fourth quarter of fiscal 2016.

Fiscal 2017 Consolidated Financial Results
Orders increased in fiscal 2017 by $52.7 million as compared to fiscal 2016.  Orders increased in all business units fiscal year over fiscal year.  International orders increase was primarily due to improved global market conditions impacting orders in our sports and spectacular projects and Out-of-Home application business.  Commercial orders increased due to the addition of ADFLOW in our on-premise niche related to in-store media solutions and increases due to the timing of large custom projects in our spectacular niche.  High School Park and Recreation orders increase was primarily due to overall strong market demand, led by video in sporting applications.  Transportation orders increase was primarily due to the variability caused by large order timing and increased state procurement project activity.  During fiscal 2017, we had an award of a multimillion-dollar project for an active traffic management system with no same sized projects the prior year.  Live Events orders remained strong. 

Net sales for fiscal 2017 increased 2.9 percent as compared to fiscal 2016.  Net sales increased in the Live Events and High School Park and Recreation business units, decreased in the International business units, and remained relatively flat in the Commercial and Transportation business units.  Live Events net sales increase was primarily the result of work completed on stadium projects mainly in the National Football League.  High School Park and Recreation net sales increase was primarily due to increased video project sizes with larger average order size.  International net sales decrease was due to the timing of converting orders to sales.

Annual operating income as a percentage of sales increased to 2.6 percent for fiscal 2017 as compared to 0.4 percent for fiscal 2016.  The operating income percentage increase is primarily attributable to lower warranty costs and improved project gross margins.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "Fiscal 2017 was a positive year for Daktronics.  We realized an increase in order volume, sales, and profit.  Our financial improvement is attributable to a number of factors.  The global economic conditions improved over the year prompting more projects to move forward, which we benefited from as our solutions provide value to a broad customer base.  We were successful in winning a number of projects for high-profile locations, for larger sized sports video projects, and standardized solutions for businesses and schools.  During the year, we increased sales by integrating ADFLOW solutions into our portfolio.  ADFLOW is the company we acquired late in fiscal 2016.

During fiscal 2017, we invested in developing additional value-based solutions for the market from improvements in our control systems, indoor and outdoor video product line selections, and service delivery options.  Our manufacturing operations continued to increase productivity through automation and other process improvements.  We continued to focus on quality and reliability of our product.  Our warranty expense as a percentage of sales was 2.5 percent for fiscal 2017 compared to 4.1 percent for fiscal 2016."

Outlook
Kurtenbach continued, "As we enter into fiscal 2018, we see the video display business continuing to expand due to market adoption of video in various applications, and expansion of the market due to lowered price points as compared to past years.  While competition remains strong across our markets, we expect continued success in growing our business over the long-term.  To deliver value to our customers and serve the markets expectations, we plan to continue to increase the level of investments in new or enhanced customer solutions during fiscal 2018.  This will improve our overall product line-up creating opportunities to capture a broader customer base."

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 be 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.  

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 2016 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)
(unaudited)
  Three Months Ended   Twelve Months Ended
  April 29,
 2017		   April 30,
 2016		   April 29,
 2017		   April 30,
 2016
               
Net sales $ 143,682     $ 138,463     $ 586,539     $ 570,168  
Cost of goods sold 109,958     110,488     446,124     449,149  
Gross profit 33,724     27,975     140,415     121,019  
               
Operating expenses:              
Selling expense 15,859     15,938     61,687     58,812  
General and administrative 8,219     8,608     34,226     32,801  
Product design and development 7,939     7,085     29,081     26,911  
  32,017     31,631     124,994     118,524  
Operating income (loss) 1,707     (3,656 )   15,421     2,495  
               
Nonoperating income (expense):              
Interest income 192     194     751     987  
Interest expense (56 )   (26 )   (230 )   (228 )
Other (expense) income, net (104 )   539     (354 )   (128 )
               
Income (loss) before income taxes 1,739     (2,949 )   15,588     3,126  
Income tax expense (benefit) 830     (19 )   5,246     1,065  
Net income (loss) $ 909     $ (2,930 )   $ 10,342     $ 2,061  
               
Weighted average shares outstanding:              
Basic 44,184     44,094     44,114     43,990  
Diluted 44,360     44,094     44,303     44,456  
               
Earnings per share:              
Basic $ 0.02     $ (0.07 )   $ 0.23     $ 0.05  
Diluted $ 0.02     $ (0.07 )   $ 0.23     $ 0.05  
               
Cash dividends declared per share $ 0.07     $ 0.10     $ 0.31     $ 0.40  
 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(unaudited) 
  April 29,
 2017		   April 30,
 2016
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 32,623     $ 28,328
Restricted cash 216     198
Marketable securities 32,713     24,672
Accounts receivable, net 78,846     77,554
Inventories, net 66,486     69,827
Costs and estimated earnings in excess of billings 36,403     30,200
Current maturities of long-term receivables 2,274     3,172
Prepaid expenses and other assets 7,553     6,468
Income tax receivables 611     4,812
Total current assets 257,725     245,231
       
Long-term receivables, less current maturities 2,616     3,866
Goodwill 7,812     8,116
Intangibles, net 4,705     7,721
Investment in affiliates and other assets 4,534     2,414
Deferred income taxes 11,292     9,437
Total other assets 30,959     31,554
PROPERTY AND EQUIPMENT:      
Land 2,099     2,155
Buildings 65,935     65,247
Machinery and equipment 84,189     82,973
Office furniture and equipment 5,604     14,746
Computer software and hardware 51,523     48,917
Equipment held for rental 374     374
Demonstration equipment 7,109     8,026
Transportation equipment 7,108     6,596
  223,941     229,034
Less accumulated depreciation 157,192     155,871
Total property and equipment 66,749     73,163
TOTAL ASSETS $ 355,433     $ 349,948
       
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
(unaudited)
  April 29,
 2017		   April 30,
 2016
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable 51,499     43,441  
Accrued expenses 25,033     23,532  
Warranty obligations 13,578     16,564  
Billings in excess of costs and estimated earnings 10,897     10,361  
Customer deposits (billed or collected) 14,498     16,012  
Deferred revenue (billed or collected) 12,137     10,712  
Current portion of other long-term obligations 1,409     585  
Income taxes payable 1,544     310  
Total current liabilities 130,595     121,517  
       
Long-term warranty obligations 14,321     13,932  
Long-term deferred revenue (billed or collected) 5,434     5,603  
Other long-term obligations, less current maturities 2,848     4,059  
Long-term income tax payable 3,113     3,016  
Deferred income taxes 836     754  
Total long-term liabilities 26,552     27,364  
TOTAL LIABILITIES 157,147     148,881  
       
SHAREHOLDERS' EQUITY:      
Common stock 52,530     51,347  
Additional paid-in capital 38,004     35,351  
Retained earnings 113,967     117,276  
Treasury stock, at cost (1,834 )   (9 )
Accumulated other comprehensive loss (4,381 )   (2,898 )
TOTAL SHAREHOLDERS' EQUITY 198,286     201,067  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 355,433     $ 349,948  
       
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
    Year Ended
    April 29,
 2017		   April 30,
 2016
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 10,342     $ 2,061  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   18,562     16,943  
Impairment of intangible assets   830     —  
Loss (gain) on sale of property, equipment and other assets   36     (71 )
Share-based compensation   2,914     2,958  
Gain on sale of equity investee   —     (119 )
Provision for doubtful accounts   1,426     481  
Deferred income taxes, net   (2,043 )   911  
Change in operating assets and liabilities   7,506     (9,583 )
Net cash provided by operating activities   39,573     13,581  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (8,686 )   (17,056 )
Proceeds from sales of property, equipment and other assets   199     152  
Purchases of marketable securities   (24,159 )   (21,286 )
Proceeds from sales or maturities of marketable securities   15,928     21,862  
Proceeds from sale of equity method investment   —     377  
Acquisitions, net of cash acquired   (1,646 )   (7,867 )
Net cash used in investing activities   (18,364 )   (23,818 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Payments on notes payable   (8 )   (38 )
Principal payments on long-term obligations   (921 )   (467 )
Dividends paid   (13,651 )   (17,556 )
Proceeds from exercise of stock options   343     610  
Payments for common shares repurchased   (1,825 )   —  
Tax payments related to RSU issuances   (261 )   (303 )
Net cash used in financing activities   (16,323 )   (17,754 )
         
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (591 )   (965 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   4,295     (28,956 )
         
CASH AND CASH EQUIVALENTS:        
Beginning of period   28,328     57,284  
End of period   $ 32,623     $ 28,328  
         
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
    Three Months Ended   Twelve Months Ended
    April 29,
 2017		   April 30,
 2016		   Dollar
Change		   Percent
Change		   April 29,
 2017		   April 30,
 2016		   Dollar
Change		   Percent
Change
Net sales:                                
Commercial   $ 35,731     $ 35,600     $ 131     0.4 %   $ 148,073     $ 148,261     $ (188 )   (0.1 )%
Live Events   56,950     55,402     1,548     2.8 %   213,982     205,151     8,831     4.3 %
High School Park and Recreation   13,821     15,883     (2,062 )   (13.0 )%   82,798     70,035     12,763     18.2 %
Transportation   12,909     13,490     (581 )   (4.3 )%   52,426     52,249     177     0.3 %
International   24,271     18,088     6,183     34.2 %   89,260     94,472     (5,212 )   (5.5 )%
    $ 143,682     $ 138,463     $ 5,219     3.8 %   $ 586,539     $ 570,168     $ 16,371     2.9 %
Orders:                                
Commercial   $ 37,236     $ 40,742     $ (3,506 )   (8.6 )%   $ 151,562     $ 135,824     $ 15,738     11.6 %
Live Events   87,445     52,295     35,150     67.2 %   222,965     220,377     2,588     1.2 %
High School Park and Recreation   22,550     20,925     1,625     7.8 %   83,605     76,485     7,120     9.3 %
Transportation   16,348     14,099     2,249     16.0 %   62,638     56,834     5,804     10.2 %
International   14,570     15,161     (591 )   (3.9 )%   92,734     71,266     21,468     30.1 %
    $ 178,149     $ 143,222     $ 34,927     24.4 %   $ 613,504     $ 560,786     $ 52,718     9.4 %
 
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands)
(unaudited)
    Twelve Months Ended
    April 29,
 2017		   April 30,
 2016
Net cash provided by operating activities   $ 39,573     $ 13,581  
Purchases of property and equipment   (8,686 )   (17,056 )
Proceeds from sales of property, equipment and other assets   199     152  
Free cash flow   $ 31,086     $ (3,323 )