OREANDA-NEWS. Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2016 fourth quarter net sales of $138.5 million, operating loss of $3.7 million, and net loss of $2.9 million, or $(0.07) per diluted share, compared to net sales of $158.1 million, operating income of $7.0 million, and a net income of $3.8 million, or $0.09 per diluted share, for the fourth quarter of fiscal 2015.  Fiscal 2016 fourth quarter orders were $143.2 million compared to $196.1 million for the fourth quarter of fiscal 2015.  Backlog at the end of the fiscal 2016 fourth quarter was $181.2 million, compared to a backlog of $190.5 million a year earlier and $176.3 million at the end of the third quarter of fiscal 2016.

Net sales, operating income, net income, and earnings per share for the fiscal year ended April 30, 2016, were $570.2 million, $2.5 million, $2.1 million and $0.05 per diluted share, respectively.  This compares to $615.9 million, $31.3 million, $20.9 million and $0.47 per diluted share, respectively, for fiscal 2015.  Fiscal 2016 was a 52-week year and fiscal 2015 was a 53-week year.  The extra week of fiscal 2015 fell within the first quarter, resulting in a 52-week versus a 53-week year end comparison.

Free cash flow, defined as cash provided from or used in operating activities less capital expenditures, was negative $3.6 million for fiscal 2016, as compared to a positive free cash flow of $35.4 million for fiscal 2015.  Cash provided by operations was $13.3 million for fiscal 2016, compared to $53.2 million for fiscal 2015.  Net investment in property and equipment was $16.9 million for fiscal 2016, as compared to $17.8 million for fiscal 2015.  Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2016 were $53.2 million, which compares to $83.1 million at the end of the fourth quarter of fiscal 2015.

Sales and orders for the fourth quarter of fiscal 2016 decreased by 12.4 percent and 27.0 percent, respectively, as compared to the fourth quarter of fiscal 2015.  The orders decline was due to International and Live Events multi-million dollar projects that were booked during the fourth quarter of fiscal 2015, while no orders of similar size occurred during the fourth quarter of fiscal 2016.  Sales decreased primarily due to lighter International and Commercial billboard and spectacular demand.  Operating loss was 2.6 percent of sales for the quarter due to increased warranty impact for the quarter and lower production levels.

Orders decreased in fiscal 2016 by $70.8 million as compared to fiscal 2015.  International, Commercial and Live Events business unit orders declined during the year.  The decline in International orders was due to the inherent timing volatility in the booking of large orders, various macroeconomic trends, and the competitive environment.  Commercial business unit orders declined in spectacular and billboard niches due to a softening in customer demand and delaying commitments on large projects and programs.  While Live Events orders declined by 2.6 percent, underlying demand remained strong considering fiscal 2015 orders included a significantly sized NFL stadium project with no similar sized project in fiscal 2016.  Orders increased by 10.5 percent in High School Park and Recreation business unit due to increased video project sizes with higher average sales price and increased market demand.  Transportation orders increased by 11.8 percent due to increased market demand with the passing of the federal highway funding bill.  Finally, approximately 2.0 percent of the annual order decline was due to the additional week in fiscal 2015.

Sales for fiscal 2016 decreased 7.4 percent as compared to fiscal 2015.  Approximately 2.0 percent of this decline is due to the decrease of one week in the fiscal 2016 year and the remaining decline was primarily due to decreases in sales in Live Events, Commercial, and International business units.  Live Events declined due to the timing of customer deliveries extending beyond the fiscal year.  The Commercial sales decline was driven by decreased customer demand in billboard and spectacular niches.  Sales in the International business unit declined due to lower orders during the last half of the year.

Annual operating income as a percentage of sales decreased to 0.4 percent for fiscal 2016 as compared to 5.1 percent for fiscal 2015.  The decline is primarily attributable to the impact of additional warranty expenses of 1.6 percent and an increase in operating expenses.  The increase in operating expense dollars is due to additional activity in design areas and increases in personnel related and information technology costs.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "Fiscal 2016 was a challenging year for Daktronics.  A warranty issue caused margin declines and high opportunity costs with time spent solving and correcting the issue. We believe we have accrued our best estimate for the most probable ultimate costs and we will continue to monitor over the coming year.  We also experienced lower demand in some markets resulting in lower production rates through our infrastructure.

“While we had these challenges, we were also successful in a number of ways.  Daktronics continues to be the world leader in market share in the video display industry. We were successful in winning and delivering orders to expanding sports and worldwide transportation markets and to global accounts.  We launched a number of new solutions in the latter part of fiscal 2016, which we anticipate will positively impact fiscal 2017.  In addition, we made progress on product enhancements to both meet specific customer needs and improve lifetime quality and reliability at lower overall cost to produce.  Finally, we acquired a company during the year to expand our capabilities in the growing industry of digital media networks."

Outlook
Kurtenbach continued, “The marketplace we operate in continues to expand as digital technology becomes ever more prevalent.  We are the most experienced market provider for video system design and delivery, lifetime support, and value to our customers. Global macroeconomic factors including low oil prices, strong U.S. dollar, slowing GDP, political instability and other uncertainties continue to affect customer purchasing decisions.  This creates some uncertainty in the near-term outlook for orders; therefore, we expect modest growth in fiscal 2017 and we will carefully manage our spending.

"Strategically, we are accelerating activities to complete product developments for a number of customer solution areas.  For example, we are investing in our control platform to allow customers to continue to experience our best-in-class control systems while lowering our ongoing development and support costs.  We also continue to invest in the video processing applications for higher resolution displays.  Finally, we are developing solutions to meet global demand for lower cost systems with performance targeted for certain applications.  This will add to our product lineup and improve our ability to capture a broader customer base in this growing global market."