BROOKINGS, S.D., Nov. 24, 2015 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2016 second quarter net sales of $157.7 million, operating income of $5.6 million, and net income of $3.2 million, or $0.07 per diluted share, compared to net sales of $173.1 million, operating income of $12.2 million, and net income of $7.7 million, or $0.18 per diluted share, for the second quarter of fiscal 2015.  Fiscal 2016 second quarter orders were $135.6 million, compared to $149.1 million for the second quarter of fiscal 2015.  Backlog at the end of the fiscal 2016 second quarter was $184.2 million, compared with a backlog of $146.1 million a year earlier and $205.5 million at the end of the first quarter of fiscal 2016. 

Net sales, operating income, net income, and earnings per share for the six months ended October 31, 2015, were $307.9 million, $11.7 million, $6.9 million, and $0.16 per diluted share, respectively.  This compares to $339.7 million, $25.9 million, $16.5 million, and $0.38 per diluted share, respectively, for the same period in fiscal 2015.  Fiscal 2016 is 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 26-week versus a 27-week year-to-date comparison.

Free cash flow, defined as cash provided from or used in operating activities less capital expenditures, was a negative $19.6 million for the first six months of fiscal 2016, as compared to a positive free cash flow of $27.6 million for the same period of fiscal 2015.    Net investment in property and equipment was $10.4 million for the first six months of fiscal 2016, as compared to $8.7 million for the first six months of fiscal 2015.  Cash and marketable securities at the end of the second quarter of fiscal 2016 were $52.6 million, which compares to $83.7 million at the end of the second quarter of fiscal 2015 and $83.1 million at the end of fiscal 2015.  

Overall order bookings decreased 9.1 percent in the second quarter of fiscal 2016 as compared to the second quarter of fiscal 2015.  Variability in the timing of orders from the awards of large projects and from large accounts is inherent in our business.  Live Events orders increased due to notable awards from the Miami Dolphins, the University of Mississippi, and Las Vegas Arena.   Transportation business unit orders also increased with a notable project award from the New York City Metropolitan Transit Authority.  Commercial on-premise orders increased with demand in petroleum market applications. Variability of timing of large orders caused the decrease in orders in the International business unit and in the billboard and spectacular niches of the Commercial business unit.  High School Park and Recreation business unit orders were down due to decreases in standard scoring systems demand and lower average selling prices in video-related orders in the quarter as compared to last year.

Sales decreased by 8.9 percent in the second quarter of fiscal 2016 as compared to the second quarter of fiscal 2015.  The Live Events and Commercial business units had the greatest impact on the quarterly sales comparisons.  In Live Events, while we generated revenue on the completion of a record number of center-hung (arena) systems during the quarter, we chose to delay production on some orders in backlog to take advantage of newly released product enhancements.  Last year, our production volumes and mix weighed more heavily toward college football and outdoor professional stadiums installations.  Commercial sales declined primarily due to the timing variability in the spectaculars niche, which is based on large individual projects, and due to declines in billboard shipments this quarter as compared to last.

Gross profit percentage for the quarter declined primarily due to an additional warranty charge and lower sales margins in our Commercial business unit.  During the quarter, we adjusted our warranty reserves by approximately $2 million due to a product issue primarily affecting out-of-home applications.  Sales margins in the Commercial business unit also declined during the quarter due to market drivers on pricing.  The overall gross profit decline was partially offset by improvements in gross profit percentages in our Live Events business due to a change in mix of business between comparative quarters and the non-recurrence of costs we incurred last year due to capacity constraints.

Operating expenses increased by approximately 4 percent due to higher levels of product design activity to develop new and enhanced solutions for our markets and increased personnel costs.

Free cash flow remained negative at the end of the quarter due to the increased use of cash in operations through the first six months of the fiscal year.  Cash outflow from operations included additional inventory of piece part purchases and production of subassemblies for projected future deliveries and cash receipt timing differences in our large project-based business.

Reece Kurtenbach, chairman, president and chief executive officer stated, “Our second quarter profitability was impacted by the timing of the conversion of orders to sales and high warranty costs.  Since we could maintain our delivery promises to customers, we chose to delay production during the quarter to take advantage of new designs with enhanced reliability features and expected lower production costs.  We also committed resources to evaluate, plan, and execute on improving our customers' experience, which increased warranty expenses as we are committed to being a long-term world-class supplier.

"Our design and development teams continued development through the quarter across various products and technologies including a line of ultra-high resolution indoor products, a new family of outdoor products, and various developments for our global transportation markets.”

Outlook

Reece Kurtenbach added, “Although the financial performance for the first half of the year did not meet our expectations, we remain committed to achieving our financial goals over the long-term.  Our backlog and market demand remains strong.  Our order pipeline in the International, Live Events, and Transportation business units remains very active.  Our order activity in the Commercial and High School Park and Recreation business units tends to be lower during our third quarter; however, we expect to see the typical increases for next spring and summer deliveries.

"Looking longer-term, we remain optimistic about future global sales opportunities and expansion in our business.  Digital technology opportunities continue to develop.  Our on-premise and out-of-home customers continue to turn to digital messaging solutions to advertise or communicate information to their audiences.  Transportation solution customers turn to our displays to effectively communicate information to travelers or manage traffic flow across constrained travel infrastructure.  Developers and venue owners in the Live Events, International, and spectacular niches continue to incorporate unique display systems at their facilities to help attract large, sustained audiences.

"To match the projected demand, we continue to focus on developing customer-centric solutions, using our industry knowledge to leverage our development, customer support, manufacturing, and process expertise.  Improved profitability and product performance remain the focus of new solutions and enhanced product lines.  We continue to drive our key initiatives forward to increase profitability by reducing costs as we improve our processes, products, and systems.”

Webcast Information

The company will host a conference call and webcast to discuss its financial results today at 10:00 a.m. (CST).  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, 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, 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 2015 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.

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.

INVESTOR RELATIONS:
Sheila Anderson, Chief Financial Officer
(605) 692-0200
Investor@daktronics.com