Daktronics sales jump $30 million for quarter
Daktronics reported fiscal 2006 fourth quarter net sales of $90.2 million and net income of $7.1 million, or $0.35 per diluted share, compared with fourth quarter net sales of $61.3 million and net income of $3.0 million, or $0.15 per diluted share, one year ago. Backlog at the end of the quarter was approximately $93 million, compared with a backlog of approximately $73 million at the end of fiscal 2005.
Net sales, net income and earnings per share for the 12 months ended April 29, 2006 were $309.4 million, $21.0 million and $1.04 per diluted share, respectively, compared to $230.3 million, $15.7 million and $0.78 per diluted share, respectively, for the same period one year ago.
“The fourth quarter results exceeded our expectations and provide us with further confidence that we are well positioned to take advantage of the growing demand for LED-based display systems,” said Jim Morgan, president and chief executive officer. “The growth for the quarter included sales increases in excess of 25 percent in all three of our major markets. Breaking through $300 million and $1 per share for the year is a credit to our hard-working employees who put in the extra effort to meet our customer demand and respond to the greater than expected growth opportunity. Orders for the quarter were up significantly in the commercial market led by billboard applications, along with continued strong interest in our standard Galaxy product for on-premise advertising. Our recently introduced GalaxyPro product, which offers a larger matrix full-color RGB Galaxy display at a reduced price point, has also been very well received,” said Morgan.
Morgan continued, “We continue to benefit from larger orders in the college and professional sports segments and video systems for high schools and smaller colleges. Order bookings for the quarter included multi-million dollar transactions with the University of Southern California, the University of Alabama, Chase Field in Phoenix, Arizona and the Louisiana Superdome. At the high school level, where we see growing potential for larger displays, we booked video systems for five facilities,” said Morgan.
“We are continuing to invest in the development of our ProTour family of modular displays, adding models and features. The product has been well received, and we booked orders and shipped product during the quarter. We also are seeing some success in our Asian marketing efforts, where we have booked a number of multi-million dollar orders that are a direct result of our presence in Macau and Shanghai. We believe that our investments in these areas and others will pay off in fiscal 2007. We continue to examine opportunities in the media services business,” said Morgan.
“Our gross profit percentage was in line with expectations. Given that our output this quarter was up about 47 percent over the same quarter last year, and we are working in the same facilities as we were a year ago, it goes without saying we are a little crowded. We are beginning the move into our new addition, which will net us about 30 percent additional manufacturing space. We are taking advantage of the move to rearrange our existing space to streamline our processes and gain efficiencies. We are underway with our lean manufacturing program, and we expect to gain ongoing efficiencies from that program. In connection with our expansion in Sioux Falls, South Dakota, we intend to invest over $4.5 million in equipment there. The facility will be geared to serve our commercial market demand, with a primary focus on digital billboards. We also intend to invest over $10 million in additional space and equipment in Brookings over the course of the upcoming year, including approximately $6 million in facilities. The goal of these investments is to get more throughput with lower costs to reduce our lead times and improve our margin performance. We are very excited about the opportunities and potential benefits we see in streamlining our operations,” said Morgan.
“For the quarter we saw a significant improvement in cash flow from operations, in spite of a significant growth in receivables,” said Bill Retterath, chief financial officer. “For the 2006 fiscal year, cash on hand increased over 50 percent. Much of this growth is attributable to projects with better payment terms and deposits on orders. We continue to focus on cash flow improvement, although we expect volatility in the short-term due to the significant cash requirements for multiple larger projects,” Retterath said.
Retterath continued, “Fiscal year 2007 will involve significant investments back into the business in addition to the items mentioned previously. Our current plan, which is subject to change, includes capital investments of approximately $35 million. This includes approximately $20 million in plant and equipment and over $9 million in information systems infrastructure. The information systems infrastructure includes a number of initiatives, including new systems to support our services business, content management, the media services business and upgrades to various other systems. This capital investment is expected to decrease cash and marketable securities for fiscal year 2007, but not result in significant debt commitments. These investments match up with our primary goal of investing into the business to build it organically.”
“This rapid growth that we have experienced results in the need to build non-manufacturing infrastructure as well,” said Retterath. “As a result, we intend to invest in various initiatives within our general and administrative areas and to continue to aggressively pursue geographical distribution in sales and service. We believe that we can improve operating margin slightly in fiscal year 2007, which is dependent on the gross profit margins. For the first quarter of fiscal year 2007, we are expecting gross profit margins to approximate the levels of recent quarters,” said Retterath.
Morgan concluded, “We estimate net sales for the first quarter of fiscal 2007 will be in the range of $87 to $95 million, with earnings in the range of $.27 to $.36 per share. Earnings per share estimates do not include the impact of stock option expensing, which we believe will be similar to the pro-forma costs previously disclosed in our annual report. In addition, we are projecting that revenues for fiscal 2007 will grow in excess of 18 percent.”