Daktronics, Inc. Announces Record Results for Fiscal 2004; Record Net Sales and Order Bookings for the Fourth Quarter

Daktronics, Inc. Announces Record Results for Fiscal 2004; Record Net Sales and Order Bookings for the Fourth Quarter

Business Editors

BROOKINGS, S.D.–(BUSINESS WIRE)–May 26, 2004

Daktronics, Inc. (Nasdaq:DAKT), today reported fiscal 2004 fourth quarter net sales of $57.9 million and net income of $4.1 million or $.21 per diluted share, compared with fourth quarter sales of $47.4 million and net income of $3.4 million, or $.17 per diluted share, one year ago. Both net sales and net income were records for the Company’s fourth quarter. Sales and orders climbed in all three markets served.

Net sales, net income and earnings per share for fiscal 2004 were $209.9 million, $17.7 million and $.89 per diluted share, respectively, compared with $177.8 million, $12.5 million, and $.64 per diluted share, respectively, for the previous fiscal year. Net sales, net income and earnings per share for the year were the highest in the Company’s history.

Backlog at the end of the quarter was approximately $54 million, compared with a backlog of approximately $50 million at the end of the last fiscal year. The timing of large orders can cause significant fluctuations in the Company’s backlog.

“Not only did we close out the year with strong sales and net income, we also booked a record level of orders, which included strong performances in all three of our markets,” said Jim Morgan, president and CEO of Daktronics. “We completed a number of premier installations, including display systems for major league baseball facilities in Cleveland, Anaheim, San Diego, and Philadelphia, as well as displays for the Sands Macao Casino near Hong Kong, Churchill Downs, and the Virginia Department of Transportation. We started work on projects for Times Square, the FedExForum in Memphis, and the University of Wisconsin,” Morgan said. “As compared to the previous two quarters our standard order volume was down as a percent of sales resulting from a decline in the national account business, which we expect to be stronger next quarter and fiscal year over the current year which was at record levels. This along with the expected decline in margins and other factors contributed to the fourth quarter gross margin of 31.8 percent,” Morgan said.

“The most dramatic sales and order growth has been in our commercial market. Not only are we seeing higher standard product business over fiscal year 2003, we are also seeing significant growth in video products installations for commercial accounts across many applications such as horse racing, gaming, retail and destination sites. Sales and orders in our transportation market also showed a very nice rebound in the quarter. Orders in all three markets were up for the quarter over last year by double-digit percentage increases,” Morgan said.

“On the product development side, we introduced a number of key products during the quarter, including our V-Net(TM) solution for the digital advertising marketplace, our three millimeter ProStar(R) video display and our Galaxy(R) 3200 series, all of which are expected to have an important impact on our total solution to our end markets,” said Morgan.

“Gross margin was slightly below expectations for the quarter as a result of the standard order mix, lower than expected margins on a couple of larger installations and industry pricing reacting to the lower cost of raw materials,” said Bill Retterath, CFO. “On the operating expense growth for the quarter, there were a number of factors contributing, including investments we are making on international sales development, higher personnel costs, compliance costs associated with Sarbanes-Oxley, the concentration of trade shows during the quarter and the costs associated with the new product introductions,” Retterath said.

“Finally, on the cash flow front, we performed well during the quarter, generating slightly less than $9 million in cash from operations through earnings and improvements in our balance sheet. Free cash flow defined as cash flow from operations less capital expenditures was also strong with the investments in demonstration equipment causing the rise in capital spending,” Retterath said.

“Our backlog going into the first quarter of fiscal year 2005, combined with a significant number of orders that were either booked in the first quarter or are expected to book very shortly, plus anticipated growth in our standard order business, brings our estimate of revenues for our next quarter in the range of $57 million to $62 million. We expect earnings per share for the quarter to be in the range of $.19 – $.26 per share. For the fiscal year 2005, we are estimating sales in the range of $235 to $250 million.” Morgan said.

Noteworthy projects booked in the fourth quarter include display systems for Stanford University, Stanford, Calif.; Antelope Valley Fair, Lancaster, Calif.; Gonzaga University, Spokane, Wash.; U.S. Smokeless Tobacco Company, Lewisville, Texas; University of Wisconsin, Madison, Wisc.; Dayton Dragons, Dayton, Ohio; Hamilton Tiger Cats, Hamilton, Ontario; MTS Centre, Winnipeg, Manitoba; Angel Stadium of Anaheim, Anaheim, Calif.; Arizona Cardinals Stadium, Glendale, Ariz.; FedExForum, Memphis, Tenn.; Owasso High School, Owasso, Okla.; Nextel, Las Vegas, Nev.; Texas Station, North Las Vegas, Nev.; Lamar Advertising Company, Birmingham, Ala.; North Carolina D.O.T; Illinois State Tollway; Port Authority of New York & New Jersey; and New York State D.O.T.

The Company will webcast its quarterly conference call at 10:00 am (central) on Wednesday, May 26. To listen to the webcast, go to the home page of www.daktronics.com, and click on the icon at the bottom right corner of the screen. Completion of a short registration form, along with Windows(R) Media Player software, are required to hear the webcast. A replay of the teleconference via the internet will also be accessible shortly after the conclusion of the conference call through www.daktronics.com. A replay of the teleconference accessible by telephone will be available for one week starting at noon Central Time on May 26. To access the replay, call toll-free in the U.S. and Canada 800-633-8284 and enter code 21195040. International callers can dial 402-977-9140 and enter code 21195040 to hear the replay by phone.

Daktronics has strong leadership positions in, and is one of the world’s largest suppliers of, electronic scoreboards, computer-programmable displays, and large screen video display and control systems. The Company excels in the control of large display systems, including those that require integration of complex multiple displays showing real time information, graphics, animation and video. Daktronics designs, manufactures, markets and services display systems for customers around the world in sport, business and transportation applications, and celebrated its 35th year in business in 2003. For more information, visit the Company’s worldwide web site at http://www.daktronics.com, email the Company at sales@daktronics.com, call toll-free 1-800-DAKTRONICS (800-325-8766) in the U.S., or write to the Company at 331 32nd Avenue, P.O. Box 5128, Brookings, SD 57006-5128.

Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements reflecting the Company’s expectations or beliefs concerning future events which could materially affect company performance in the future. The Company cautions that these and similar statements involve risk and uncertainties including changes in economic and market conditions, management of growth, timing and magnitude of future contracts, and other risks noted in the company’s SEC filings which may cause actual results to differ materially. 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 Income

(in thousands, except earnings per share)

Three Months Ended Twelve Months Ended

———————– ———————–

May 1, 2004 May 3, 2003 May 1, 2004 May 3, 2003

(13 weeks) (13 weeks) (52 weeks) (53 weeks)

(unaudited) (unaudited) (unaudited)

———– ———– ———– ———–

Net sales $57,938 $47,364 $209,907 $177,764

Cost of goods sold 39,523 31,707 137,436 118,633

———– ———– ———– ———–

Gross profit 18,415 15,657 72,471 59,131

———– ———– ———– ———–

Operating expenses:

Selling 7,610 6,317 27,305 24,966

General and

administrative 2,652 2,263 9,510 7,422

Product design and

development 1,949 1,833 8,126 6,918

———– ———– ———– ———–

12,211 10,413 44,941 39,306

———– ———– ———– ———–

Operating income 6,204 5,244 27,530 19,825

Nonoperating income

(expense):

Interest income 290 178 1,014 694

Interest expense (78) (222) (478) (897)

Other income

(expense), net 19 651 586 974

———– ———– ———– ———–

Income before income taxes

and minority interest 6,435 5,851 28,652 20,596

Income tax expense 2,315 2,419 10,907 8,107

———– ———– ———– ———–

Income before

minority interest 4,120 3,432 17,745 12,489

Minority interest in (income)

loss of subsidiary 13 (21) (18) (31)

———– ———– ———– ———–

Net income $4,133 $3,411 $17,727 $12,458

=========== =========== =========== ===========

Weighted average number of

fully diluted shares and

common equivalent

shares 20,092 19,739 19,936 19,514

=========== =========== =========== ===========

Earnings per share:

Basic $0.22 $0.18 $0.95 $0.68

=========== =========== =========== ===========

Diluted $0.21 $0.17 $0.89 $0.64

=========== =========== =========== ===========

Daktronics, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)

May 1, 2004 May 3, 2003

(unaudited)

———— ———–

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $16,255 $9,277

Accounts receivable, less allowance for

doubtful accounts 28,686 25,912

Current maturities of long-term receivables 3,772 2,650

Inventories 16,604 14,863

Costs and estimated earnings in excess of

billings 12,862 11,467

Prepaid expenses and other 905 756

Deferred income taxes 4,524 3,801

Income taxes receivable 813 –

———— ———–

Total current assets 84,421 68,726

———— ———–

Advertising rights, net 1,415 385

Long term receivables, less current maturities 10,267 6,711

Goodwill, net of accumulated amortization 1,411 1,043

Intangible and other assets 920 873

———— ———–

14,013 9,012

———— ———–

PROPERTY AND EQUIPMENT:

Land 654 654

Buildings 12,415 12,281

Machinery and equipment 18,123 13,762

Office furniture and equipment 15,706 13,495

Equipment held for rental 4,581 3,476

Transportation equipment 3,054 2,185

———— ———–

54,533 45,853

Less accumulated depreciation 26,731 21,064

———— ———–

27,802 24,789

———— ———–

TOTAL ASSETS $126,236 $102,527

============ ===========

Daktronics, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

(in thousands)

May 1, 2004 May 3, 2003

(unaudited)

———– ———–

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Notes payable, bank $214 $180

Accounts payable 12,586 9,312

Accrued expenses 11,611 7,790

Current maturities of long-term debt 1,296 2,951

Billings in excess of costs and estimated

earnings 6,761 5,528

Customer deposits 2,829 1,709

Income taxes payable – 1,556

———– ———–

Total current liabilities 35,297 29,026

———– ———–

Long-term debt, less current maturities 1,498 5,449

Deferred revenue 1,134 1,338

Deferred income taxes 2,043 1,296

———– ———–

4,675 8,083

———– ———–

TOTAL LIABILITIES 39,972 37,109

Minority Interest In Subsidiary – 115

———– ———–

SHAREHOLDERS’ EQUITY:

Common stock 15,944 14,654

Additional paid-in capital 2,736 746

Retained earnings 67,677 49,950

Treasury stock, at cost (9) (9)

Accumulated other comprehensive loss (84) (38)

———– ———–

TOTAL SHAREHOLDERS’ EQUITY 86,264 65,303

———– ———–

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $126,236 $102,527

=========== ===========

Daktronics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

Twelve Months Ended

———————–

May 1, 2004 May 3, 2003

(52 weeks) (53 weeks)

(unaudited)

———– ———–

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $17,727 $12,458

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation 6,264 5,686

Amortization 125 242

(Gain) loss on sale of property and

equipment (301) 400

Minority interest in income of subsidiary 18 31

Provision for doubtful accounts 256 (225)

Deferred taxes, net 24 (1,002)

Change in operating assets and liabilities (3,196) (1,678)

———– ———–

Net cash provided by operating activities 20,917 15,912

———– ———–

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment (9,779) (5,340)

Proceeds from sale of property and equipment 820 1,287

———– ———–

Net cash used in investing activities (8,959) (4,053)

———– ———–

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds on notes payable 35 129

Proceeds from long-term debt 358 1,594

Principal payments on long-term debt (5,988) (7,102)

Proceeds from exercise of stock options and

warrants 655 718

———– ———–

Net cash used in financing activities (4,940) (4,661)

———– ———–

EFFECT OF EXCHANGE RATE CHANGES ON CASH (40) (18)

———– ———–

INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 6,978 7,180

CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 9,277 2,097

———– ———–

CASH AND CASH EQUIVALENTS END OF PERIOD $16,255 $9,277

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