Daktronics expects higher sales, lower gross profit in 2009
Daktronics, Inc. (Nasdaq:DAKT) CEO Jim Morgan said changes in product development and manufacturing have enabled the maker of large screen video displays to double its annual income over the last three years.
“We had to make some significant changes on how we were going about some things, especially on the operations side,” Morgan said. “As we look back [to 2005] till now, the changes in our manufacturing and product development are indeed dramatic.”
Business improvements are an “ongoing story,” he said, and the company continues to invest in consulting to further efficiencies.
The Brookings, S.D.-based company said on Tuesday afternoon that it plans to restructure its field service organization.
“We will be consolidating our field services staffing into one organization and that will allow us to develop more flexibility in our field technicians and serve our customers more cost effectively,” Morgan said. “People who now work in dual sales and service roles will now focus in one role or the other. We will also be reviewing our network of offices and consolidating where appropriate.”
In addition to consolidating, Morgan said Daktronics is rolling out new software for managing its services division. The software will begin being phased in during the first quarter, he said, and will be used to manage personnel and inventory.
“It’s a quite comprehensive system and will be phased in over stages through the course of the year,” Morgan said.
The firm said in an early Wednesday release that it expects sales to increase 20% in fiscal 2009 ending next April, compared with 2008. A 20% sales boost would translate to $599.6 million versus $499.7 million in 2008. Wall Street analysts, on average, expect $587.9 million in sales. CFO Bill Retterath said Daktronics’ backlog should grow over the year, meaning order growth will outpace sales.
“There’s approximately $80 million in orders out there in the large professional and college sports business, each worth around $8 million each, that could convert to somewhere around $50 million over sales,” Retterath said.
The firm is well underway with projects with the Yankees, the Mets, the Indianapolis Colts and others, the CFO said.
Performance results can vary greatly in the international business, Retterath said, because the segment depends on large orders from a small customer base. The company booked almost $27 million in international orders during the fourth quarter, Retterath said, which was half the total for the fiscal year.
Daktronics expects gross profit to decline in 2009, the chief financial officer said. Reasons include the decline in billboard margins, large sports projects and investments in business efficiency and manufacturing quality.
“As most of you know, gross margins are difficult to project on the large projects,” Retterath said. “Partially offsetting the decline in margins, we expect lower warranty costs as a percent of sales improvements in our field service organizations as well as some of the other benefits in manufacturing. We see margins declining slightly from the 2008 levels.”
Before Wednesday’s opening, Daktronics reported fourth-quarter net income of $5.7 million, or $0.14 per share, versus $3.5 million, or $0.09 per share, a year earlier. The quarterly earnings vigorously trumped Wall Street analysts’ consensus estimate of earning $0.06 per share.
Quarterly sales rose 17% to $129.1 million from $110.8 million during the prior-year period. The sales results also beat Wall Street’s expectation of $123.3 million in sales.
In Wednesday afternoon trading, DAKT shares are up 10.76% to $18.33.
