Daktronics Inc. (NASDAQ:DAKT) filed Quarterly Report for the period ended 2010-07-31.
Daktronics Inc. has a market cap of $398.8 million; its shares were traded at around $9.67 with and P/S ratio of 1. The dividend yield of Daktronics Inc. stocks is 1.1%.DAKT is in the portfolios of Bill Frels of Mairs & Power Inc. , Paul Tudor Jones of The Tudor Group.
Highlight of Business Operations:Warranties. We have recognized a reserve for warranties on our products equal to our estimate of the actual costs to be incurred in connection with our performance under the warranties. Generally, estimates are based on historical experience taking into account known or expected changes. If we would become aware of an increase in our estimated warranty costs, additional reserves may become necessary, resulting in an increase in costs of goods sold. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine our reserve for warranties. As of July 31, 2010 and May 1, 2010, we had approximately $17.5 million and $18.9 million reserved for these costs, respectively.
Extended warranty and product maintenance. We recognize deferred revenue related to separately priced extended warranty and product maintenance agreements. The deferred revenue is recognized ratably over the contractual term. If we would become aware of an increase in our estimated costs under these agreements in excess of our deferred revenue, additional reserves may be necessary, resulting in an increase in costs of goods sold. In determining if additional reserves are necessary, we examine cost trends on the contracts and other information and compare that to the deferred revenue. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine estimated costs under these agreements. As of July 31, 2010 and May 1, 2010, we had $11.5 million and $12.1 million of deferred revenue related to separately priced extended warranty and product maintenance agreements, respectively.
For the first quarter of fiscal 2011, net sales in the outdoor advertising business were generally flat as compared to the same period one year ago; however, orders were up over 304% to more than $9 million. In the early part of the third quarter of fiscal 2009, our largest customer in our outdoor advertising niche significantly decreased its spending on digital billboards from approximately $100 million annually to approximately $15 million annually, effective for calendar year 2009. We were one of two primary vendors of digital billboards for this customer. This corresponded to a decline in orders overall in the outdoor advertising niche, which started to become evident late in the second quarter of fiscal 2009. It is our belief that the then current economic conditions and limited credit availability caused the declines in this business. It is also important to note that the outdoor advertising business has a number of constraints in addition to the current economic conditions, primarily the challenges of achieving adequate returns on investments on digital displays, which limit locations suitable for digital displays, and regulatory constraints, which we expect to be a long-term factor that limits deployment of digital displays.
Live Events Business Unit. The decrease in net sales in the Live Events business unit for the first quarter fiscal 2011 as compared to the same period in fiscal 2010 was the result of a decline in revenues from large new construction contracts exceeding $5 million as explained in prior filings and the decline in opportunities resulting from the current adverse economic conditions. These large contracts contributed approximately $15 million in net sales during the first quarter of fiscal year 2010 compared to approximately $11 million for the same period in fiscal 2011. During the third quarter of fiscal 2010, there was a significant decline in orders for professional baseball facilities and other sports venues which we attributed to the economic conditions at that time. Economic conditions are continuing to adversely impact orders in large sports facilities, causing the decline in orders and sales in large sports venues. Generally, when orders are not booked due to such factors, they are delayed rather than cancelled, usually for a full year until the start of the next season, assuming the economy improves. We have not seen significant improvement in order bookings during the first quarter of fiscal 2011 and are uncertain as to when recovery will happen.
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