DAKT » Topics » LIQUIDITY AND CAPITAL RESOURCES

These excerpts taken from the DAKT 10-K filed Jun 17, 2009.

Liquidity and Capital Resources

 

Working capital was $104.5 million at May 2, 2009 compared to $62.5 million at April 26, 2008. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for fiscal 2009 was $48.7 million. Net income of $26.4 million plus depreciation and amortization of $24.4 million, the add back of $2.4 million equity in net losses of equity investments and $3.2 million of stock-based compensation, less $2.9 million in changes in net operating assets and $4.3 million in the changes of deferred income taxes, generated the cash provided by operations.

 

The most significant driver of the changes in net operating assets was the increase in accrued expenses and warranty obligations. This increase was partially offset by increases in inventories, costs and estimated earnings in excess of billings, deferred income taxes, and accounts receivable and a decrease in billings in excess of costs and estimated earnings. The decrease in billings in excess of costs and estimated earnings is the result of deposits we receive on orders primarily with outdoor advertising customers, which declined significantly. The increase in accrued expenses and warranties is the result of higher warranty reserves established in fiscal 2009 as a percentage of net sales as compared to fiscal 2008. With regard to operating assets, there was an increase in the levels of inventory and accounts receivable in fiscal 2009 as compared to fiscal 2008, which decreased cash provided by operations. Days sales outstanding for accounts receivables improved from 42 days as of April 26, 2008 to 38 days as of May 2, 2009. In addition, days of inventory outstanding also improved by six days. Days outstanding for costs and estimated earnings in excess of billings improved by two days as of the end of fiscal 2009 as compared to the end of fiscal 2008. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as described above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to net sales and costs of goods.

 

Cash used by investing activities in fiscal 2009 included $22.9 million used to purchase property and equipment. During fiscal year 2009, we invested approximately $2.9 million in facilities; approximately $6.4 million in manufacturing equipment; approximately $7.4 million on information systems hardware and software; approximately $3.1 million in demonstration equipment; approximately $2.6 million in rental equipment; and approximately $0.5 in office equipment. These investments supported our continued growth and replaced obsolete equipment. For fiscal 2009, capital expenditures were 3.9% of net sales. We expect total capital expenditure dollars to decrease in fiscal 2010.

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Other cash provided by investing activities included $4.7 million from the sale of property and equipment. Cash used in financing activities of approximately $3.2 million in fiscal 2009 included $0.5 million of payments of long-term debt and $3.6 million paid to shareholders in the form of a dividend, offset by $0.6 million received for option exercises and $0.3 million in tax benefit from stock-based compensation.

 

Included in receivables as of May 2, 2009 was approximately $7.0 million of retainage on construction-type contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and, to a lesser extent, bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments or progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product development expenses for fiscal years 2009, 2008 and 2007 were $21.6 million, $20.8 million and $15.6 million, respectively. We intend to continue to incur these expenditures to develop new display products and solutions using various technologies to offer higher resolution and more cost-effective and energy-efficient displays, as well as to complement the services and solutions that are provided with the displays. We also intend to continue developing software applications related to our display systems to enable these products to continue to meet the needs and expectations of the marketplace.

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 1.2% at May 2, 2009. Starting January 23, 2007, we are assessed a loan fee equal to 0.1% per annum of any unused portion of the loan. As of May 2, 2009, no advances under the line of credit were outstanding. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio.

Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2010. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 3.8% at April 26, 2008. As of May 2, 2009, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivables, inventory and other assets of the subsidiary.

Daktronics Shanghai, Ltd., has established a line of credit for $1.5 million to facilitate the issuance of bank guarantees in connection with orders it receives. The fees on the line are equal to 0.5% of the outstanding bank guarantees, and the line of credit is secured by a letter of credit issued by us. The line expires on March 31, 2010. As of May 2, 2009, no advances under the letter of credit or bank guarantees were outstanding.

We are sometimes required to obtain performance bonds for display installations. We currently have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At May 2, 2009, we had approximately $37.6 million of bonded work outstanding against this line.

 

We believe that if our growth extends beyond current expectations or if we make any strategic investments, we may need to increase the amount of our credit facility or seek other means of financing our growth. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender or other sources. We believe that our working capital available from all sources will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

Liquidity and Capital Resources

 

Working capital was $104.5 million at May 2, 2009 compared to $62.5 million at April 26, 2008. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for fiscal 2009 was $48.7 million. Net income of $26.4 million plus depreciation and amortization of $24.4 million, the add back of $2.4 million equity in net losses of equity investments and $3.2 million of stock-based compensation, less $2.9 million in changes in net operating assets and $4.3 million in the changes of deferred income taxes, generated the cash provided by operations.

 

The most significant driver of the changes in net operating assets was the increase in accrued expenses and warranty obligations. This increase was partially offset by increases in inventories, costs and estimated earnings in excess of billings, deferred income taxes, and accounts receivable and a decrease in billings in excess of costs and estimated earnings. The decrease in billings in excess of costs and estimated earnings is the result of deposits we receive on orders primarily with outdoor advertising customers, which declined significantly. The increase in accrued expenses and warranties is the result of higher warranty reserves established in fiscal 2009 as a percentage of net sales as compared to fiscal 2008. With regard to operating assets, there was an increase in the levels of inventory and accounts receivable in fiscal 2009 as compared to fiscal 2008, which decreased cash provided by operations. Days sales outstanding for accounts receivables improved from 42 days as of April 26, 2008 to 38 days as of May 2, 2009. In addition, days of inventory outstanding also improved by six days. Days outstanding for costs and estimated earnings in excess of billings improved by two days as of the end of fiscal 2009 as compared to the end of fiscal 2008. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as described above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to net sales and costs of goods.

 

Cash used by investing activities in fiscal 2009 included $22.9 million used to purchase property and equipment. During fiscal year 2009, we invested approximately $2.9 million in facilities; approximately $6.4 million in manufacturing equipment; approximately $7.4 million on information systems hardware and software; approximately $3.1 million in demonstration equipment; approximately $2.6 million in rental equipment; and approximately $0.5 in office equipment. These investments supported our continued growth and replaced obsolete equipment. For fiscal 2009, capital expenditures were 3.9% of net sales. We expect total capital expenditure dollars to decrease in fiscal 2010.

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Other cash provided by investing activities included $4.7 million from the sale of property and equipment. Cash used in financing activities of approximately $3.2 million in fiscal 2009 included $0.5 million of payments of long-term debt and $3.6 million paid to shareholders in the form of a dividend, offset by $0.6 million received for option exercises and $0.3 million in tax benefit from stock-based compensation.

 

Included in receivables as of May 2, 2009 was approximately $7.0 million of retainage on construction-type contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and, to a lesser extent, bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments or progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product development expenses for fiscal years 2009, 2008 and 2007 were $21.6 million, $20.8 million and $15.6 million, respectively. We intend to continue to incur these expenditures to develop new display products and solutions using various technologies to offer higher resolution and more cost-effective and energy-efficient displays, as well as to complement the services and solutions that are provided with the displays. We also intend to continue developing software applications related to our display systems to enable these products to continue to meet the needs and expectations of the marketplace.

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 1.2% at May 2, 2009. Starting January 23, 2007, we are assessed a loan fee equal to 0.1% per annum of any unused portion of the loan. As of May 2, 2009, no advances under the line of credit were outstanding. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio.

Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2010. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 3.8% at April 26, 2008. As of May 2, 2009, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivables, inventory and other assets of the subsidiary.

Daktronics Shanghai, Ltd., has established a line of credit for $1.5 million to facilitate the issuance of bank guarantees in connection with orders it receives. The fees on the line are equal to 0.5% of the outstanding bank guarantees, and the line of credit is secured by a letter of credit issued by us. The line expires on March 31, 2010. As of May 2, 2009, no advances under the letter of credit or bank guarantees were outstanding.

We are sometimes required to obtain performance bonds for display installations. We currently have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At May 2, 2009, we had approximately $37.6 million of bonded work outstanding against this line.

 

We believe that if our growth extends beyond current expectations or if we make any strategic investments, we may need to increase the amount of our credit facility or seek other means of financing our growth. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender or other sources. We believe that our working capital available from all sources will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

Liquidity and Capital Resources



 



Working capital was $104.5 million at May 2, 2009 compared to $62.5 million at April 26, 2008. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.



 



Cash provided by operations for fiscal 2009 was $48.7 million. Net income of $26.4 million plus depreciation and amortization of $24.4 million, the add back of $2.4 million equity in net losses of equity investments and $3.2 million of stock-based compensation, less $2.9 million in changes in net operating assets and $4.3
million in the changes of deferred income taxes, generated the cash provided by operations.



 



The most significant driver of the changes in net operating assets was the increase in accrued expenses and warranty obligations. This increase was partially offset by increases in inventories, costs and estimated earnings in excess of billings, deferred income taxes, and accounts receivable and a decrease in billings in
excess of costs and estimated earnings. The decrease in billings in excess of costs and estimated earnings is the result of deposits we receive on orders primarily with outdoor advertising customers, which declined significantly. The increase in accrued expenses and warranties is the result of higher warranty reserves established in fiscal 2009 as a percentage of net sales as compared to fiscal 2008.
With regard to operating assets, there was an increase in the levels of inventory and accounts receivable in fiscal 2009 as compared to fiscal 2008, which decreased cash provided by operations. Days sales outstanding for accounts receivables improved from 42 days as of April 26, 2008 to 38 days as of May 2, 2009. In addition, days of inventory outstanding also improved by six days. Days outstanding for
costs and estimated earnings in excess of billings improved by two days as of the end of fiscal 2009 as compared to the end of fiscal 2008. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as described above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in
manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to net sales and costs of goods.



 



Cash used by investing activities in fiscal 2009 included $22.9 million used to purchase property and equipment. During fiscal year 2009, we invested approximately $2.9 million in facilities; approximately $6.4 million in manufacturing equipment; approximately $7.4 million on information systems hardware and software;
approximately $3.1 million in demonstration equipment; approximately $2.6 million in rental equipment; and approximately $0.5 in office equipment. These investments supported our continued growth and replaced obsolete equipment. For fiscal 2009, capital expenditures were 3.9% of net sales. We expect total capital expenditure dollars to decrease in fiscal 2010.






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Other cash provided by investing activities included $4.7 million from the sale of property and equipment. Cash used in financing activities of approximately $3.2 million in fiscal 2009 included $0.5 million of payments of long-term debt and $3.6 million paid to shareholders in the form of a dividend, offset by $0.6
million received for option exercises and $0.3 million in tax benefit from stock-based compensation.



 



Included in receivables as of May 2, 2009 was approximately $7.0 million of retainage on construction-type contracts, all of which is expected to be collected in one year.



 



We have used and expect to continue to use cash reserves and, to a lesser extent, bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the
customer’s delivery needs. We often receive down payments or progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.



 



Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product development expenses for fiscal years 2009, 2008 and 2007 were $21.6 million, $20.8 million and $15.6 million, respectively. We intend to continue to incur these
expenditures to develop new display products and solutions using various technologies to offer higher resolution and more cost-effective and energy-efficient displays, as well as to complement the services and solutions that are provided with the displays. We also intend to continue developing software applications related to our display systems to enable these products to continue to meet the needs
and expectations of the marketplace.



We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 1.2% at May 2, 2009. Starting January 23, 2007, we
are assessed a loan fee equal to 0.1% per annum of any unused portion of the loan. As of May 2, 2009, no advances under the line of credit were outstanding. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted
fixed charge coverage ratio.



Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2010. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 3.8% at April 26, 2008. As of May 2, 2009, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts
receivables, inventory and other assets of the subsidiary.



Daktronics Shanghai, Ltd., has established a line of credit for $1.5 million to facilitate the issuance of bank guarantees in connection with orders it receives. The fees on the line are equal to 0.5% of the outstanding bank guarantees, and the line of credit is secured by a letter of credit issued by us. The line expires on March 31, 2010. As of May 2, 2009, no advances under the letter of credit or
bank guarantees were outstanding.



We are sometimes required to obtain performance bonds for display installations. We currently have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At May 2, 2009, we had approximately $37.6 million of bonded work outstanding against this
line.



 



We believe that if our growth extends beyond current expectations or if we make any strategic investments, we may need to increase the amount of our credit facility or seek other means of financing our growth. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our
current lender or other sources. We believe that our working capital available from all sources will be adequate to meet the cash requirements of our operations in the foreseeable future.



 



This excerpt taken from the DAKT 10-Q filed Feb 27, 2009.

LIQUIDITY AND CAPITAL RESOURCES

 

Working capital was $95.8 million at January 31, 2009 and $62.5 million at April 26, 2008. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for the first nine months of fiscal 2009 was $27.6 million. Net income of $26.1 million plus depreciation and amortization of $18.3 million, the add-back of equity in net losses of equity investments, and stock-based compensation, less $20.0 million in changes in net operating assets, and gain on sale of property and equipment, generated the cash provided by operations.

 

The most significant drivers of the change in net operating assets for the first nine months of fiscal 2009 were the increases in accounts receivable and inventories and a decrease in customer deposits and billings in excess of costs and profits as of January 1, 2009 as compared to their levels at April 26, 2008. The increase in accounts receivables was the result of higher billings during the third quarter of fiscal 2009 resulting from the higher level of net sales and an increase in days sales outstanding of approximately nine days. When determining days sales outstanding, if costs and estimated earnings in excess of profits were to be included, it increased by ten days as of January 31, 2009. Day’s inventory outstanding increased by four days as compared to the end of fiscal 2008. The decrease in customer deposits results from the decline in sale of digital billboards which generated significant levels of deposits. Other changes in net operating assets were not significant and generally related to the change in overall business during the quarter. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as described above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to sales and costs of goods.

 

Cash used by investing activities of $16.8 million for the first nine months of fiscal 2009 included $19.3 million for purchases of property and equipment, which was offset by $3.0 million of proceeds from the sale of property and equipment. During the first nine months of fiscal 2009, we invested approximately $5.5 million in manufacturing equipment, $2.1 million in product demonstration equipment, $6.8 million in information systems infrastructure, including software, $2.7 million in facilities, $1.8 million in rental equipment and $0.4 million in office equipment and various other items. These investments supported our continued growth and replaced obsolete equipment. As of the end of the third quarter of fiscal 2009, capital expenditures were 4.2% of net sales.

 

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Cash used by financing activities of $3.2 million for the first nine months of fiscal 2009 consisted of the dividend paid to shareholders of $3.6 million on June 24, 2008, which was partially offset by option exercises and excess tax benefits from equity-based compensation.

 

Included in receivables as of January 31, 2009 was approximately $7.2 million of retainage on long-term contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments and progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

Our product development activities during the three months ended January 31, 2009 included the enhancement of existing products and the development of new products from existing technologies. Product design and development expenses were $5.1 million for the third quarter of fiscal 2009 as compared to $4.9 million for the third quarter of fiscal 2008. We intend to continue to incur expenditures at a rate of 4% of net sales to develop new display products using various display technologies to offer higher resolution and more cost effective and energy efficient displays. We also intend to continue developing software applications for our display systems to enable these products to continue to meet the needs and expectations of the marketplace.

 

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 2.6% at January 31, 2009. We are assessed a loan fee equal to 0.1% per annum of any non-used portion of the loan. As of January 1, 2009, there were no advances under the line of credit. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio. Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2009. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 3.0% on January 31, 2009. As of January 31, 2009, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivable, inventory and other assets of the subsidiary. Daktronics Shanghai, Ltd., has established a line of credit for $7.2 million to facilitate the issuance of bank guarantees in connection with orders it receives. The fees on the line are equal to 3% of the outstanding bank guarantees, and the line of credit is secured by a letter of credit issued by us. The line expires on February 28, 2010. As of January 31, 2009, no advances under the letter of credit or bank guarantees were outstanding.

 

On May 29, 2008, our Board declared an annual dividend payment of $0.09 per share on our common stock for the fiscal ended April 26, 2008. Although we intend to pay regular annual dividends for the foreseeable future, all subsequent dividends will be reviewed annually and declared by our Board of Directors at its discretion.

 

We are sometimes required to obtain performance bonds for display installations, and we have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At January 31, 2009, we had approximately $47.4 million of bonded work outstanding against this line.

 

We believe that based on our current growth estimates over the next 12 months, we have sufficient capacity under our lines of credit. Beyond that time, we may need to increase the amount of our credit facilities depending on various factors. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lenders. We believe that cash from operations, our existing or increased credit facility and our current working capital will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

This excerpt taken from the DAKT 10-Q filed Nov 26, 2008.

LIQUIDITY AND CAPITAL RESOURCES

 

Working capital was $81.7 million at November 1, 2008 and $62.5 million at April 26, 2008. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for the first six months of fiscal 2009 was $15.7 million. Net income of $21.9 million plus depreciation and amortization of $12.0 million, the add-back of equity in net losses of equity investments, and stock-based compensation, less $20.0 million in changes in net operating assets, and gain on sale of property and equipment, generated the cash provided by operations.

 

The most significant drivers of the change in net operating assets for the first six months of fiscal 2009 were the increases in accounts receivable and inventories as of November 1, 2008 as compared to their levels at April 26, 2008. These increases were partially offset by increases in customer deposits, accounts payable and various other items. The increase in accounts receivables was the result of higher billings during the second quarter of fiscal 2009 resulting from the higher level of net sales and an increase in days sales outstanding of approximately four days. When determining days sales outstanding, costs and estimated earnings in excess of profits, which is our key indicator, it increased by five days as of November 1, 2008 as compared to April 26, 2008. Days inventory outstanding was relatively flat as compared to the end of fiscal year 2008. The increase in accounts payable corresponds to the increase in inventory. Other changes in net operating assets were not significant and generally related to the change in overall business during the quarter. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as described above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to sales and costs of goods.

 

Cash used by investing activities of $14.1 million for the first six months of fiscal 2009 included $16.6 million for purchases of property and equipment, which was offset by $2.9 million of proceeds from the sale of property and equipment. During the first six months of fiscal 2009, we invested approximately $4.6 million in manufacturing equipment, $1.3 million in product demonstration equipment, $6.3 million in information systems infrastructure, including software, $2.2 million in facilities, $1.7 million in rental equipment and $0.3 million in office equipment and various other items. These investments were made to support our continued growth and to replace obsolete equipment. As of the end of the second quarter of fiscal 2009, capital expenditures were 5.0% of net sales.

 

Cash used by financing activities of $3.4 million for the first six months of fiscal 2009 consisted of the dividend paid to shareholders of $3.6 million on June 24, 2008, which was offset by option exercises and excess tax benefits from equity-based compensation.

 

Included in receivables as of November 1, 2008 was approximately $3.0 million of retainage on long-term contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments and progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

 

Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product design and development expenses were $5.3 million for each of the second quarter of fiscal 2009 and for the second quarter of fiscal 2008. We intend to continue to incur expenditures to develop new display products using various display technologies to offer higher resolution and more cost effective and energy efficient displays at a rate of 4.0% of net sales. We also intend to continue developing software applications for our display systems to enable these products to continue to meet the needs and expectations of the marketplace.

 

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 3.2% at November 1, 2008. We are assessed a loan fee equal to 0.1% per annum of any non-used portion of the loan. As of November 1, 2008, there were no advances under the line of credit. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio. Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2009. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 4.8% on November 1, 2008. As of November 1, 2008, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivable, inventory and other assets of the subsidiary. Daktronics Shanghai, Ltd., has established a line of credit for $7.2 million to facilitate the issuance of bank guarantees in connection with orders it receives. The fees on the line are equal to 3% of the outstanding bank guarantees, and the line of credit is secured by a letter of credit issue by us. The line expires on February 28, 2010.

 

On May 29, 2008, our Board declared an annual dividend payment of $0.09 per share on our common stock for the fiscal year ended April 26, 2008. Although we intend to pay regular annual dividends for the foreseeable future, all subsequent dividends will be reviewed annually and declared by our Board of Directors at its discretion.

 

We are sometimes required to obtain performance bonds for display installations, and we have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At November 1, 2008, we had approximately $25.5 million of bonded work outstanding against this line.

 

We believe that based on our current growth estimates over the next 12 months, we have sufficient capacity under our lines of credit. Beyond that time, we may need to increase the amount of our credit facilities depending on various factors. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender. We believe that cash from operations, our existing or increased credit facility and our current working capital will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

This excerpt taken from the DAKT 10-Q filed Aug 27, 2008.

LIQUIDITY AND CAPITAL RESOURCES

 

Working capital was $72.2 million at August 2, 2008 and $62.5 million at April 26, 2008. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for the first fiscal quarter of fiscal 2009 was $3.7 million. Net income of $9.7 million plus depreciation and amortization of $6.0 million, the add-back of equity in net losses of equity investments, and stock-based compensation, less $12.5 million in changes in net operating assets, and gain on sale of property and equipment generated the cash provided by operations.

 

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The most significant drivers of the change in net operating assets were the increases in accounts receivable and inventories. These increases were partially offset by increases in customer deposits and accounts payable. The increase in accounts receivables was the result of higher billings during the quarter resulting from the higher level of net sales and an increase in days sales outstanding of approximately 10 days. When determining days sales outstanding, costs and estimated earnings in excess of profits, which is our key indicator, it increased by 11 days. The lengthening was adversely impacted by one large customer that negotiated an extension to pay approximately $4 million after 2009 first fiscal quarter end. This money has been subsequently received. Days inventory outstanding also increased by nine days. The increase in accounts payable corresponds to the increase in inventory. Other changes in net operating assets were not significant and generally related to the change in overall business during the quarter. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as described above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to sales and costs of goods.

 

Cash used by investing activities of $4.8 million for the first quarter of fiscal 2009 included $7.5 million for purchases of property and equipment, which was offset by $2.7 million of proceeds from the sale of property and equipment. During the first quarter of fiscal 2009, we invested approximately $2.7 million in manufacturing equipment, $0.6 million in product demonstration equipment, $2.8 million in information systems infrastructure, including software, $0.6 million in facilities, $0.6 million in rental equipment and $0.2 million in office equipment and various other items. These investments were made to support our continued growth and to replace obsolete equipment. As of the end of the first quarter of fiscal 2009, capital expenditures were 4.6% of net sales.

 

Cash used by financing activities of $3.4 million for the first quarter of fiscal 2009 consisted of the dividend paid to shareholders of $3.6 million on June 24, 2008, which was offset by option exercises and excess tax benefits from equity-based compensation.

 

Included in receivables as of August 2, 2008 was approximately $3.9 million of retainage on long-term contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments and progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product design and development expenses were $6.5 million for the first quarter of fiscal 2009 as compared to $4.8 million for the first quarter of fiscal 2008. We intend to continue to incur expenditures to develop new display products using various display technologies to offer higher resolution and more cost effective and energy efficient displays at a rate of 4.0% of net sales. We also intend to continue developing software applications for our display systems to enable these products to continue to meet the needs and expectations of the marketplace.

 

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 3.2% at August 2, 2008. We are assessed a loan fee equal to 0.1% per annum of any non-used portion of the loan. As of August 2, 2008, there were no advances under the line of credit. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio. Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2009. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 4.8% on August 2, 2008. As of August 2, 2008, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivable, inventory and other assets of the subsidiary. Daktronics Shanghai, Ltd, has established a line of credit for $7.2 million to facilitate the issuance of bank guarantees in connection with orders it receives. The fees on the line are equal to 3% of the outstanding bank guarantees, and the line of credit is secured by a letter of credit issue by us. The line expires on February 28, 2010.

 

On May 29, 2008, our Board declared an annual dividend payment of $0.09 per share on our common stock for the year ended April 26, 2008. Although we intend to pay regular annual dividends for the foreseeable future, all subsequent dividends will be reviewed annually and declared by our Board of Directors at its discretion.

 

We are sometimes required to obtain performance bonds for display installations, and we have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At August 2, 2008, we had approximately $32.3 million of bonded work outstanding against this line.

 

- 22 -




 

We believe that based on our current growth estimates over the next 12 months, we have sufficient capacity under our lines of credit. Beyond that time, we may need to increase the amount of our credit facilities depending on various factors. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender. We believe that cash from operations, our existing or increased credit facility and our current working capital will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

These excerpts taken from the DAKT 10-K filed Jun 23, 2008.

Liquidity and Capital Resources

 

Working capital was $62.5 million at April 26, 2008 compared to $44.9 million at April 28, 2007. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for fiscal year 2008 was $59.8 million. Net income of $26.2 million plus depreciation and amortization of $20.8 million, $10.9 million in changes in net operating assets, the add back of equity in net losses of equity investments, and stock based compensation, less the gain on sale of equity investments, generated the cash provided by operations.

 

The most significant drivers of the changes in net operating assets were the increases in accounts payable, accrued expenses and warranty obligations, and billings in excess of costs and estimated earnings. These increases were partially offset by increases in inventories, costs and estimated earnings in excess of billings, deferred income taxes and long-term receivables. The improvement in billings in excess of costs and estimated earnings is the result of deposits we receive on orders and included deposits on a few large orders, primarily with outdoor advertising customers. The increase in accrued expenses and warranties is the result of higher than customary warranty reserves established in fiscal year 2008 as a percentage of sales. With regard to operating assets, we saw a reduction in the levels of inventory and accounts receivable as a percent of sales, which helped increase cash provided by operations as we focused on controlling these levels. Days sales outstanding for accounts receivables improved from 50 days as of April 28, 2007 to 42 days as of April 26, 2008. In addition, days of inventory outstanding also improved by three days. Days outstanding for costs and estimated earnings in excess of billings remained flat year over year. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as noted above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to sales and costs of goods.

 

Cash used by investing activities in fiscal 2008 included $33.9 million used to purchase property and equipment. During fiscal year 2008, we invested in excess of $13 million in facilities, primarily our new headquarters in Brookings, South Dakota, which we occupied in September, 2007; approximately $8 million in manufacturing equipment, of which more than $4 million related to equipment to complete the Redwood Falls, Minnesota facility; approximately $7 million on information systems hardware and software, and; approximately $3 million in demonstration equipment. These purchases were made to support our continued growth, finance plant expansions in Redwood Falls, Minnesota and Sioux Falls, South Dakota and to replace obsolete equipment. Other cash provided by investing activities included $7 million in proceeds resulting from sales of equity method investments and $1 million from the sale of fixed assets. We expect that capital expenditures will exceed $40 million in fiscal year 2009.

 

Cash used in financing activities of approximately $25.3 million in fiscal 2008 included $24.6 million in payments under our main credit facility, $1.0 million of payments of long-term debt, and $2.8 million paid to shareholders in the form of a dividend, offset by $2.3 million received for option exercises.

 

 

26




Included in receivables as of April 28, 2007 was approximately $3.8 million of retainage on construction-type contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and, to a lesser extent, bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments or progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product development expenses for fiscal years 2008, 2007 and 2006 were $20.8 million, $15.6 million and $11.2 million, respectively. We intend to continue to incur these expenditures to develop new display products and solutions using various technologies to offer higher resolution and more cost-effective and energy-efficient displays, as well as to complement the services and solutions that are provided with the displays. We also intend to continue developing software applications related to our display systems to enable these products to continue to meet the needs and expectations of the marketplace.

 

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 3.6% at April 26, 2008. Starting January 23, 2007, we are assessed a loan fee equal to 0.1% per annum of any non-used portion of the loan. As of April 26, 2008, no advances under the line of credit were outstanding. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio. Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2009. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 6.0% at April 26, 2008. As of April 26, 2008, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivables, inventory and other assets of the subsidiary.

 

We are sometimes required to obtain performance bonds for display installations. We currently have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At April 26, 2008, we had approximately $45 million of bonded work outstanding against this line.

 

We believe that if our growth extends beyond current expectations or if we make any strategic investments, we may need to increase the amount of our credit facility or seek other means of financing our growth. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender or other sources. We believe that our working capital available from all sources will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

Liquidity and Capital Resources



 



Working capital was $62.5 million at April 26, 2008 compared to $44.9 million at April 28, 2007. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.



 



Cash provided by operations for fiscal year 2008 was $59.8 million. Net income of $26.2 million plus depreciation and amortization of $20.8 million, $10.9 million in changes in net operating assets, the add back of equity in net losses of equity investments, and stock based compensation, less the gain on sale of equity investments, generated the cash provided by operations.



 



The most significant drivers of the changes in net operating assets were the increases in accounts payable, accrued expenses and warranty obligations, and billings in excess of costs and estimated earnings. These increases were partially offset by increases in inventories, costs and estimated earnings in excess of billings, deferred income taxes and long-term receivables. The improvement in billings in
excess of costs and estimated earnings is the result of deposits we receive on orders and included deposits on a few large orders, primarily with outdoor advertising customers. The increase in accrued expenses and warranties is the result of higher than customary warranty reserves established in fiscal year 2008 as a percentage of sales. With regard to operating assets, we saw a reduction in the levels of inventory and accounts receivable as a percent of sales, which helped increase
cash provided by operations as we focused on controlling these levels. Days sales outstanding for accounts receivables improved from 50 days as of April 28, 2007 to 42 days as of April 26, 2008. In addition, days of inventory outstanding also improved by three days. Days outstanding for costs and estimated earnings in excess of billings remained flat year over year. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders as
noted above that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to sales and costs of goods.



 



Cash used by investing activities in fiscal 2008 included $33.9 million used to purchase property and equipment. During fiscal year 2008, we invested in excess of $13 million in facilities, primarily our new headquarters in Brookings, South Dakota, which we occupied in September, 2007; approximately $8 million in manufacturing equipment, of which more than $4 million related to equipment to complete the
Redwood Falls, Minnesota facility; approximately $7 million on information systems hardware and software, and; approximately $3 million in demonstration equipment. These purchases were made to support our continued growth, finance plant expansions in Redwood Falls, Minnesota and Sioux Falls, South Dakota and to replace obsolete equipment. Other cash provided by investing activities included $7 million in proceeds resulting from sales of equity method investments and $1 million from
the sale of fixed assets. We expect that capital expenditures will exceed $40 million in fiscal year 2009.



 



Cash used in financing activities of approximately $25.3 million in fiscal 2008 included $24.6 million in payments under our main credit facility, $1.0 million of payments of long-term debt, and $2.8 million paid to shareholders in the form of a dividend, offset by $2.3 million received for option exercises.



 



 






26












Included in receivables as of April 28, 2007 was approximately $3.8 million of retainage on construction-type contracts, all of which is expected to be collected in one year.



 



We have used and expect to continue to use cash reserves and, to a lesser extent, bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 24 months depending on the amount of custom work and the customer’s delivery needs. We often receive down payments or progress payments
on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.



 



Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product development expenses for fiscal years 2008, 2007 and 2006 were $20.8 million, $15.6 million and $11.2 million, respectively. We intend to continue to incur these expenditures to develop new display products and solutions using various technologies to offer
higher resolution and more cost-effective and energy-efficient displays, as well as to complement the services and solutions that are provided with the displays. We also intend to continue developing software applications related to our display systems to enable these products to continue to meet the needs and expectations of the marketplace.



 



We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $15.0 million for standby letters of credit. The line of credit is due on November 15, 2009. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 3.6% at April 26, 2008. Starting January 23, 2007, we are
assessed a loan fee equal to 0.1% per annum of any non-used portion of the loan. As of April 26, 2008, no advances under the line of credit were outstanding. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio. Daktronics Canada, Inc. has a credit agreement with a
bank which provides for a $0.3 million line of credit. The line of credit is due on February 1, 2009. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 6.0% at April 26, 2008. As of April 26, 2008, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivables, inventory and other assets of the subsidiary.



 



We are sometimes required to obtain performance bonds for display installations. We currently have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At April 26, 2008, we had approximately $45 million of bonded work outstanding against this line.



 



We believe that if our growth extends beyond current expectations or if we make any strategic investments, we may need to increase the amount of our credit facility or seek other means of financing our growth. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender or other sources. We believe that our working capital available from all
sources will be adequate to meet the cash requirements of our operations in the foreseeable future.



 



This excerpt taken from the DAKT 10-Q filed Feb 29, 2008.

LIQUIDITY AND CAPITAL RESOURCES

 

Working capital was $53.0 million at January 26, 2008 and $44.9 million at April 28, 2007. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

 

Cash provided by operations for the nine months ended January 26, 2008 was $35.4 million. Net income of $20.5 million, plus depreciation and amortization of $15.4 million, stock-based compensation of $1.9 million and increases in accounts payable, customer deposits, accrued expenses and income taxes payable caused an increase in cash provided by operations. This increase was offset by increases in costs and estimated earnings in excess of billings, accounts receivable, inventory and notes receivables and decreases in billings in excess of costs and profits.

 

Accounts receivables and estimated earnings in excess of billings increased significantly as a result of the timing on projects and a higher level of receivables related to outdoor advertising customers, which is expected to decrease in the fourth quarter. Increases in inventory are occurring as we continue to reorganize the plant and related inventory into the separate plants as opposed to a centralized inventory serving the plants. Over the long-term, we expect that this will cause less excess and obsolete inventory and improved turns. The days sales outstanding related to the combined accounts receivables and costs and earnings in excess of billings as of January 26, 2008 and April 28, 2007 was 77 and 71 days, respectively. Inventory turns as of those same dates were approximately 10 and 8, respectively. It is not unusual to have these types of fluctuations as a result of the types of contracts we enter into, although these levels are expected to improve.  The changes overall in operating assets and liabilities are due generally to the impact of the timing of cash flows on projects, which can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to improve our cash flow relative to sales.

 

Cash used by investing activities of $21.7 million for the first nine months of fiscal 2008 included $28.4 million for purchases of property and equipment. During the first nine months of fiscal year 2008, we invested approximately $6.8 million in manufacturing equipment, $11.2 million in facilities additions, $6.2 million in information systems infrastructure, including software, $2.9 million in product demonstration equipment, $1.2 million in rental equipment and $0.1 million in office equipment. These investments were made to support our continued growth and to replace obsolete equipment. We are taking steps to curtail and reduce capital expenditures as a percent of net sales. As of the end of the third quarter of fiscal 2008 and fiscal 2007, capital expenditures were 7.6% and 14.4% of net sales, respectively.

 

In the second quarter of fiscal year 2008, we completed construction of a new building in Brookings, South Dakota to be used primarily for office and warehouse space. The total cost of the building and furnishings was approximately $19.2 million. We funded approximately $2.0 million of the cost of furnishings through operating leases. We also invested in equipment for our Redwood Falls, Minnesota manufacturing facility. We consider these two areas to be the completion of the major capacity expansion efforts we began in fiscal year 2006. We expect to invest approximately $4.5 million in capital expenditures through the rest of fiscal 2008. We believe that in fiscal year 2009, investments in capital assets will decrease and, over the long term, we will increase our cash and marketable securities while decreasing the level of debt.

 

Cash used by financing activities of $12.5 million for the first nine months of fiscal 2008 consisted of the dividend paid to shareholders of $2.8 million on June 20, 2007, which was offset by payments on notes payables and by option exercises and excess tax benefits from equity-based compensation.

 

Included in receivables as of January 26, 2008 was approximately $4.1 million of retainage on long-term contracts, all of which is expected to be collected in one year.

 

We have used and expect to continue to use cash reserves and bank borrowings to meet our short-term working capital requirements. On large product orders, the time between order acceptance and project completion may extend up to and exceed 18 months depending on the amount of custom work and the customer’s delivery needs. We often receive a down payment or progress payments on these product orders. To the extent that these payments are not sufficient to fund the costs and other expenses associated with these orders, we use working capital and bank borrowings to finance these cash requirements.

 

 

 

- 26 -

 


Our product development activities include the enhancement of existing products and the development of new products from existing technologies. Product design and development expenses were $4.9 million for the quarter ended January 26, 2008 as compared to $3.6 million for the third quarter of fiscal 2007. We intend to continue to incur expenditures to develop new display products using various display technologies to offer higher resolution and more cost effective and energy efficient displays at a rate of 4.0% of net sales. We also intend to continue developing software applications for our display controllers to enable these products to continue to meet the needs and expectations of the marketplace.

 

We have a credit agreement with a bank which provides for a $45.0 million line of credit and includes up to $10.0 million for standby letters of credit. The line of credit is due on November 15, 2008. The interest rate ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points depending on certain ratios. The effective interest rate was 3.31% at January 26, 2008. We are assessed a loan fee equal to 0.1% per annum of any non-used portion of the loan. As of January 26, 2008, $13.4 million was advanced under the line of credit. The credit agreement is unsecured and requires us to comply with certain covenants, including the maintenance of tangible net worth of at least $75 million, a minimum liquidity ratio, a limit on dividends and distributions and a minimum adjusted fixed charge coverage ratio. Daktronics Canada, Inc. has a credit agreement with a bank which provides for a $0.4 million line of credit. The line of credit is due on April 30, 2008. The interest rate on the line of credit is equal to 1.5% above the prime rate of interest and was 5.75% on January 26, 2008. As of January 26, 2008, no advances under the line of credit were outstanding. The line of credit is secured primarily by accounts receivable, inventory and other assets of the subsidiary.

 

On May 24, 2007, our Board declared an annual dividend payment of $0.07 per share on our common stock for the year ended April 28, 2007. Although we intend to pay regular annual dividends for the foreseeable future, all subsequent dividends will be reviewed annually and declared by our Board of Directors at its discretion.

 

We are sometimes required to obtain performance bonds for display installations, and we have a bonding line available through a surety company that provides for an aggregate of $100 million in bonded work outstanding. At January 26, 2008, we had approximately $21.6 million of bonded work outstanding against this line.

 

We believe that based on our current growth estimates over the next 12 months, we have sufficient capacity under our lines of credit. Beyond that time, we may need to increase the amount of our credit facilities depending on various factors. We anticipate that we will be able to obtain any needed funds under commercially reasonable terms from our current lender. We believe that cash from operations, our existing or increased credit facility and our current working capital will be adequate to meet the cash requirements of our operations in the foreseeable future.

 

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