================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1998 Commission file number 0-23246 DAKTRONICS, INC. South Dakota 46-0306862 ------------ ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation of organization) 331 32nd Avenue Brookings, SD 57006 ----------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (605) 697-4000 ------------------------------------------------------------------ (Former name, address, and/or fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No ______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at December 1, 1998 - ---------------------------- ------------------------------- Common Stock, No par value 4,367,159 ================================================================================
Daktronics, Inc. Table of Contents Part I. Financial Information Page(s) ------- Consolidated Balance Sheets - October 31, 1998 and May 2, 1998 ........................... 3 - 4 Consolidated Statements of Income - Three months and six months ended October 31, 1998 and November 1, 1997 ...................... 5 Consolidated Statements of Cash Flows - Six months ended October 31, 1998 and November 1, 1997............................................ 6 Notes to Consolidated Financial Statements.................. 7 - 8 Management's Discussion and Analysis of Financial Condition and Results of Operation................ 9 - 12 Part II. Other Information............................................. 13 - 14 Signatures.................................................. 15 2
DAKTRONICS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands) <TABLE> <CAPTION> OCTOBER 31, 1998 MAY 2, ASSETS (UNAUDITED) 1998 ----------- ----------- <S> <C> <C> CURRENT ASSETS Cash and cash equivalents ................... $ 162 $ 148 Accounts receivable less allowance for doubtful accounts of $270 at October 31, 1998 and $208 at May 2, 1998 .. 17,287 13,632 Current maturities of long-term receivables ............................... 838 990 Inventories ................................. 12,175 10,994 Costs and estimated earnings in excess of billings on uncompleted contracts ................................. 6,983 1,523 Prepaid expenses and other .................. 44 448 Deferred income tax benefit ................. 1,139 1,139 ----------- ----------- Total current assets ...................... $ 38,628 $ 28,874 ----------- ----------- LONG-TERM RECEIVABLES AND OTHER ASSETS Long-term receivables, less current maturities ................... $ 4,800 $ 4,575 Intangible assets and other ................. 801 814 ----------- ----------- $ 5,601 $ 5,389 ----------- ----------- PROPERTY AND EQUIPMENT, at cost Land ...................................... $ 532 $ 492 Buildings ................................. 5,369 5,069 Machinery and equipment ................... 13,510 12,177 Office furniture and equipment ............ 738 403 Transportation equipment .................. 499 590 ----------- ----------- $ 20,648 $ 18,731 Less accumulated depreciation ............... 10,314 9,506 ----------- ----------- $ 10,334 $ 9,225 ----------- ----------- $ 54,563 $ 43,488 =========== =========== </TABLE> The accompanying notes are an integral part of these Consolidated Financial Statements. 3
DAKTRONICS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands) <TABLE> <CAPTION> OCTOBER 31, 1998 MAY 2, LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) 1998 ----------- ----------- <S> <C> <C> CURRENT LIABILITIES Notes payable, bank .............................. $ 7,245 $ 5,594 Current maturities of long-term debt ................................. 1,355 455 Accounts payable ................................. 7,420 5,730 Accrued expenses ................................. 3,921 3,752 Billings in excess of costs and estimated earnings on uncompleted contracts .... 1,944 645 Income taxes payable ............................. -- 469 ----------- ----------- Total current liabilities ...................... $ 21,885 $ 16,645 ----------- ----------- LONG-TERM DEBT ..................................... Less current maturities .......................... $ 4,572 $ 783 DEFERRED INCOME .................................... $ 389 $ 361 DEFERRED INCOME TAXES .............................. $ 515 $ 515 SHAREHOLDERS' EQUITY Common stock, no par value Authorized 30,000,000 shares Issued October 31, 1998 4,330,278 shares May 2, 1998 4,324,210 shares ................... $ 11,783 $ 11,722 Retained earnings ................................ 15,428 13,471 ----------- ----------- $ 27,211 $ 25,193 Less: Cost of 4,920 treasury shares .................... (9) (9) ----------- ----------- $ 27,202 $ 25,184 ----------- ----------- $ 54,563 $ 43,488 =========== =========== </TABLE> The accompanying notes are an integral part of these Consolidated Financial Statements. 4
DAKTRONICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (In thousands, except earnings per share) (unaudited) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED -------------------------- -------------------------- OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1, 1998 1997 1998 1997 (13 WEEKS) (13 WEEKS) (26 WEEKS) (27 WEEKS) ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Net sales ............................. $ 24,233 $ 16,936 $ 46,469 $ 32,704 Cost of goods sold .................... 18,064 12,049 34,003 23,809 ---------- ---------- ---------- ---------- Gross profit .................. $ 6,169 $ 4,887 $ 12,466 $ 8,895 ---------- ---------- ---------- ---------- Operating expenses: Selling ........................... $ 3,054 $ 2,293 5,691 $ 4,500 General and administrative ........ 885 793 1,837 1,512 Product design and development .... 801 532 1,669 1,160 ---------- ---------- ---------- ---------- $ 4,740 $ 3,618 $ 9,197 $ 7,172 ---------- ---------- ---------- ---------- Operating income .............. $ 1,429 $ 1,269 $ 3,269 $ 1,723 Nonoperating income (expense): Interest income ................... 191 160 293 256 Interest expense .................. (245) (99) (419) (212) Other income ...................... 34 44 128 51 ---------- ---------- ---------- ---------- Income before income taxes .... $ 1,409 $ 1,374 $ 3,271 $ 1,818 Income tax expense .................... 566 545 1,314 720 ---------- ---------- ---------- ---------- Net income .................... $ 843 $ 829 $ 1,957 $ 1,098 ========== ========== ========== ========== Earnings per share (basic) ............ $ .19 $ .19 $ .45 $ .25 ========== ========== ========== ========== Earnings per share (diluted) .......... $ .19 $ .19 $ .44 $ .25 ========== ========== ========== ========== </TABLE> The accompanying notes are an integral part of these Consolidated Financial Statements. 5
DAKTRONICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) <TABLE> <CAPTION> SIX MONTHS ENDED ---------------------------- OCTOBER 31, NOVEMBER 1, 1998 1997 (26 WEEKS) (27 WEEKS) ----------- ----------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income ................................................. $ 1,957 $ 1,098 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation ........................................... 808 684 Amoritization .......................................... 160 440 Provision for doubtful accounts ........................ 62 9 Change in operating assets and liabilities .......................................... (7,310) (1,619) ----------- ----------- Net cash provided by (used in) operating activities ............................. $ (4,323) $ 612 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ......................... $ (1,917) $ (816) Other, net ................................................. (147) 227 ----------- ----------- Net cash (used in) investing activities ................................... $ (2,064) $ (589) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on notes payable ............................ $ 1,651 $ 709 Proceeds from long-term debt ............................... 5,000 -- Principal payments on long-term debt ........................................... (311) (671) Proceeds from exercise of stock options .................... 61 -- ----------- ----------- Net cash provided by financing activities ..................................... $ 6,401 $ 38 ----------- ----------- Increase in cash and cash equivalents ...................... $ 14 $ 61 Cash and cash equivalents: Beginning .................................................. 148 118 ----------- ----------- Ending ..................................................... $ 162 $ 179 =========== =========== </TABLE> The accompanying notes are an integral part of these Consolidated Financial Statements. 6
DAKTRONICS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE A. GENERAL The consolidated financial statements include the accounts of Daktronics, Inc. and its wholly-owned subsidiary, Star Circuits, Inc. Intercompany accounts and transactions have been eliminated in consolidation. Earnings per share are calculated in accordance with the provisions of FASB Statement No. 128, "Earnings Per Share". A reconciliation of the income and common stock share amounts used in the calculation of basic and diluted earnings per share for the six months ended October 31, 1998 and November 1, 1997 follows (amounts in thousands except per share amounts): <TABLE> <CAPTION> Per Net Share Income Shares Amount --------- --------- --------- <S> <C> <C> <C> For the six months ended October 31, 1998: Basic EPS .............................. $ 1,957 4,330 $ 0.45 Effect of dilutive securities: Exercise of stock options ............ -- 94 .01 --------- --------- --------- Diluted EPS ............................ $ 1,957 4,424 $ 0.44 ========= ========= ========= For the six months ended November 1, 1997: Basic EPS .............................. $ 1,098 4,306 $ 0.25 Effect of dilutive securities: Exercise of stock options ............ -- 32 -- --------- --------- --------- Diluted EPS ............................ $ 1,098 4,338 $ 0.25 ========= ========= ========= </TABLE> In the opinion of management, the unaudited financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the consolidated financial position of the Company and its subsidiary as of October 31, 1998 and the results of its operations and cash flows for the six months ended October 31, 1998 and November 1, 1997. These results may not be indicative of the results to be expected for the full fiscal year. NOTE B. INVENTORIES Inventories consist of the following (in thousands): October 31, May 2, 1998 1998 ---- ---- Raw materials............. $ 9,953 $ 8,657 Work-in-process........... 956 790 Finished goods............ 1,266 1,547 --------- --------- $ 12,175 $ 10,994 ========= ========= NOTE C. LITIGATION On May 4, 1995, the Company was served with a complaint alleging that the Company infringed on the plaintiff's patent rights. On November 5, 1997, the case was dismissed and the plaintiff appealed the decision. Management of the Company believes that there is no infringement and intends to defend the litigation vigorously. The Company's trial counsel is unable to evaluate the likelihood of an unfavorable outcome or the potential range of loss, if any. 7
The Company has recorded a provision for estimated costs to be incurred in connection with the litigation described above, as well as other miscellaneous claims and litigation arising in the ordinary course of business. 8
ITEM 2. FINANCIAL REVIEW (Management's discussion and analysis of financial condition and results of operations) The following discussion highlights the principal factors affecting changes in financial condition and results of operations. This review should be read in conjunction with the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements. GENERAL The Company designs, manufactures and sells a wide range of computer-programmable information display systems to customers in a variety of markets throughout the world. The Company focuses its sales and marketing efforts on markets rather than products. Major categories of markets include Sports, Business and Government. The Company's net sales and profitability historically have fluctuated due to the impact of large product orders, such as display systems for the Olympic Games and major league sports, as well as the seasonality of the sports market. The Company's gross margins on large product orders tend to fluctuate more than those for small standard orders. Large product orders that involve competitive bidding and substantial subcontract work for product installation generally have lower gross margins. Although the Company follows the percentage of completion method of recognizing revenues for these large orders, the Company nevertheless has experienced fluctuations in operating results and expects that its future results of operations may be subject to similar fluctuations. The Company operates on a 52-53 week fiscal year, with fiscal years ending on the Saturday closest to April 30 of each year. The first three quarters end on the Saturday closest to July 31, October 31 and January 31. RESULTS OF OPERATIONS The following table sets forth the percentage of net sales represented by items included in the Company's Consolidated Statements of Operations for the periods indicated: <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ------------------------- ------------------------- OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1, 1998 1997 1998 1997 (13 WEEKS) (13 WEEKS) (26 WEEKS) (27 WEEKS) --------- --------- --------- --------- <S> <C> <C> <C> <C> Net sales .......................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold ................. 74.5% 71.1% 73.2% 72.8% --------- --------- --------- --------- Gross profit ....................... 25.5% 28.9% 26.8% 27.2% Operating expenses ................. 19.6% 21.4% 19.8% 21.9% --------- --------- --------- --------- Operating income ................... 5.9% 7.5% 7.0% 5.3% Interest income .................... 0.8% 0.9% 0.6% 0.8% Interest expense ................... (1.0%) (0.6%) (0.9%) (0.6%) Other income ....................... 0.1% 0.3% 0.3% 0.1% --------- --------- --------- --------- Income before income taxes ......... 5.8% 8.1% 7.0% 5.6% Income tax expense ................. 2.3% 3.2% 2.8% 2.2% --------- --------- --------- --------- Net income ......................... 3.5% 4.9% 4.2% 3.4% ========= ========= ========= ========= </TABLE> 9
NET SALES Net sales were $24.2 million and $46.5 million for the three and six months ended October 31, 1998, compared to $16.9 million and $32.7 million for the three and six months ended November 1, 1997. The increase in net sales was primarily the result in increases in sales in most of the sport niche markets, particularly in the federation, major league and college and university markets. Based on current backlog and customer quotations, the Company believes that net sales for the last six months of fiscal year 1999 should exceed the last six months of fiscal year 1998. GROSS PROFIT Gross profit increased 27% from $4.9 million for the three months ended November 1, 1997 to $6.2 million for the three months ended October 31, 1998 while gross profit as a percentage of net sales decreased from 28.9% to 25.5%, respectively. Gross profit increased 40% from $8.9 million for the six months ended November 1, 1997 to $12.5 million for the six months ended October 31, 1998 while gross profit as a percentage of net sales decreased from 27.2% to 26.8%, respectively. The increase in gross profit was the result of increased net sales for the two periods. The decrease in gross profit as a percentage of sales for the periods was primarily the result of introducing the newest version of the ProStar(TM) Video Plus display into two college and university stadiums with virtually no gross profit in the second quarter. Due in part to the impact of large orders and the amount of subcontracting work associated with installation of these products, the Company expects that its gross profit margin will continue to fluctuate in future periods. OPERATING EXPENSES Selling expenses increased from $2.3 million for the three months ended November 1, 1997, to $3.1 million for the three months ended October 31, 1998. Selling expenses increased from $4.5 million for the six months ended November 1, 1997 to $5.7 million for the six months ended October 31, 1998. The increases were due primarily to the addition of sales staff and increased selling activity. General and administrative expenses increased from $793,000 and $1.5 million for the three and six months ended November 1, 1997 to $885,000 and $1.8 million for the three and six months ended October 31, 1998. The increases were due to increases in salary and personnel to support company growth. Product design and development was $532,000 and $1.2 million for the three and six months ended November 1, 1997 and $801,000 and $1.7 million for the three and six months ended October 31, 1998 as the Company continues to aggressively develop its family of ProStar(TM) Video Plus displays. INTEREST INCOME The Company occasionally sells products on an installment basis or in exchange for advertising revenues from the scoreboard or display, both which result in long-term receivables. Interest income increased from $160,000 and $256,000 for the three and six months ended November 1, 1997 to $191,000 and $293,000 for the three and six months ended October 31, 1998. The increase was due to higher average balances of long-term receivables. INTEREST EXPENSE Interest expense increased from $99,000 and $212,000 for the three and six month periods ended November 1, 1997 to $245,000 and $419,000 for the three and six months ended October 31, 1998. The increase was due to an increase in average loan balances. 10
INCOME TAX EXPENSE Income taxes as a percentage of income before income taxes were 40% for the six months ended November 1, 1997 and October 31, 1998 respectively. NET INCOME Net income was $829,000 and $1.1 million for the three and six months ended November 1, 1997 compared to $843,000 and $2.0 million for the three and six months ended October 31, 1998. The increase was due to an increase in net sales. Management believes that one of the principal factors that will affect net sales and income growth is the Company's ability to increase the marketing of its products in existing markets and expand the marketing of its products to new markets. LIQUIDITY AND CAPITAL RESOURCES Working capital was $16.7 million at October 31, 1998 and $12.2 million at May 2, 1998. Working capital provided by net income, depreciation and amortization, and $5.0 million in additional long-term debt was offset by purchases of property and equipment and repayment of long-term debt. The Company has historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements. Cash used by operations for the six months ended October 31, 1998 was $4.3 million. Net income of $2.0 million plus depreciation and amortization of $968,000 were offset by an increase in inventories and receivables including costs and estimated earnings in excess of billings on uncompleted contracts. Cash used by investing activities consisted of $1,917,000 of purchases of property and equipment. Cash provided from financing activities included $1,651,000 net borrowings under the Company's line of credit, borrowings under a long-term financing agreement of $5.0 million and $61,000 in proceeds from the exercise of stock options. Cash used for financing activities consisted of $311,000 of repayment of long-term debt. The Company has used and expects to continue to use cash reserves and bank borrowings to meet its short-term working capital requirements. On large product orders, the time between acceptance and completion may extend up to 12 months depending on the amount of custom work and the customer's delivery needs. The Company often receives 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, the Company uses working capital and bank borrowings to finance these cash requirements. The Company's product development activities include the enhancement of existing products and the development of new products from existing technologies. Product development expenses were $1.7 million for the six months ended October 31, 1998 and $1.2 million for the six months ended November 1, 1997. The Company intends to continue to incur these expenditures to develop new display products using various display technologies to offer higher resolution, and more cost effective and energy efficient displays. Daktronics also intends to continue developing software applications for its display controllers to enable these products to continue to meet the needs and expectations of the marketplace. The Company has a credit agreement with a bank. The credit agreement provides for a $15.0 million line of credit which includes up to $2.0 million for standby letters of credit. The line of credit is at LIBOR rate plus 1.55% (6.82% at October 31, 1998) and is due on October 1, 2001. As of October 31, 1998, $7.2 million had been drawn on the line of credit and no standby letters of credit had been issued by the bank. The credit agreement is unsecured and requires the Company to meet certain covenants. Financial covenants include the maintenance of tangible net worth of at least $23 million, a minimum liquidity ratio and a maximum ratio of liabilities to tangible net worth. 11
The Company is sometimes required to obtain performance bonds for display installations. The Company currently has a bonding line available through an insurance company that provides for an aggregate of $25.0 million in bonded work outstanding. At October 31, 1998, the Company had $4.9 million of bonded work outstanding against this line. The Company believes that if its growth continues, it may need to increase the amount of its credit facility. The Company anticipates that it will be able to obtain any needed funds under commercially reasonable terms from its current lender. The Company believes that cash from operations, from its existing or increased credit facility, and its current working capital will be adequate to meet the cash requirements of its operations in the foreseeable future. BUSINESS RISKS AND UNCERTAINTIES A number of risks and uncertainties exist which could impact the Company's future operating results. These uncertainties include, but are not limited to, general economic conditions, competition, the Company's success in developing new products and technologies, market acceptance of new products, and other factors, including those set forth in the Company's SEC filings, including its current report on Form 10-K for the year ended May 2, 1998. YEAR 2000 ISSUES Many existing computer programs use only two digits to identify a year in the date field, with the result that data referring to the Year 2000 and subsequent years may be misinterpreted by these programs. If present in the computer applications of the Company or its suppliers and not corrected, this problem could cause computer applications to fail or to create erroneous results and could cause a disruption in operations and have an adverse effect on the Company's business and results of operations. The Company has evaluated its principal computer systems and is in the process of implementation of new enterprise resource planning software which will be fully operational in fiscal 1999 and has been represented by the vendor to be Year 2000 compliant. The cost of the new software will be capitalized. The Company has initiated discussions with its key suppliers to determine whether they have any Year 2000 issues. At this time the Company has not received assurances from all critical vendors. The Company has not incurred any material expenses to date in connection with this evaluation, and does not anticipate material expenses in the future, depending on the status of its key suppliers with respect to this issue. The Company has reviewed its computer programs which it includes in its display systems and has started to implement changes to be Year 2000 compliant. The Company has determined that the cost of these modifications will not have a material impact on the result of operations in upcoming fiscal years. RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board and the Accounting Standards Executive Committee have issued certain Statements of Financial Accounting Standards and Statements of Position, respectively, which have required effective dates occurring after the Company's May 2, 1998 year end. The Company's financial statements, including the disclosures therein, are not expected to be materially affected by those accounting pronouncements. 12
PART II - OTHER INFORMATION Item 1 - LEGAL PROCEEDINGS During the year ended May 3, 1997, a lawsuit was brought by another party alleging the Company breached contracts, committed tortious interference with contract, intentionally inflicted emotional distress and is responsible for compensatory and punitive damages. On October 28, 1997, a jury awarded the plaintiff an amount the Company had accrued as owing the plaintiff for royalties and commissions. The amount has been paid by the Company. The plaintiff appealed part of the verdict which was upheld by the appellate court on September 19, 1998 and in favor of the Company. Item 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS On November 19, 1998 the Company adopted a shareholders rights plan. A copy of this plan is included in form 8-K filed on November 30, 1998. Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The following items and the results were submitted to the shareholders at the annual meeting held on August 19, 1998. 1. Election of the following three nominees as directors of the Company, until their successors are duly elected and qualified: James B. Morgan: For 4,183,840 Against 37,564 Abstain) Duane E. Sander: For 4,183,840 Against 1,933 Abstain) 46,333 John L. Mulligan: For 4,183,840 Against 16,211 Abstain) 2. Consider and vote upon a proposal to approve the Amendment to the Amended and Restated Articles of Incorporation increasing the shares authorized to be issued from 15,000,000 to 30,000,000. For 4,036,183 Against 239,883 Abstain 12,439 3. Consider and vote upon a proposal to approve an amendment to the Daktronics, Inc. 1993 Stock Option Plan increasing the number of shares reserved for issuance under the Plan by 300,000 shares. For 2,927,486 Against 174,318 Abstain 11,383 4. Consider and vote upon a proposal to approve an amendment to the Daktronics, Inc. 1993 Outside Directors Stock Option Plan increasing the number of shares reserved for issuance under the Plan by 100,000 shares. For 2,825,048 Against 252,046 Abstain 31,245 5. Ratification of the appointment of McGladrey & Pullen as independent auditors for the Company for the fiscal year ending 1 May 1999. For 4,223,242 Against 56,147 Abstain 9,453 13
Item 6 - EXHIBITS 4.2 - Shareholder Rights Agreement (1) 10.6 - Loan Agreement dated October 14, 1998 between U.S. Bank National Association and Daktronics Inc. (1) Incorporated by reference under exhibit number 4.1 to the exhibits filed with form 8-K on November 30, 1998 as Commission File No. 0-23246. 14
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. /s/ Aelred J. Kurtenbach, President ----------------------------------- Daktronics, Inc. (Dr. Aelred J. Kurtenbach, President) (President) Date December 11, 1998 ------------------- /s/ Paul J. Weinand, Treasurer ------------------------------- Daktronics, Inc. (Paul J. Weinand, Treasurer) (Principal Financial Officer) 15