Good day, ladies and gentlemen, and welcome to the Daktronics Fiscal Year 2019 second quarter earnings result conference call. As a reminder, this conference is being recorded today, Wednesday, November 21, 2018, and is available on the company's website at www.daktronics.com. At this time, all participants are in listen only mode. Later, we'll conduct a question and answer session, and instructions will follow at the time. If anyone should require assistance during the conference, please press star the number zero on your telephone keypad. I would now like to turn the conference over to Ms. Sheila Anderson, Chief Financial Officer for Daktronics, for some introductory remarks. Please go ahead, Sheila.
Thank you, Rusty. Good morning, everyone. Thank you for participating in our second quarter earnings conference call. I would like to review our disclosure cautioning investors and participants that in addition to statements of historical facts, we will be discussing forward-looking statements reflecting our expectations and plans about our future financial performance and future business opportunities. All forward-looking statements involve risks and uncertainties which may be out of our control and may cause actual results to differ materially. Such risks include changes in economic conditions, changes in the competitive and market landscape, including impacts of global trade discussions and policies, management of growth, timing and magnitude of future contracts, fluctuations of margins, the introduction of new products and technologies, and other important factors as noted and detailed in our 10-K and 10-Q SEC filings. With that, let me highlight some of the financials for the quarter.
Orders for the second quarter of fiscal 2019 were $151 million as compared to last year's second quarter of $142 million. Most of the order fluctuation this quarter is attributable to the variability of timing and large project and account-based business. Transportation's increase in orders was due to continued intelligent transportation system investments by city and state department of transportation. High School Park and Recreation increased due to higher demand for larger video systems. Commercial increased for orders on the on-premise and spectacular niches, with out-of-home orders similar in comparison to last year. Internationally, we won a multi-million dollar project in the Middle East in the transportation segment, with the rest of the segments down as compared to last year the same quarter. Live Events orders were similar in comparison to last year.
As a reminder, we derive a significant portion of our orders and sales from large dollar sized projects, primarily for colleges and professional sports facilities, entertainment venues, transportation market applications, and from spectacular niche and account-based business in the out-of-home niche. The timing and amount of these contracts can cause material fluctuation in our orders, sales, and earnings. Awards of large contracts and their timing and amount are difficult to predict, may not be repeatable, and are outside of our control. Our business also fluctuates seasonally based on the sports markets and construction cycles and is dependent on the varied schedules based on our customers' needs. Sales for the second quarter of fiscal 2019 were $173 million as compared to $169 million last year. Net sales increased in commercial, High School Park and Recreation , transportation, and international business units, and decreased in Live Events business units quarter-over-quarter.
We expected sales in Live Events business unit for the second quarter and for the first half of the year to be lower as compared to 2018, as we completed a number of arenas, professional sports, and colleges and university venues in 2018 with no similar site to projects this year during the same timeframe. Commercial, especially in spectacular and on-premise, transportation, and international sales increased mostly related to the variability of timing and large projects. High School Park and Recreation sales increased as a result of more activity in larger size orders and the timing of customer demand. Other financials comparables include gross profit as a percentage of net sales at 24.8% for the second quarter as compared to 25.2% last year during the same quarter. Warranty expenses declined year-over-year.
Unfortunately, this improvement was offset by higher commodity costs due to the current global trade environment, which made our overall profitability to decline year-over-year. Total warranty as a percent of sales decreased to 2.5% as compared to 3.9% quarter-over-quarter. Operating expenses for the second quarter of 2019 was $33.7 million compared to $33.2 million for the second quarter of fiscal 2018. The increase in total operating expenses of a half a million dollars was primarily attributable to the increase in selling expenses, which is mostly due to personnel-related costs. General and administrative expenses and product design and development expenses in total remained relatively flat quarter-over-quarter. Operating income as a percentage of sales was 5.2% for the second quarter of fiscal 2019 as compared to 5.6% for the second quarter of fiscal 2018.
For the quarter, our overall effective tax expense was 5.8% compared to an expense of 24.6% last year. This decrease in effective tax rate is due to tax credits proportionate to pre-tax book income as compared to the same prior year period, and a decrease in the federal statutory rates from 35% to 21% pursuant to the US Tax Cuts and Jobs Act. In the first quarter of fiscal 2019, we recorded a benefit, and in the second quarter, we recorded a tax expense, which resulted in a 0 tax expense for a year-to-date basis. As our estimated effective tax rate is based on our estimate of the permanent research and development tax credits we receive offsetting the estimated tax expense for the year. As we have previously discussed, our effective tax rate can fluctuate depending on changes in tax legislation and the actual geographic mix of taxable income.
Our cash and marketable securities position was $67.3 million at the end of the quarter. We reported a positive free cash flow of $12.9 million for the second quarter of fiscal 2019 as compared to $3.6 million for the same period last year. The fluctuation in free cash flow is the results of timing differences in operating assets and liabilities, corresponding with the seasonality of our business, offset by a decrease in net income this quarter as compared, and with the $12.1 million used for investments and capital acquisitions. Acquisitions as well. We expect capital expenditures to be less than $20 million for fiscal 2019. Our product backlog is $150 million going into the third quarter. Much of this backlog is projected to be realized over the coming few quarters.
We expect sales for the third quarter of fiscal 2019 to be slightly lower as compared to last year's third quarter. Of course, sales could change pending project bookings and customer schedule changes. I'll now turn the call over to Reece Kurtenbach, our Chairman, President, and CEO, for a few comments.
Thank you, Sheila. Good morning, everyone. We had a good second quarter. As Sheila highlighted, our orders and sales for the quarter were up as compared to last year during the same time, and our pipeline of projects remained strong in our various business segments. Overall, our outlook for the second half of fiscal 2019 remains similar to our past discussions. We predict ongoing global market growth and continue to provide a competitive and diverse solution offering to meet customers' needs. Both factors support our goal of long-term profitable growth. Some specific highlights of our outlook by business units include, we expect sustained demand and growth for larger-sized orders due to the adoption of video in sporting applications in the High School Park and Recreation market . During the second quarter, we continued to quote and win higher dollar video projects.
In our international business unit, we believe the market's increased adoption of digital systems, as well as our focus on increasing market share in our segments of sport, out-of-home, spectacular, and transportation, will continue our growth outside of the U.S. and Canada. The transportation business in the U.S. and Canada has growth opportunities due to continued investment in the U.S. transportation systems, the stability in federal funding, and increasing advertising and on-premise promotional application needs in mass transit facilities. In our commercial business unit, we see opportunities for growth, mainly driven by digital opportunities in the spectacular segment, both new and replacement systems for our account-based businesses, expansion of solutions for indoor applications, and continued replacement and new investment activity in the out-of-home segment.
We expect Live Events sales in the short term to be down as this business is primarily lumpy and can be highly competitive in the larger contract space. Over the long term, replacement cycles and new product uses support a similar size business. In all our markets, we have a natural replacement cycle and strive to serve our customers with their needs today as well as in the future. Our range of solutions and global capabilities makes us the industry's most experienced digital display provider to support them over the long term. We are focused on developing and bringing innovative solutions to our customers in all segments. For example, the expected use of narrow pixel pitch technology by customers in our markets is predicted to grow, and we continue to release newer generations of this product line to serve this demand.
We also have differentiated our product offering, allowing customers to have choices for their particular situation. We invest in new technologies to enhance our service and control system offerings and regularly release new offerings. While we are optimistic about our long-term growth in the digital display industry, various geopolitical, economic, and competitive factors influence order growth. Daktronics competes on the world stage, and we are impacted by the uncertainties in today's trade and business environments, both in the sourcing of components to produce our products and in shipping these finished products globally. As we know, today's global trade environment is very dynamic. We continue to monitor the situation and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments. Our teams are focused on the continued development of industry-leading solutions and global sales channels to support long-term profitable growth.
With that, I would ask the operator to please open the line for questions.
Ladies and gentlemen, if you have questions at this time, please press star then the number one on your telephone keypad. If your question has been answered or wish to remove yourself from the queue, press the pound key. Again, that's star one to ask a question. Our first question comes from the line of Greg Pendy from Sidoti & Company. Your line is open.
Hey, guys. Thanks for taking my questions. I guess, just a couple. First, can you just share with us on the higher commodity costs? Were a lot of these just raw input costs, or was it also a mix of higher costs related to sourcing components?
There were input costs related to aluminum and some of the electronic components. There's been a high demand in the world for both of those and some of the tariff impacts have caused some of the supply and demand factors to be at force right now. That's the areas we've seen some higher costs.
Can you just share with us, what are you seeing in terms of right now, maybe on a go-forward basis on the electronic component side? Is that starting to ease up, do you think, or is it going to stay a headwind for some time now?
It's difficult to predict. The next clear milestone is after the first of the year when this List 3 could potentially be increased. We think there's a lot of decisions being made right now trying to anticipate what that could be. It'll be easier as we get into 2019 and maybe not as much dynamic change, and we can understand what the steady state may be.
Got it. Just switching gears maybe just to one other thing. You mentioned earlier on the call the investments. We've seen you guys ramp up a narrow pixel pitch technology. Now that we're in further generations, is that something that will cycle year-over-year that will stay at these levels, or is that something you think those investments will continue to ramp higher?
We've increased our product development expense or investment considerably in 2018 and held that flat within 2019. I would expect that we wouldn't see an increase in 2020, I would find it unlikely we would significantly decrease it either.
Okay, great. Well, that's helpful, congratulations on the results.
Thank you very much.
There are no further questions at this time. You may continue now, Reece.
Well, thank you. I appreciate everybody joining the call today. For those of you in the U.S., I hope you have a great Thanksgiving holiday. For everybody, I hope your holiday season and new year go well, and we will talk to you in a quarter. Thank you.
Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.