UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January ~~27, 2018~~26, 2019

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___.

Commission File Number: 0-23246

Daktronics, Inc.

(Exact Name of Registrant as Specified in its Charter)



South Dakota		46-0306862
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

201 Daktronics Drive Brookings, SD		57006
(Address of Principal Executive Offices)		(Zip Code)

(605) 692-0200

(Registrant’s Telephone Number, Including Area Code)

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 o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer x
Non-accelerated filer o~~(Do not check if a smaller reporting company)~~	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding as of February ~~26, 2018~~18, 2019 was ~~44,474,202.~~

45,012,524.

DAKTRONICS, INC. AND SUBSIDIARIES

FORM 10-Q

For the Quarter Ended January ~~27, 2018~~26, 2019

Table of Contents



		Page
Part I.	Financial Information	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of January ~~27, 2018 (unaudited)~~26, 2019 and April ~~29, 2017~~28, 2018	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January ~~27, 2018~~26, 2019 and January ~~28, 2017 (unaudited)~~27, 2018	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended January ~~27, 2018~~26, 2019 and January ~~28, 2017 (unaudited)~~27, 2018	4
	Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended January 26, 2019 and January 27, 2018	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January ~~27, 2018~~26, 2019 and January ~~28, 2017 (unaudited)~~27, 2018	57
	Notes to the Condensed Consolidated Financial Statements	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1824
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3036
Item 4.	Controls and Procedures	3136

Part II.	Other Information	3137
Item 1.	Legal Proceedings	3137
Item 1A.	Risk Factors	3237
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3237
Item 3.	Defaults Upon Senior Securities	3237
Item 4.	Mine Safety Disclosures	3337
Item 5.	Other Information	3337
Item 6.	Exhibits	3337

Signatures		3438
Index to Exhibits		3539

Table of contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited)					DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited)
	January 27, 2018		April 29, 2017
	(unaudited)					January 26, 2019		April 28, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	49,042	$	32,623		$	33,281	$	29,727
Restricted cash	28		216			26		28
Marketable securities	23,937		32,713			37,596		34,522
Accounts receivable, net	76,104		78,846			77,743		77,387
Inventories, net	70,451		66,486
Costs and estimated earnings in excess of billings	32,449		36,403
Inventories						72,187		75,335
Contract assets						26,542		30,968
Current maturities of long-term receivables	2,199		2,274			1,998		1,752
Prepaid expenses and other assets	7,333		7,553
Prepaid expenses and other current assets						7,566		9,029
Income tax receivables	2,726		611			5,772		5,385
Property and equipment and other assets available for sale						1,893		—
Total current assets	264,269		257,725			264,604		264,133

Property and equipment, net						65,765		68,059
Long-term receivables, less current maturities	1,948		2,616			1,247		1,641
Goodwill	8,469		7,812			7,968		8,264
Intangibles, net	4,174		4,705			5,429		3,682
Investment in affiliates and other assets	4,888		4,534			5,422		5,091
Deferred income taxes	7,983		11,292			8,317		7,930
	27,462		30,959
PROPERTY AND EQUIPMENT:
Land	2,172		2,099
Buildings	67,340		65,935
Machinery and equipment	88,143		84,189
Office furniture and equipment	5,799		5,604
Computer software and hardware	51,980		51,523
Equipment held for rental	287		374
Demonstration equipment	7,044		7,109
Transportation equipment	7,647		7,108
Property and equipment, net	230,412		223,941
Less accumulated depreciation	166,117		157,192
	64,295		66,749
Total non-current assets						94,148		94,667
TOTAL ASSETS	$	356,026	$	355,433		$	358,752	$	358,800

See notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable						$	35,117	$	48,845
Contract liabilities						48,745		39,379
Accrued expenses						30,784		27,445
Warranty obligations						11,283		13,891
Current portion of other long-term obligations						1,199		1,088
Income taxes payable						1,894		660
Total current liabilities						129,022		131,308

Long-term warranty obligations						15,370		16,062
Long-term contract liabilities						9,814		7,475
Other long-term obligations, less current portion						1,955		2,285
Long-term income taxes payable						843		3,440
Deferred income taxes						597		614
Total long-term liabilities						28,579		29,876

Table of contents

DAKTRONICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
(in thousands, except share data)

January 27,
2018 April 29,
2017
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY ��
CURRENT LIABILITIES:
Accounts payable $ 40,309
$ 51,499
Accrued expenses 27,578
25,033
Warranty obligations 13,291
13,578
Billings in excess of costs and estimated earnings 14,424
10,897
Customer deposits (billed or collected) 10,288
14,498
Deferred revenue (billed or collected) 13,906
12,137
Current portion of other long-term obligations 1,000
1,409
Income taxes payable 532
1,544
Total current liabilities 121,328
130,595

Long-term warranty obligations 15,909
14,321
Long-term deferred revenue (billed or collected) 6,916
5,434
Other long-term obligations 2,795
2,848
Long-term income tax payable 3,679
3,113
Deferred income taxes 984
836
Total long-term liabilities 30,283
26,552
TOTAL LIABILITIES 151,611
157,147

SHAREHOLDERS' EQUITY:

Common Stock, no par value, authorized 120,000,000 shares; 44,778,945 and 44,372,357 shares issued and outstanding at January 27, 2018 and April 29, 2017, respectively 54,725
52,530
Additional paid-in capital 39,671
38,004
Retained earnings 114,028
113,967
Treasury Stock, at cost, 303,957 shares at January 27, 2018 and April 29, 2017, respectively (1,834 ) (1,834 )
Accumulated other comprehensive loss (2,175 ) (4,381 )
TOTAL SHAREHOLDERS' EQUITY 204,415
198,286
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 356,026
$ 355,433

See notes to consolidated financial statements.

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (in thousands, except per share data) (unaudited)

	January 26, 2019			April 28, 2018
SHAREHOLDERS' EQUITY:
Common Stock, no par value, authorized 115,000,000 shares; 45,317,267 and 44,779,534 shares issued and outstanding at January 26, 2019 and April 28, 2018, respectively	57,699			54,731
Additional paid-in capital	41,949			40,328
Retained earnings	107,563			107,105
Treasury Stock, at cost, 303,957 shares at January 26, 2019 and April 28, 2018, respectively	(1,834		)	(1,834		)
Accumulated other comprehensive loss	(4,226		)	(2,714		)
TOTAL SHAREHOLDERS' EQUITY	201,151			197,616
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	358,752		$	358,800

See notes to condensed consolidated financial statements.

Table of contents

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)

	Three Months Ended						Nine Months Ended
	January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018
Net sales	$	115,069		$	130,316		$	441,949		$	472,353
Cost of sales	90,200			101,749			336,076			356,536
Gross profit	24,869			28,567			105,873			115,817

Operating expenses:
Selling	15,537			15,271			48,040			45,560
General and administrative	8,574			8,335			25,685			26,138
Product design and development	8,280			8,299			26,611			26,294
	32,391			31,905			100,336			97,992
Operating (loss) income	(7,522		)	(3,338		)	5,537			17,825

Nonoperating income (expense):
Interest income	328			158			713			520
Interest expense	(45		)	(40		)	(86		)	(173		)
Other (expense) income, net	(203		)	(487		)	(423		)	(429		)

(Loss) income before income taxes	(7,442		)	(3,707		)	5,741			17,743
Income tax (benefit) expense	(4,123		)	2,482			(4,120		)	8,371
Net (loss) income	$	(3,319	)	$	(6,189	)	$	9,861		$	9,372

Weighted average shares outstanding:
Basic	45,018			44,518			44,834			44,403
Diluted	45,018			44,518			45,139			44,798

(Loss) earnings per share:
Basic	$	(0.07	)	$	(0.14	)	$	0.22		$	0.21
Diluted	$	(0.07	)	$	(0.14	)	$	0.22		$	0.21

See notes to condensed consolidated financial statements.

Table of contents

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited)

	Three Months Ended						Nine Months Ended
	January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018

Net (loss) income	$	(3,319	)	$	(6,189	)	$	9,861		$	9,372

Other comprehensive (loss) income:
Cumulative translation adjustments	134			1,228			(1,560		)	2,289
Unrealized gain (loss) on available-for-sale securities, net of tax	55			(50		)	48			(83		)
Total other comprehensive (loss) income, net of tax	189			1,178			(1,512		)	2,206
Comprehensive (loss) income	$	(3,130	)	$	(5,011	)	$	8,349		$	11,578

See notes to condensed consolidated financial statements.

Table of contents

DAKTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

Three Months Ended Nine Months Ended
January 27,
2018 January 28,
2017 January 27,
2018 January 28,
2017
Net sales $ 130,316
$ 115,719
$ 472,353
$ 442,857
Cost of goods sold 101,749
92,403
356,536
336,166
Gross profit 28,567
23,316
115,817
106,691

Operating expenses:

Selling expense 15,271
14,678
45,560
45,828
General and administrative 8,335
8,599
26,138
26,007
Product design and development 8,299
6,973
26,294
21,142
31,905
30,250
97,992
92,977
Operating (loss) income (3,338 ) (6,934 ) 17,825
13,714

Nonoperating income (expense):

Interest income 158
183
520
559
Interest expense (40 ) (56 ) (173 ) (174 )
Other (expense) income, net (487 ) (305 ) (429 ) (250 )

(Loss) income before income taxes (3,707 ) (7,112 ) 17,743
13,849
Income tax expense (benefit) 2,482
(1,985 ) 8,371
4,416
Net (loss) income $ (6,189 ) $ (5,127 ) $ 9,372
$ 9,433

Weighted average shares outstanding:

Basic 44,518
44,102
44,403
44,071
Diluted 44,518
44,102
44,798
44,206

(Loss) earnings per share:

Basic $ (0.14 ) $ (0.12 ) $ 0.21
$ 0.21
Diluted $ (0.14 ) $ (0.12 ) $ 0.21
$ 0.21

Cash dividends declared per share $ 0.07
$ 0.07
$ 0.21
$ 0.24

See notes to consolidated financial statements.

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) (unaudited)

	Common Stock		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total
Balance as of April 28, 2018	$	54,731	$	40,328		$	107,105		$	(1,834	)	$	(2,714	)	$	197,616
Net income	—		—			4,574			—			—			4,574
Cumulative translation adjustments	—		—			—			—			(1,139		)	(1,139		)
Unrealized (loss) gain on available-for-sale securities, net of tax	—		—			—			—			(13		)	(13		)
Share-based compensation	—		651			—			—			—			651
Exercise of stock options	57		—			—			—			—			57
Employee savings plan activity	820		—			—			—			—			820
Dividends declared ($0.07 per share)	—		—			(3,121		)	—			—			(3,121		)
Balance as of July 28, 2018	55,608		40,979			108,558			(1,834		)	(3,866		)	199,445
Net income	—		—			8,606			—			—			8,606
Cumulative translation adjustments	—		—			—			—			(555		)	(555		)
Unrealized (loss) gain on available-for-sale securities, net of tax	—		—			—			—			6			6
Share-based compensation	—		612			—			—			—			612
Tax payments related to RSU issuances	—		(246		)	—			—			—			(246		)
Dividends declared ($0.07 per share)	—		—			(3,131		)	—			—			(3,131		)
Balance as of October 27, 2018	55,608		41,345			114,033			(1,834		)	(4,415		)	204,737
Net loss	—		—			(3,319		)	—			—			(3,319		)
Cumulative translation adjustments	—		—			—			—			134			134
Unrealized (loss) gain on available-for-sale securities, net of tax	—		—			—			—			55			55
Share-based compensation	—		604			—			—			—			604
Exercise of stock options	1,261		—			—			—			—			1,261
Employee savings plan activity	830		—			—			—			—			830
Dividends declared ($0.07 per share)	—		—			(3,151		)	—			—			(3,151		)
Balance as of January 26, 2019	$	57,699	$	41,949		$	107,563		$	(1,834	)	$	(4,226	)	$	201,151

See notes to condensed consolidated financial statements.

Table of contents

DAKTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

Three Months Ended Nine Months Ended
January 27, 2018 January 28,
2017 January 27,
2018 January 28,
2017

Net (loss) income $ (6,189 ) $ (5,127 ) $ 9,372
$ 9,433

Other comprehensive income (loss):
Cumulative translation adjustments 1,228
(47 ) 2,289
(1,487 )
Unrealized loss on available-for-sale securities, net of tax (50 ) (29 ) (83 ) (33 )
Total other comprehensive income (loss), net of tax 1,178
(76 ) 2,206
(1,520 )
Comprehensive (loss) income $ (5,011 ) $ (5,203 ) $ 11,578
$ 7,913

See notes to consolidated financial statements.

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) (in thousands) (unaudited)

	Common Stock		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total
Balance as of April 29, 2017	$	52,530	$	38,004		$	113,967		$	(1,834	)	$	(4,381	)	$	198,286
Net income	—		—			8,429			—			—			8,429
Cumulative translation adjustments	—		—			—			—			1,081			1,081
Unrealized (loss) gain on available-for-sale securities, net of tax	—		—			—			—			(7		)	(7		)
Share-based compensation	—		673			—			—			—			673
Exercise of stock options	211		—			—			—			—			211
Employee savings plan activity	820		—			—			—			—			820
Dividends declared ($0.07 per share)	—		—			(3,094		)	—			—			(3,094		)
Balance as of July 29, 2017	53,561		38,677			119,302			(1,834		)	(3,307		)	206,399
Net income	—		—			7,132			—			—			7,132
Cumulative translation adjustments	—		—			—			—			(20		)	(20		)
Unrealized (loss) gain on available-for-sale securities, net of tax	—		—			—			—			(26		)	(26		)
Share-based compensation	—		668			—			—			—			668
Exercise of stock options	301		—			—			—			—			301
Tax payments related to RSU issuances	—		(311		)	—			—			—			(311		)
Dividends declared ($0.07 per share)	—		—			(3,104		)	—			—			(3,104		)
Balance as of October 28, 2017	53,862		39,034			123,330			(1,834		)	(3,353		)	211,039
Net loss	—		—			(6,189		)	—			—			(6,189		)
Cumulative translation adjustments	—		—			—			—			1,228			1,228
Unrealized (loss) gain on available-for-sale securities, net of tax	—		—			—			—			(50		)	(50		)
Share-based compensation	—		637			—			—			—			637
Exercise of stock options	2		—			—			—			—			2
Employee savings plan activity	861		—			—			—			—			861
Dividends declared ($0.07 per share)	—		—			(3,113		)	—			—			(3,113		)
Balance as of January 27, 2018	$	54,725	$	39,671		$	114,028		$	(1,834	)	$	(2,175	)	$	204,415

See notes to condensed consolidated financial statements.

Table of contents

DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)							DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

	Nine Months Ended						Nine Months Ended
	January 27, 2018			January 28, 2017			January 26, 2019			January 27, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,372		$	9,433		$	9,861		$	9,372
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,335			13,941			14,054			13,335
Impairment of intangible assets	—			830
(Gain) loss on sale of property, equipment and other assets	(1,211		)	23
Gain on sale of property, equipment and other assets							(130		)	(1,211		)
Share-based compensation	1,978			2,204			1,867			1,978
Contingent consideration adjustment							(956		)	—
Equity in loss of affiliate	401			78			392			401
Provision for doubtful accounts	(55		)	898			180			(55		)
Deferred income taxes, net	3,429			(286		)	(445		)	3,429
Change in operating assets and liabilities	(296		)	18,266			7,364			(296		)
Net cash provided by operating activities	26,953			45,387			32,187			26,953

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(10,865		)	(6,709		)	(14,081		)	(10,865		)
Proceeds from sale of property, equipment and other assets	2,107			166
Proceeds from sales of property, equipment and other assets							255			2,107
Purchases of marketable securities	(5,211		)	(18,098		)	(25,337		)	(5,211		)
Proceeds from sales or maturities of marketable securities	13,751			14,594			22,341			13,751
Purchases of equity investment	(1,027		)	(1,374		)	(854		)	(1,027		)
Acquisitions, net of cash acquired							(2,250		)	—
Net cash used in investing activities	(1,245		)	(11,421		)	(19,926		)	(1,245		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable	—			(8		)
Proceeds from exercise of stock options	514			343			1,318			514
Principal payments on long-term obligations	(1,036		)	(912		)	(440		)	(1,036		)
Dividends paid	(9,311		)	(10,566		)	(9,403		)	(9,311		)
Payments for common shares repurchased	—			(1,825		)
Tax payments related to RSU issuances	(311		)	(261		)	(246		)	(311		)
Net cash used in financing activities	(10,144		)	(13,229		)	(8,771		)	(10,144		)

EFFECT OF EXCHANGE RATE CHANGES	667			(680		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH							62			667
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	16,231			20,057			3,552			16,231

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	32,839			28,526			29,755			32,839
End of period	$	49,070		$	48,583		$	33,307		$	49,070

Supplemental disclosures of cash flow information:
Cash payments for:
Interest	$	161		$	171		$	114		$	161
Income taxes, net of refunds	7,449			114			(1,868		)	7,449

Supplemental schedule of non-cash investing and financing activities:
Demonstration equipment transferred to inventory	72			218			$	97		$	72
Purchase of property and equipment included in accounts payable	1,163			397			454			1,163
Contributions of common stock under the ESPP	1,681			840			1,650			1,681

See notes to consolidated financial statements.
See notes to condensed consolidated financial statements.

Table of contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollar amounts in thousands, except per share data)

(unaudited)

Note 1. Basis of Presentation ~~and Summary of Critical Accounting Policies~~

Daktronics, Inc. and its subsidiaries (the “Company”, “Daktronics”, “we”, “our”, or “us”) isare the world's industry leader in designing and manufacturing electronic scoreboards, programmable display systems and large screen video displays for sporting, commercial and transportation applications.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions affecting the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The balance sheet at April ~~29, 2017~~28, 2018, has been derived from the audited financial statements at that date, but it does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with our financial statements and notes thereto for the year ended April ~~29, 2017,~~28, 2018, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange ~~Commission.~~Commission ("SEC"). The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Certain prior year amounts in the condensed consolidated balance sheet have been reclassified to conform to the current year's presentation due to the adoption of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). Billings in excess of costs and estimated earnings, customer deposits, and deferred revenue are combined to present contract liabilities. Costs and estimated earnings in excess of billings now represent contract assets. These reclassifications had no effect on reported net income, comprehensive income, cash flows, total assets or total liabilities.

Daktronics, Inc. operates on a 52- toor 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The nine months ended January ~~27, 2018~~26, 2019 and January ~~28, 2017~~27, 2018, contained operating results for 39 weeks.

~~Investments in affiliates over which we have significant influence are accounted for under~~The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the ~~equity method~~condensed consolidated balance sheet that sum to the total of ~~accounting. Investments in affiliates over which we do not have~~ the ability to exert significant influence over the affiliate's operating and financing activities are accounted for under the cost method of accounting. We have evaluated our relationships with our affiliates and have determined that these entities are not variable interest entities.

The aggregate amount of investments accounted for under the equity method was $3,303 and $2,678 at January 27, 2018 and April 29, 2017, respectively. The equity method requires us to report our share of losses up to our equity investment amount. Cash paid for investments in affiliates is includedsame amounts shown in the ~~Purchases of equity investment line item in our~~condensed consolidated ~~statements~~statement of cash flows. Our proportional share of the respective affiliate’s earnings or losses is included in the Other (expense) income, net line item in our consolidated statements of operations. For the nine months ended January 27, 2018, our share of the losses of our affiliates was $401.flows:

The aggregate amount of investments accounted for under the cost method was $42 at January 27, 2018 and April 29, 2017, respectively. There have not been any identified events or changes in circumstances that may have a significant adverse effect on their fair value, and it is not practical to estimate their fair value.



	January 26, 2019		January 27, 2018
Cash and cash equivalents	$	33,281	$	49,042
Restricted cash	26		28
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$	33,307	$	49,070

Recent Accounting Pronouncements

New Accounting Standards Adopted

In ~~August~~October 2016, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU") 2016-15,~~ASU 2016-16, ~~Statement~~Income Taxes (Topic 740) Intra-Entity Transfers of ~~Cash Flows (Topic 230) Classification~~Assets Other than Inventory, which is intended to improve the accounting for the income tax consequences of ~~Certain Cash Receipts~~intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and ~~Cash Payments,~~ deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which ~~reduces~~is an exception to the ~~diversity~~principle of comprehensive recognition of current and deferred income taxes in ~~practice in how certain cash receipts and cash payments are presented and classified in~~GAAP. This update eliminates the ~~statement~~exception by requiring entities to recognize the income tax consequences of ~~cash flows.~~an intra-entity transfer of an asset other than inventory when the transfer occurs. We ~~early~~ adopted ASU ~~2016-15~~2016-16 during the ~~second~~first quarter of fiscal ~~2018. Adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Restricted Cash,~~ which requires that the statements of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Accordingly, restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statements of cash flows. We early adopted ASU 2016-18 during the second quarter of fiscal 2018 and applied its provisions retrospectively. Other than the change in presentation within the statements of cash flows, the2019. The adoption of ASU ~~2016-18~~2016-16 did not have an impact on our condensed consolidated financial statements.

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In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Subsequently, the FASB also issued ASUs 2016-08, 2016-10, 2016-12, and 2016-20 to give further guidance to revenue recognition matters. ASU 2014-09 and related guidance supersedes revenue recognition requirements under FASB Accounting Standards Codification ("ASC") Topic 605 and related industry specific revenue recognition guidance. This new standard defines a comprehensive revenue recognition model, requiring a company to recognize revenue from the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. It defines a five-step process to achieve this core principle that allows companies to use more judgment and make more estimates than under current guidance. In addition, it requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts and provides guidance on transition requirements.

We adopted ASU 2014-09 and its related guidance under the modified retrospective method during the first quarter of fiscal 2019 by applying the guidance to all open contracts at the adoption date. We completed an evaluation of our revenue arrangements under the new standard and determined that the adoption did not materially change the timing or amount of revenue recognized, primarily based upon our assessment of "point in time" and "over time" revenue recognition. No adjustment to beginning retained earnings was recorded and we have made additional disclosures related to revenue from contracts with customers as required by the new standard upon adoption. See "Note 4. Revenue Recognition" for more information.

New Accounting Standards Not Yet Adopted

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate under the U.S. Tax Cuts and Jobs ~~Act.~~Act (the "Tax Act"). ASU 2018-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption ~~permitted.~~permitted that can be made on a prospective or retrospective basis. We are currently evaluating the effect that adopting ASU 2018-02 will have on our condensed consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for interim and annual periods beginning after December 15, 2019 and will require adoption on a prospective basis. We are currently evaluating the effect that adopting ASU 2017-04 will have on our ~~consolidated financial statements and related disclosures.~~

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other than Inventory~~, which is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. This update eliminates the exception by requiring entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for us on April 29, 2018. We are currently evaluating the effect that adopting ASU 2016-16 will have on ourcondensed consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement and recognition of credit impairment for certain financial assets. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019, with early adoption ~~permitted.~~permitted, and will require adoption on a modified retrospective basis. We are currently evaluating the effect that adopting ASU 2016-13 will have on our condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (that is, lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. ASU 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In July 2018, the FASB issued ASU ~~2016-02 is~~2018-10, Codification Improvements to Topic 842 (Leases) and ASU 2018-11, Leases (Topic 842), Targeted Improvements, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method to adopt the new standard, and (iii) lessors with a practical expedient for separating components of a contract. All ASUs are effective for interim and annual periods beginning after December 15, 2018, with early adoption ~~permitted.~~permitted, and will require adoption on a modified retrospective basis.

We plan to adopt this new standard in the first quarter of fiscal 2020. We are ~~currently evaluating~~still reviewing the new standard and recent updates published by FASB. Our preliminary assumptions suggest we will likely adopt certain practical expedients, including the lookback option, and not change historical conclusions related to (1) contracts that contain leases, (2) existing lease classification, and (3) initial direct costs. Based on our current estimates, we expect to recognize right of use assets and lessee lease liabilities of approximately $5,600 with respect to operating leases. We are continuing to evaluate the effect that adopting ~~ASU 2016-02~~these ASUs will have on our condensed consolidated financial statements and related ~~disclosures.~~disclosures, but at this time do not think the adoption will have a material impact on our financial statements.

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Note 2. Investments in Affiliates

Investments in affiliates over which we have significant influence are accounted for under the equity method of accounting in accordance with the provisions of ASC 323, Investments – Equity Method and Joint Ventures. Investments in affiliates over which we do not have the ability to exert significant influence over the affiliate's operating and financing activities are accounted for under the provisions of ASC 321, Investments – Equity Securities. We have evaluated our relationships with our affiliates and have determined that these entities are not variable interest entities.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606).~~ ~~ASU 2014-09 is a comprehensive revenue recognition model that requires a company to recognize revenue from the transfer~~The aggregate amount of ~~goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange~~investments accounted for those goods or services. The FASB has also issued ASUs 2016-08, 2016-10, 2016-12, and 2016-20 to clarify guidance with respect to principal versus agent considerations and the identification of performance obligations and licensing, to issue guidance on certain narrow areas, and to add practical expedients. We will adopt ASU 2014-09 and related guidance under the ~~modified retrospective~~equity method ~~during~~was $4,108 and $3,647 at January 26, 2019 and April 28, 2018, respectively. The equity method requires us to report our share of losses up to our equity investment amount. Cash paid for investments in affiliates is included in the ~~first quarter~~"Purchases of ~~fiscal 2019. The implementation team has completed its evaluation~~equity investment" line item in our condensed consolidated statements of cash flows. Our proportional share of the revenue arrangements, analyzed contracts to identify key provisions impacted by Accounting Standards Codification ("ASC") 606, assessed the applicable accounting, and reviewed existing accounting policies and internal controls. We arerespective affiliates' earnings or losses is included in the ~~process~~"Other (expense) income, net" line item in our condensed consolidated statements of ~~implementing appropriate changes to~~operations. For the nine months ended January 26, 2019 and January 27, 2018, our ~~business processes, systems and controls to support recognition and disclosure under ASC 606. As a result~~share of the ~~evaluation performed to date, we do not anticipate that the adoption will significantly change the timing or~~losses of our affiliates was $392 and $401, respectively.

The aggregate amount of ~~revenue recognized, based upon our current assessment~~investments without readily determinable fair values was $42 at January 26, 2019 and April 28, 2018, respectively. There have not been any identified events or changes in circumstances that may have a significant adverse effect on their fair value, and it is not practical to estimate their fair value. We record equity investments without readily determinable fair values at cost, less any impairment, adjusted for observable price changes. During the nine months ended January 26, 2019, we did not record any changes in the measurement of "point in time" and "over time" revenue recognition. Therefore, we do not anticipate that the adoption of ASU 2014-09 will materially impact our consolidated results of operations and financial statements, other than the additional disclosure requirements.such investments.

Note 2.3. Earnings Per Share ("EPS")

Basic EPS is computed by dividing income attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution which may occur if securities or other obligations to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock which share in our earnings.

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The following is a reconciliation of the net (loss) income and common share amounts used in the calculation of basic and diluted EPS for the three and nine months ended January ~~27, 2018~~26, 2019 and January ~~28, 2017:~~27, 2018:


	Net (loss) income			Shares	Per share (loss) income			Net (loss) income			Shares	Per share (loss) income
For the three months ended January 26, 2019
Basic (loss) earnings per share								$	(3,319	)	45,018	$	(0.07	)
Dilution associated with stock compensation plans								—			—	—
Diluted (loss) earnings per share								$	(3,319	)	45,018	$	(0.07	)
For the three months ended January 27, 2018
Basic (loss) earnings per share	$	(6,189	)	44,518	$	(0.14	)	$	(6,189	)	44,518	$	(0.14	)
Dilution associated with stock compensation plans	—			—	—			—			—	—
Diluted (loss) earnings per share	$	(6,189	)	44,518	$	(0.14	)	$	(6,189	)	44,518	$	(0.14	)
For the three months ended January 28, 2017
Basic (loss) earnings per share	$	(5,127	)	44,102	$	(0.12	)
For the nine months ended January 26, 2019
Basic earnings per share								$	9,861		44,834	$	0.22
Dilution associated with stock compensation plans	—			—	—			—			305	—
Diluted (loss) earnings per share	$	(5,127	)	44,102	$	(0.12	)
Diluted earnings per share								$	9,861		45,139	$	0.22
For the nine months ended January 27, 2018
Basic earnings per share	$	9,372		44,403	$	0.21		$	9,372		44,403	$	0.21
Dilution associated with stock compensation plans	—			395	—			—			395	—
Diluted earnings per share	$	9,372		44,798	$	0.21		$	9,372		44,798	$	0.21
For the nine months ended January 28, 2017
Basic earnings per share	$	9,433		44,071	$	0.21
Dilution associated with stock compensation plans	—			135	—
Diluted earnings per share	$	9,433		44,206	$	0.21

Options outstanding to purchase2,308 shares of common stock with a weighted average exercise price of $9.98 for the three months ended January 26, 2019 and 1,203 shares of common stock with a weighted average exercise price of $11.45 for the three months ended January 27, 2018 ~~and~~ ~~1,354~~ ~~shares of common stock with a weighted average exercise price of~~ ~~$13.86~~ ~~for the three months ended January 28, 2017~~ were not included in the computation of diluted (loss) earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 2,328 shares of common stock with a weighted average exercise price of $9.98 for the nine months ended January 26, 2019 and 1,281 shares of common stock with a weighted average exercise price of $12.55 for the nine months ended January 27, 2018 ~~and 2,380 shares of common stock with a weighted average exercise price of $13.27 for the nine months ended January 28, 2017~~ were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Note ~~3. Share Repurchase Program~~4. Revenue Recognition

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Our accounting policies and estimates as a result of adopting ASU 2014-09, Revenue from Contracts with Customers (Topic 606), are as follows:

~~On June 17, 2016,~~Contracts are identified and follow the revenue recognition policies when: we have evidence all parties to the contract have approved the contract and are committed to perform their respective obligations, we can identify each party’s rights regarding the goods or services to be transferred, we can identify the payment terms for the goods or services to be transferred, the contract has commercial substance, and it is probable we will collect substantially all of the consideration to which we would be entitled in exchange for the goods or services.

Precontract costs are generally expensed as incurred, unless they are directly associated with an anticipated contract and recoverability from that contract is probable. Precontract costs directly associated with anticipated contracts expected to be recoverable include $478 and $217 as of January 26, 2019 and April 28, 2018, respectively. These are included in the "Inventories" line item in our ~~Board~~condensed consolidated balance sheet.

At contract inception, we identify performance obligations by reviewing the agreement for material distinct goods and services. Goods and services are distinct when the customer can benefit from them on their own and our promises to transfer these items are identifiable from other promises within the contract. When we are contracted to provide a single promise (an integrated system), we often treat it as a single performance obligation as we are providing goods and services with the same pattern of ~~Directors approved~~transfer, that are highly integrated or interdependent, that are modified or customized by other goods or services promised, or that provide a ~~stock repurchase program under~~combined outcome for which ~~Daktronics, Inc. may purchase up~~the customer has contracted. When less interdependency or integration is necessary, or the customer can benefit from distinct items, we separate the contract into multiple performance obligations. We account for those warranties that extend beyond typical terms and include other services ("service-type warranty") as a separate performance obligation.

Our contracts can contain multiple components of transaction price. We evaluate each contract for these components and include fixed consideration, variable consideration, financing components, and non-cash consideration and exclude consideration payable to ~~$40,000~~a customer and sales taxes in the transaction price. When we are responsible for site installations which includes subcontracted work, we maintain the responsibility and risks and consider ourselves the principal and include the consideration for these services in the transaction price. When our contract contains variable consideration, including return rights, discounts, claims, unpriced change orders, and liquidated damages, we estimate the transaction price using the expected value (i.e., the sum of ~~its outstanding shares~~the probability-weighted amount) or the most likely amount method, whichever is expected to better predict revenue for that contract situation. We also constrain the revenue to the extent that it is probable that a significant reversal of ~~common stock. Under this program,~~the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We consider the following factors in determining revenue associated with variable consideration: (a) the contract or other evidence providing legal basis, (b) additional costs caused by unforeseen circumstances, (c) evidence supporting the claim, and (d) historical evidence and patterns of customers. We adjust the contract price for the effects of a significant financing component if we ~~may repurchase shares~~expect, at contract inception, that the period between when we transfer goods and services to a customer will exceed one year from the time the customer pays and represents financing. If the payment structures exceed a year but are structured to ~~time~~account for risks with a contract or correspond to payments on milestones or are scheduled for performance, we do not adjust the contract price for a financing component. See "Note 11. Receivables" for amounts recorded in ~~open market transactions and in privately negotiated transactions~~long-term receivables.

When separate performance obligations are identified, we allocate the transaction price to the individual performance obligation based on the best evidence and method we judge as faithfully depicting the value of the performance obligation. We allocate revenue to each performance obligation on the relative standalone selling price basis, when the standalone selling price is available. Many of our contracts are bundled and we do not have separate selling prices for each performance obligation, therefore, we primarily use the cost plus a margin approach to allocate the relative transaction price to identified performance obligations as it is the best representative of our pricing methods.

Revenue is recognized when we satisfy a performance obligation. We receive payments from customers based on a billing schedule as established in our contracts. Billing schedules include down payments and progress billings over time, set milestone payments specific to the project, are scheduled for performance-based payments, or are set time-based payment(s). Variability in contract assets and contract liabilities relates to the timing of billings and revenue recognition, which can vary significantly depending on contractual payment terms and build and installation schedules and the related timing differences in transfer of control. Balances are also impacted by the seasonality in our business.

Significant judgments and estimates are used in our revenue policies. Throughout the revenue cycle, we evaluate contractual evidence, monitor our performance, evaluate variable consideration changes, update estimated costs to complete cost-to-cost projects, and obtain evidence of deliveries or other control change evidence for appropriate and consistent revenue recognition. We maintain internal policies and procedures to provide guidance for those involved in recording revenue. We monitor for changes in our business ~~market, applicable legal requirements~~sales practices and customer interactions to capture the appropriate types of performance obligations and adjust for any change in control terms and conditions.

Our material performance obligation types include:

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Unique configuration contracts: audio-visual communication systems uniquely configured (custom) or integrated for a customer's particular location and system configuration may include all or a combination of the following: engineering services, project management services, video display(s), control solution(s), installation and integration services, scoring and messaging equipment, training, other on-site services, spare parts, software licenses, and assurance-type warranties.

We account for these types of contracts as a combined single performance obligation with no segmentation between types of products and services. In our judgment, this accounting treatment is most appropriate because the substantial part of our promise to customers is to provide significant integration services and incorporates individual goods and services into a combined output or system. Often times, the system is customized or significantly modified to the customers' desired configurations and location, and the interrelated goods and services provide utility to the customers as a package.

Revenue for uniquely configured (custom) or integrated systems is recognized over time using the cost incurred input method. Over time revenue recognition is appropriate because we have no alternative use for the uniquely configured system and have an enforceable right to payment for work performed. The cost incurred input method measures cost incurred to date compared to estimated total costs for each contract. This method is the most faithful depiction of our performance because it measures the value of the contract transferred to the customer. Costs to perform include direct and indirect costs for contract design, production, integration, installation, and assurance-type warranty reserve. Direct costs include material and components; manufacturing, project management and engineering labor; and subcontracting expenses. Indirect costs include allocated charges for such items as facilities and equipment depreciation and general overhead. Provisions of estimated losses on uncompleted contracts are made in the period when such losses are capable of being estimated.

Contract modifications to existing contracts with customers are evaluated in accordance with the five-step revenue model. We treat contract modifications as a separate contract and new performance obligations when the additional goods or services are distinct and do not add to the unique configuration or are outside the integrated system and when the consideration reflects standalone selling prices. If the additional goods or services offered under the modification enhance the uniquely configured or integrated systems, revenue is allocated to the existing contracts' performance obligation. Modifications may cause changes in the timing of revenue recognition depending on the allocation to various performance obligations.

The time between contract order and project completion is typically less than 12 months but may extend longer depending on the amount of custom work and customers’ delivery needs.

Limited configuration (standard systems) and after-sale parts contracts: Limited configured (standard systems) or after-sale parts contracts with limited or no configuration or limited integration are recognized as distinct individual performance obligations when material. When not distinct, we combine into one performance obligation the goods and/or services with each other until the bundle of goods or services are distinct. For standard display purchases made in large quantities, we account for each piece of equipment separately as a distinct performance obligation from which a customer derives benefit. Immaterial goods or services in the context of the contract are included with the display system performance obligation. Standard systems and equipment with limited configurations or integrations may include all or a combination (when immaterial) of the following performance obligations: engineering services, project management services, video display(s), control solution(s), installation and integration services, scoring, messaging and audio equipment, training, spare parts, software licenses, assurance-type warranties, and after-sale parts.

Revenue is recognized at a point in time when title or control passes, or over time as services are performed. When fulfilling limited configuration performance obligations, we are typically able to redirect the video displays or scoring, messaging, or audio equipment to another customer without incurring significant economic losses. Therefore, we have alternative use for the performance obligation and recognize revenue upon our substantial completion and at the point in time we estimate control has transferred to the customer. When limited configured single performance obligations are more service-type (i.e., installation and integration services), we recognize revenue over time using the cost-to-cost input method, which is the most faithful depiction of the customer obtaining control and benefits from the work performed.

Services and other ~~considerations.~~ : Services sold on a stand-alone basis or after the initial system sale include performance obligations such as event support, control room design, on-site training, equipment service, service-type warranties, technical support, software sold as a service, and other immaterial revenue streams. These are contracted with a customer generally per service event or service type on a stand-alone basis. Services and other are recognized as net sales when the services are performed, and control is transferred to the customer at a point in time when title or control passes or over time as services are performed and for time-based "stand ready to perform" type obligations. We use professional judgment to determine control transfer. If we have the right to consideration from a customer that directly corresponds with the value of our performance (where we bill a fixed amount for each hour of service provided), we recognize revenue related to the work completed.

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Software

Revenues from software license fees on sales, other than uniquely configured type contracts, are recognized when delivery of the product has occurred. Subscription-based licenses include the right for a customer to use our licenses and receive related support for a specified term, and revenue is recognized pro-rata over the term of the engagement.

Shipping and handling costs

Shipping and handling costs collected from our customers in connection with our sales are recorded as revenue. We record shipping and handling costs as a component of cost of sales at the time the product is shipped.

Warranty

Our warranty offerings are described in "Note 12. Commitments and Contingencies."

Disaggregation of revenue

In accordance with ASC 606-10-50, we disaggregate revenue from contracts with customers by the type of performance obligation and the timing of revenue recognition. We determine that disaggregating revenue in these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors and to enable users of financial statements to understand the relationship to each reportable segment. As noted in the segment information footnote, we are organized in five business segments: Commercial, Live Events, High School Park and Recreation, Transportation, and International.

The ~~repurchase program does not require~~following table presents our disaggregation of revenue by segments:

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	Three Months Ended January 26, 2019
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	5,942	$	18,491	$	3,053	$	10,095	$	6,798	$	44,379
Limited configuration	27,353		5,958		11,036		4,692		8,649		57,688
Service and other	3,864		5,546		709		603		2,280		13,002
	$	37,159	$	29,995	$	14,798	$	15,390	$	17,727	$	115,069
Timing of revenue recognition
Goods/services transferred at a point in time	$	28,105	$	7,436	$	9,874	$	4,911	$	9,702	$	60,028
Goods/services transferred over time	9,054		22,559		4,924		10,479		8,025		55,041
	$	37,159	$	29,995	$	14,798	$	15,390	$	17,727	$	115,069

	Nine Months Ended January 26, 2019
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	20,417	$	95,695	$	18,667	$	30,140	$	33,790	$	198,709
Limited configuration	82,605		23,243		53,964		18,970		29,278		208,060
Service and other	10,775		15,628		1,867		1,514		5,396		35,180
	$	113,797	$	134,566	$	74,498	$	50,624	$	68,464	$	441,949
Timing of revenue recognition
Goods/services transferred at a point in time	$	84,584	$	26,796	$	48,932	$	19,410	$	31,364	$	211,086
Goods/services transferred over time	29,213		107,770		25,566		31,214		37,100		230,863
	$	113,797	$	134,566	$	74,498	$	50,624	$	68,464	$	441,949

See "Note 5. Segment Reporting" for a disaggregation of revenue by geography.

Contract balances

Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables. Unbilled receivables, which represent an unconditional right to payment subject only to the ~~repurchase~~passage of ~~a specific number~~time, are reclassified to accounts receivable when they are billed under the contract terms. Contract liabilities represent amounts billed to the clients in excess of ~~shares~~revenue recognized to date.

The following table reflects the changes in our contract assets and ~~may be terminated at any time. During~~liabilities:



	January 26, 2019		April 28, 2018		Dollar Change			Percent Change
Contract assets	$	26,542	$	30,968	$	(4,426	)	(14.3	)%
Contract liabilities - current	48,745		39,379		9,366			23.8
Contract liabilities - noncurrent	9,814		7,475		2,339			31.3

The changes in our contract assets and contract liabilities from April 28, 2018 to January 26, 2019 were due to the ~~first, second~~timing of billing schedules and ~~third quarter~~revenue recognition, which can vary significantly depending on the contractual payment terms and the seasonality of ~~fiscal~~the sports markets. We had no material impairments of contract assets for the year.

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As of January 26, 2019 and April 28, 2018, we had ~~no repurchases~~three contracts in progress that were identified as loss contracts and a provision for losses of ~~shares of~~$1,465 and $87, respectively. These were included in the "Accrued expenses" line item in our ~~outstanding common stock.~~ condensed consolidated balance sheets.

During the ~~first quarter~~nine months ended January 26, 2019, we recognized revenue of ~~fiscal 2017, we repurchased 284 shares~~$34,268 related to our contract liabilities as of ~~common stock at a total cost of $1,825, and there were no other purchases during fiscal 2017.~~ April 28, 2018.

Remaining performance obligations

As of January ~~27, 2018, we had $38,175~~26, 2019, the aggregate amount of the transaction price allocated to the remaining ~~capacity under~~performance obligations was $222,155. We expect approximately $185,993 of our ~~current share repurchase program.~~remaining performance obligations to be recognized over the next 12 months with the remainder recognized thereafter. Remaining performance obligations related to product and service agreements are $167,890 and $54,265, respectively. Although remaining performance obligations reflect business that is considered to be legally binding; cancellations, deferrals or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals are reflected or excluded in the remaining performance obligation balance as appropriate.

Note 4.5. Segment ~~Disclosure~~Reporting

We have organized and manage our business ~~into~~by five segments which meet the definition of reportable segments under ASC 280-10, Segment Reporting: Commercial, Live Events, High School Park and Recreation, Transportation, and International. These segments are based on the customer type ~~of customer~~ or geography and are the same as our business units.

~~Our Commercial business unit primarily consists of sales of our video display systems, digital billboards, Galaxy~~^® ~~and Fuelight~~^™ product lines to resellers (primarily sign companies), Out-of-Home ("OOH") companies, national retailers, quick-serve restaurants, casinos and petroleum retailers. Our Live Events business unit primarily consists of sales of integrated scoring and video display systems to college and professional sports facilities and convention centers and sales of our mobile display technology to video rental organizations and other live events type venues. Our High School Park and Recreation business unit primarily consists of sales of scoring systems, Galaxy^® ~~displays and video display systems to primary and secondary education facilities. Our Transportation business unit primarily consists of sales of our Vanguard~~^® ~~and Galaxy~~^® product lines to governmental transportation departments, airlines and other transportation related customers. Our International business unit consists of sales of all product lines outside the United States and Canada. In our International business unit, we focus We evaluate segment performance based on ~~product lines related to integrated scoring and video display systems for sports and commercial applications, OOH advertising products, and European transportation related products.~~

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~~Our segment reporting presents~~operating results through contribution margin, which is comprised of gross profit less selling costs. Gross profit is net sales less cost of goods sold. Cost of goods sold consists primarily of inventory, consumables, salaries, other employee-related costs, facilities-related costs for manufacturing locations, machinery and equipment maintenance and depreciation, site sub-contractors, warranty costs, and other service delivery expenses. Selling expenses consist primarily of salaries, other employee-related costs, travel and entertainment expenses, facilities-related costs for sales and service offices, bad debt expenses, third-party commissions and expenditures for marketing efforts, including the costs of collateral materials, conventions and trade shows, product demos, and supplies. Segment profit excludesexpense. We exclude general and administration expense, product design and development ~~expense, interest income and~~ expense, non-operating income and expense and income tax ~~expense. Assets are not allocated to~~expense in the ~~segments. Depreciation and amortization are allocated to each~~ segment ~~based on various~~analysis. Separate financial measures; however, some depreciation and amortization are corporate in nature and remain unallocated. Our segments follow the same accounting policies as those described in Note 1 of our Annual Report on Form 10-K for the fiscal year ended April 29, 2017. Unabsorbed manufacturing costs are allocated to the business unit benefiting most from that manufacturing location's production capabilities. Unabsorbed costs of domestic field sales and services infrastructure, including most field administrative staff, are allocated to the Commercial, Live Events, High School Park and Recreation, and Transportation business units based on cost of sales. Shared manufacturing, buildings and utilities, and procurement costs are allocated based on payroll dollars, square footage and various other financial measures.

~~We do not maintain information on sales by products; therefore, disclosure of such~~ information is ~~not practical.~~

available and regularly evaluated by our chief operating decision-maker (CODM), the president and chief executive officer, in making resource allocation decisions for our segments.

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The following table sets forth certain financial information for each of our five reporting segments for the periods indicated:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	January 27, 2018			January 28, 2017			January 27, 2018			January 28, 2017			January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018
Net sales:
Commercial	$	35,483		$	36,165		$	102,723		$	112,342		$	37,159		$	35,483		$	113,797		$	102,723
Live Events	45,167			41,036			191,432			157,032			29,995			45,167			134,566			191,432
High School Park and Recreation	11,463			12,653			69,602			68,977			14,798			11,463			74,498			69,602
Transportation	11,189			9,130			46,577			39,517			15,390			11,189			50,624			46,577
International	27,014			16,735			62,019			64,989			17,727			27,014			68,464			62,019
	130,316			115,719			472,353			442,857			115,069			130,316			441,949			472,353

Gross profit:
Commercial	7,546			7,711			21,085			27,418			8,942			7,546			27,593			21,085
Live Events	9,747			6,629			43,056			30,430			3,950			9,747			26,495			43,056
High School Park and Recreation	2,768			3,198			23,672			21,900			2,736			2,768			21,997			23,672
Transportation	3,570			2,325			16,696			12,966			5,880			3,570			17,471			16,696
International	4,936			3,453			11,308			13,977			3,361			4,936			12,317			11,308
	28,567			23,316			115,817			106,691			24,869			28,567			105,873			115,817

Selling expense:
Contribution margin: (1)
Commercial	4,415			4,575			13,778			13,949			4,460			3,131			13,984			7,307
Live Events	3,843			3,417			10,562			9,686			347			5,904			16,250			32,494
High School Park and Recreation	2,726			2,581			8,073			7,532			(384		)	42			12,874			15,599
Transportation	945			952			3,084			3,461			4,959			2,625			14,245			13,612
International	3,342			3,153			10,063			11,200			(50		)	1,594			480			1,245
	15,271			14,678			45,560			45,828			9,332			13,296			57,833			70,257

Non-allocated operating expenses:
General and administrative	8,335			8,599			26,138			26,007			8,574			8,335			25,685			26,138
Product design and development	8,299			6,973			26,294			21,142			8,280			8,299			26,611			26,294
Operating (loss) income	(3,338		)	(6,934		)	17,825			13,714			(7,522		)	(3,338		)	5,537			17,825

Nonoperating income (expense):
Interest income	158			183			520			559			328			158			713			520
Interest expense	(40		)	(56		)	(173		)	(174		)	(45		)	(40		)	(86		)	(173		)
Other (expense) income, net	(487		)	(305		)	(429		)	(250		)	(203		)	(487		)	(423		)	(429		)

(Loss) income before income taxes	(3,707		)	(7,112		)	17,743			13,849			(7,442		)	(3,707		)	5,741			17,743
Income tax expense (benefit)	2,482			(1,985		)	8,371			4,416
Income tax (benefit) expense													(4,123		)	2,482			(4,120		)	8,371
Net (loss) income	$	(6,189	)	$	(5,127	)	$	9,372		$	9,433		$	(3,319	)	$	(6,189	)	$	9,861		$	9,372

Depreciation, amortization and impairment:
Depreciation and amortization:
Commercial	$	1,550		$	1,616		$	4,628		$	4,777		$	1,206		$	1,550		$	3,620		$	4,628
Live Events	1,192			1,245			3,626			3,798			1,332			1,192			3,838			3,626
High School Park and Recreation	401			421			1,245			1,310			503			401			1,463			1,245
Transportation	281			311			860			957			279			281			830			860
International	284			423			835			1,914			766			284			2,189			835
Unallocated corporate depreciation	725			683			2,141			2,015			668			725			2,114			2,141
	$	4,433		$	4,699		$	13,335		$	14,771		$	4,754		$	4,433		$	14,054		$	13,335

(1) Contribution margin consists of gross profit less selling expense.

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No single geographic area comprises a material amount of our net sales or property and equipment, net of accumulated depreciation, other than the United States. The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	January��27, 2018		January 28, 2017		January 27, 2018		January 28, 2017		January 26, 2019		January 27, 2018		January 26, 2019		January 27, 2018
Net sales:
United States	$	98,297	$	94,174	$	396,155	$	363,766	$	94,418	$	98,989	$	361,679	$	398,894
Outside United States	32,019		21,545		76,198		79,091		20,651		31,327		80,270		73,459
	$	130,316	$	115,719	$	472,353	$	442,857	$	115,069	$	130,316	$	441,949	$	472,353


	January 27, 2018		April 29, 2017						January 26, 2019		April 28, 2018
Property and equipment, net of accumulated depreciation:
United States	$	58,333	$	62,425					$	59,665	$	61,206
Outside United States	5,962		4,324						6,100		6,853
	$	64,295	$	66,749					$	65,765	$	68,059

We have numerous customers worldwide for sales of our products and ~~services;~~services, and no customer accounted for 10% or more of net sales; therefore, we are not economically dependent on a limited number of customers for the sale of our products and ~~services except with respect to~~services.

We have numerous raw material and component suppliers, and no supplier accounts for 10% or more of our ~~dependence on two major digital billboard customers~~cost of sales; however, we have a number of single-source suppliers that could limit our supply or cause delays in ~~our Commercial business unit.~~ obtaining raw material and components needed in manufacturing.

Note 5.6. Marketable Securities

We have a cash management program which provides for the investment of cash balances not used in current operations. We classify our investments in marketable securities as available-for-sale in accordance with the provisions of ASC 320, Investments – Debt and Equity Securities. Marketable securities classified as available-for-sale are reported at fair value with unrealized gains or losses, net of tax, reported in accumulated other comprehensive ~~loss.~~loss on the condensed consolidated balance sheets. As it relates to fixed income marketable securities, it is not likely we will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of January ~~27, 2018,~~26, 2019, we anticipate we will recover the entire amortized cost basis of such fixed income securities, and we have determined no other-than-temporary impairments associated with credit losses were required to be recognized. The cost of securities sold is based on the specific identification method. Where quoted market prices are not available, we use the market price of similar types of securities traded in the market to estimate fair value.

As of January ~~27, 2018~~26, 2019 and April ~~29, 2017,~~28, 2018, our available-for-sale securities consisted of the following:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Losses			Fair Value
Balance as of January 27, 2018
Certificates of deposit	$	8,918	$	—	$	—		$	8,918
U.S. Government sponsored entities	9,104		—		(73		)	9,031
Municipal bonds	6,001		—		(13		)	5,988
	$	24,023	$	—	$	(86	)	$	23,937
Balance as of April 29, 2017
Balance as of January 26, 2019
Certificates of deposit	$	12,487	$	—	$	—		$	12,487	$	3,959	$	—		$	3,959
U.S. Government securities	400		—		—			400		15,493		(11		)	15,482
U.S. Government sponsored entities	12,260		—		(22		)	12,238		14,929		(65		)	14,864
Municipal bonds	7,574		14		—			7,588		3,297		(6		)	3,291
	$	32,721	$	14	$	(22	)	$	32,713	$	37,678	$	(82	)	$	37,596
Balance as of April 28, 2018
Certificates of deposit										$	8,669	$	—		$	8,669
U.S. Government securities										999		(7		)	992
U.S. Government sponsored entities										20,072		(123		)	19,949
Municipal bonds										4,936		(24		)	4,912
										$	34,676	$	(154	)	$	34,522

Realized gains or losses on investments are recorded in our condensed consolidated statements of operations as ~~other~~"Other (expense) income, ~~(expense),~~ net." Upon the sale of a security classified as available-for-sale, the security’s specific unrealized gain (loss) is reclassified out of

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accumulated other comprehensive loss into earnings based on the specific identification method. In the nine months ended January ~~27, 2018~~26, 2019 and January ~~28, 2017,~~27, 2018, the reclassifications from accumulated other comprehensive loss to net earnings were immaterial.

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All available-for-sale securities are classified as current assets, as they are readily available to support our current operating needs. The contractual maturities of available-for-sale debt securities as of January ~~27, 2018~~26, 2019 were as follows:


	Less than 12 months		1-5 Years		Total		Less than 12 months		1-5 Years		Total
Certificates of deposit	$	5,207	$	3,711	$	8,918	$	1,985	$	1,974	$	3,959
U.S. Government securities							14,488		994		15,482
U.S. Government sponsored entities	999		8,032		9,031		11,646		3,218		14,864
Municipal bonds	2,598		3,390		5,988		3,134		157		3,291
	$	8,804	$	15,133	$	23,937	$	31,253	$	6,343	$	37,596

Note 6.7. Business Combinations

~~ADFLOW~~AJT Systems, Inc. Acquisition

We ~~have a contingent liability related to a prior year acquisition~~acquired the net assets of ~~ADFLOW Networks,~~AJT Systems, Inc. ("~~ADFLOW"~~AJT"), a Florida-based company, on ~~March 15, 2016. For more information related~~June 21, 2018. The results of its operations have been included in our condensed consolidated financial statements since the date of acquisition. We have not made pro forma disclosures because the results of its operations are not material to our condensed consolidated financial statements.

AJT is a developer of real-time live to air graphics rendering and video server systems for the broadcast TV industry. This acquisition will allow our organization to grow and strengthen our solution offerings to the ~~ADFLOW~~market. This acquisition ~~see "Note 4. Business Combinations" of our Annual Report~~was primarily funded with cash on Form 10-K for the fiscal year ended April 29, 2017. The fair value of such contingent consideration is estimated as of the acquisition date, and subsequently at the end of each reporting period, using forecasted cash flows. Projecting future cash flows requires us to make significant estimates and assumptions regarding future events, conditions, or revenues being achieved under the subject contingent agreement as well as the appropriate discount rate. Such valuation techniques include one or more significant inputs that are not observable. See "Note 13. Fair Value Measurement" for more information.hand.

Note 7.8. Sale of Non-Digital Division Assets

In September 2017, we sold our non-digital division assets, primarily consisting of inventory, non-digital manufacturing equipment, patented and unpatented technology and know-how, customer lists, and backlog, net of warranty obligations and accounts payable with a net book value of $517. We recorded a gain of $1,267 on the disposal, which is included in cost of ~~goods sold~~sales in the International business ~~unit.~~unit during the second quarter of fiscal 2018. No gain was recorded in the three or nine months ended January 26, 2019.

Note 8.9. Goodwill

The changes in the carrying amount of goodwill related to each reportable segment for the nine months ended January ~~27, 2018~~26, 2019 were as follows:

Live Events Commercial Transportation International Total
Balance as of April 29, 2017 $ 2,274
$ 3,199
$ 45
$ 2,294
$ 7,812
Foreign currency translation 38
258
38
323
657
Balance as of January 27, 2018 $ 2,312
$ 3,457
$ 83
$ 2,617
$ 8,469



	Live Events			Commercial			Transportation			International			Total
Balance as of April 28, 2018	$	2,295		$	3,344		$	67		$	2,558		$	8,264
Foreign currency translation	(14		)	(99		)	(14		)	(169		)	(296		)
Balance as of January 26, 2019	$	2,281		$	3,245		$	53		$	2,389		$	7,968

We perform an analysis of goodwill on an annual basis, and it is tested for impairment more frequently if events or changes in circumstances indicate that an asset might be impaired. We ~~performed~~perform our annual analysis during our third quarter of each fiscal year, based on the goodwill amount as of the first business day of our third ~~quarter in~~ fiscal ~~2018, which was~~quarter.

In conducting our impairment testing, we compare the fair value of each of our business units to the related carrying value of the allocated assets. We utilize the income approach based on discounted projected cash flows to estimate the fair value of each unit. The projected cash flows use many estimates including market conditions, expected market demand and our ability to grow or maintain market share, gross profit, and expected expenditures for capital and operating expenses. Assets shared or not directly attributed to a reportable segment's activities are allocated to the reportable segment based on sales and other measures.

We performed our annual impairment test on October 29, ~~2017. The result of the analysis indicated~~2018 and concluded no goodwill impairment ~~existed as of that date.~~existed.

~~Note 9. Inventories~~

~~Inventories consisted of the following:~~

January 27,
2018 April 29,
2017
Raw materials $ 26,833
$ 24,801
Work-in-process 11,813
7,366
Finished goods 31,805
34,319
$ 70,451
$ 66,486

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Note 10. Selected Financial Statement Data

Inventories consisted of the following:



	January 26, 2019		April 28, 2018
Raw materials	$	27,028	$	30,570
Work-in-process	10,743		8,645
Finished goods	34,416		36,120
	$	72,187	$	75,335

Property and equipment, net consisted of the following:



	January 26, 2019		April 28, 2018
Land	$	1,738	$	2,161
Buildings	66,170		67,773
Machinery and equipment	98,409		93,439
Office furniture and equipment	6,079		5,878
Computer software and hardware	55,000		53,004
Equipment held for rental	287		287
Demonstration equipment	7,331		7,035
Transportation equipment	7,724		7,632
	242,738		237,209
Less accumulated depreciation	176,973		169,150
	$	65,765	$	68,059

Note 11. Receivables

Accounts receivable are reported net of an allowance for doubtful accounts of $~~2,311~~2,387 and $~~2,610~~2,151 at January ~~27, 2018~~26, 2019 and April ~~29, 2017,~~28, 2018, respectively. Included in accounts receivable as of January ~~27, 2018~~26, 2019 and April ~~29, 2017~~28, 2018 was ~~$2,044~~$928 and ~~$1,857,~~$964, respectively, of retainage on construction-type contracts, all of which is expected to be collected within one year.

In connection with certain sales transactions, we have entered into sales contracts with installment payments exceeding ~~twelve~~12 months and sales-type leases. The present value of these contracts and leases are recorded as a receivable as the revenue is recognized in accordance with GAAP, and profit is recognized to the extent the present value is in excess of cost. We generally retain a security interest in the equipment or in the cash flow generated by the equipment until the contract is paid. The present value of long-term contracts and lease receivables, including accrued interest and current maturities, was $~~4,147~~3,245 and $~~4,890~~3,393 as of January ~~27, 2018~~26, 2019 and April ~~29, 2017,~~28, 2018, respectively. Contract and lease receivables bearing annual interest rates of 4.8 to ~~10.0~~9.0 percent are due in varying annual installments through August 2024. The face amount of long-term receivables was $~~4,547~~ ~~and~~ ~~$5,201~~3,440 as of January ~~27, 2018~~26, 2019 and $3,733 as of April ~~29, 2017, respectively.~~28, 2018.

Note ~~11.~~12. Commitments and Contingencies

Litigation: We are a party to legal proceedings and claims which arise during the ordinary course of business. We review our legal proceedings and claims, regulatory reviews and inspections, and other legal matters on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions. We establish accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our condensed financial statements to not be misleading. We do not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote, although disclosures will be made for material matters as required by ASC 450-20, Contingencies - Loss Contingencies. Our assessment of whether a loss is reasonably possible or probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter following all appeals.

As of April 28, 2018, we recorded a liability and related other receivable of $1,904 for a net claim from a customer against work performed by one of our subcontractors during installation which damaged our customer's property. The amount recorded was for probable and reasonably estimated cost to remediate the damage. During the third quarter of fiscal 2019, this claim settled and was fully covered by insurance.

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As of January ~~27, 2018~~26, 2019 and April ~~29, 2017,~~28, 2018, a customer was withholding $2,224 of payment claiming we did not perform to the customer's specifications. We believe we have performed to the agreed-upon written specifications, have strong contractual documentation to support our position, and customer with wherewithal to pay. We believe that we will ultimately prevail in collections. Although our assessment of the loss is remote, a number of factors could change the outcome.

For other unresolved legal proceedings or claims, we do not believe there ~~was~~is a reasonable probability that any material loss ~~for these various claims or legal actions, including reviews, inspections or other legal proceedings, if any,~~ would be incurred. Accordingly, no material accrual or disclosure of a potential range of loss has been made related to these matters. ~~In the opinion of management,~~We do not expect the ultimate liability of ~~all~~these unresolved legal proceedings ~~is not expected~~or claims to have a material effect on our financial position, liquidity or capital resources.

Warranties: We offer a standard parts coverage warranty for periods varying from one to five years for most of our products. We also offer additional types of warranties to include on-site labor, routine maintenance and event support. In addition, the terms of warranties on some installations can vary from one to 10 years. The specific terms and conditions of these warranties vary primarily depending on the type of product sold. We estimate the costs which may be incurred under the contractual warranty obligations (assurance type warranty) and record a liability in the amount of such estimated costs at the time the revenue is recognized. Factors affecting our estimate of the cost of our warranty obligations include historical experience and expectations of future conditions. We continually assess the adequacy of our recorded warranty accruals and, to the extent we experience any changes in warranty claim activity or costs associated with servicing those claims, our accrued warranty obligation is adjusted accordingly. For service-type warranty contracts, we allocate revenue to this performance obligation and recognize the revenue over time and costs as incurred.

~~During fiscal 2016, we discovered~~We disclosed a warranty issue ~~caused by~~in Note 18 of our Annual Report on Form 10-K for the fiscal year ended April 28, 2018 regarding a mechanical device failure within a module for ~~displays primarily in our OOH applications built prior to fiscal 2013. The device failure causes a visual defect in~~displays. During the ~~display. Over the past three years, we have deployed preventative maintenance to sites impacted~~nine months ended January 26, 2019 and repaired the defective devices in our repair center. When certain site locations have exceeded an acceptable failure rate, we have refurbished the display to meet customers’ expectations under contractual obligations. During fiscal 2017, 2016, and 2015January 27, 2018, we recognized warranty expense and estimated equipment service agreement losses for probable and reasonably estimated costs to remediate this issue of ~~$1,766, $9,174,~~$1,610 and ~~$1,168,~~$4,034, respectively. We recognized warranty expense related to this issue of $4,034 during the nine months ended January 27, 2018. This increased expense level is not the result of a new issue, but is primarily based on our decision to preserve our market leadership. We elected to expand the refurbishments for customer relationship purposes. As of January ~~27, 2018,~~26, 2019, we had ~~$3,066~~$828 remaining in accrued ~~warranty~~for equipment service agreement obligations for the estimate of probable future claims related to this issue. ~~Although many of our~~Our contractual warranty arrangements ~~are nearing expiration~~have expired for products with this issue and we ~~may incur additional discretionary costs~~do not expect material changes to ~~maintain customer relationships or for higher than expected failure rates. Accordingly, it is possible that~~ the ~~ultimate cost to resolve this matter may increase and be materially different from the amount of the current estimate and~~equipment service agreement accrual.

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Changes in our warranty obligation for the nine months ended January ~~27, 2018~~26, 2019 consisted of the following:


	Amount			January 26, 2019
Beginning accrued warranty obligations	$	27,899		$	29,953
Warranties issued during the period	9,652			6,642
Settlements made during the period	(13,581		)	(12,571		)
Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations	5,230			2,629
Ending accrued warranty obligations	$	29,200		$	26,653

Performance guarantees: We have entered into standby letters of credit and surety bonds with financial institutions relating to the guarantee of our future performance on contracts, primarily construction type contracts. As of January ~~27, 2018,~~26, 2019, we had outstanding letters of credit and surety bonds in the amount of $~~13,396~~14,795 and $~~8,330~~6,587, respectively. Performance guarantees are issued to certain customers to guarantee the operation and installation of the equipment and our ability to complete a contract. These performance guarantees have various terms ~~which~~but are generally one year.

Leases: We lease vehicles, office space and equipment for various global sales and service locations, including manufacturing space in the United States and China. Some of these leases, including the lease for manufacturing facilities in Sioux Falls, South Dakota, include provisions for extensions or purchase. The lease for the facilities in Sioux Falls, South Dakota, can be extended for an additional five years past its current term, which ends March 31, ~~2022, and it~~2022. This lease contains an option to purchase the property subject to the lease from March 31, 2017 to March 31, 2022 for $9,000, which approximates fair value. If the lease is extended, the purchase option increases to $9,090 for the year ending March 31, 2023 and $9,180 for the year ending March 31, 2024. Rental expense for operating leases was $~~2,568~~2,551 and $~~2,358~~2,568 for the nine months ended January ~~27, 2018~~26, 2019 and January ~~28, 2017,~~27, 2018, respectively.

Future minimum payments under noncancelable operating leases, excluding executory costs such as management and maintenance fees, with initial or remaining terms of one year or more consisted of the following at January ~~27, 2018:~~26, 2019:

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Fiscal years ending	Amount		Amount
2018	$	775
2019	2,624		$	826
2020	2,101		2,966
2021	1,771		2,482
2022	1,437		1,607
2023			249
Thereafter	544		294
	$	9,252	$	8,424

Purchase commitments: From time to time, we commit to purchase inventory, advertising, cloud-based information systems, information technology maintenance and support services, and various other products and services over periods that extend beyond one year. As of January ~~27, 2018,~~26, 2019, we were obligated under the following conditional and unconditional purchase commitments, which included $~~350~~150 in conditional purchase commitments:


Fiscal years ending	Amount		Amount
2018	$	665
2019	2,675		$	2,422
2020	1,898		5,368
2021	313		3,728
2022	143		1,851
2023			1,820
Thereafter	380		266
	$	6,074	$	15,455

Note ~~12.~~13. Income Taxes

We ~~are subject to U.S. Federal income tax as well as~~calculate the provision for income taxes during interim reporting periods by applying an estimate of ~~multiple state and foreign jurisdictions.~~the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Due to various factors and operating in multiple state and foreign jurisdictions, our effective tax rate is subject to fluctuation. AsWe recorded an effective tax rate of 55.4 percent and (71.8) percent for the three and nine months ended January 26, 2019, respectively, and an effective tax rate of (67.0) percent and 47.2 percent for the three and nine months ended January 27, 2018, respectively. The changes in the effective tax rates are due to tax credits proportionate to pre-tax book income, the release of $2,775 in unrecognized tax benefits related to a ~~result~~lapse of statute, the release of $480 for a valuation allowance reversal related to foreign net operating loss carryforwards, and a decrease in the federal statutory tax rate from 30.4 percent to 21 percent pursuant to the Tax Act as compared to the same prior year periods, which included a re-measurement of deferred taxes resulting in a $3,679 impact to tax expense due to the lowering of the ~~expiration~~tax rate under the Tax Act. The Tax Act reduced the federal normal statutory rate from 35 percent to 21 percent; however, since we are a fiscal year tax filer, a blended rate of ~~statutes~~30.4 percent was used for fiscal year 2018.

Pursuant to the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of ~~limitations,~~the Tax Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year from the enactment date of December 22, 2017. As of January 26, 2019, the accounting for the remeasurement of U.S. deferred tax assets and deemed repatriation tax was finalized, resulting in additional tax expense of $12 and $5, respectively. We have also elected to recognize tax resulting from any Global Intangible Low Taxed Income (GILTI) inclusion as a period cost if, and when, incurred. We have not previously provided deferred taxes on unremitted earnings attributable to foreign subsidiaries that have been considered to be reinvested indefinitely. The full effects of the Tax Act require a reassessment of previous indefinite reinvestment assertions with respect to certain jurisdictions. As of January 26, 2019, undistributed earnings of our foreign subsidiaries were considered to have been reinvested indefinitely.

We are subject to U.S. federal income tax as well as income taxes of multiple state and foreign jurisdictions. Fiscal years 2016- 2018 remain open to federal tax examinations and fiscal years ~~2015, 2016, and 2017 are the remaining years open under statutes of limitations~~2015-2018 for ~~federal and~~ state income tax examinations. Certain subsidiaries are also subject to income tax in several foreign jurisdictions which have open tax years varying by jurisdiction beginning in fiscal 2008.

~~Table~~ In the event of ~~contents~~

any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our condensed consolidated statement of operations.

As of January ~~27, 2018,~~26, 2019, we had ~~$3,179~~$575 of unrecognized tax benefits which would reduce our effective tax rate if recognized.

~~On December 22, 2017, President Trump signed the U.S. Tax Cuts and Jobs Act (the “Tax Act”) into law. The Tax Act makes broad and complex changes to the U.S. tax code. Some~~

Table of the most significant provisions of the Tax Act impacting us include a reduction of the U.S. federal corporate income tax rate from 35% to 21%, a one-time "deemed repatriation" tax on previously untaxed accumulated earnings and profits of certain subsidiaries in non-U.S. jurisdictions, and a transition of U.S. international taxation from a worldwide tax system to a territorial tax system.

GAAP accounting for income taxes requires us to record the impact of any tax law change in the quarter the law change is enacted. On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 which provides additional guidance allowing companies to record provisional amounts during a measurement period, not to exceed one year from the enactment date of the Tax Act, to account for the impacts of the Tax Act in their financial statements when companies do not have the necessary information available, prepared or analyzed in reasonable detail to complete their accounting for the effects of the changes in the Tax Act. We have accounted for the impacts of the Tax Act to the extent a reasonable estimate could be made during the quarter ended January 27, 2018. We will continue to refine our estimates throughout the measurement period or until the accounting is complete, and the impact of the Tax Act may differ from these estimates, possibly materially, due to, among other things, changes in estimates and assumptions that we have made.

As a result, we have recorded a provisional reduction to our net deferred tax asset (which represents future tax benefits) of $3,679 which resulted in a corresponding increase to income tax expense for the quarter ended January 27, 2018. The revaluation of our net deferred tax asset is subject to further adjustments during the measurement period due to the complexity of determining our net deferred tax asset as of the enactment date of the Tax Act. Some of the information necessary to determine the accounting impacts of the tax rate change includes finalization of our fiscal 2018 tax return as well as refining the analysis of which existing deferred balances at the enactment date will reverse in fiscal 2018 and which deferred balances will reverse after fiscal 2018.

Additionally, we have recorded a provisional increase to income tax expense of $601 for the one-time deemed repatriation tax. The estimate of the deemed repatriation tax is based, in part, on the amount of cash and other specified assets anticipated to be held by Daktronics’ foreign subsidiaries as of April 28, 2018. As a result, the final amount may change as the amounts are finalized. We plan to pay the tax payable in installments in accordance with the Tax Act.contents

Note ~~13.~~14. Fair Value Measurement

ASC 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy within ASC 820 distinguishes between the following three levels of inputs which may be utilized when measuring fair value.

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included within Level 1 for the assets or liabilities, either directly or indirectly (for example, quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated input).

Level 3 - Unobservable inputs supported by little or no market activity based on our own assumptions used to measure assets and liabilities.

~~Table~~The fair values for fixed-rate long-term receivables are estimated using a discounted cash flow analysis based on interest rates currently being offered for contracts with similar terms to customers with similar credit quality. The carrying amounts reported on our condensed consolidated balance sheets for long-term receivables approximate fair value and have been categorized as a Level 2 fair value measurement. Fair values for fixed-rate long-term marketing obligations are estimated using a discounted cash flow calculation applying interest rates currently being offered for debt with similar terms and underlying collateral. The total carrying value of ~~contents~~

long-term marketing obligations as reported on our condensed consolidated balance sheets within other long-term obligations approximates fair value and has been categorized as a Level 2 fair value measurement.

The following table sets forth by Level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at January ~~27, 2018~~26, 2019 and April ~~29, 2017~~28, 2018 according to the valuation techniques we used to determine their fair values. There have been no transfers of assets or liabilities among the fair value hierarchies presented.


	Fair Value Measurements											Fair Value Measurements
	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
Balance as of January 27, 2018
Cash and cash equivalents	$	49,042	$	—		$	—		$	49,042
Restricted cash	28		—			—			28
Available-for-sale securities:
Certificates of deposit	—		8,918			—			8,918
U.S. Government sponsored entities	—		9,031			—			9,031
Municipal bonds	—		5,988			—			5,988
Derivatives - asset position	—		64			—			64
Derivatives - liability position	—		(720		)	—			(720		)
Contingent liability	—		—			(1,034		)	(1,034		)
	$	49,070	$	23,281		$	(1,034	)	$	71,317
Balance as of April 29, 2017
Balance as of January 26, 2019
Cash and cash equivalents	$	32,623	$	—		$	—		$	32,623		$	33,281	$	—		$	—		$	33,281
Restricted cash	216		—			—			216			26		—			—			26
Available-for-sale securities:
Certificates of deposit	—		12,487			—			12,487			—		3,959			—			3,959
U.S. Government securities	400		—			—			400			15,482		—			—			15,482
U.S. Government sponsored entities	—		12,238			—			12,238			—		14,864			—			14,864
Municipal bonds	—		7,588			—			7,588			—		3,291			—			3,291
Derivatives - asset position	—		64			—			64			—		20			—			20
Derivatives - liability position	—		(277		)	—			(277		)	—		(24		)	—			(24		)
Contingent liability	—		—			(1,891		)	(1,891		)
Contingent liabilities												—		—			(1,354		)	(1,354		)
	$	33,239	$	32,100		$	(1,891	)	$	63,448		$	48,789	$	22,110		$	(1,354	)	$	69,545
Balance as of April 28, 2018
Cash and cash equivalents												$	29,727	$	—		$	—		$	29,727
Restricted cash												28		—			—			28
Available-for-sale securities:
Certificates of deposit												—		8,669			—			8,669
U.S. Government securities												992		—			—			992
U.S. Government sponsored entities												—		19,949			—			19,949
Municipal bonds												—		4,912			—			4,912
Derivatives - asset position												—		41			—			41
Derivatives - liability position												—		(236		)	—			(236		)
Contingent liabilities												—		—			(1,000		)	(1,000		)
												$	30,747	$	33,335		$	(1,000	)	$	63,082

A roll forward of the Level 3 contingent ~~liability,~~liabilities, both short- and long-term, for the nine months ended January ~~27, 2018~~26, 2019 is as follows:

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Contingent liability as of April 29, 2017 $ 1,891
Settlements (1,009 )
Interest 30
Foreign currency translation 122
Contingent liability as of January 27, 2018 $ 1,034



Contingent liability as of April 28, 2018	$	1,000
Additions	1,316
Fair value adjustments (1)	(956		)
Interest	9
Foreign currency translation	(15		)
Contingent liabilities as of January 26, 2019	$	1,354

(1) We recorded an adjustment to the contingent consideration liability in the second quarter of fiscal 2019, resulting in an increase in income from operations. The adjustment was caused by a change in the fair value of the contingent liability, which reflected future financial performance measures established by the seller prior to the close of the acquisition.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument. There have been no changes in the valuation techniques used by us to value our financial instruments.

Cash and cash equivalents: Consists of cash on hand in bank deposits and highly liquid investments, primarily money market accounts. The fair value was measured using quoted market prices in active markets. The carrying amount approximates fair value.

Restricted cash: Consists of cash and cash equivalents held in bank deposit accounts to secure issuances of foreign bank guarantees. The fair value of restricted cash was measured using quoted market prices in active markets. The carrying amount approximates fair value.

Certificates of deposit: Consists of time deposit accounts with original maturities of less than three years and various yields. The fair value of these securities was measured based on valuations observed in less active markets than Level 1 investments from a third-party financial institution. The carrying amount approximates fair value.

U.S. Government securities: Consists of U.S. Government treasury bills, notes, and bonds with original maturities of less than three years and various yields. The fair value of these securities was measured using quoted market prices in active markets.

U.S. Government sponsored entities: Consists of Fannie Mae and Federal Home Loan Bank investment grade debt securities trading with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The fair value of these securities was measured based on valuations observed in less active markets than Level 1 investments. The contractual maturities of these investments vary from one month to three years.

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Municipal bonds: ~~Consist~~Consists of investment grade municipal bonds trading with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The contractual maturities of these investments vary from two to three years. The fair value of these bonds was measured based on valuations observed in less active markets than Level 1 investments.

Derivatives – currency forward contracts: Consists of currency forward contracts trading with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The fair value of these securities was measured based on a valuation from a third-party bank. See "Note ~~14.~~15. Derivative Financial Instruments" for more information regarding our derivatives.

Contingent ~~liability~~liabilities: Consists of the fair value of ~~a liability~~liabilities measured on expected future payments relating to a business ~~acquisition~~acquisitions if future financial performance measures are achieved. The contingent ~~liability was~~liabilities were calculated by estimating the discounted present value of expected future payments for estimated performance measure attainment. To estimate future performance measure attainment, we utilized significant unobservable inputs as of January ~~27, 2018~~26, 2019 and April ~~29, 2017.~~28, 2018. The unobservable inputs included management expectations and forecasts for business sales and profit performance and an estimated discount rate based on current borrowing interest rates. To the extent that these assumptions changed, or actual results differed from these estimates, the fair value of the contingent consideration ~~liability~~liabilities could ~~change.~~change from $1,354 to $0 or increase in proportion to increased business performance from this estimate. The contingent ~~liability is~~liabilities are presented in the "Current portion of other long-term ~~obligations~~obligations" and "Other long-term obligations" line items in our condensed consolidated balance sheets.

Non-recurring measurements: The fair value measurement standard also applies to certain non-financial assets and liabilities measured at fair value on a nonrecurring basis. Certain long-lived assets such as goodwill, intangible assets and property and equipment are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Other measurements using fair value: Some of our financial instruments, such as accounts receivable, long-term receivables, prepaid expense and other assets, ~~costs~~contract assets and ~~earnings in excess of billings and billings in excess of costs,~~liabilities, accounts payable, warranty obligations, ~~customer deposits, deferred revenue,~~ and other long-term obligations, are reflected in the condensed consolidated balance ~~sheet~~sheets at carrying value, which approximates fair value due to their short-term nature.

Note ~~14.~~15. Derivative Financial Instruments

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We utilize derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates on those transactions denominated in currencies other than our functional currency, which is the U.S. dollar. We enter into currency forward contracts to manage these economic risks. We account for all derivatives on the condensed consolidated balance ~~sheet~~sheets within accounts receivable or accounts payable measured at fair value, and changes in fair values are recognized in earnings unless specific hedge accounting criteria are met for cash flow or net investment hedges. As of January ~~27, 2018~~26, 2019 and April ~~29, 2017,~~28, 2018, we had not designated any of our derivative instruments as accounting hedges, and thus we recorded the changes in fair value in ~~other~~"Other (expense) income, ~~(expense), net.~~net" in the condensed consolidated statements of operations.

The foreign currency exchange contracts in aggregated notional amounts in place to exchange U.S. dollars at January ~~27, 2018~~26, 2019 and April ~~29, 2017~~28, 2018 were as follows:


	January 27, 2018				April 29, 2017		January 26, 2019		April 28, 2018
	U.S. Dollars		Foreign Currency		U.S. Dollars	Foreign Currency	U.S. Dollars	Foreign Currency	U.S. Dollars		Foreign Currency
Foreign Currency Exchange Forward Contracts:
U.S. Dollars/Australian Dollars	2,615		3,408		7,984	10,669	3,800	5,286	1,081		1,400
U.S. Dollars/Canadian Dollars	1,424		1,864		256	345	623	821	2,165		2,819
U.S. Dollars/British Pounds	6,402		4,778		4,936	3,959	—	—	5,856		4,368
U.S. Dollars/Singapore Dollars	237		312		605	844	—	—	236		312
U.S. Dollars/Euros	(1,277	)	(1,061	)	528	491	—	—	(854	)	(708	)
U.S. Dollars/Swiss Franc	998		989		—	—	—	—	41		40
U.S. Dollars/Malaysian Ringgit							473	1,966	—		—

As of January ~~27,~~26, 2019, there was an asset and liability of $20 and $24, respectively, and as of April 28, 2018, there was an asset and liability of ~~$64~~$41 and $~~720, respectively, and as of April 29, 2017, there was an asset and liability of $64 and~~ ~~$277~~236, respectively, representing the fair value of foreign currency exchange forward contracts, which were determined using Level 2 inputs from a third-party bank.

~~Note 15. Subsequent Events~~

On March 1, 2018, our Board of Directors declared a regular quarterly dividend of $0.07 per share on our common stock payable on March 22, 2018 to holders of record of our common stock on March 12, 2018.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (including exhibits and any information incorporated by reference herein) contains both historical and forward-looking statements that involve risks, uncertainties and assumptions. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, beliefs, intentions and strategies for the future. These statements appear in a number of places in this Report and include all statements that are not historical statements of fact regarding the intent, belief or current expectations with respect to, among other things: (i.) our competition; (ii.) our financing plans; (iii.) trends affecting our financial condition or results of operations; (iv.) our growth strategy and operating strategy; (v.) the declaration and payment of dividends; (vi.) the timing and magnitude of future contracts; (vii.) raw material shortages and lead times; (viii.) fluctuations in margins; (ix.) the seasonality of our business; (x.) the introduction of new products and technology; (xi.) the amount and frequency of warranty claims; (xii.) our ability to manage the impact that new or adjusted tariffs may have on the cost of raw materials and ~~(xii.~~components and our ability to sell product internationally; (xiii.) resolution of litigation contingencies; and (xiv.) the timing and magnitude of any acquisitions or dispositions. The words “may,” “would,” “could,” “should,” “will,” “expect,” “estimate,” “anticipate,” “believe,” “intend,” ~~“plans”~~“plan” and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond our ability to control, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors discussed herein, including those discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended April ~~29, 2017~~28, 2018 in the section entitled “Item 1A. Risk Factors” and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," and those factors discussed in detail in our other filings with the Securities and Exchange Commission.

The following discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements included in this Report. The preparation of these condensed financial statements requires us to make estimates and judgments affecting the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate our estimates, including those related to total costs on long-term

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construction-type contracts, costs to be incurred for product warranties and extended maintenance contracts, bad debts, excess and obsolete inventory, income taxes, share-based compensation, goodwill impairment and contingencies. Our estimates are based on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates.

OVERVIEW

We design, manufacture and sell a wide range of display systems to customers throughout the world. We focus our sales and marketing efforts on markets, geographical regions and products. Our five business segments consist of four domestic business units and the International business unit. The four domestic business units consist of Commercial, Live Events, High School Park and Recreation, and Transportation, all of which include the geographic territories of the United States and Canada. Disclosures related to our business segments are provided in "Note 4.5. Segment ~~Disclosure"~~Reporting" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

Our net sales and profitability historically have fluctuated due to the impact of ~~large project~~uniquely configured orders, such as display systems for professional sports facilities, colleges and universities, and spectacular projects in the commercial area, as well as the seasonality of the sports market. ~~Large project~~Uniquely configured orders can include several displays, controllers, and subcontracted structure builds, each of which can occur on varied schedules per the customer's needs. ~~Net~~Outdoor installation sales can be impacted by outdoor weather conditions and ~~gross profit percentages also have fluctuated~~the construction season. Our third fiscal quarter tends to be a slower quarter because it includes two holidays, it is affected by sports seasonality, and generally less outdoor construction work occurs due to ~~other seasonal factors, including the impact of holidays, which primarily affects our third fiscal quarter.~~weather conditions.

Our gross margins ~~on large custom and large standard orders~~ tend to fluctuate more on uniquely configured orders than on ~~small standard~~limited configured orders. ~~Large product~~Uniquely configured orders involving competitive bidding and substantial subcontract work for product installation generally have lower gross margins. Although we follow the ~~percentage of completion~~over time method of recognizing revenues for ~~large custom~~uniquely configured orders, we nevertheless have experienced fluctuations in operating results and expect our future results of operations will be subject to similar fluctuations.

Our ~~backlog consists~~remaining performance obligations ("backlog") consist of contractually binding sales agreements or purchase orders for integrated electronic display systems and related products and exclude extended service agreements and service only orders. Orders are included in backlog when we ~~expect to fill within the next 24 months. Orders, which we define as a~~are in receipt of an executed contract and any required deposits ~~are booked and included in backlog.~~or security. As a result, certain orders for which we have received binding letters of intent or contracts will not be ~~booked~~included in backlog until all required contractual documents and deposits are received. ~~In addition,~~Backlog can fluctuate due to large order bookings ~~can vary significantly on a quarterly basis as a result of~~and the timing and seasonality of ~~large orders.~~net sales. Because order backlog fluctuates and may be subject to extended delivery schedules, orders may be canceled and ~~orders~~ have varied estimated

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~~profitability, our~~ profitability. Our backlog is not necessarily indicative of future net sales or net income. Backlog can fluctuate due to large order booking timing and seasonality. Backlog is not a measure defined by GAAP, and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts.

For a summary of recently issued accounting pronouncements and the effects of those pronouncements on our financial results, refer to "Note 1. Basis of Presentation and Summary of Critical Accounting Policies" of the Notes to the Consolidated Financial Statements included elsewhere in this Report.

GENERAL

Our mission is to be the world leader at informing and entertaining audiences through dynamic audio-visual communication systems. We measure our success through estimated market share based on estimated market demand for digital displays and generating profits over the long-term. Our success is contingent on the depth and quality of our products, including related control systems, the depth of our service offerings and our technology serving these market demands. These qualities are important for our long-term success because our products have finite lifetimes, and we strive to win replacement business from existing customers.

Increases in user adoption, the acceptance of a variety of digital solutions, and the decline of digital solution pricing over the years ~~has~~have increased the size of the global market. With this positive demand, strong competition exists across all of our business units, which causes margin constraints. Projects with multimillion-dollar revenue potential also attract competition, which generally reduces profitability.

We organize around customer segments and geographic regions as further described in "Note 4.5. Segment ~~Disclosure"~~Reporting" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report. Each business segment also has unique key growth drivers and challenges.

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Commercial Business Unit: Over the long-term, we believe growth in the Commercial business unit will result from a number of factors, including:

Standard display product market growth due to market adoption and lower product costs, which drive marketplace expansion. Standard display products are used to attract or communicate with customers and potential customers of retail, commercial, and other establishments. Pricing and economic conditions are the principal factors that impact our success in this business unit. We utilize a reseller network to distribute our standard products.

National accounts standard display market opportunities due to customers' desire to communicate their message, advertising and content consistently across the country. Increased demand is possible from retailers, quick serve restaurants, petroleum businesses, and other nationwide organizations.

Increasing interest in spectaculars, which include very large and sometimes highly customized displays as part of entertainment venues such as casinos, shopping centers, cruise ships and Times Square type locations.

Dynamic messaging systems demand growth due to market adoption and marketplace expansion.

The use of architectural lighting products for commercial buildings, which real estate owners use to add accents or effects to an entire side or circumference of a building to communicate messages or to decorate the building.

The continued deployment of digital billboards as Out-of-Home ("OOH") advertising companies continue developing new sites and replacing digital billboards ~~which are~~ reaching end of life. This is dependent on ~~there being~~ no adverse changes occurring in the digital billboard regulatory environment restricting future ~~deployments of billboards,~~billboard deployment, as well as maintaining our current market share ~~of the~~in a business that is concentrated in a few large OOH companies.

Replacement cycles within each of these areas.

Live Events Business Unit: Over the long-term, we believe growth in the Live Events business unit will result from a number of factors, including:

Facilities spending more on larger display systems to enhance the game-day and event experience for attendees.

Lower product costs, driving an expansion of the marketplace.

Our product and service offerings, which remain the most integrated and comprehensive offerings in the industry.

The competitive nature of sports teams, which strive to out-perform their competitors with display systems.

The desire for high-definition video displays, which typically drives larger displays or higher resolution displays, both of which increase the average transaction size.

Dynamic messaging systems needs throughout a sports facility.

Replacement cycles within each of these areas.

High School Park and Recreation Business Unit: Over the long-term, we believe growth in the High School Park and Recreation business unit will result from a number of factors, including:

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Increased demand for video systems in high schools as school districts realize the revenue generating potential of these displays ~~versus~~compared to traditional scoreboards.

Increased demand for different types of displays and dynamic messaging systems, such as message centers at schools to communicate to students, parents and the broader community.

The use of more sophisticated displays in school athletic facilities, such as large integrated video systems.

Transportation Business Unit: Over the long-term, we believe growth in the Transportation business unit will result from increasing applications and acceptance of electronic displays to manage transportation systems, including roadway, airport, parking, transit and other applications. Effective use of the United States transportation infrastructure requires intelligent transportation systems. This growth is highly dependent on government spending, primarily by state and federal governments, along with the continuing acceptance of private/public partnerships as an alternative funding source. Growth is also expected in dynamic messaging systems for advertising and way-finding use in public transport and airport terminals.

International Business Unit: Over the long-term, we believe growth in the International business unit will result from achieving greater penetration in various geographies and building products more suited to individual markets. We continue to broaden our product offerings into the transportation segment in Europe and the Middle East. We also focus on sports facility, spectacular-type, and third-party advertising market opportunities and the factors listed in each of the other business units to the extent they apply outside of the United States and Canada.

Each of our business units is impacted by adverse economic conditions in different ways and to different degrees. The effects of an adverse economy are generally less severe on our sports related business as compared to our other businesses, although in severe economic downturns, the sports business also can be seriously impacted. Our Commercial and International business units are highly dependent on economic conditions in general.

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The cost to manufacture and the selling prices of our products have decreased over time and are expected to continue to decrease in the future. As a result, each year we must sell more product to generate the same or greater level of net sales as in previous fiscal years. This price decline has been significant as a result of increased competition across all business units.

Our Annual Report discloses Risk Factors we face, including exposure to geopolitical, economic, and social changes. For fiscal year 2019, while we remain optimistic about long-term growth in the digital display industry, the recent U.S. Administrative trade actions, including tariffs and sanctions, and related reactions and responses outside the U.S. are very dynamic. This environment has created volatility, such as increases in pricing of and demand for aluminum, electrical, and other components we use in our production. We continue to monitor the situation and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments. We also expect some of the measures being contemplated by various governments will create market reactions and will possibly have significant financial impact in future quarters.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED JANUARY ~~27, 2018~~26, 2019 AND JANUARY ~~28, 2017~~27, 2018

Net Sales


	Three Months Ended									Three Months Ended
(in thousands)	January 27, 2018		January 28, 2017		Dollar Change			Percent Change		January 26, 2019		January 27, 2018		Dollar Change			Percent Change
Net sales:
Commercial	$	35,483	$	36,165	$	(682	)	(1.9	)%	$	37,159	$	35,483	$	1,676		4.7	%
Live Events	45,167		41,036		4,131			10.1		29,995		45,167		(15,172		)	(33.6	)
High School Park and Recreation	11,463		12,653		(1,190		)	(9.4	)	14,798		11,463		3,335			29.1
Transportation	11,189		9,130		2,059			22.6		15,390		11,189		4,201			37.5
International	27,014		16,735		10,279			61.4		17,727		27,014		(9,287		)	(34.4	)
	$	130,316	$	115,719	$	14,597		12.6	%	$	115,069	$	130,316	$	(15,247	)	(11.7	)%
Orders:
Commercial	$	28,745	$	32,595	$	(3,850	)	(11.8	)%	$	41,114	$	28,745	$	12,369		43.0	%
Live Events	39,911		51,590		(11,679		)	(22.6	)	45,767		39,911		5,856			14.7
High School Park and Recreation	13,451		14,178		(727		)	(5.1	)	17,034		13,451		3,583			26.6
Transportation	14,641		19,621		(4,980		)	(25.4	)	11,541		14,641		(3,100		)	(21.2	)
International	29,405		25,329		4,076			16.1		19,973		29,405		(9,432		)	(32.1	)
	$	126,153	$	143,313	$	(17,160	)	(12.0	)%	$	135,429	$	126,153	$	9,276		7.4	%

Commercial: The decrease in net sales for the three months ended January 27, 2018 compared to the same period one year ago was primarily due to lower order volumes in the on-premise niche and the timing of delivery of large projects in the spectacular niche, which were partially offset by an increase in the billboard niche shipment activity due to changes of timing of customer demand as compared to last year.

The decrease in orders for the three months ended January 27, 2018 compared to the same period one year ago was the net result of decreases in the billboard niche and decreases in the on-premise niche due to a number of factors, including competitive market pricing, a delay of national account-based opportunities, and the natural volatility of large project timing.

~~Table of contents~~

~~Live Events:~~ The increase in net sales for the three months ended January 27, 2018 compared to the same period one year ago was primarily due to continued demand and the timing of customer needs. This year, net sales were impacted by projects for professional baseball facilities renovation and construction project timeliness.

~~Orders decreased for the three months ended January 27, 2018 compared to the same period one year ago due to variability in order timing.~~

~~High School Park and Recreation:~~ ~~The decrease in net sales for the three months ended January 27, 2018~~26, 2019 compared to the same period one year ago was primarily due to the timing of ~~customer demand.~~large custom projects in the spectacular niche, increased order volumes in the on-premise niche, and a decrease in shipments in the OOH niche.

~~Orders decreased~~The increase in orders for the three months ended January ~~27,~~26, 2019 compared to the same period one year ago was the net result ofvolatility in order timing of large custom projects in the spectacular niche and increased demand in the on-premise and OOH niches.

Live Events: The decrease in net sales for the three months ended January 26, 2019 compared to the same period one year ago was primarily due to lower orders on a year to date basis. During the third quarter of fiscal 2018, we recognized more than $15 million in sales on three projects, with no similar sized projects in the third quarter of fiscal 2019.

Orders increased for the three months ended January 26, 2019 compared to the same period one year ago due to ~~fewer~~the increased number of projects in professional sports and college and university venues. During the third quarter of fiscal 2019, we were awarded two projects each valued at over $4 million, with no similar sized projects in the third quarter of fiscal 2018.

High School Park and Recreation: The increase in net sales for the three months ended January 26, 2019 compared to the same period one year ago was primarily due to increased shipments of scoring systems and message centers as a result of growth in market activity and the timing of customer demand.

Orders increased for the three months ended January 26, 2019 compared to the same period one year ago due to overall strong market demand and an increase in projects for larger video ~~project orders which have larger average selling prices in this segment during the period.~~systems.

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Transportation: The increase in net sales for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago was primarily due to ~~higher delivery needs from state~~the timing of production for large orders and an increase in demand for intelligent transportation ~~authorities during the quarter this year as compared to last year.~~systems.

Orders for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago decreased primarily due to variability caused by large order timing.

International: Net sales for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago ~~increased~~decreased primarily due to ~~increased market demand~~the size and timing of large contracts and fluctuations in ~~OOH.~~conversion to revenue inherent in this large contract business.

Orders ~~increased~~decreased for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago primarily due to the ~~volatility~~variability of timing caused by large ~~order timing.~~projects.

Product Order Backlog

The product order backlog as of January ~~27, 2018~~26, 2019 was ~~$151~~$168 million as compared to ~~$170~~$151 million as of January ~~28, 2017~~27, 2018 and ~~$155~~$150 million at the end of the second quarter of fiscal ~~2018.~~2019. Historically, our product order backlog varies due to the seasonality of our business, the timing of large projects, and customer delivery schedules for these orders. The product order backlog as of January ~~27, 2018 decreased~~26, 2019 increased from January ~~28, 2017~~27, 2018 in our Commercial, Live Events, ~~and Transportation business units, increased in our International business unit, and remained relatively flat in our~~ High School Park and Recreation, and Transportation business units and decreased in our International business unit.

Gross Profit


	Three Months Ended								Three Months Ended
	January 27, 2018				January 28, 2017				January 26, 2019				January 27, 2018
	Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales
(in thousands)	Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales
Commercial	$	7,546	21.3	%	$	7,711	21.3	%	$	8,942	24.1	%	$	7,546	21.3	%
Live Events	9,747		21.6		6,629		16.2		3,950		13.2		9,747		21.6
High School Park and Recreation	2,768		24.1		3,198		25.3		2,736		18.5		2,768		24.1
Transportation	3,570		31.9		2,325		25.5		5,880		38.2		3,570		31.9
International	4,936		18.3		3,453		20.6		3,361		19.0		4,936		18.3
	$	28,567	21.9	%	$	23,316	20.1	%	$	24,869	21.6	%	$	28,567	21.9	%

Gross profit is net sales less cost of ~~goods sold.~~sales. Cost of ~~goods sold~~sales consists primarily of inventory, consumables, salaries, other employee-related costs, facilities-related costs for manufacturing locations, machinery and equipment maintenance and depreciation, site sub-contractors, warranty costs, and other service delivery expenses.

The ~~increase~~decrease in our gross profit percentage for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago was primarily due to ~~higher~~lower sales volumes over relatively fixed infrastructure ~~costs.~~costs, $1.8 million in expenses for an unprofitable project and a litigation claim, and an increase in commodity costs due to the current global trade environment, which was partly offset by lower warranty expenses and a change in sales mix. Total warranty as a percent of sales decreased to 1.6% for the three months ended January 26, 2019 as compared to 2.9% during the three months ended January 27, 2018. The following describes the overall impact by business unit:

Commercial: The gross profit percent ~~for the three months ended January 27, 2018 compared to the same period one year ago remained relatively flat.~~

~~Live Events:~~ ~~The gross profit percent~~ increase for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago was due to ~~an increased volume of sales over relatively fixed infrastructure costs and~~ lower warranty ~~expenses.~~and service expenses and sales mix.

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~~High School Park and Recreation:~~ Live Events:The gross profit percent decrease for the three months ended January ~~27, 2018 as~~26, 2019 compared to the same period one year ago was primarily due to lower sales volumes over relatively fixed infrastructure costs and an unprofitable project.

High School Park and Recreation: The gross profit percent decrease for the three months ended January 26, 2019 as compared to the same period one year ago was primarily due to a ~~change in~~litigation claim, partly offset by higher sales ~~mix.~~volumes over relatively fixed infrastructure.

Transportation: The gross profit percent increase for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago was primarily due to higher sales volumes over relatively fixed infrastructure ~~costs.~~costs and a change in sales mix.

International: The gross profit percent ~~decrease~~increase for the three months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago was primarily the result of ~~higher~~lower warranty expenses and ~~an unfavorable~~a change in sales mix, ~~which were~~partly offset by ~~increased volume of~~lower sales volumes over relatively fixed infrastructure costs.

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~~Selling Expense~~

Contribution Margin


	Three Months Ended													Three Months Ended
	January 27, 2018								January 28, 2017					January 26, 2019										January 27, 2018
	Amount		As a Percent of Net Sales			Percent Change			Amount			As a Percent of Net Sales		Amount				As a Percent of Net Sales			Percent Change			Amount				As a Percent of Net Sales
(in thousands)	Amount					Percent Change						As a Percent of Net Sales		Amount				As a Percent of Net Sales			Percent Change			Amount				As a Percent of Net Sales
Commercial	$	4,415	As a Percent of Net Sales		12.4	%		(3.5	Amount		)%		$	4,575			12.7	%	$	4,460			12.0	%		42.4	%		$	3,131	8.8	%
Live Events	3,843		8.5			12.5			3,417			8.3		347				1.2			(94.1	)		5,904				13.1
High School Park and Recreation	2,726		23.8			5.6			2,581			20.4		(384		)		(2.6	)		(1,014.3	)		42				0.4
Transportation	945		8.4			(0.7	)		952			10.4		4,959				32.2			88.9			2,625				23.5
International	3,342		12.4			6.0			3,153			18.8		(50		)		(0.3	)		(103.1	)		1,594				5.9
	$	15,271	11.7	%		4.0	%		$	14,678		12.7	%	$	9,332			8.1	%		(29.8	)%		$	13,296			10.2	%

Contribution margin consists of gross profit less selling expenses. Selling expenses consist primarily of salaries, other employee-related costs, travel and entertainment expenses, ~~facilities-related~~facility-related costs for sales and service offices, bad debt expenses, third-party commissions and expenditures for marketing efforts, including the costs of collateral materials, conventions and trade shows, product ~~demos,~~demonstrations, customer relationship management systems, and supplies.

~~Selling expense~~Contribution margin is impacted by the previously discussed sales and gross margin for each business unit. The impact of changes in ~~our Commercial~~selling expenses on each business unit for the third quarter of fiscal 2018 decreased compared to the same quarter a year ago due to decreases in personnel expenses. Selling expense in our Live Events business unit increased in the third quarter of fiscal 2018 compared to the same quarter a year ago due to increases in conventions/advertising expenses and higher bad debt expenses. unit's contribution margin are as follows:

Selling expense in our High School Park and Recreation business unit increased in the third quarter of fiscal ~~2018~~2019 compared to the same quarter a year ago due to ~~travel and entertainment expenses and conventions/advertising expenses.~~an increase in the allocation of shared resources to this market's selling efforts. Selling expense ~~remained relatively flat~~ in our ~~Transportation~~Live Events business unit decreased in the third quarter of fiscal ~~2018 compared to the same quarter a year ago. Selling expense in our International business unit increased in the third quarter of fiscal 2018~~2019 compared to the same quarter a year ago due to ~~increases~~reduced personnel related expenses.

Selling expense in ~~personnel expenses~~our Commercial, Transportation, and ~~third-party commissions expenses.~~International business units remained relatively flat during the third quarter of fiscal 2019 compared to the same quarter a year ago.

Other Operating Expenses


	Three Months Ended										Three Months Ended
	January 27, 2018						January 28, 2017				January 26, 2019						January 27, 2018
	Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales
(in thousands)	Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales
General and administrative	$	8,335	6.4	%	(3.1	)%	$	8,599	7.4	%	$	8,574	7.5	%	2.9	%	$	8,335	6.4	%
Product design and development	$	8,299	6.4	%	19.0	%	$	6,973	6.0	%	$	8,280	7.2	%	(0.2	)%	$	8,299	6.4	%

General and administrative expenses consist primarily of salaries, other employee-related costs, professional fees, shareholder relations costs, facilities and equipment-related costs for administrative departments, training costs, and the ~~costs~~cost of supplies.

General and administrative expenses in the third quarter of fiscal ~~2018 decreased~~2019 increased as compared to the same period one year ago primarily due to ~~decreases~~an increase in ~~personnel expenses.~~professional fees and IT related systems.

Product design and development expenses consist primarily of salaries, other employee-related costs, professional services, facilities costs and equipment-related costs and supplies. Product development investments in the near term are focused on developing or improving our video technology over a wide range of pixel pitches for both indoor and outdoor applications. These new or improved technologies are focused on varied pixel density for image quality and use, expanded product line offerings for our various markets and geographies, improved quality and reliability, and improved cost points. We plan to make continued investments in our software and controller capabilities throughout our various product offerings. Through all design efforts, we focus on standardizing display components and control systems for both single site and network displays.

~~Table of contents~~

Our costs for product development represent an allocated amount of costs based on time charges, professional services, materials costs and the overhead of our engineering departments. Generally, a significant portion of our engineering time is spent on product development, while the rest is allocated to large contract work and is included in cost of goods sold.

Product development expenses in the third quarter of fiscal 2018 increased as compared to the same period one year ago primarily due to increased labor costs and professional services assigned to product development projects relating to our strategy to accelerate the deployment of products and solutions to our markets. To deliver value to our customers and serve the markets' expectations, we plan to increase the level of expenditures for new or enhanced customer solutions for the remainder of fiscal 2018 as compared to prior years.

~~Other Income and Expenses~~

Three Months Ended
January 27, 2018 January 28, 2017
Amount As a Percent of Net Sales Percent Change Amount As a Percent of Net Sales
(in thousands)
Interest income, net $ 118
0.1 % (7.1 )% $ 127
0.1 %
Other (expense) income, net $ (487 ) (0.4 )% 59.7 % $ (305 ) (0.3 )%

~~Interest income (expense), net:~~ We generate interest income through short-term cash investments, marketable securities, and product sales on an installment basis or in exchange for the rights to sell and retain advertising revenues from displays, which result in long-term receivables. Interest expense is comprised primarily of interest costs on long-term marketing obligations.

Interest income, net in the third quarter of fiscal 2018 compared to the same period one year ago remained relatively flat. As a result of the volatility of working capital needs and changes in investing and financing activities, along with changes in the interest rate environment, it is difficult to project changes in interest income.

~~Other (expense) income, net:~~ The change in other income and expense, net for the third quarter of fiscal 2018 as compared to the same period one year ago was primarily due to foreign currency volatility and the losses recorded from an equity method affiliate.

~~Income Taxes~~

The current-year rate was significantly impacted by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was signed into law on December 22, 2017. Most notably, the Tax Act reduced the statutory federal income tax rate for corporations from 35% to 21%. Because we file our tax return based on our fiscal year, the statutory tax rate for our 2018 tax return will be a blended rate of approximately 30.4%. In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $3.7 million one-time expense for the estimated re-measurement of our net deferred tax asset and a $0.6 million estimated one-time transition tax on certain undistributed earnings of our foreign subsidiaries in the quarter ended January 27, 2018. Any additional impacts from the enactment of the Tax Act will be recorded as they are identified during the measurement period as provided for in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"). Excluding the impact of this one-time expense, our effective tax rate was 46.9% for the three months ended January 27, 2018. We expect our effective tax rate to be approximately 30% for the remainder of our fiscal year. In fiscal 2019, we expect an effective tax rate of approximately 21%, exclusive of any SAB 118 changes in estimate.

~~COMPARISON OF THE NINE MONTHS ENDED JANUARY 27, 2018 AND JANUARY 28, 2017~~

~~Net Sales~~

~~Table of contents~~

Nine Months Ended
(in thousands) January 27,
2018 January 28,
2017 Dollar Change Percent Change
Net sales:
    Commercial $ 102,723
$ 112,342
$ (9,619 ) (8.6 )%
    Live Events 191,432
157,032
34,400
21.9
    High School Park and Recreation 69,602
68,977
625
0.9
    Transportation 46,577
39,517
7,060
17.9
    International 62,019
64,989
(2,970 ) (4.6 )
$ 472,353
$ 442,857
$ 29,496
6.7 %
Orders:
    Commercial $ 97,816
$ 114,326
$ (16,510 ) (14.4 )%
    Live Events 145,246
135,520
9,726
7.2
    High School Park and Recreation 60,368
61,055
(687 ) (1.1 )
    Transportation 38,155
46,290
(8,135 ) (17.6 )
    International 79,909
78,164
1,745
2.2
$ 421,494
$ 435,355
$ (13,861 ) (3.2 )%

~~Commercial:~~ Net sales for the nine months ended January 27, 2018 compared to the same period one year ago decreased as a result of lower order volumes in the on-premise niche and the timing of delivery of large projects in the spectacular niche, partially offset by an increase in the billboard niche.

The decrease in orders for the nine months ended January 27, 2018 compared to the same period one year ago was the net result of decreases in the on-premise and spectacular niches due to a number of factors including competitive market pricing, a delay of national account-based opportunities during the nine months ended January 27, 2018 as compared to the same period last year, and the natural volatility of large project timing.

~~Live Events:~~ The increase in net sales for the nine months ended January 27, 2018 compared to the same period one year ago was primarily due to continued demand and the timing of the demand for upgraded or new solutions for arenas, professional sports, and colleges and universities.

~~Orders increased for the nine months ended January 27, 2018 compared to the same period one year ago due to an increased number of projects in professional sport arenas.~~

~~High School Park and Recreation:~~ ~~Net sales for the nine months ended January 27, 2018 compared to the same period one year ago remained relatively flat.~~

Orders decreased for the nine months ended January 27, 2018 compared to the same period one year ago due to fewer large sports video projects awarded during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017.

~~Transportation:~~ ~~The increase in net sales for the nine months ended January 27, 2018 compared to the same period one year ago was related to the variability caused by large order production timing.~~

~~Orders decreased for the nine months ended January 27, 2018 compared to the same period one year ago primarily due to variability caused by large order timing.~~

~~International:~~ ~~Net sales decreased in our International business unit for the nine months ended January 27, 2018 compared to the same period one year ago mainly due to timing of revenue recognition.~~

~~Orders increased for the nine months ended January 27, 2018 compared to the same period one year ago primarily due to the volatility of large order timing.~~

~~Table of contents~~

~~Gross Profit~~

Nine Months Ended
January 27, 2018 January 28, 2017
Amount As a Percent of Net Sales Amount As a Percent of Net Sales
(in thousands)
Commercial $ 21,085
20.5 % $ 27,418
24.4 %
Live Events 43,056
22.5
30,430
19.4
High School Park and Recreation
23,672
34.0
21,900
31.7
Transportation 16,696
35.8
12,966
32.8
International 11,308
18.2
13,977
21.5
$ 115,817
24.5 % $ 106,691
24.1 %

~~Gross profit~~ is net sales less cost of goods sold. Cost of goods sold consists primarily of inventory, consumables, salaries, other employee-related costs, facilities-related costs for manufacturing locations, machinery and equipment maintenance and depreciation, site sub-contractors, warranty costs, and other service delivery expenses.

~~The increase in our gross profitpercentage for the nine months ended January 27, 2018 compared to the same period one year ago was the net result of the changes described below:~~

~~Commercial:~~ The gross profit percent decrease for the nine months ended January 27, 2018 compared to the same period one year ago was primarily the result of higher warranty expenses and lower sales volumes over relatively fixed infrastructure costs.

~~Live Events:~~ The gross profit percent increase for the nine months ended January 27, 2018 compared to the same period one year ago was the result of an increased volume of sales over relatively fixed infrastructure costs, improved performance on large projects as compared to original estimates.

~~High School Park and Recreation:~~ ~~The gross profit percent increase for the nine months ended January 27, 2018 as compared to the same period one year ago primarily was due to a favorable sales mix and improved productivity.~~

~~Transportation:~~ The gross profit percent increase for the nine months ended January 27, 2018 compared to the same period one year ago was primarily due to an increased volume of sales over relatively fixed infrastructure costs.

~~International:~~ The gross profit percent decrease for the nine months ended January 27, 2018 compared to the same period one year ago was primarily the result of lower sales volumes over a relatively fixed cost structure and higher warranty expenses, which were offset by the $1.2 million gain from the sale of our non-digital assets.

~~Selling Expense~~

Nine Months Ended
January 27, 2018 January 28, 2017
Amount As a Percent of Net Sales Percent Change Amount As a Percent of Net Sales
(in thousands)
Commercial $ 13,778
13.4 % (1.2 )% $ 13,949
12.4 %
Live Events 10,562
5.5
9.0
9,686
6.2
High School Park and Recreation 8,073
11.6
7.2
7,532
10.9
Transportation 3,084
6.6
(10.9 ) 3,461
8.8
International 10,063
16.2
(10.2 ) 11,200
17.2
$ 45,560
9.6 % (0.6 )% $ 45,828
10.3 %

~~Selling expenses~~ consist primarily of salaries, other employee-related costs, travel and entertainment expenses, facilities-related costs for sales and service offices, bad debt expenses, third-party commissions and expenditures for marketing efforts, including the costs of collateral materials, conventions and trade shows, product demos, and supplies.

~~Table of contents~~

Selling expense in our Commercial business unit decreased in the nine months ended January 27, 2018 compared to the same period one year ago primarily due to third-party commission expenses. Selling expense in our Live Events business unit increased in the nine months ended January 27, 2018 compared to the same period one year ago primarily due to increased conventions/advertising expenses, bad debt expenses, and travel and entertainment expenses. Selling expense in our High School Park and Recreation business unit increased in the nine months ended January 27, 2018 compared to the same period one year ago due to increases in personnel expenses. Selling expense in our Transportation business unit decreased in the nine months ended January 27, 2018 compared to the same period one year ago primarily due to lower bad debt expense. Selling expense in our International business unit declined in the nine months ended January 27, 2018 compared to the same period one year ago due to lower bad debt expenses, lower third-party commissions expenses and a $0.2 million intangible asset impairment that had been incurred in the first nine months of fiscal 2017 that was not incurred in the first nine months of fiscal 2018.

~~Other Operating Expenses~~

Nine Months Ended
January 27, 2018 January 28, 2017
Amount As a Percent of Net Sales Percent Change Amount As a Percent of Net Sales
(in thousands)
General and administrative $ 26,138
5.5 % 0.5 % $ 26,007
5.9 %
Product design and development $ 26,294
5.6 % 24.4 % $ 21,142
4.8 %

~~General and administrative expenses~~ consist primarily of salaries, other employee-related costs, professional fees, shareholder relations costs, facilities and equipment-related costs for administrative departments, training costs, and the costs of supplies.

~~General and administrative expenses~~in the nine months ended January 27, 2018 increased as compared to the same period one year ago primarily due to increases in personnel expenses and information technology software and hardware expenses.

~~Product~~ design and ~~development expenses~~ ~~consist primarily of salaries, other employee-related costs, professional services, facilities costs and equipment-related costs and supplies. Product~~ development investments in the near term are focused on developing or improving our video technology over a wide range of pixel pitches for both indoor and outdoor applications. These new or improved technologies are focused on varied pixel density for image quality and use, expanded product line offerings for our various markets and geographies, improved quality and reliability, and improved cost points. We plan to make continued investments in our software and controller capabilities throughout our various product offerings. Through all design efforts, we focus on standardizing display components and control systems for both single site and network displays.

Our costs for product design and development represent an allocated amount of costs based on time charges, professional services, ~~materials~~material costs and the overhead of our engineering departments. Generally, a significant portion of our engineering time is spent on product design and development, while the rest is allocated to large contract work and is included in cost of ~~goods sold.~~sales.

Product design and development expenses in the ~~nine months ended January 27, 2018~~third quarter of fiscal 2019 remained relatively flat as compared to the same period one year ago increased primarily due to increased labor costs and professional services assigned to product development projects relating to our strategy to accelerate the deployment of products and solutions to our markets.ago. To deliver value to our customers and serve the markets' expectations, we ~~plan to increase the~~expect a similar level of expenditures for new or enhanced customer solutions for the remainder of fiscal ~~2018~~2019 as compared to ~~prior years.~~fiscal 2018.

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Other Income and Expenses


	Nine Months Ended												Three Months Ended
	January 27, 2018							January 28, 2017					January 26, 2019							January 27, 2018
	Amount			As a Percent of Net Sales		Percent Change		Amount			As a Percent of Net Sales		Amount			As a Percent of Net Sales		Percent Change		Amount			As a Percent of Net Sales
(in thousands)	Amount			As a Percent of Net Sales		Percent Change		Amount			As a Percent of Net Sales		Amount			As a Percent of Net Sales		Percent Change		Amount			As a Percent of Net Sales
Interest income, net	$	347		0.1	%	(9.9	)%	$	385		0.1	%	$	283		0.2	%	139.8	%	$	118		0.1	%
Other (expense) income, net	$	(429	)	(0.1	)%	71.6	%	$	(250	)	(0.1	)%	$	(203	)	(0.2	)%	(58.3	)%	$	(487	)	(0.4	)%

Interest income, ~~(expense),~~ net: We generate interest income through short-term cash investments, marketable securities, and product sales on an installment basis or in exchange for the rights to sell and retain advertising revenues from displays, which result in long-term receivables. Interest expense is comprised primarily of interest costs on long-term marketing obligations.

The change in interest income, net for the third quarter of fiscal 2019 compared to the same period one year ago was primarily due to the change in investment levels caused by the volatility of working capital needs.

Other (expense) income, net: The change in other income and expense, net for the third quarter of fiscal 2019 as compared to the same period one year ago was primarily due to foreign currency volatility and losses recorded from an equity method affiliate.

Income Taxes

We calculate the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Due to various factors, including operations in multiple jurisdictions worldwide, our effective tax rate is subject to fluctuation. We have recorded a tax rate of 55.4 percent for the third quarter of fiscal 2019 as compared to an effective tax rate of (67.0) percent for the third quarter of fiscal 2018. The change in the effective tax rate is due to tax credits proportionate to pre-tax book income, the release of $2.8 million in unrecognized tax benefits related to a lapse of statute, the release of $0.5 million for a valuation allowance reversal related to foreign net operating loss carryforwards, and a decrease in the federal statutory tax rate from 30.4 percent to 21 percent pursuant to the U.S. Tax Cuts and Jobs Act (the “Tax Act”), as compared to the same prior year period, which included a re-measurement of deferred taxes resulting in a $3.7 million impact to tax expense due to the lowering of the tax rate under the Tax Act. The Tax Act reduced the federal normal statutory rate from 35 percent to 21 percent; however, since we are a fiscal year tax filer, a blended rate of 30.4 percent was used for fiscal year 2018.

COMPARISON OF THE NINE MONTHS ENDED JANUARY 26, 2019 AND JANUARY 27, 2018

Net Sales



	Nine Months Ended
(in thousands)	January 26, 2019		January 27, 2018		Dollar Change			Percent Change
Net sales:
Commercial	$	113,797	$	102,723	$	11,074		10.8	%
Live Events	134,566		191,432		(56,866		)	(29.7	)
High School Park and Recreation	74,498		69,602		4,896			7.0
Transportation	50,624		46,577		4,047			8.7
International	68,464		62,019		6,445			10.4
	$	441,949	$	472,353	$	(30,404	)	(6.4	)%
Orders:
Commercial	$	123,637	$	97,816	$	25,821		26.4	%
Live Events	128,803		145,246		(16,443		)	(11.3	)
High School Park and Recreation	73,928		60,368		13,560			22.5
Transportation	54,736		38,155		16,581			43.5
International	65,291		79,909		(14,618		)	(18.3	)
	$	446,395	$	421,494	$	24,901		5.9	%

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Commercial: Net sales for the nine months ended January 26, 2019 compared to the same period one year ago increased as a result of the timing of large custom projects in the spectacular niche and increased order volumes in the on-premise niche. The OOH niche remained relatively flat year over year.

The increase in orders for the nine months ended January 26, 2019 compared to the same period one year ago was the result of volatility in order timing of large custom projects in the spectacular niche and increased demand in the on-premise and OOH niches.

Live Events: The decrease in net sales for the nine months ended January 26, 2019 compared to the same period one year ago was primarily due to decreased video project sizes with lower average sales price for arenas, professional sports, and colleges and universities. During the first nine months of fiscal 2018, we recognized more than $41 million in sales on seven projects, with no similar sized projects in the first nine months of fiscal 2019.

Orders decreased for the nine months ended January 26, 2019 compared to the same period one year ago due to a decreased number of projects in professional sports venues and an order cancellation. During the first nine months of fiscal 2018, we were awarded three projects each valued at over $5 million as compared to one project valued at over $5 million in the first nine months of fiscal 2019.

High School Park and Recreation: The increase in net sales for the nine months ended January 26, 2019 compared to the same period one year ago was primarily due to increased shipments of scoring systems and message centers as a result of growth in market activity and timing of customer demand.

Orders increased for the nine months ended January 26, 2019 compared to the same period one year ago due to overall strong market demand and an increase in large video system projects.

Transportation: Net sales for the nine months ended January 26, 2019 compared to the same period one year ago was primarily due to the variability of production for large orders and timing of customer schedules and an increase in demand for intelligent transportation systems.

Orders increased for the nine months ended January 26, 2019 compared to the same period one year ago primarily due to variability caused by large order timing and continued demand for intelligent transportation systems.

International: Net sales increased in our International business unit for the nine months ended January 26, 2019 compared to the same period one year ago mainly due to the timing of recognizing revenue on large project orders and decreased orders on a year to date basis.

Orders decreased for the nine months ended January 26, 2019 compared to the same period one year ago primarily due to the variability of timing caused by large projects.

Gross Profit



	Nine Months Ended
	January 26, 2019				January 27, 2018
	Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales
(in thousands)	Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales
Commercial	$	27,593	24.2	%	$	21,085	20.5	%
Live Events	26,495		19.7		43,056		22.5
High School Park and Recreation	21,997		29.5		23,672		34.0
Transportation	17,471		34.5		16,696		35.8
International	12,317		18.0		11,308		18.2
	$	105,873	24.0	%	$	115,817	24.5	%

Gross profit is net sales less cost of sales. Cost of sales consists primarily of inventory, consumables, salaries, other employee-related costs, facilities-related costs for manufacturing locations, machinery and equipment maintenance and depreciation, site sub-contractors, warranty costs, and other service delivery expenses.

The decrease in our gross profit percentage for the nine months ended January 26, 2019 compared to the same period one year ago was the net result of the changes described below:

Commercial: The gross profit percent increase for the nine months ended January 26, 2019 compared to the same period one year ago was the result of lower warranty expenses, sales mix, and the $1.0 million adjustment of the contingent liability related to a prior acquisition earnout provision.

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Live Events: The gross profit percent decrease for the nine months ended January 26, 2019 compared to the same period one year ago was the result of lower sales volumes over relatively fixed infrastructure costs and an unprofitable project, partly offset by lower warranty expenses.

High School Park and Recreation: The gross profit percent decrease for the nine months ended January 26, 2019 as compared to the same period one year ago was due to competitive bidding on large projects, a change in sales mix, and a litigation claim, partly offset by higher sales volumes over relatively fixed infrastructure costs.

Transportation: The gross profit percent decrease for the nine months ended January 26, 2019 compared to the same period one year ago was due to the receipt in the first nine months of the prior fiscal year of a supplier reimbursement for a component issue with no similar receipt in the first nine months of the current fiscal year, partly offset by higher sales volumes over relatively fixed infrastructure costs.

International: The gross profit percent decrease for the nine months ended January 26, 2019 compared to the same period one year ago was primarily the result of the $1.2 million gain from the sale of our non-digital assets that was recorded in the first nine months of fiscal 2018, partly offset by higher sales volumes over relatively fixed infrastructure costs.

Contribution Margin



	Nine Months Ended
	January 26, 2019						January 27, 2018
	Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales
(in thousands)	Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales
Commercial	$	13,984	12.3	%	91.4	%	$	7,307	7.1	%
Live Events	16,250		12.1		(50.0	)	32,494		17.0
High School Park and Recreation	12,874		17.3		(17.5	)	15,599		22.4
Transportation	14,245		28.1		4.7		13,612		29.2
International	480		0.7		(61.4	)	1,245		2.0
	$	57,833	13.1	%	(17.7	)%	$	70,257	14.9	%

Contribution margin consists of gross profit less selling expenses. Selling expenses consist primarily of salaries, other employee-related costs, travel and entertainment expenses, facilities-related costs for sales and service offices, bad debt expenses, third-party commissions and expenditures for marketing efforts, including the costs of collateral materials, conventions and trade shows, product demonstrations, customer relationship management systems, and supplies.

Contribution margin is impacted by the previously discussed sales and gross margin for each business unit. The impact of changes in selling expenses on each business unit's contribution margin are as follows:

Selling expense in our High School Park and Recreation business unit increased in the nine months ended January 26, 2019 compared to the same period one year ago primarily due to a change in the allocation of resources to this market's selling efforts. Selling expense in our International business unit increased in the nine months ended January 26, 2019 compared to the same period one year ago primarily due to third-party commissions and increased personnel related expenses.

Selling expenses in our Commercial, Live Events, and Transportation business units remained relatively flat in the nine months ended January 26, 2019 compared to the same period one year ago.

Other Operating Expenses



	Nine Months Ended
	January 26, 2019						January 27, 2018
	Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales
(in thousands)	Amount		As a Percent of Net Sales		Percent Change		Amount		As a Percent of Net Sales
General and administrative	$	25,685	5.8	%	(1.7	)%	$	26,138	5.5	%
Product design and development	$	26,611	6.0	%	1.2	%	$	26,294	5.6	%

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General and administrative expensesin the nine months ended January 26, 2019 decreased as compared to the same period one year ago primarily due to a decrease in professional fees.

Product design and development expenses consist primarily of salaries, other employee-related costs, professional services, facilities costs and equipment-related costs and supplies. Product design and development investments in the near term are focused on developing or improving our video technology over a wide range of pixel pitches for both indoor and outdoor applications. These new or improved technologies are focused on varied pixel density for image quality and use, expanded product line offerings for our various markets and geographies, improved quality and reliability, and improved cost points. We plan to make continued investments in our software and controller capabilities throughout our various product offerings. Through all design efforts, we focus on standardizing display components and control systems for both single site and network displays.

Our costs for product design and development represent an allocated amount of costs based on time charges, professional services, material costs and the overhead of our engineering departments. Generally, a significant portion of our engineering time is spent on product design and development, while the rest is allocated to large contract work and included in cost of sales.

Product design and development expenses in the nine months ended January 26, 2019 as compared to the same period one year ago increased primarily due to increased labor costs assigned to product design and development projects relating to our strategy to accelerate the deployment of products and solutions to our markets. To deliver value to our customers and serve the markets' expectations, we expect a similar level of expenditures for new or enhanced customer solutions for the remainder of fiscal 2019 as compared to fiscal 2018.

Other Income and Expenses



	Nine Months Ended
	January 26, 2019							January 27, 2018
	Amount			As a Percent of Net Sales		Percent Change		Amount			As a Percent of Net Sales
(in thousands)	Amount			As a Percent of Net Sales		Percent Change		Amount			As a Percent of Net Sales
Interest income, net	$	627		0.1	%	80.7	%	$	347		0.1	%
Other (expense) income, net	$	(423	)	(0.1	)%	(1.4	)%	$	(429	)	(0.1	)%

Interest income, net: We generate interest income through short-term cash investments, marketable securities, and product sales on an installment basis or in exchange for the rights to sell and retain advertising revenues from displays, which result in long-term receivables. Interest expense is comprised primarily of interest costs on long-term marketing obligations.

The change in interest income, net in the nine months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago ~~decreased as a result of lower long-term receivables which bear imputed interest rates. As a result of~~was primarily due to the change in investment levels caused by the volatility of working capital needs and changes in investing and financing ~~activities, along with changes in the interest rate environment, it is difficult to project changes in interest income.~~activities.

Other (expense) income, net: The change in other income and expense, net for the nine months ended January ~~27, 2018~~26, 2019 compared to the same period one year ago was primarily due to foreign currency volatility ~~the~~and losses recorded from an equity method ~~affiliate, and an income tax penalty incurred on a late filing.~~affiliate.

Income Taxes

~~Our~~We calculate the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate ~~was~~for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Due to various factors, including operations in multiple jurisdictions worldwide, our effective tax rate is subject to fluctuation. We have recorded a tax rate of (71.8) percent for the nine months ended January 26, 2019 as compared to an effective tax rate of 47.2 percent for the nine months ended January 27, ~~2018~~2018. The change in the effective tax rate is due to tax credits proportionate to pre-tax book income, the release of $2.8 million in unrecognized tax benefits related to a lapse of statute, the release of $0.5 million for a valuation allowance reversal related to foreign net operating loss carryforwards, and a decrease in the federal statutory tax rate from 30.4 percent to 21 percent pursuant to the Tax Act, as compared to ~~an effective~~the same prior year period, which included a re-measurement of deferred taxes resulting in a $3.7 million impact to tax expense due to the lowering of the tax rate ~~of 31.9 percent for the nine months ended January 28, 2017.~~

~~The current-year rate was significantly impacted by~~under the Tax ~~Act, which was signed into law on December 22, 2017. Most notably, the~~Act. The Tax Act reduced the federal normal statutory ~~federal income tax~~ rate ~~for corporations~~ from ~~35%~~35 percent to ~~21%. Because~~21 percent; however, since we ~~file our tax return based on our~~are a fiscal year ~~the statutory~~ tax ~~rate for our 2018 tax return will be~~filer, a blended rate of ~~approximately 30.4%. In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $3.7 million one-time expense~~30.4 percent was used for the estimated re-measurement of our net deferred tax asset and a $0.6 million estimated one-time transition tax on certain undistributed earnings of our foreign subsidiaries in the quarter ended January 27,fiscal year 2018. Any additional impacts from the enactment of the Tax Act will be recorded as they are identified during the measurement period as provided for in accordance with SAB 118. Excluding the impact of this one-time expense, our effective tax rate was 23% for the nine months ended January 27, 2018, and we expect our effective tax rate to be approximately 48% for the remainder of our fiscal year. In fiscal 2019, we expect an effective tax rate of approximately 21%, exclusive of any SAB 118 changes in estimate.

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LIQUIDITY AND CAPITAL RESOURCES


	Nine Months Ended								Nine Months Ended
	January 27, 2018			January 28, 2017			Percent Change		January 26, 2019			January 27, 2018			Percent Change
(in thousands)	January 27, 2018			January 28, 2017			Percent Change		January 26, 2019			January 27, 2018			Percent Change
Net cash (used in) provided by:
Operating activities	$	26,953		$	45,387		(40.6	)%	$	32,187		$	26,953		19.4	%
Investing activities	(1,245		)	(11,421		)	(89.1	)	(19,926		)	(1,245		)	1,500.5
Financing activities	(10,144		)	(13,229		)	(23.3	)	(8,771		)	(10,144		)	(13.5	)
Effect of exchange rate changes on cash	667			(680		)	(198.1	)	62			667			(90.7	)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	16,231		$	20,057		(19.1	)%
Net increase in cash, cash equivalents and restricted cash									$	3,552		$	16,231		(78.1	)%

Net cash provided by operating activities: Operating cash flows consist primarily of net income adjusted for non-cash items, including depreciation and amortization, stock-based compensation, deferred income taxes and the effect of changes in operating assets and liabilities.

Net cash provided by operating activities was ~~$27.0~~$32.2 million for the first nine months of fiscal ~~2018~~2019 compared to net cash provided by operating activities of ~~$45.4~~$27.0 million in the first nine months of fiscal ~~2017.~~2018. The ~~$18.4~~$5.2 million ~~decrease~~increase in cash from operating activities from the first nine months of fiscal ~~2017~~2018 to the first nine months of fiscal ~~2018~~2019 was the ~~net~~ result of changes in net operating assets and liabilities of ~~$18.6~~$7.7 million, a ~~$1.4~~$1.0 million ~~decrease~~adjustment of the contingent liability, $0.7 million in depreciation and amortization, ~~and impairment, a $1.2~~$0.5 million ~~gain on the sale of our non-digital division, a $0.9 million decrease in the provision for doubtful accounts, and a $0.1 million decrease~~increase in net income, and $0.1 million in other non-cash items, net, adjusted by ~~an increase of $3.7~~$3.8 million in deferred income taxes, and a ~~$0.1~~$1.0 million ~~increase in~~gain on the sale of property, equipment and other ~~non-cash items, net.~~assets.

The changes in operating assets and liabilities consisted of the following:


	Nine Months Ended						Nine Months Ended
	January 27, 2018			January 28, 2017			January 26, 2019			January 27, 2018
(Increase) decrease:
Accounts receivable	$	2,797		$	5,020		$	(1,209	)	$	2,797
Long-term receivables	752			1,991			148			752
Inventories	(4,462		)	7,790			2,617			(4,462		)
Costs and estimated earnings in excess of billings	3,954			(3,004		)
Contract assets							4,199			3,954
Prepaid expenses and other current assets	221			500			1,231			221
Property and equipment and other assets available for sale							(1,893		)	—
Income tax receivables	(2,115		)	4,556			(433		)	(2,115		)
Investment in affiliates and other assets	272			139			130			272
Increase (decrease):
Current marketing obligations and other payables	(385		)	(106		)	155			(385		)
Accounts payable	(9,829		)	(4,744		)	(10,059		)	(9,829		)
Customer deposits (billed or collected)	(4,210		)	(1,529		)
Contract liabilities							12,104			2,573
Accrued expenses	4,220			2,859			5,247			4,220
Warranty obligations	(242		)	(1,717		)	(2,604		)	(242		)
Billings in excess of costs and estimated earnings	3,532			1,719
Long-term warranty obligations	1,588			707			(687		)	1,588
Income taxes payable	(447		)	1,525			(1,333		)	(447		)
Deferred revenue (billed or collected)	3,251			1,391
Long-term marketing obligations and other payables	807			1,169			(249		)	807
	$	(296	)	$	18,266		$	7,364		$	(296	)

Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders, which can cause significant short-term and seasonal fluctuations in inventory, accounts receivables, accounts payable, ~~customer deposits, costs~~contract assets and ~~earnings in excess of billings,~~liabilities, and various other operating assets and liabilities. Variability in ~~costs~~contract assets and ~~earnings in excess of billings and billings in excess of costs~~liabilities relates to the timing of billings on construction-type contracts and revenue recognition, which can vary significantly depending on contractual payment terms and build and installation schedules. Balances are also impacted by the ~~seasonality of the~~ sports ~~markets.~~

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market seasonality.

Net cash used in investing activities:Net cash used in investing activities totaled $19.9 million in the first nine months of fiscal 2019 compared to net cash used in investing activities of $1.2 million in the first nine months of fiscal ~~2018 compared to $11.4~~2018. Marketable securities, net totaled $3.0 million in the first nine months of fiscal ~~2017. The change in the amount of cash used in investing activities was the result of a net increase in marketable securities of $12.0~~2019 as compared $8.5 million in the first nine months of fiscal ~~2018 as compared to~~2018. Purchases of property and equipment totaled $14.1 million in the first nine months of fiscal ~~2017. Purchases of property and equipment totaled~~2019 compared to $10.9 million in the first nine months of fiscal ~~2018 compared to $6.7 million in the first nine months of fiscal 2017.~~2018. Proceeds from the sale of property, equipment and other assets totaled $0.3 million in the first nine months of fiscal 2019 compared

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to $2.1 million in the first nine months of fiscal ~~2018 compared to $0.2 million in the first nine months of fiscal 2017;~~2018; this was mostly related to the sale of our non-digital ~~division.~~division assets in the first nine months of fiscal 2018. During the first nine months of fiscal 2019, we had a net cash outflow of $2.3 million for the acquisition of assets of AJT Systems, Inc.

Net cash used in financing activities: Net cash used in financing activities was ~~$10.1~~$8.8 million for the nine months ended January ~~27, 2018~~26, 2019 compared to ~~$13.2~~$10.1 million in the same period one year ago. Principal payments on long-term obligations for the nine months ended January 26, 2019 was $0.4 million compared to $1.0 million during the first nine months of fiscal 2018, which was mostly related to a contingent liability payment. Dividends of ~~$9.3~~$9.4 million, or $0.21 per share, were paid to Daktronics shareholders during the first nine months of fiscal ~~2018,~~2019, as compared to dividends of ~~$10.6~~$9.3 million, or ~~$0.24~~$0.21 per share, paid to Daktronics shareholders during the first nine months of fiscal ~~2017. In~~2018. Proceeds from the exercise of stock options for the nine months ended January 26, 2019 were $1.3 million compared to $0.5 million during the first nine months of fiscal 2017, we used $1.8 million to purchase our common shares as part of the $40.0 million share repurchase plan authorized by our Board of Directors, and there have been no purchases in the nine months ended January 27, 2018.

Other Liquidity and Capital Resources Discussion: We ~~have $6.6~~had $3.1 million of retainage on long-term contracts included in receivables and ~~costs in excess of billings~~contract assets as of January ~~27, 2018,~~26, 2019, which we expect to collect within one year.

Working capital was $~~142.9~~135.6 million and ~~$127.1~~$132.8 million at January ~~27, 2018~~26, 2019 and April ~~29, 2017,~~28, 2018, respectively. The changes in working capital, particularly changes in accounts receivable, accounts payable, inventory, and ~~costs in excess of billings~~contract assets and ~~billings in excess of costs,~~liabilities, and the seasonality of the sports market can have a significant impact on the amount of net cash provided by operating activities largely due to the timing of payments and receipts. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

We have used and expect to continue to use cash balances 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 2412 months depending on the amount of custom work and a customer’s delivery needs. We often receive down payments or progress payments on these product orders. To the extent 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.

On November 15, 2016, we entered into a credit agreement and a related revolving note with a U.S. bank. The agreement and note have a maturity date of November 15, 2019. The revolving amount of the agreement and note is $35.0 million, including up to $15.0 million for commercial and standby letters of credits. The interest rate ranges from LIBOR plus 145 basis points to LIBOR plus 195 basis points depending on the ratio of our interest-bearing debt to EBITDA. EBITDA is defined as net income before deductions for interest expense, income taxes, depreciation and amortization, all as determined in accordance with GAAP. The effective interest rate was ~~3.0~~4.0 percent at January ~~27, 2018.~~26, 2019. We are assessed a loan fee equal to 0.125 percent per annum on any unused portion of the loan. As of January ~~27, 2018,~~26, 2019, there were no advances to us under the loan portion of the line of credit, and the balance of letters of credit outstanding was approximately ~~$10.7~~$11.2 million.

The credit agreement is unsecured and requires us to be in compliance with the following financial ratios:

A minimum fixed charge coverage ratio of at least 2 to 1 at the end of any fiscal year. The ratio is equal to (a) EBITDA ~~less~~minus the sum of dividends or other distributions ~~(with~~(unless the ~~exception of any U.S.~~ bank ~~approved special cash dividend)~~approves), share repurchases, a maintenance capital expenditure reserve in the amount of $6$6.0 million, and income tax ~~expenses paid in cash, but excluding cash used~~ to ~~repurchase any Daktronics, Inc. stock over~~ (b) all principal and interest payments with respect to ~~debt,~~indebtedness, excluding principal payments on the line of credit; and

A ratio of ~~interest-bearing~~funded debt, excluding any marketing obligations, to EBITDA of less than 1 to 1 at the end of any fiscal quarter.

On November 15, 2016, we entered into an amended and restated loan agreement and a continuing and unlimited guaranty agreement with another U.S. bank which supports our credit needs outside of the United States. The loan and guaranty have a maturity date of November 15, 2019. The revolving amount of the loan is $20.0 million. We intend to use the borrowings under the agreement to support credit needs for general corporate purposes outside the United States. This credit agreement is unsecured. It contains the same covenants as the credit agreement on the line of credit and contains an inter creditor agreement whereby the debt has a cross default provision with the primary credit agreement. Total credit allowed between the two credit agreements is limited to ~~$40.0~~$55.0 million. The interest rate is equal to LIBOR plus 1.5 percent. As of January ~~27, 2018,~~26, 2019, there were no advances outstanding under the loan agreement and approximately ~~$2.7~~$3.6 million in bank guarantees under this line of credit.

As of January ~~27, 2018,~~26, 2019, we were in compliance with all applicable bank loan covenants.

We utilize cash on hand to pay dividends to our investors. The following table summarizes the quarterly dividends declared and/or paid since the prior fiscal year end of April ~~29, 2017:~~28, 2018:

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Date Declared	Record Date	Payment Date	Amount per Share
~~June 1, 2017~~May 31, 2018	June ~~13, 2017~~11, 2018	June ~~23, 2017~~21, 2018	$0.07
~~August 31, 2017~~September 6, 2018	September ~~11, 2017~~17, 2018	September ~~22, 2017~~27, 2018	$0.07
November ~~30, 2017~~29, 2018	December ~~11, 2017~~10, 2018	December ~~21, 2017~~	~~$0.07~~
~~March 1, 2018~~	~~March 12, 2018~~	~~March 22,~~20, 2018	$0.07

Although we expect to continue to pay dividends for the foreseeable future, the nature and amounts of dividends will be reviewed regularly and declared by the 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 for an aggregate of $150.0 million in bonded work outstanding. If we were unable to complete the work and our customer would call upon the bond for payment, the surety company would subrogate its loss to Daktronics. At January ~~27, 2018,~~26, 2019, we had $~~8.3~~6.6 million of bonded work outstanding against this line.

Our business growth and profitability improvement strategies depend on investments in capital expenditures. We are projecting capital expenditures to be less than ~~$20~~$20.0 million for fiscal ~~2018 for~~2019 purchases of manufacturing equipment for new or enhanced product production, expanded capacity, investments in quality and reliability equipment, and continued information infrastructure investments.

We believe our working capital available from all sources will be adequate to meet the cash requirements of our operations in the foreseeable future. If our growth extends beyond current expectations, profitability does not continue, or if we make any strategic investments, we may need to increase our credit facilities or seek other means of financing. We anticipate we will be able to obtain any needed funds under commercially reasonable terms from our current lenders or other sources, although ~~there can~~this availability cannot be guaranteed.

Off-Balance Sheet Arrangements and Contractual Obligations

There has been no ~~guarantee~~material change in our off-balance sheet arrangements and contractual obligations since the fiscal year ended April 28, 2018. For additional information, see our Annual Report on Form 10-K for the fiscal year ended April 28, 2018.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in "Note 1. Nature of ~~such.~~ Business and Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 28, 2018. We discuss our critical accounting estimates in "Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended April 28, 2018. In the first quarter of fiscal 2019, we adopted new revenue recognition guidance, as described in "Note 1. Basis of Presentation" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report. There have been no other significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2018.

New Accounting Pronouncements

For a summary of recently issued accounting pronouncements and the effects of those pronouncements on our financial results, refer to "Note 1. Basis of Presentation" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Foreign Currency Exchange Rates~~

~~Through January 27, 2018, most of~~We are exposed to certain interest rate, foreign currency, and commodity risks as disclosed in our ~~net sales were denominated~~Annual Report on Form 10-K for the fiscal year ended April 28, 2018. There have been no material changes in ~~U.S. dollars, and~~ our exposure to ~~foreign currency exchange rate changes on net sales had not been significant. For~~these risks during the first nine months ~~ended January 27, 2018, net sales originating outside the United States were~~ ~~16.1 percent~~of total net sales, of which a portion was denominated in Canadian dollars, Euros, Chinese renminbi, British pounds, Australian dollars, Brazilian reais or other currencies. We manufacture our products in the United States, China, Belgium, and Ireland. Our results of operations could be affected by factors such as changes in foreign currency rates or weak economic conditions in foreign markets. If we believed currency risk in any foreign location is significant, we would utilize foreign exchange hedging contracts to manage our exposure to the currency fluctuations.

Over the long term, net sales to international markets are expected to increase as a percentage of total net sales and, consequently, a greater portion of our business could be denominated in foreign currencies. In addition, we may fund our foreign subsidiaries’ operating cash needs in the form of loans denominated in U.S. dollars. As a result, operating results may become more subject to fluctuations based upon changes in the exchange rates of certain currencies in relation to the U.S. dollar. To the extent we engage in international sales denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets. This effect is also impacted by sources of raw materials from international sources. We estimate that a 10 percent change in all foreign exchange rates would impact our reported income before taxes by approximately $1.1 million. This sensitivity analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area. We will continue to monitor and minimize our exposure to currency fluctuations and, when appropriate, use financial hedging techniques, including foreign currency forward contracts and options, to minimize the effect of these fluctuations. However, exchange rate fluctuations as well as differing economic conditions, changes in political climates, differing tax structures and other rules and regulations could adversely affect our ability to effectively hedge exchange rate fluctuations in the future.

We have foreign currency forward agreements in place to offset changes in the value of contracts with customers denominated in a foreign currency. The notional amount of these derivatives is $10.4 million, and all contracts mature within 19 months. These contracts are marked to market each balance sheet date and are not designated as hedges. See "Note 14. Derivative Financial Instruments" of the Notes to the Consolidated Financial Statements included elsewhere in this Report for further details.

~~Interest Rate Risks~~

Our exposure to market rate risk for changes in interest rates relates primarily to our marketing obligations and long-term accounts receivable. As of January 27, 2018, our outstanding marketing obligations were ~~$0.5 million, all of which were in fixed rate obligations.~~

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In connection with the sale of certain display systems, we have entered into various types of financing with customers. The aggregate amounts due from customers include an imputed interest element. The majority of these financings carry fixed rates of interest. As of January 27, 2018, our outstanding long-term receivables were ~~$4.1 million. Each 25 basis point increase in interest rates would have an associated immaterial annual opportunity cost.~~

~~The following table provides maturities and weighted average interest rates on our financial instruments sensitive to changes in interest rates.~~

Fiscal Years (dollars in thousands)

2018 2019 2020 2021 2022 Thereafter
Assets:
Long-term receivables, including current maturities:
Fixed-rate $ 572
$ 2,030
$ 689
$ 447
$ 341
$ 68
Average interest rate 8.9 % 8.7 % 8.7 % 8.5 % 9.0 % 9.0 %
Liabilities:

Long- and short-term debt:

Fixed-rate $ 379
$ 575
$ 1,013
$ —
$ —
$ —
Average interest rate 5.5 % 4.5 % 3.3 % — % — % — %
Long-term marketing obligations, including current portion:

Fixed-rate $ 131
$ 200
$ 109
$ 10
$ —
$ —
Average interest rate 8.6 % 7.8 % 9.0 % 9.0 % — % — %

~~Of our $49.0 million in cash balances at January 27, 2018,~~ ~~$40.8 million~~ were denominated in U.S. dollars of which $3.7 million is held by our foreign subsidiaries. We have an additional $8.2 million in cash balances denominated in foreign currencies of which $7.1 million are maintained in accounts of our foreign subsidiaries. A portion of the cash held in foreign accounts is used to collateralize outstanding bank guarantees issued by our foreign subsidiaries.

~~Commodity Risk~~

We are dependent on basic raw materials, sub-assemblies, components, and other supplies used in our operations. Our financial results could be affected by the availability and changes in prices of these materials. Some of these materials are sourced from a limited number of suppliers or only a single supplier. These materials are also key source materials for our competitors. Therefore, if demand for these materials rises, we may experience increased costs and/or limited or unavailable supplies. As a result, we may not be able to acquire key production materials on a timely basis, which could impact our ability to produce products and satisfy incoming sales orders on a timely basis. In addition, the costs of these materials can rise suddenly and result in significantly higher costs of production. Our sourcing group works to implement strategies to mitigate these risks. Periodically, we enter into pricing agreements or purchasing contracts under which we agree to purchase a minimum amount of product in exchange for guaranteed price terms over the length of the contract, which generally does not exceed one year. We have been impacted by longer lead times because of worldwide shortages; however, we believe that we have adequate sources of supply for our key materials.fiscal 2019.

Item 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as of January ~~27, 2018,~~26, 2019, which is the end of the period covered by this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of January ~~27, 2018,~~26, 2019, our disclosure controls and procedures were effective.

Based on the evaluation described in the foregoing paragraph, our Chief Executive Officer and Chief Financial Officer concluded that during the quarter ended January ~~27, 2018,~~26, 2019, there was no change in our internal control over financial reporting which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Not applicable.

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Item 1A. RISK FACTORS

The discussion of our business and operations included in this Quarterly Report on Form 10-Q should be read together with the risk factors described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended April ~~29, 2017.~~28, 2018. They describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties, together with other factors described elsewhere in this Report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our financial condition or financial results.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchases

During the nine months ended January ~~27, 2018,~~26, 2019, we did not repurchase any shares of our common stock.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

Not applicable.

Item 6. EXHIBITS

A list of exhibits required to be filed as part of this report is set forth in the Index of Exhibits, which immediately precedes such exhibits, and is incorporated herein by reference.

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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/ Sheila M. Anderson
		Daktronics, Inc.
		Sheila M. Anderson
		Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)

Date:	~~March 2, 2018~~February 22, 2019

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Index to Exhibits

Certain of the following exhibits are incorporated by reference from prior filings. The form with which each exhibit was filed and the date of filing are as indicated below; the reports described below are filed as Commission File No. 0-23246 unless otherwise indicated.



3.1	Amended and Restated Articles of Incorporation of the ~~Company~~Company. (Incorporated by reference to Exhibit 3.1 ~~filed with our Quarterly~~of the Current Report on Form ~~10-Q~~10-Q/A (Amendment No. 1) of Daktronics, Inc. filed on ~~August 30, 2013)~~December 21, 2018).
3.2	Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.4 filed with our Annual Report on Form 10-K on June 12, 2013).
4.1	Rights Agreement dated as of November 16, 2018 between Daktronics, Inc. and Equiniti Trust Company, as Rights Agent (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K of Daktronics, Inc. filed on November 16, 2018).
10.1	Credit Agreement dated November 15, 2016 by and between the Company and U.S. Bank National Association (Incorporated by reference to Exhibit 10.1 filed with our Current Report on Form 8-K filed on November 16, 2016).
10.2	Revolving Note dated November 15, 2016 issued by the Company to U.S. Bank National Association (Incorporated by reference to Exhibit 10.2 filed with our Current Report on Form 8-K filed on November 16, 2016).
10.3	Amended and Restated Loan Agreement dated November 15, 2016 by and between the Company and Bank of America, N.A. (Incorporated by reference to Exhibit 10.3 filed with our Current Report on Form 8-K filed on November 16, 2016).
10.4	Continuing and Unconditional Guaranty dated November 15, 2016 by and between the Company and Bank of America, N.A. (Incorporated by reference to Exhibit 10.4 filed with our Current Report on Form 8-K filed on November 16, 2016).
10.5	Amended and Restated Loan Agreement dated May 5, 2017 by and between the Company and Bank of America, N.A. (Incorporated by reference to Exhibit 10.6 filed with our Annual Report on Form 10-K filed on June 9, 2017).
10.6	Daktronics, Inc. 2015 Stock Incentive Plan ("2015 Plan"). (Incorporated by reference to Exhibit A to the Company's Definitive Proxy Statement on Schedule 14A filed on July 14, 2015).
10.7	Form of Restricted Stock Award Agreement under the 2015 Plan (Incorporated by reference to Exhibit 10.2 filed with our Current Report on Form 8-K on September 3, 2015).
10.8	Form of Non-Qualified Stock Option Agreement Terms and Conditions under the 2015 Plan (Incorporated by reference to Exhibit 10.3 filed with our Current Report on Form 8-K on September 3, 2015).
10.9	Form of Incentive Stock Option Terms and Conditions under the 2015 Plan (Incorporated by reference to Exhibit 10.4 filed with our Current Report on Form 8-K on September 3, 2015).
10.10	Form of Restricted Stock Unit Terms and Conditions under the 2015 Plan (Incorporated by reference to Exhibit 10.5 filed with our Current Report on Form 8-K on September 3, 2015).
31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (1)
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (1)
101	The following financial information from our Quarterly Report on Form 10-Q for the period ended January ~~27, 2018~~26, 2019 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, (v) Notes to Condensed Consolidated Financial Statements, and (vii) document and entity information. (1)
	(1)	Filed herewith electronically.

3539



Contingent liability as of April 29, 2017	$	1,891
Settlements	(1,009		)
Interest	30
Foreign currency translation	122
Contingent liability as of January 27, 2018	$	1,034



	Fiscal Years (dollars in thousands)
	2018			2019			2020			2021			2022			Thereafter
Assets:
Long-term receivables, including current maturities:
Fixed-rate	$	572		$	2,030		$	689		$	447		$	341		$	68
Average interest rate	8.9		%	8.7		%	8.7		%	8.5		%	9.0		%	9.0		%
Liabilities:
Long- and short-term debt:
Fixed-rate	$	379		$	575		$	1,013		$	—		$	—		$	—
Average interest rate	5.5		%	4.5		%	3.3		%	—		%	—		%	—		%
Long-term marketing obligations, including current portion:
Fixed-rate	$	131		$	200		$	109		$	10		$	—		$	—
Average interest rate	8.6		%	7.8		%	9.0		%	9.0		%	—		%	—		%