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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended May 1, 1999
OR

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

Commission file number 0-23246
DAKTRONICS, INC.
(Exact name of registrant as specified in its charter)

South Dakota 41-0306862
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

331 32nd Avenue, Brookings, SD 57006
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(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (605) 697-4000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, No Par Value
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(Title of Class)

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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(g) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of July 26, 1999, 4,369,941 shares of the registrant's Common Stock
were issued and outstanding, and the aggregate market value of voting stock held
by non-affiliates of the registrant as of July 26, 1999 was approximately
$37,600,000 based on the closing price of $12 per share of July 26, 1999 on the
NASDAQ/NMS).
Documents Incorporated By Reference
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Selected portions of the Definitive Proxy Statement Incorporated into Part III
Statement for the Annual Meeting of Shareholders to be held August 18, 1999

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DAKTRONICS, INC.

Table of Contents

Page(s)
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PART I................................................................... 2 - 15

PART II..................................................................16 - 36

PART III................................................................. 37

PART IV..................................................................37 - 58

Signatures............................................................... 39

PART I

Item 1. Business.

THIS REPORT CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 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 OF THE COMPANY, ITS DIRECTORS OR ITS OFFICERS WITH RESPECT TO,
AMONG OTHER THINGS: (i) THE COMPANY'S FINANCING PLANS; (ii) TRENDS AFFECTING THE
COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS; (iii) THE COMPANY'S
GROWTH STRATEGY AND OPERATING STRATEGY; AND (iv) THE DECLARATION AND PAYMENT OF
DIVIDENDS. THE WORDS "MAY," "WOULD," "COULD," "WILL," "EXPECT," "ESTIMATE,"
"ANTICIPATE," "BELIEVE," "INTEND," "PLANS" 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 THE COMPANY'S 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 AND THOSE FACTORS DISCUSSED IN DETAIL
IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

GENERAL

Daktronics is a leading supplier of electronic scoreboards, computer
programmable display systems, and large video displays for sport, business and
government applications. The Company offers the most complete line of large
display products of any single manufacturer, from smaller indoor scoreboards and
displays to multi-million dollar outdoor video display systems. The Company is
recognized worldwide as a technical leader with the capabilities to design,
manufacture, install and service complete integrated systems that display
real-time data, graphics, animation and video. Thousands of Daktronics displays
communicate with millions of viewers every day in more than 65 countries
worldwide.

The Company has sold display systems ranging from small standard scoreboards
priced under $1,000 to large complex display systems priced in excess of $13
million. In fiscal 1999, sales of products and services under $50,000
represented approximately 28% of net sales.

The Company's net sales and profitability historically have fluctuated due to
the impact of large product orders, such as display systems for the Olympic
Games and major league sport facilities, as well as the seasonality of the
sports market. The Company's gross margins on large product orders tend to
fluctuate more than those for small standard orders. Large product orders that
involve competitive bidding and substantial subcontract work for product
installation generally have lower gross margins. Although the Company follows
the percentage of completion method of recognizing revenues for these larger
orders, the Company nevertheless has experienced fluctuations in operating
results and expects that its future results of operations may be subject to
similar fluctuations.

INDUSTRY

The Company's products fit into a growing niche which is part of the broad
visual communications business which includes printing, photography, television,
signage, etc. In particular, the Company's products fit within the signage
sub-category of the broad visual communications businesses. Signage

includes various niches commonly identified as painted signs, architectural
signage, electric signs, programmable signs and large video displays (LVD).

Daktronics is an established leader in the niche of computer programmable signs.
Growth of this product category was stimulated by the invention of the
microprocessor and the continued development and acceptance in society of the
personal computer. In many applications, the sign is another peripheral that is
attached to a personal or desk top computer. The growth of computer programmable
signage is related to the growth of the personal computer industry.

Programmable displays either emit or reflect light depending on the specific
display technology that is utilized. Two years ago another technology
breakthrough of the blue light emitting diode visible outdoors provided the
basis for significant future growth in the industry. This allowed Daktronics to
enter the large video display segment of the signage business. Previously the
large video display business was dominated by the small cathode ray tube based
product, and the suppliers were generally the same companies that were in the
television set business.

With the availability of high quality blue and green light emitting diodes, it
has been possible for Daktronics to broaden its scope and provide not only
computer programmable signage but also large video displays for both outdoor and
indoor usage.

Currently with the exception of Daktronics, the manufacturers of computer
programmable displays are not manufacturing large video displays and conversely
the large video manufacturers are not manufacturing computer programmable
displays. This places Daktronics in a uniquely beneficial position to serve
venues that have both requirements such as the typical large sports venue.
Daktronics, through the use of its proprietary Venus(R) 7000 software, also has
the unique capability of time sharing a large screen such as in a large stadium
or arena between the video display functions previously provided by the large
video display and the information and animation display functions previously
provided by computer programmable display. Having all these functions integrated
into one ultra large display system gives the venue owner significant
flexibility in managing his information and entertainment presentations that has
not been available previously.

It is the Company's opinion that the advent of digital television will further
stimulate the ease and value of combining these video and information
presentations into a single display system.

COMPANY BACKGROUND

The Company was founded in 1968 by Drs. Aelred Kurtenbach and Duane Sander,
while professors of electrical engineering at South Dakota State University in
Brookings, South Dakota, in part to utilize the talents of university graduates.
Daktronics produced and sold its first product in 1970, a voting display system
for the Utah Legislature. Using the technology developed from voting display
systems, Daktronics expanded its product line to scoreboards in 1971 and
commercial displays in 1973. Beginning in the late 1970's, the Company
incorporated microprocessor-based computers into its display controllers to
process information provided by an operator and to formulate the information for
presentation on a display. At that time, Daktronics also began building
computer-programmable information display systems utilizing standard modules or
sections in a variety of systems. The use of modular sections for both its
smaller and larger display systems has allowed the Company to offer customers a
broad range of both standard and custom products. These innovations helped the
Company to obtain a scoreboard contract for the 1980 Winter Olympic Games and
several large college installations. In the early to mid-1980's, Daktronics
continued to enhance its controller and display

technology, acquired the Glow Cube(R) display technology and a manufacturer of
printed circuit boards, and installed its first scoreboard in a major league
facility.

During the 1990's, the Company has continued to expand its product lines,
increase market share in its existing markets and develop new markets for its
products. Daktronics has enhanced its Starburst(R) display technology by
developing new lens and reflector designs to capture viewer attention and reduce
energy consumption. The Company has display control circuitry capability to
display 16 million possible color combinations at 30 frames per second. The
Company has utilized this circuiting to develop technology for LED video
displays. Examples of the Company's continued market penetration include (i)
scoreboards and/or LED video displays for Seattle Mariners, Indianapolis Motor
Speedway, University of Georgia, Ohio State University, (ii) commercial displays
in Times Square, New York; Las Vegas, Nevada and Branson, Missouri; and (iii)
variable message systems for highway and mass transit use in California,
Washington, Delaware, Illinois and Pennsylvania.

Daktronics has received several awards, including being named the South Dakota
Business of the Year in 1987, 1989 and 1993 by the South Dakota Industry and
Commerce Association.

PRODUCTS

The Company offers its customers a wide range of computer-programmable
information display systems consisting of related products, or families of
products, that have similar functions and varying degrees of capabilities.
Products within each family use displays and controllers that are built with
many of the same modular components to reduce the cost of production and provide
flexibility for standard and custom installations. The use of modular components
also enhances the reliability and serviceability of the display systems. For
example, the basketball scoreboard family includes products that use many of the
same display modules and range from a small, single-faced scoreboard to a large,
four-sided display with player statistics. The sizes of displays range from 2
inches by 20 inches for small indoor displays to 30 feet by 100 feet or more for
large outdoor displays.

The two principal components of the Company's systems are the display and the
display controller. The display controller uses computer hardware and software
to process the information provided from the operator and to formulate the
information, graphics or animation to be presented on the display. The display
controller then controls each of the picture elements or "pixels" on the display
to present the message or image.

Data is transferred between the display controller and the displays for both
local and remote display sites. Local connections use twisted pair cables, fiber
optic cables, infrared links or radio frequency. Both standard and cellular
telephone connections are used to connect remote display locations. These
connections are generally purchased from third parties.

Within each product family, Daktronics produces both standard and custom
displays that vary in complexity, size and resolution. For example, a large
color animation display is significantly more complex than a time and
temperature display. The physical dimensions of a display depend on the size of
the viewing area, the distance from the viewer to the display and the amount of
information to be displayed at any one time. Generally, larger pixels spaced
farther apart are used for longer distance viewing. The resolution of a display
is determined by the size and spacing of each pixel, with smaller more densely
packed pixels for higher resolution. The type of the display may depend on the
shape of the viewing area. For example, arena scoreboards may have a viewing
angle as wide as 180 degrees,

compared with a roadside display which can been viewed from a passing vehicle
only within a narrow angle from the display.

DISPLAY TECHNOLOGIES

Each of the Company's display systems uses one or more of the following display
technologies: (i) Starburst(R) four-color incandescent lamps, (ii) SunSpot(R)
monochrome incandescent lamps, (iii) Glow Cube and other reflective elements or
(iv) LEDs. The selection of a display technology depends on a variety of
factors, including price, location, power consumption and operating cost, and
complexity of the information, graphics or animation to be displayed. The
outdoor displays are designed to withstand the elements and to be visible in
both bright sunlight and at night.

STARBURST(R) COLOR INCANDESCENT LAMP DISPLAYS. Starburst(R) displays use four
colors (red, green, blue and clear) to display many shades of color when
different combinations of lights are illuminated. The most popular Starburst(R)
displays use reflectors with colored lenses over clear lamps. Each of the
display lamps is turned on and off at different intervals and rates determined
by the software in the controller to change what is presented on the display.
The Company-designed reflector and lens system consumes less energy than a
traditional incandescent lamp display while maintaining the brightness of the
display to the viewing audience. The Starburst(R) color displays are used both
indoors and outdoors and provide customers the flexibility of displaying text,
numbers, graphics, animation and other types of information. Among the thousands
of the Company's Starburst(R) installations are displays at Caesars Palace, Penn
State University, Tacoma Dome and the Marine Midland Arena, and various indoor
and outdoor sports facilities.

SUNSPOT(R) MONOCHROME INCANDESCENT LAMP DISPLAYS. SunSpot(R) displays use
monochrome (one color) incandescent lamps which turn on and off at intervals and
rates similar to a Starburst(R) four color display. SunSpot(R) displays are used
both indoors and outdoors typically for time and temperature, messaging,
graphics and other applications where color is not required. Daktronics has sold
its SunSpot(R) displays for many small and large installations such as high
school football stadiums, commercial businesses, and major league baseball
parks.

REFLECTIVE DISPLAYS. The Company's Glow Cube(R) display technology uses
three-dimensional pixels or "cubes." Each pixel is programmed to turn so that
the viewing surface of the cube flips from a bright color to a dark contrasting
color. Words and graphics form as each pixel flips from one color to the other.
Glow Cube(R) displays are generally used outdoors, use less power and can be
configured in a wide variety of sizes. Because a Glow Cube(R) display reflects
sunlight during the day and fluorescent light at night, the display consumes
relatively little power while operating. The Company's 7 x 18 foot Glow Cube(R)
displays for the PGA TOUR each operate on a golf cart battery and are moved
between tour sites throughout the season. Daktronics has also provided Glow
Cube(R) displays for the 1996 Summer Olympic Games, the 1994 Winter Olympic
Games and transportation departments in Connecticut, New Jersey and Virginia,
and will be providing displays for the 2000 Sydney Olympics.

Another reflective product is the MagneView(TM) technology, with its two
dimensional design, is a low cost alternative to the Glow Cube(R) technology.
This technology, along with others, was incorporated into the displays at the
1996 Summer Olympics in Atlanta, and will also be used for the 2000 Summer
Olympics in Sydney.

LED (LIGHT EMITTING DIODE) DISPLAYS. The Company's LED displays use programmable
light emitting diodes as the light source for each display pixel. LED technology
uses individual indicator elements that are commonly found in applications such
as automobile dashboards, small appliances and digital clocks. The LEDs turn on
and off at different intervals and rates to form the display images. One line
LED displays are used for text, and larger LED displays are used for text,
graphics, animation and video. LED displays can be one or multiple colors. The
LED technology is advantageous because of the long life of LEDs and their low
power consumption. Daktronics manufactures both indoor and outdoor LED displays
(including its own pixels). Displays range from small character-based
DataTrac(TM) signs to 16 million color ProStar(R) video displays.

PRODUCT FAMILIES

Daktronics product offering is comprised of three primary product groups:

1) Sports Products
2) Large Matrix Products
3) Business Products

SPORTS PRODUCTS
The Sports Products group includes the following products:

Sports Product Displays. The Company offers a full line of indoor scoreboards
ranging from 2-digit shot clocks to high school basketball scoreboards to large
center hung scoreboards incorporating message centers and ad panels. The Company
offers a number of indoor scoreboard models using LED technology or incandescent
models. Approximately 50% of the popular indoor models sold are now the LED
type.

The Company also offers outdoor scoreboards which use mostly incandescent lamp
technology. The outdoor scoreboards likewise range from 2-digit game timers to
high school football scoreboards to large scoring systems incorporating message
centers and ad panels.

In 1996 the Company began standardizing many of the large scoring systems, both
indoor and outdoor, suitable especially for colleges and municipal arenas.
Previously, many of these systems were designed individually from the ground up.
This standardization of the large scoring systems has improved Daktronics
ability to deliver a quality system in minimal time, with improved and more
consistent margins.

Sports Product Controllers. The Company offers a variety of internally developed
controllers depending on the sport and complexity of the system. The following
is a list of controllers for sports displays.

All Sport(R) 2000 - low cost, entry level controller for scoreboards.
All Sport(R) 4000 - controller with enhanced features and packaging over
All Sport(R) 2000.
Pro Sport(R) 6000 - controller for large multi-display, multi-sport scoring
system for large college and professional levels.
OmniSport(R) 1000 - entry level timer for aquatics, track, and other timed
events.
OmniSport(R) 6000 - timer with enhanced features and packaging for larger
aquatics, track, or other timed events.

The Company also offers a variety of statistics and results software under the
DakStats(R) trademark to compliment the controllers.

LARGE MATRIX PRODUCTS
The Large Matrix product group consist of displays having a large number of
display pixels (dots or picture elements that make up an image). The pixels
offered are incandescent, LED, or reflective Glow Cube(R) pixels.

In recent years, the electronic sign industry has grown more and more
sophisticated with the increased capability of the desktop PC.

Large Matrix Displays. Previously, conventional matrix displays formed images by
simply turning a pixel on or off, displays today have the ability to vary the
intensity of each pixel to allow the generation of multiple colors. These
displays have the capability to display up to 16 million colors at speeds that
allow the display of video information.

The large matrix product offering spans from a basic 24 pixel high display with
on/off pixel control up to a full large-screen video at the high end.

Daktronics ProStar(R) LED technology, which uses red, green, and blue (RGB) LEDs
at brightness levels adequate for outdoor, is well suited to display video
because of its very quick response times. The 16 million color RGB LED displays
offer state-of-the-art video and animation capability at a price significantly
less than traditional large screen videos used in sports stadiums. The first
ProStar(R) installations were installed in the fall of 1997. Through fiscal year
1999, 45 ProStar(R) displays have been installed.

The 16 million color Starburst(R) technology offers a lower cost alternative,
approximately one-half the price per square foot of the RGB LED technology
display for customers with tighter budgets. Although the Starburst(R) technology
has lower resolution than the RGB LED product, it still provides an effective
video and animation display.

Large Matrix Controllers. Daktronics Venus(R) 7000 controller uses the
Windows(R) operating system. This is a PC based, high end controller which
provides advanced capability for control of large animation/video displays.

The Venus(R) 4600 controller continues to be a viable product as a lower cost
but very capable controller. The Company has also developed applications
software that supports its Venus(R) display controllers. The Company's
DakStats(R) software allows score keepers and statisticians to enter and display
sports statistics and other information on certain of the Company's scoreboards.
The user is responsible for updating the statistics after the software has been
installed. The DakStats(R) baseball software was first used in 1988 by the AAA
minor league Buffalo Bisons and has now been installed at several major league
facilities, including Oriole Park at Camden Yards, Jacobs Field, Ballpark in
Arlington and Coors Field. The Company has developed proprietary statistics and
results software for several other sports such as golf, football, swimming,
diving, auto racing, track and skiing. In addition to providing these software
products, the Company develops customized hardware circuit boards and software
for customers who have special information display requirements.

The Company designs interfaces between its display systems and other computer
systems allowing its large scoreboard systems to receive and display information
from computers used for statistics, timing or scoring. These interfaces allow
the display controller to send information back to a statistics system or
customer computer. These interface products automatically report continually
updated sports scores and information from national wire services.

BUSINESS PRODUCTS
The Business Products develops the Company's DataTrac(TM) and InfoNet(TM)
product lines intended primarily as text-base message displays. They cost less
than a large matrix display which are designed for full graphics and animation.

DataTrac(TM) / InfoNet(TM) Displays. The DataTrac(TM) product line consists of a
family of indoor LED displays comprised of discrete 5x7 (pixel) characters. Each
character is spaced horizontally and vertically from the adjacent character.
This provides the least expensive display per character for display of text
messages only. Daktronics offers products with .7", 1.2", 2.1" & 4.2" characters
in a wide range of overall display sizes. Some models are available in either
monochrome or tri-color.

InfoNet(TM) product line includes line oriented displays, with character heights
of 2" and 4" on indoor models, and 9" for outdoor. The outdoor model, the G1000
series, has wide application as a low cost marquee display applicable to many of
the markets Daktronics serves, especially the High School and Commercial
markets. InfoNet(TM) products are available as single or multi-line units.
Indoor InfoNet(TM) models find applications in the majority of markets served by
Daktronics.

Controllers for DataTrac(TM) and InfoNet(TM) Displays. All DataTrac(TM) and
InfoNet(TM) products have a controller in the display which is capable of
receiving a downloaded display program, and then operating independently
displaying that program until a new program is downloaded to it. This
controller, called an MDC (Multi-purpose Display Controller), is a key building
block for future product growth and expansion of the Company character and line
oriented display product offering.

The Venus(R) 1500 is the software used on a PC that allows creation of messages
and simple graphic sequences for downloading to a DataTrac(TM), InfoNet(TM),
Galaxy(TM) or SunSpot(R) display, or future display models containing an MDC.
The Venus(R) 1500 software is designed to be useable without any special
training, and is applicable to all general advertising or message presentation
applications.

The protocol for transferring data into the MDC is called the Venus(R) 1500
protocol. For applications not addressed by the Venus(R) 1500, OEM's can
purchase the Company displays and write their own software using the Venus(R)
1500 protocol to communicate to the displays. The Company also offers a software
module the OEM's can incorporate into a Windows(R) based program to reduce the
time it takes to write this interface. Several OEM's have implemented the
Venus(R) 1500 protocol into these applications, resulting in display sales in
both the aviation market and the automatic call distribution (ACD) market (ie.
Credit card processing centers).

OTHER PRODUCTS. Other products outside the three primary product groups include
time and temperature displays, lottery billboard displays and price displays.

MARKETING AND SALES

There are many manufacturers and sellers of signs and displays throughout the
world. The design and manufacture of computer-programmable signs and displays
that allow a customer to readily change the information displayed is a smaller
and more specialized segment of the larger sign and display industry. Many
makers of computer-programmable signs and displays serve only one or a few
specialized markets. Daktronics strives to distinguish itself by providing a
broad range of technologically advanced information display products to a number
of strategic markets.

The Company's display systems have been sold throughout the United States and in
more than 65 countries worldwide. Daktronics markets and sells its products
worldwide by direct sales and through independent resellers. The Company's sales
personnel learn the needs of the Company's markets and customers by establishing
relationships with existing and prospective customers, attending trade shows,
conventions and seminars, and participating with customers in the installation
of the Company's products.

When the Company targets a potential customer for a display system, the prospect
is contacted either directly or through a reseller. Daktronics sells custom
display systems for larger projects on a direct basis and frequently uses a team
of Company personnel to ensure that the proposed system meets the customer's
needs in the most cost effective manner. Engineers, technicians and direct sales
personnel participate in site visits to assess site conditions and to evaluate
the customer's requirements. The Company's sales staff submits proposals to
prospective customers, often followed by a business and technical presentation.
The Company also regularly hosts prospective customers at its manufacturing
facility to demonstrate product quality and delivery capability.

The Company's direct sales staff, who are grouped by end user market, are also
responsible for international sales in their respective markets. During fiscal
1999, 1998 and 1997, 11.4%, 9.3% and 14.9% of the Company's net sales,
respectively, were derived from international sales. The typical terms for
international sales is letter of credit or payment in advance in United States
dollars. Daktronics intends to expand its international sales. The Company has a
strategic business alliance with Omega Electronics, S.A. of Bienne, Switzerland,
that makes use of each other's complementary core business positions. Omega
Electronics, a leading timing systems manufacturer, is now a distributor of the
Company's scoreboards and matrix displays for use in sports applications around
the world. The Company started to receive orders in fiscal 1996 from Omega
Electronics. The Company has added Omega Electronics sports timing and photo
finish products to its product offering for sale in the United States and
Canada.

Resellers are used most prevalently in the areas of standard or "catalog" sports
scoreboards and commercial applications where systems must be installed in
accordance with local zoning ordinances. The Company offers, primarily through
its resellers, a broad selection of scoreboard and display models that are
moderately priced and relatively easy to install. The most popular models are
built to inventory and available for next-day shipment. The remaining models are
built to order and quoted for shipment in 30 to 90 days after order acceptance.
The Company supports its resellers through national and regional direct mail
advertising and trade show exhibitions. Regional sales managers support
resellers in the field, and the Company's sales staff provides daily telephone
support. Daktronics believes that it can expand market share by increasing the
productivity of existing resellers and adding additional resellers in new
geographic areas. The primary markets served by the Company, along with types of
customers, are shown below.

MARKETS TYPES OF CUSTOMERS
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SPORTS Elementary and Secondary Schools, Colleges and Universities,
Recreation Centers, YMCAs, Major and Minor League Sports, Olympic
Games and Other Sports Federations, Civic Arenas and Convention
Centers, Parimutuel Gaming and Motor Racing

BUSINESS Banks, Auto Dealers, Shopping Malls, Casinos and other businesses

GOVERNMENT Legislatures and Assemblies, Departments of Transportation,
Financial Exchanges, Airlines, Transit

During fiscal 1999, the Company's net sales to the sports market were
approximately 70% of net sales, while the business and government markets
accounted for approximately 20% and 5%, respectively, of net sales.

CUSTOMER SERVICE AND SUPPORT

Daktronics believes that its prompt and reliable customer service distinguishes
it from many of its competitors. The Company provides a limited warranty for
most of its products against failure due to defective parts or workmanship for
periods generally ranging from 90 days to 5 years after first sale or
installation, depending on the product or type of customer. Under the limited
warranty, the customer returns the failed component to the Company for
replacement or repair. The Company also provides customer service and support,
including "Help Desk" access, parts repair and replacement, and programming
support for animation and other display information. The Company staffs its Help
Desk with experienced technicians who are available at the desk or on call for
the extended hours required to support evening and weekend sports events. A
comprehensive database of customers provides the Company with immediate access
to each customer's equipment and service history. A repair center is staffed
with trained technicians who promptly repair and return components that require
service, and offers a component exchange program for same day shipment of
replacement parts. The Company's modular approach to the design and production
of products enhances its ability to provide effective customer service.
Customers can obtain periodic training and maintenance seminars at the Company's
principal offices and also contract for on-site training and maintenance for
certain types of installations such as high profile sports events.

The Company's animation and display programming support department (i) designs
custom animation sequences and answers display operator questions through its
Help Desk, (ii) publishes regular newsletters for operators, (iii) conducts
regularly-scheduled display operator workshops throughout the year and (iv)
provides on-site display operator training. Daktronics believes that its
extensive customer support program is essential to continued market penetration.

To enhance the level of service available to its customers, the Company has
established 17 service centers in 15 states and plans to open other service
centers in the future. Scoreboard and message display sales to schools and
recreation departments are also made through these offices. The Company uses a
network of authorized service dealers in other domestic locations and in a
number of other countries.

ENGINEERING AND PRODUCT DEVELOPMENT

The computer-programmable information display industry is characterized by
ongoing product innovations and developments in display and controller
technology. To remain competitive, the Company must continue to anticipate and
respond to these changes and developments. Daktronics intends to continue its
tradition of applying engineering resources throughout its business to help
achieve more effective product development, manufacturing, sales and customer
support.

The Company employs engineers and engineering technicians in the areas of
mechanical design, electronics design, applications engineering, and customer
and product support. Unlike some of its competitors who depend on contract
engineering from outside vendors, the Company uses in-house engineering staff to
anticipate and respond rapidly to the product development needs of customers and
the marketplace. The Company assigns product managers from its engineering staff
to each product or product family to assist its sales staff in customer
training, to implement product improvements requested by customers, and to
ensure that each product is designed for maximum reliability and serviceability.
The Company's product development personnel also modify existing products and
develop new products to comply with rule changes for particular sports.

Daktronics engineering department, consists of three design groups, each aligned
with one of the three primary product families, namely:

* Sports Products
* Large Matrix
* Business Products (See "Product Families" Section)

Each of these design groups is autonomous to allow it to focus on the respective
product family. This organizational structure, plus a concentrated focus on
standardization, which reduces the amount of engineering time allocated to
one-time custom design, positions the company for even more effective product
development in the future.

Daktronics believes its engineering capability and experience are unparalleled
among its competitors and its product development capability will continue to be
a very important factor in its market position.

Product development expenses for fiscal 1999, 1998, and 1997 were approximately
$3,809,000, $2,409,000 and $2,208,000 respectively.

MANUFACTURING AND TECHNICAL CONTRACTING

As a vertically-integrated manufacturer of display systems, the Company performs
most sub-assembly and substantially all final assembly of its products. The
Company also serves as a technical contractor for customers who desire custom
hardware design, custom software development or specific site support.

MANUFACTURING OPERATIONS

The Company's manufacturing operations include component manufacturing (printed
circuit boards and Glow Cube(R) pixel assembly) and system manufacturing (metal
fabrication, electronic assembly, sub-assembly and final assembly). Star
Circuits, Inc., a wholly owned subsidiary, manufactures

printed circuit boards for the Company and other customers at its separate
production facility located in Brookings, South Dakota. The Company augments its
production capacity with the use of outside subcontractors, primarily for metal
fabrication and loading printed circuit boards.

Daktronics uses a modular approach for manufacturing its displays. Standard
product modules are designed and built to be used in a variety of different
products. This modular approach reduces parts inventory and improves
manufacturing efficiency. The Company inventories finished goods of smaller,
standard products and builds to order larger, seasonal and custom products.
Daktronics designs its product modules so that a custom product may include a
significant percentage of standard products to maximize reliability and ease of
service. Certain components used in the Company's products are currently
available from a limited number of sources. To reduce its inventories and
enhance product quality, the Company elects to purchase certain components from
a limited number of suppliers who are willing to provide components on an "as
needed" basis. From time to time, the Company enters into pricing agreements or
purchasing contracts under which it agrees to purchase a minimum amount of
product in exchange for guaranteed price terms over the course of the contract,
which generally do not exceed one year. Through the Company's "total quality
management" and "just-in-time" methods of scheduling and manufacturing,
production employees work as teams to ensure quality and timely delivery while
minimizing excess inventories. The Company's order entry, production and
customer service functions are also computerized to facilitate communication
throughout the entire sales, design, production and delivery process.

TECHNICAL CONTRACTING

Daktronics serves as a technical contractor for larger display system
installations that require custom designs and innovative product solutions. The
purchase of scoreboards and other state of the art display systems for Olympic
venues and other large installations typically involves competitive proposals by
the Company and its competitors. As a part of its response to a proposal
request, the Company may suggest additional products or features to assist the
prospective customer in analyzing the optimal type of computer-programmable
information display system. If requested by a customer or if necessary to help
secure a bid, the Company will include as a part of its contract proposal the
work necessary to prepare the site and install the display system. In such
cases, Daktronics may serve as the general contractor and retain subcontractors.
With each custom order, the Company forms a project team to assure that the
project is completed to the customer's satisfaction. Key members of a project
team include a project manager, sales person, mechanical design team,
electronics and software team, manufacturing team, animation programmer,
installation supervisor and an executive officer.

BACKLOG

The Company's backlog consists of customer sales agreements or purchase orders
that the Company expects to fill within the next 12 months and was approximately
$34 million as of June 30, 1999 and $22.2 million as of June 30, 1998. Because
sales agreements and purchase orders are typically subject to cancellation or
delay by customers with limited or no penalty, the Company's backlog is not
necessarily indicative of future net sales or net income. While orders for
certain products may be shipped within 90 days, other orders may take longer
depending on the size and complexity of the display.

COMPETITION

The computer-programmable information display industry is highly fragmented and
characterized by intense competition in certain markets. There are a number of
established manufacturers of competing products who may have greater market
penetration in certain market niches or greater financial, marketing and other
resources than the Company. Because a customer's budget for the purchase of a
computer-programmable information display is often part of that customer's
advertising budget, the Company may also compete with other forms of
advertising, such as television, print media or fixed display signs.
Competitors might also attempt to copy the Company's products or product
features.

Many of the Company's competitors compete in only one or a few of the market
niches served by the Company. There are generally more competitors in markets
that require less complicated information display systems, such as the high
school scoreboard market and the commercial market for time and temperature or
message displays used by banks and small retail stores. As the needs of a
customer increase and the display systems become more complex, there are fewer
competitors. Nevertheless, competition may be intense even within markets which
require more complex display systems. Some of the Company's primary competitors
are White Way Sign and Maintenance Company, Chicago, Illinois; Display
Solutions, Inc., Atlanta, Georgia; Nevco, Inc., Greenville, Illinois; Trans-Lux
Corporation, Norwalk, Connecticut; and Display Technologies, Inc., Orlando,
Florida.

Daktronics competes based on its broad range of products and features, advanced
technology, prompt delivery, and reliable and readily available customer
service. The Company also strives to provide cost effective products and
solutions for its customers. Contrary to the Company's focus on technologically
advanced products and customer support, certain companies compete in some
markets by providing lower cost display systems which, in the Company's belief,
are of a lesser quality with lower product performance or customer support. If a
customer focuses principally on price, the Company is less likely to obtain the
sale. To remain competitive, Daktronics must continue to enhance its existing
products, introduce new products and product features, and provide customers
cost effective solutions to their scoring or display needs.

GOVERNMENT AND OTHER REGULATION

In the United States and other countries, various laws and regulations restrict
the installation of outdoor signs and computer-programmable information
displays. These regulations may impose greater restrictions on
computer-programmable information displays due to alleged concerns over
aesthetics or driver safety if a "moving" display is located near a road or
highway. These factors may prevent the Company from selling products to some
prospective customers.

Some of the Company's products are tested to safety standards developed by
Underwriters Laboratories(R) in the United States as well as similar standards
in other countries. Daktronics designs and produces these products in accordance
with these standards. The Company's printed circuit board manufacturing
operations use certain chemical processes that are subject to various
environmental rules and regulations. The Company's manufacturing operations must
also meet various safety related rules and regulations. The Company believes it
is in material compliance with all applicable governmental laws and regulations.

INTELLECTUAL PROPERTY

Daktronics currently owns one United States patent. The patent pertains to the
lens display technology and expires in 2011. The Company relies principally on
trademarks, rather than patents, to help establish and preserve limited
proprietary protection for its products. The Company has 22 trademarks
registered in the United States. Daktronics uses these trademarks to establish
brand recognition and distinction in its various markets. The Company's product
drawings, controller software and other works of authorship are also subject to
applicable copyright laws. The Company typically provides software to its
customers in only machine readable form to help preserve trade secret protection
which may be applicable to the text versions of the software code. The Company
also relies on nondisclosure agreements with its employees. Despite these
intellectual property protections, there can be no assurance that a competitor
will not copy the functions or features of the Company's products.

EMPLOYEES

At June 30, 1999, Daktronics employed approximately 638 full time employees and
363 part time and temporary employees. Of these employees, approximately 529
were in manufacturing, 238 in sales, marketing and customer service, 185 in
engineering, and 49 in administration. None of the Company's employees are
represented by a collective bargaining agreement. The Company believes its
employee relations are good.

EXECUTIVE OFFICERS OF THE COMPANY

AELRED J. KURTENBACH, PH.D. (65) is a co-founder of the Company and has
served as a director and as President of the Company since its incorporation.
Dr. Kurtenbach also served as Treasurer until 1993. Dr. Kurtenbach has 42 years
of experience in the fields of communication engineering and control system
design, technical services, computer systems, electrical engineering education
and small business management. Dr. Kurtenbach has B.S., M.S. and Ph.D. degrees
in Electrical Engineering from South Dakota School of Mines and Technology, the
University of Nebraska and Purdue University, respectively.

DUANE E. SANDER, PH.D. (61) is a co-founder of the Company and has served
as a director and as Secretary of the Company since its incorporation. Dr.
Sander has recently retired as Dean of Engineering at South Dakota State
University where he has taught electrical engineering courses and directed
biomedical research projects since 1967.

JAMES B. MORGAN (52) joined the Company in 1969 as a part-time engineer
while earning his M.S. degree in Electrical Engineering from South Dakota State
University. Since 1970, he has been employed by the Company as its Engineering
Manager and since 1975 as its Vice President, Engineering, with responsibility
for product development, contract design, project management for customer
contracts, and corporate information and scheduling systems. Mr. Morgan has
served as a director since 1984.

FRANK J. KURTENBACH (61) joined the Company in 1979 as Sales Manager of the
Standard Scoreboard Division, which was expanded to include other products in
1981. He has served as Sales Manager for the Company since 1982, as a director
since 1984 and as Vice President, Sales since November 1993. Mr. Kurtenbach has
a M.S. degree from South Dakota State University. Aelred Kurtenbach and Frank
Kurtenbach are brothers.

PAUL J. WEINAND (43) joined the Company in August 1990 as its Chief
Financial Officer and has been Treasurer since November 1993. From 1985 to
August 1990, he was employed by American Western Corporation, a publicly held
manufacturer of plastic packaging products, as its controller. From 1980 to
1985, he was an accountant with McGladrey & Pullen, LLP. Mr. Weinand has a M.S.
degree in Accounting from the University of North Dakota and is a Certified
Public Accountant.

Item 2. Properties.

The Company currently owns and occupies approximately 180,000 square feet in
adjoining facilities located on a Company-owned 40-acre site in Brookings, South
Dakota. The Company has recently started construction on a 50,000 square foot
expansion to its manufacturing facility, with scheduled completion for late fall
of 1999. The Company's circuit board manufacturing subsidiary and reflective
pixel assembly operation are located at a separate site in Brookings and
currently occupy 20,000 square feet in a facility owned by that subsidiary.

Item 3. Legal Proceedings.

On February 17, 1999, Daktronics was sued in the circuit court of Hillsborough
County, Florida by the Buccaneers Football Stadium Limited Partnership, an
affiliated company of the Tampa Bay Buccaneers football team. The lawsuit
alleges that the quality of the video displays installed at Raymond James
Stadium in Tampa, Florida does not meet the contract requirements. The lawsuit
seeks either to rescind the contract under which Daktronics furnished the
scoring and display equipment for the Stadium and obtain the return of all funds
paid or to obtain damages for breach of contract. The Tampa Sports Authority
owns Raymond James Stadium and is not a plaintiff in the action.

The contract, valued at approximately $7.9 million, included two large end zone
scoreboards with video displays, sideline auxiliary scoreboards, advertising
panels and installation. Daktronics has received approximately $3.1 million in
payments under the contract and has unpaid invoices outstanding in the amount of
approximately 2.9 million. In addition, the plaintiff is in default on a payment
in the amount of $257,347 under a promissory note to Daktronics as part of the
contract. Daktronics believes these payments have been unreasonably withheld and
has filed a counterclaim for these payments, related interest and acceleration
of remaining payments under the promissory note.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of stockholders through a solicitation of
proxies or otherwise, during the fourth quarter of fiscal 1999.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholders Matters.

Daktronics common stock currently trades on the NASDAQ National Market System
under the symbol "DAKT". As of May 1, 1999 the Company had 435 shareholders of
record. Following are the high and low sale prices for the Company's common
stock:

FY 1999 FY 1998
High Low High Low
-----------------------------------------
1st Quarter 12 7/8 7 1/4 6 3/8 3 5/8
2nd Quarter 11 15/32 7 3/8 6 1/8 5 1/8
3rd Quarter 16 1/2 10 6 3/4 5 1/4
4th Quarter 12 1/4 8 1/4 8 7/8 5 3/4

The Company has not paid any cash dividends on its common stock and does not
intend to pay cash dividends in the foreseeable future. Earnings will be
retained for use in the operation and expansion of the Company's business.
Provisions of the Company's bank credit agreement limit the Company's ability to
pay cash dividends.

Item 6. Selected Financial Data.
(In Thousands, Except Per Share Data)

1999 1998 1997 1996 1995
-----------------------------------------------------------

Statement of Operations Data:
Net Sales ............................. $ 95,851 $ 69,884 $ 62,640 $ 52,507 $ 41,947
Operating Income (Loss) ............... 6,816 5,028 2,501 (319) 1,210
Net Income (Loss) ..................... 4,220 3,392 1,508 (215) 967
Diluted earnings (Loss) per Share ..... .94 .78 .35 (.05) .23
Weighted Average Shares Outstanding ... 4,475 4,336 4,266 4,191 4,228

Balance Sheet Data:
Working Capital ....................... $ 20,592 $ 12,229 $ 10,923 $ 9,504 $ 12,169
Total Assets .......................... 62,619 43,488 37,136 37,767 28,262
Long-term Liabilities ................. 9,503 1,659 2,640 2,568 2,292
Shareholders' Equity .................. 29,501 25,184 21,750 19,861 20,076

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

GENERAL

The Company designs, manufactures and sells a wide range of computer-
programmable information display systems to customers in a variety of markets
throughout the world. The Company focuses its sales and marketing efforts on
markets rather than products. Major categories of markets include sport,
business and government.

The Company operates on a 52-53 week fiscal year, with fiscal years ending on
the Saturday closest to April 30 of each year. The Company's 1999 fiscal year
contained 52 weeks.

RESULTS OF OPERATIONS

The following table sets forth the percentage of net sales represented by items
included in the Company's Consolidated Statements of Operations for the fiscal
years ended 1999, 1998, 1997:

YEAR ENDED
1999 1998 1997
--------------------------------------

Net sales .............................. 100.0% 100.0% 100.0%
Cost of goods sold ..................... 73.0 71.8 74.7
--------------------------------------
Gross profit ....................... 27.0 28.2 25.3
Operating expenses ..................... 19.9 21.0 21.3
--------------------------------------
Operating income ................... 7.1 7.2 4.0
Interest income ........................ 0.6 0.9 0.9
Interest expense ....................... (1.0) (0.6) (1.2)
Other income ........................... 0.2 0.2 0.3
--------------------------------------
Income before income taxes ......... 6.9 7.7 4.0
Income tax expense ..................... 2.5 2.8 1.6
--------------------------------------
Net income .......................... 4.4% 4.9% 2.4%
======================================

NET SALES

Net sales for fiscal 1999 were $95.9 million representing a 37% increase over
fiscal 1998 sales of $69.9 million. The increase was primarily the result of
increased sales in all sports market niches. The government niches also
experienced a net increase in sales.

Net sales for fiscal 1998 were $69.9 million representing a 12% increase over
fiscal 1997 sales of $62.6 million. The increase in sales was due to increased
sales in almost all of the Company's market niches, especially the sports market
niches.

The Company occasionally sells products in exchange for advertising revenues
from the scoreboard or display. These sales represented less than 10% of net
sales for fiscal 1999, 1998 and 1997. The gross profit margin on these net sales
has been comparable to the gross profit margin on other net sales.

GROSS PROFIT

Gross profit increased from $19.7 million in fiscal 1998 to $25.9 million in
fiscal 1999. The increase was due to increased sales while gross profit as a
percentage of net sales decreased from 28.2% in fiscal 1998 to 27.0% in fiscal
1999. The decrease in gross profit as a percentage of net sales was primarily
the result of introductory pricing of its higher resolution ProStar(R) product
in the second quarter of fiscal 1999.

Gross profit increased from $15.9 million in fiscal 1997 to $19.7 million in
fiscal 1998. The increase was due to increased sales and continued improvement
in gross profit percentage of sales as the Company continued its cost
improvement programs, including product standardization. Gross profit as a
percentage of net sales was 25.3% in fiscal 1997 and 28.2% in fiscal 1998.

OPERATING EXPENSES

Selling expenses have increased 27% and 22% for fiscal years 1999 and 1998,
respectively over the previous fiscal year. The increases were primarily
attributable to the expansion of sales staff and higher travel expenses as the
Company continues to expand its marketing efforts.

General and administrative expenses increased 17% and 4% for fiscal years 1999
and 1998, respectively over the previous fiscal year. The increase in fiscal
1999 over fiscal 1998 is more reflective of the increased administrative support
to sustain the Company's sales growth. The modest increase in fiscal 1998 was
due to a large increase in fiscal 1997 which was the result of incurred and
accrued legal fees in 1997. In fiscal 1997, the Company established an accrual
to defend itself in various lawsuits and continued to maintain this accrual in
fiscal 1998 as it awaited the outcome of several appeals.

Product design and development expenses increased 58% and 9% for fiscal years
1999 and 1998, respectively over the previous fiscal year. The increases were
due to the Company's commitment to develop new products and continue to improve
existing products to maintain a competitive advantage. The increase in fiscal
1999 was primarily the result of the Company aggressively developing its family
of ProStar(R) VideoPlus displays, and adapting other products to LED technology.

INTEREST INCOME

The Company occasionally sells products on an installment basis or in exchange
for advertising revenues from the scoreboard or display, both of which result in
long-term receivables. Interest income was $.6 million, $.7 million and $.5
million for fiscal years 1999, 1998 and 1997 respectively. Factors affecting the
increases and decreases include the average balance of long-term receivables
resulting from new receivables, principal repayments and the sale of long-term
receivables to third parties, average interest rate and excess cash balances
invested in interest bearing accounts.

INTEREST EXPENSE

Interest expense was $.9 million, $.4 million and $.7 million for the fiscal
years 1999, 1998, and 1997. The increase in interest expense from fiscal 1998 to
fiscal 1999 was the result of increased average loan balances as the Company
utilized its line of credit and long-term debt to fund increased operating

activities. The decrease in interest expense from fiscal 1997 to fiscal 1998 was
the result of lower average loan balances during fiscal 1998.

INCOME TAXES

The effective tax rates were 37%, 37% and 40% for fiscal years 1999, 1998 and
1997, respectively.

NET INCOME

Net income was $4.2 million, $3.4 million and $1.5 million for fiscal years
1999, 1998 and 1997, respectively. The increases in net income were primarily
the result of increased sales which was partially offset by lower gross profit
margins and increased operating expenses.

Management believes that one of the principal factors that will continue to
affect the Company's rate of growth is the Company's ability to increase the
marketing of its current and future products in existing markets and expand the
marketing of its products to new markets.

Liquidity and Capital Resources
Working capital was $20.6 million at May 1, 1999 compared to $12.2 million at
May 2, 1998. The increase was primarily the result of $10.0 million in
borrowings in long-term debt and an increase in net income which was offset by
the purchase of property and equipment.

Cash used in operations for fiscal 1999 was $.6 million. Net income of $4.2
million plus depreciation and amortization of $2.3 million and an increase of
$4.8 million in accounts payable and accrued expenses were offset by an increase
in receivables of $9.2 million and an increase in inventories of $2.9 million.
The increase in receivables was attributable to the increase in net sales. The
increase in inventories was a result of the Company's current backlog of orders.

Cash used in investing activities for fiscal 1999 was $4.6 million which
principally consisted of equipment acquisitions and plant expansion.

Cash provided by financing activities was $6.2 million which consisted primarily
of $10.0 million in borrowings in long-term debt less net payments under the
Company's line of credit and principal payments on long-term debt.

The Company has used and expects to continue to use cash reserves and bank
borrowings to meet its short-term working capital requirements. On large product
orders, the time between order acceptance and project completion may extend up
to 12 months depending on the amount of custom work and the customer's delivery
needs. The Company often receives a down payment or progress payments on these
product orders. To the extent that these payments are not sufficient to fund the
costs and other expenses associated with these orders, the Company uses working
capital and bank borrowings to finance these cash requirements.

The Company's product development activities include the enhancement of existing
products and the development of new products from existing technologies. Product
development expenses for fiscal years 1999, 1998 and 1997 were $3.8 million,
$2.4 million, and $2.2 million, respectively. The Company intends to continue to
incur these expenditures to develop new display products using various display
technologies to offer higher resolution, more cost-effective and
energy-efficient displays. The

Company also intends to continue developing software applications for its
display controllers to enable these products to continue to meet the needs and
expectations of the marketplace.

The Company has a credit agreement with a bank. The credit agreement provides
for a $15.0 million line of credit which includes up to $2.0 million for standby
letters of credit. The line of credit is at LIBOR rate plus 1.55% (6.45% at May
1, 1999) and is due on October 1, 2001. As of May 1, 1999, $2.6 million had been
drawn on the line of credit and no standby letters of credit had been issued by
the bank. The credit agreement is unsecured and requires the Company to meet
certain covenants. Financial covenants include the maintenance of tangible net
worth of at least $23 million, a minimum liquidity ratio, a limit on dividends
and distributions, and a minimum adjusted fixed charge coverage ratio.

The Company is sometimes required to obtain performance bonds for display
installations. The Company currently has a bonding line available through an
insurance company that provides for an aggregate of $50.0 million in bonded work
outstanding. At May 1, 1999, the Company had $16.6 million of bonded work
outstanding against this line.

The Company believes that if its growth continues, it may need to increase the
amount of its credit facility. The Company anticipates that it will be able to
obtain any needed funds under commercially reasonable terms from its current
lender. The Company believes that cash from operations, from its existing or
increased credit facility, and its current working capital will be adequate to
meet the cash requirement of its operations in the foreseeable future.

BUSINESS RISKS AND UNCERTAINTIES

A number of risks and uncertainties exist which could impact the Company's
future operating results. These uncertainties include, but are not limited to,
general economic conditions, competition, the Company's success in developing
new products and technologies, market acceptance of new products, and other
factors, including those set forth in the Company's SEC filings, including its
current report on Form 10-K for the year ended May 1, 1999.

YEAR 2000 ISSUES

Many existing computer programs use only two digits to identify a year in the
date field, with the result that data referring to the Year 2000 and subsequent
years may be misinterpreted by these programs. If present in the computer
applications of the Company or its suppliers and not corrected, this problem
could cause computer applications to fail or to create erroneous results and
could cause a disruption in operations and have an adverse effect on the
Company's business and results of operations. The Company evaluated its
principal computer systems and implemented a new enterprise resource planning
software which was fully operational in fiscal 1999 and has been represented by
the vendor to be Year 2000 compliant. The Company has tested the software for
Year 2000 compliance. The cost of the new software was capitalized. The Company
has assurances from a majority of its key suppliers indicating that they are
Year 2000 compliant. The Company has not incurred any material expenses to date
in connection with this evaluation, and does not anticipate material expenses in
the future. The Company has reviewed its computer programs which it includes in
its display systems and has substantially completed the implementation changes
to be Year 2000 compliant. Based on the Company's review, management does not
believe the remaining remediation costs to be incurred will be material to the
Company's financial position and results of operations.

The Company has identified alternative suppliers in the event that its key
suppliers fail to adequately address the Year 2000 issue.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board and the Accounting Standards Executive
Committee have issued certain Statements of Financial Accounting Standards and
Statements of Position, respectively, which have required effective dates
occurring after the Company's May 1, 1999 year end. The Company's financial
statements, including the disclosures therein, are not expected to be materially
affected by those accounting pronouncements.

Item 8. Financial Statements and Supplementary Data

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders
Daktronics, Inc.
Brookings, South Dakota

We have audited the accompanying consolidated balance sheets of Daktronics, Inc.
and subsidiary as of May 1, 1999 and May 2, 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended May 1, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Daktronics, Inc. and
subsidiary as of May 1, 1999 and May 2, 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
May 1, 1999, in conformity with generally accepted accounting principles.

McGLADREY & PULLEN, LLP

Sioux Falls, South Dakota
June 28, 1999

DAKTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
MAY 1, 1999 AND MAY 2, 1998
(DOLLARS IN THOUSANDS)

ASSETS 1999 1998
- -------------------------------------------------------------------------------------------------

Current Assets
Cash and cash equivalents $ 1,050 $ 148
Accounts receivable (Note 4) 19,832 13,632
Current maturities of long-term receivables (Note 4) 2,300 990
Inventories (Note 2) 13,864 10,994
Costs and estimated earnings in excess of billings (Note 3) 5,374 1,523
Prepaid expenses and other 311 448
Deferred income taxes (Note 9) 1,476 1,139
----------------------------
TOTAL CURRENT ASSETS 44,207 28,874
Property and equipment, net (Note 2) 11,743 9,225
Long-term receivables (Note 4) 6,048 4,575
Intangible assets 621 814
----------------------------
$ 62,619 $ 43,488
============================

LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------
Current Liabilities
Note payable, bank (Note 5) $ 2,659 $ 5,594
Current maturities of long-term debt (Note 5) 1,951 455
Accounts payable 8,815 5,480
Customer deposits 1,292 250
Accrued expenses (Note 2) 5,293 3,752
Billings in excess of costs and estimated earnings (Note 3) 2,970 645
Income taxes payable 635 469
----------------------------
TOTAL CURRENT LIABILITIES 23,615 16,645
----------------------------

Long-Term Debt, less current maturities (Note 5) 8,275 783
----------------------------

Deferred Income 602 361
----------------------------

Deferred Income Taxes (Note 9) 626 515
----------------------------

Contingencies (Notes 4, 10, 11 and 12)

Shareholders' Equity (Notes 6 and 7)
Common stock, no par value; authorized 30,000,000 shares,
issued 1999 4,374,861 shares, 1998 4,324,210 shares 11,819 11,722
Retained earnings 17,691 13,471
Less cost of treasury stock 4,920 shares 1999 and 1998 (9) (9)
----------------------------
29,501 25,184
----------------------------
$ 62,619 $ 43,488
============================

See Notes to Consolidated Financial Statements.

DAKTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND SHAREHOLDERS' EQUITY
YEARS ENDED MAY 1, 1999, MAY 2, 1998 AND MAY 3, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

OPERATIONS 1999 1998 1997
- --------------------------------------------------------------------------------------------

Net sales $ 95,851 $ 69,884 $ 62,640
Cost of goods sold 69,970 50,187 46,768
-------------------------------------------
GROSS PROFIT 25,881 19,697 15,872
-------------------------------------------

Operating expenses:
Selling 11,565 9,094 8,108
General and administrative 3,691 3,166 3,055
Product design and development 3,809 2,409 2,208
-------------------------------------------
19,065 14,669 13,371
-------------------------------------------
OPERATING INCOME 6,816 5,028 2,501

Nonoperating income (expense):
Interest income 603 654 534
Interest expense (934) (414) (748)
Other income, net 162 110 206
-------------------------------------------
INCOME BEFORE INCOME TAXES 6,647 5,378 2,493
Income tax expense (Note 9) 2,427 1,986 985
-------------------------------------------
NET INCOME $ 4,220 $ 3,392 $ 1,508
===========================================

Earnings per share:
Basic $ 0.97 $ 0.79 $ 0.35
===========================================
Diluted $ 0.94 $ 0.78 $ 0.35
===========================================

Common Retained Treasury
SHAREHOLDERS' EQUITY Stock Earnings Stock Total
- --------------------------------------------------------------------------------------------

Balance, April 27, 1996 $ 11,299 $ 8,571 $ (9) $ 19,861
Exercise of stock options (Note 6) 381 -- -- 381
Net income -- 1,508 -- 1,508
--------------------------------------------------
Balance, May 3, 1997 11,680 10,079 (9) 21,750
Exercise of stock options (Note 6) 42 -- -- 42
Net income -- 3,392 -- 3,392
--------------------------------------------------
Balance, May 2, 1998 11,722 13,471 (9) 25,184
Exercise of stock options (Note 6) 97 -- -- 97
Net income -- 4,220 -- 4,220
--------------------------------------------------
Balance, May 1, 1999 $ 11,819 $ 17,691 $ (9) $ 29,501
==================================================

See Notes to Consolidated Financial Statements.

DAKTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 1, 1999, MAY 2, 1998 AND MAY 3, 1997
(DOLLARS IN THOUSANDS)

1999 1998 1997
- ------------------------------------------------------------------------------------------------------------

Cash Flows From Operating Activities
Net income $ 4,220 $ 3,392 $ 1,508
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 1,913 1,471 1,255
Amortization 353 634 823
Loss on sale of property and equipment 129 -- --
Provision for impairment loss on advertising rights -- -- 600
Provision for loss on uncompleted contracts -- -- 225
Provision for doubtful accounts 182 179 130
Deferred income taxes (credits) (226) 108 (514)
Other -- 5 (10)
Change in operating assets and liabilities (Note 13) (7,204) (4,968) 924
-------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (633) 821 4,941
-------------------------------------------

Cash Flows From Investing Activities
Proceeds from sale of property and equipment 387 11 --
Purchase of property and equipment (4,842) (3,265) (2,208)
Proceeds from sale of real estate held for sale -- -- 1,126
Purchase of intangible assets (160) -- --
Other -- 33 39
-------------------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES (4,615) (3,221) (1,043)
-------------------------------------------

Cash Flows From Financing Activities
Net borrowings (payments) on note payable (2,935) 2,919 (3,015)
Proceeds from exercise of stock options 97 42 381
Principal payments on long-term debt (1,012) (531) (1,364)
Borrowings on long-term debt 10,000 -- --
-------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 6,150 2,430 (3,998)
-------------------------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 902 30 (100)

Cash and Cash Equivalents
Beginning 148 118 218
-------------------------------------------
Ending $ 1,050 $ 148 $ 118
===========================================

Supplemental Cash Flow Disclosures
Interest paid $ 891 $ 456 $ 725
Net income tax payments 2,488 2,298 532

See Notes to Consolidated Financial Statements.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of business: Daktronics, Inc. and its subsidiary design, manufacture, and
sell a wide range of computer-programmable information display systems to
customers in a variety of markets throughout the world.

Fiscal year: The Company operates on a 52 - 53 week fiscal year end with fiscal
years ending on the Saturday closest to April 30 of each year. The years ended
May 1, 1999 and May 2, 1998 each included 52 weeks and the year ended May 3,
1997 included 53 weeks.

A summary of the Company's significant accounting policies follows:

Principles of consolidation: The consolidated financial statements include the
accounts of Daktronics, Inc. and its wholly-owned subsidiary, Star Circuits,
Inc. Intercompany accounts and transactions have been eliminated in
consolidation.

Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Material
estimates which are particularly susceptible to significant change in the
near-term relate to the determination of the estimated total costs on long-term
contracts and estimated costs to be incurred for litigation and product
warranty.

Cash and cash equivalents: For purposes of reporting cash flows, the Company
considers all money market mutual funds to be cash equivalents. The Company
maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.

Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market.

Revenue and cost recognition on long-term contracts: Earnings on long-term
contracts are recognized on the percentage-of-completion method, measured by the
percentage of costs incurred to date to estimated total costs for each contract.
Operating expenses are charged to operations as incurred and are not allocated
to contract costs. Provisions for estimated losses (which were $0 in 1999 and
1998, and $225 in 1997) on uncompleted contracts are made in the period in which
such losses are estimable.

Advertising rights: The Company occasionally installs scoreboards and message
display systems at facilities in exchange for the rights to future advertising
revenues. The Company recognizes revenue at the time the advertising is sold for
the amount of the present value of the future advertising revenue on the portion
of the scoreboard or message display system advertising which is sold for the
entire term. The cost assigned to the portion sold is based upon the relative
value of the portion of the scoreboard or message display center sold.

Advertising rights on the portion of the advertising which have not been sold to
term are stated at cost and are amortized on a straight-line method over the
term of the advertising rights. The cost of advertising rights was $0 as of May
1, 1999 and May 2, 1998. On advertising rights which are not sold to term,
revenue is recognized when it becomes receivable under the provisions of the
advertising contract. Advance collections of advertising revenues are recorded
as deferred income.

During the fourth quarter of 1997, the Company committed to a plan to dispose of
certain advertising rights with a carrying amount of $1,514. The advertising
rights had an estimated sales value of $914. Accordingly, the Company recorded
an impairment loss of $600 in 1997 on this long-lived asset, which was included
in cost of sales.

Property and equipment: Property and equipment is stated at cost. Depreciation
of property and equipment is computed principally on the straight-line method
over the following estimated useful lives:

Years
----------
Buildings 7 - 40
Machinery and equipment 5 - 7
Office furniture and equipment 3 - 7
Transportation equipment 5 - 7

Intangible assets: Intangible assets consist of consulting and noncompete
agreements and goodwill. Consulting and noncompete agreements are stated at cost
and are amortized on a straight-line method over their remaining terms which
range from one to five years. Goodwill is amortized on the straight-line method
over 5 years. Accumulated amortization on intangible assets was $1,176 and
$1,363 as of May 1, 1999 and May 2, 1998, respectively.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Product warranty: Current operations are charged for the estimated cost of
future claims under the terms of various customer warranty programs provided by
the Company. Customers have the option of purchasing long-term warranty
contracts. The amounts received for long-term warranties are included in
deferred income and are amortized over the lives of the warranties.

Product design and development: All expenditures related to product design and
development are charged to operations as incurred.

Income taxes: Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Stock-based compensation: In fiscal year 1997, the Company adopted FASB
Statement No. 123, "Accounting for Stock-Based Compensation". The Statement
established standards for accounting for stock-based compensation but also
allows companies to continue to account for stock-based compensation under the
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees", and make certain additional disclosures in the notes
to the financial statements. The Company continues to account for stock-based
compensation in accordance with APB Opinion No. 25.

Earnings per share: A reconciliation of the income and common stock share
amounts used in the calculation of basic and diluted earnings per share for the
years ended May 1, 1999, May 2, 1998 and May 3, 1997 follows.

Net Per Share
Income Shares Amount
---------------------------------------
For the year ended May 1, 1999:
Basic EPS $ 4,220 4,345,229 $ 0.97
Effect of dilutive securities:
Exercise of
stock options -- 129,282 0.03
---------------------------------------
$ 4,220 4,474,511 $ 0.94
=======================================

Net Per Share
Income Shares Amount
---------------------------------------
For the year ended May 2, 1998:
Basic EPS $ 3,392 4,312,414 $ 0.79
Effect of dilutive
securities:
Exercise of
stock options -- 24,046 0.01
---------------------------------------
Diluted EPS $ 3,392 4,336,460 $ 0.78
=======================================
For the year ended May 3, 1997:
Basic EPS $ 1,508 4,250,445 $ 0.35
Effect of dilutive
securities:
Exercise of
stock options -- 15,797 --
---------------------------------------
Diluted EPS $ 1,508 4,266,242 $ 0.35
=======================================

Options outstanding of 25,000, 97,200 and 261,450 shares of common stock at
weighted average share prices of $11.83, $7.72 and $6.48 during the years ended
May 1, 1999, May 2, 1998 and May 3, 1997, respectively, and the warrant
discussed in Note 7 were not included in the computation of diluted earnings per
share because the exercise price of those options and the warrant exceeded the
average market price of the common shares during the respective year.

New accounting standards: Effective May 3, 1998, the Company adopted FASB
Statement No. 130, which establishes new rules for the reporting and display of
comprehensive income and its components, but has no effect on the Company's net
income or total stockholders' equity. The Company currently has no items which
are required to be reported in comprehensive income.

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information", ("SFAS No. 131"). FASB Statement No. 131
establishes standards for the way that public companies report selected
information about operating segments in annual financial statements and requires
that those companies report selected information about segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers.

The Company is engaged principally in one line of business, the design and
manufacture of a wide range of computer-programmable information display
systems, which represents more than 90% of the total revenue of the Company.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent accounting pronouncements: The Financial Accounting Standards Board and
the Accounting Standards Executive Committee have issued certain Statements of
Financial Accounting Standards and Statements of Position, respectively, which
have required effective dates occurring after the Company's May 1, 1999 year
end. The Company's financial statements, including the disclosures therein, are
not expected to be materially affected by those accounting pronouncements.

NOTE 2. SELECTED FINANCIAL STATEMENT DATA
1999 1998
-------------------------
Inventories:
Raw materials $ 8,465 $ 8,657
Work-in-process 1,596 790
Finished goods 3,803 1,547
-------------------------
$ 13,864 $ 10,994
=========================
Property and equipment:
Land $ 532 $ 492
Buildings 5,459 5,069
Machinery and equipment 14,036 12,177
Office furniture and
equipment 1,997 403
Transportation equipment 744 590
-------------------------
22,768 18,731
Less accumulated
depreciation 11,025 9,506
-------------------------
$ 11,743 $ 9,225
=========================
Accrued expenses:
Product warranty $ 2,161 $ 1,551
Compensation 1,817 1,382
Taxes, other than
income taxes 791 469
Other 524 350
-------------------------
$ 5,293 $ 3,752
=========================

NOTE 3. UNCOMPLETED CONTRACTS

Uncompleted contracts consist of the following:
1999 1998
-------------------------
Costs incurred $ 21,204 $ 3,325
Estimated earnings 6,622 1,241
-------------------------
27,826 4,566
Less billings to date 25,422 3,688
-------------------------
$ 2,404 $ 878
=========================

Uncompleted contracts are included in the accompanying consolidated balance
sheets as follows:
1999 1998
-------------------------
Costs and estimated earnings
in excess of billings $ 5,374 $ 1,523
Billings in excess of costs and
estimated earnings 2,970 645
-------------------------
$ 2,404 $ 878
=========================
NOTE 4. RECEIVABLES

The Company sells its products throughout the United States and certain foreign
countries on credit terms that the Company establishes for each customer. On the
sale of certain scoreboards and message display centers, the Company has the
ability to file a contractor's lien against the product installed as collateral.
Foreign sales are generally secured by irrevocable letters of credit. During the
fiscal years ended 1999, 1998 and 1997, foreign sales were approximately
$10,953, $6,528 and $9,356, respectively. Foreign sales by individual
geographical area vary from year to year.

Accounts receivable include unbilled receivables of $1,698 and $1,553 as of May
1, 1999 and May 2, 1998, respectively. Unbilled receivables are generally
invoiced within thirty days. Accounts receivable are reported net of an
allowance for doubtful accounts of $212 and $208 at May 1, 1999 and May 2, 1998,
respectively.

In connection with the sale of certain scoreboards and message display centers,
the Company has entered into long-term sales contracts and sales type leases.
The present value of the contract or lease is recorded as a receivable upon the
installation and acceptance of the scoreboard or message display, and profit is
recognized to the extent that the present value is in excess of cost. The
Company generally retains a security interest in the scoreboard, message display
or advertising rights until the contract is paid. Long-term contract and lease
receivables, including accrued interest and current maturities, were $8,348 and
$5,565 as of May 1, 1999 and May 2, 1998, respectively. Contract and lease
receivables bear interest at rates of 8.5% to 23.6% and are due in varying
annual installments through January of 2008.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 4. RECEIVABLES (CONTINUED)

During the year ended May 3, 1997, the Company sold contracts receivable with
recourse in the amount of $1,156, resulting in a gain of $38.

At May 1, 1999 and May 2, 1998, the Company was contingently liable for
contracts sold with recourse of $517 and $782, respectively.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5. FINANCING AGREEMENTS

Long-term debt:
1999 1998
-------------------
6.77% - 7.09% Notes payable due to bank, due in monthly
installments of $98,470 and $99,219, including interest,
through November 2003 and April 2004, subject to credit
agreement financial covenants discussed below, unsecured $ 9,444 $ --
9.7% - 12.5% Contracts payable, primarily related to
advertising rights, due in annual installments,
including interest, from January 2001 to August 2005 575 675
8.05% and 10.0% Notes payable to a university, due in annual
installments, including interest, through January 2000
collateralized by advertising rights 147 309
9.7% - 12.3% Unsecured contracts payable, paid in full -- 139
Other notes payable, installment obligations secured by
equipment 60 115
-------------------
10,226 1,238
Less current maturities 1,951 455
-------------------
$ 8,275 $ 783
===================

Maturities of long-term debt are as follows at May 1, 1999:
2000 $1,951; 2001 $1,994; 2002 $2,084; 2003 $2,227;
2004 $1,833; and thereafter $137.

Credit agreement: The Company has a credit agreement with a bank. The credit
agreement provides for a $15,000 line of credit which includes up to $2,000 for
standby letters of credit. The line of credit is at the LIBOR rate of interest
plus 1.55% (6.45% at May 1, 1999) and is due on October 1, 2002. As of May 1,
1999, $2,659 had been drawn on the line of credit and no standby letters of
credit had been issued by the bank. The credit agreement is unsecured and
requires the Company to meet certain covenants. Financial covenants include the
maintenance of tangible net worth of at least $23,000, a minimum liquidity
ratio, a limit on dividends and distributions, and a minimum adjusted fixed
charge coverage ratio.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 6. STOCK-BASED COMPENSATION

The Company has stock-based compensation plans which are described below. The
Company applies APB Opinion No. 25 and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for grants
under the fixed stock option plans. Had compensation cost for the Company's
stock-based compensation plans been determined based on the grant date fair
values of awards (the method described in FASB Statement No. 123), reported net
income and earnings per common share would have been reduced to the pro forma
amounts shown below:

1999 1998 1997
----------------------------------------------
Net income: (loss):
As reported $ 4,220 $ 3,392 $ 1,508
Pro forma 4,149 3,350 1,469

Earnings per
share:
As reported:
Basic 0.97 0.79 0.35
Diluted 0.94 0.78 0.35

Pro forma:
Basic 0.95 0.78 0.35
Diluted 0.93 0.77 0.34

The pro forma effects of applying Statement No. 123 are not indicative of future
amounts since, among other reasons, the pro forma requirements of the Statement
have been applied only to options granted after April 29, 1995.

Fixed stock option plans: The Company has reserved 760,000 shares of its common
stock for issuance under two fixed stock option plans under which it may grant
options to purchase common stock. These options may have a maximum term of 10
years at the market price or 110% of market price on the date of grant. During
1999 the options were amended from 300,000 shares to 600,000 shares which may be
granted to employees under the 1993 Stock Option Plan (1993 Option Plan). The
options which may be granted to outside directors under the 1993 Outside
Directors Stock Option Plan (Outside Directors Plan) were amended during 1999
from 60,000 shares to 160,000 shares. Options in the 1993 Option Plan vest at
20% per year and options in the Outside Directors Plan vest at 1,000 options
annually.

The fair value of each grant is estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted average
assumptions for grants in 1999, 1998 and 1997, respectively: no dividend rate
for all years; price volatility of 32% for 1999, 28% for 1998 and 25% for 1997;
risk-free interest rates of 4.8%, 6.5% and 6.2% for the 1993 Option Plan and
5.0%, 6.5% and 6.9% for the Outside Directors Plan; and expected lives of five
to seven years for the 1993 Option Plan and seven years for the Outside
Directors Plan for all years.

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 6. STOCK-BASED COMPENSATION (CONTINUED)

A summary of the status of the plans at May 1, 1999, May 2, 1998 and May 3, 1997
and changes during the years ended on those dates follows:

1999 1998 1997
--------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Fixed Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------------

Outstanding at beginning of year 327,510 $ 6.26 274,280 $ 6.34 357,010 $ 5.62
Granted 116,900 11.68 67,850 5.40 47,000 4.31
Forfeited (15,950) 8.19 (1,750) 6.25 (14,200) 6.46
Exercised (14,600) 6.57 (12,870) 3.30 (115,530) 3.30
----------- ----------- -----------
Outstanding at end of year 413,860 7.71 327,510 6.26 274,280 6.34
=========== =========== ===========

Options for 189,810, 147,842 and 112,240 shares were exercisable at May 1, 1999,
May 2, 1998 and May 3, 1997, respectively. The weighted average fair value of
options granted were $3.11, $2.59 and $1.83 for the years ended May 1, 1999, May
2, 1998 and May 3, 1997, respectively.

A further summary about fixed options outstanding at May 1, 1999 is as follows:

Options Outstanding Options Exercisable
-------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
- ------------------------------------------------------------------------------------------------------

$4.18 to $4.88 42,090 .8 years $ 4.31 17,836 $ 4.34
$5.31 to $6.56 171,670 3.7 5.91 88,774 6.12
$7.22 to $7.63 83,200 1.5 7.56 83,200 7.56
$10.38 to $10.73 45,000 5.8 10.49 -- --
$12.25 to $13.48 71,900 6.3 12.42 -- --
------------ ------------
$4.18 to $13.48 413,860 3.6 7.71 189,810 6.58
============ ============

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 7. SHAREHOLDERS' EQUITY

Common stock: The Company amended its Articles of Incorporation in 1999 to
increase its authorized shares from 15,000,000 shares to 30,000,000 shares of no
par value stock. The authorized shares include 25,000,000 shares of common stock
and 5,000,000 shares of "undesignated stock". The Company's board of directors
has the power to issue any or all of the shares of undesignated stock including
the authority to establish the rights and preferences of the undesignated stock,
without shareholder approval.

During 1999, the Company declared a dividend of one preferred share purchase
right (Right) for each outstanding share of common stock of the Company. The
dividend was paid on December 9, 1998 to the stockholders of record on such
date. Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock at a
price of $80 per one-hundredth of a preferred share, subject to the complete
terms as stated in the Rights Agreement. The Rights become exercisable
immediately after the earlier of (i) ten business days following a public
announcement that a person or group has acquired beneficial ownership of 20% or
more of the outstanding common shares of the Company (subject to certain
exclusions), (ii) ten business days following the commencement or announcement
of an intention to make a tender offer or exchange offer, the consummation of
which would result in the beneficial ownership by a person or group of 20% or
more of such outstanding common shares. The Rights expire on November 19, 2008,
which date may be extended subject to certain additional conditions.

Common stock warrants: The Company, in connection with its public offering,
issued the underwriter five year warrants to purchase up to 113,312 shares of
the Company's common stock. The warrants were exercised at $9.15 per share in
1999 in a cashless exercise. The result was to increase common stock outstanding
by 36,051 shares.

NOTE 8. EMPLOYEE BENEFIT PLANS

The Company has an Employee Stock Ownership Plan (ESOP) and a related trust for
the benefit of its employees. Employees are eligible to participate in the plan
upon completion of one year of service if they have attained the age of 21 and
have worked at least 1,000 hours during such plan year. Contributions to the
plan are recognized as compensation expense and are made at the discretion of
the Board of Directors. The contributions to the plan were $45, $13 and $5
during the fiscal years ended 1999, 1998 and 1997, respectively. The plan holds
267,799 shares and 270,778 shares as of May 1, 1999 and May 2, 1998,
respectively, all of which have been allocated to plan participants. No
dividends were paid on plan shares in 1999, 1998 or 1997 and all outstanding
plan shares are included for purposes of earnings per share computations.

The Company has an employee savings plan which provides for voluntary
contributions by eligible employees into designated investment funds with a
matching contribution by the Company of 25% of the employee's qualifying
contribution up to 6% of such employee's compensation. Employees are eligible to
participate upon completion of one year of service if they have attained the age
of 21 and have worked more than 1,000 hours during such plan year. The Company
contributed $185, $115 and $110 to the plan for the fiscal years ended 1999,
1998 and 1997, respectively.

NOTE 9. INCOME TAXES

Income tax expense consists of the following:

Current: 1999 1998 1997
---------------------------------------
Federal $ 2,433 $ 1,757 $ 1,448
State 220 121 51
Deferred (credits) (226) 108 (514)
---------------------------------------
$ 2,427 $ 1,986 $ 985
=======================================

The components of the net deferred tax asset as of 1999 and 1998 are as follows:

Deferred tax assets: 1999 1998
-----------------------
Product warranty accruals $ 772 $ 596
Legal fees accrual 216 180
Vacation accruals 286 217
Inventories 151 123
Allowance for doubtful accounts 76 75
Other accruals 32 22
Amortization of intangibles 246 173
Other, net 21 11
-----------------------
1,800 1,397
Less valuation allowance -- --
-----------------------
1,800 1,397
-----------------------

DAKTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9. INCOME TAXES (CONTINUED)

Deferred tax liabilities:
Property and equipment 950 773
-----------------------
$ 850 $ 624
=======================

Reflected on the accompanying consolidated balance sheets as follows:

1999 1998
--------------------------
Current assets $ 1,476 $ 1,139
Noncurrent liabilities 626 515
--------------------------
$ 850 $ 624
==========================

A reconciliation of the provision for income taxes and the amount computed by
applying the federal statutory rate to income before income tax expense is as
follows:

1999 1998 1997
-----------------------------------------
Computed income tax
expense at federal
statutory rate $ 2,327 $ 1,882 $ 873
State taxes, net of
federal benefit 145 80 34
Meals and
entertainment 105 75 67
Other, net (150) (51) 11
-----------------------------------------
$ 2,427 $ 1,986 $ 985
=========================================

NOTE 10. YEAR 2000 ISSUE

The Year 2000 issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company is dependent on computer processing in its business
activities and the Year 2000 issue creates risk for the Company from unforeseen
problems in the Company's computer system and from third parties with whom the
Company conducts business. Such failures of the Company's computer system and/or
third parties' computer systems could have a material impact on the Company's
ability to conduct its business.

In accordance with its remediation plan to resolve the Year 2000 issue, the
Company has completed a review of its computer systems and products to identify
systems and products that could be affected by the Year 2000 issue. Based on the
Company's review, management does not believe the remaining remediation costs to
be incurred will be material to the Company's financial position and results of
operations.

NOTE 11. LITIGATION

On February 17, 1999, Daktronics was sued in the circuit court of Hillsborough
County, Florida by the Buccaneers Football Stadium Limited Partnership, an
affiliated company of the Tampa Bay Buccaneers football team. The lawsuit
alleges that the video displays installed at Raymond James Stadium in Tampa,
Florida do not meet the contract requirements. The lawsuit seeks either to
rescind the contract under which Daktronics furnished the scoring and display
equipment for the Stadium and obtain the return of all funds paid or to obtain
damages for breach of contract. The Tampa Sports Authority owns Raymond James
Stadium and is not a plaintiff in the action.

The contract, valued at approximately $7.9 million, included two large end zone
scoreboards with video displays, sideline auxiliary scoreboards, advertising
panels and installation. Daktronics has received approximately $3.1 million in
payments under the contract and has unpaid invoices outstanding in the amount of
approximately $2.9 million. In addition, the plaintiff is in default on a
payment in the amount of $257 under a promissory note to Daktronics as part of
the contract. Daktronics believes these payments have been unreasonably withheld
and has filed a counterclaim for these payments, related interest and
acceleration of remaining payments under the promissory note.

The Company has recorded a provision for estimated costs to be incurred in
connection with the litigation described above as well as other miscellaneous
claims and litigation arising in the ordinary course of business.

NOTE 12. COMMITMENT

The Company has a commitment for approximately $1.3 million for a building
expansion at its Brookings manufacturing facility.

NOTE 13. CASH FLOW INFORMATION

Noncash investing and financing activities consist of the purchase of fixed
assets through accounts payable of $105 in 1999; sale of advertising rights
through reduction of long-term debt of $231 and issuance of a long-term
receivable of $683 in 1998; reduction of long-term receivable of $419 to offset
and reduce long-term debt by the corresponding amount in 1998; purchase of
advertising rights through issuance of long-term debt of $675 in 1997; purchase
of advertising rights through incurrence of accounts payable of $160 in 1997;
property and equipment transferred to inventory of $10 in 1997; sale of property
and equipment of $193 included in long-term receivables in 1997; and purchase of
property and equipment through issuance of long-term debt of $182 in 1997.

Change in operating assets and liabilities consist of the following:

1999 1998 1997
----------------------------------------

(Increase) decrease:
Trade receivables $ (6,382) $ (1,922) $ (3,389)
Installment receivables (2,783) (1,191) 169
Inventories (2,870) (2,969) 1,785
Costs and estimated earnings in excess of billings (3,851) (272) 1,433
Advertising rights -- 587 97
Prepaids and other 137 (319) 180
Increase (decrease):
Accounts payable and accrued expenses 4,771 2,501 196
Customer deposits 1,042 -- --
Billings in excess of costs and estimated earnings 2,325 (430) 74
Accrued loss on uncompleted contracts -- (399) (466)
Deferred income 241 (120) (58)
Income taxes payable 166 (434) 903
----------------------------------------
$ (7,204) $ (4,968) $ 924
========================================

NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported on the balance sheets for cash and cash
equivalents approximate their fair values due to the highly liquid nature of the
instruments. The fair values for fixed-rate contracts receivable are estimated
using discounted cash flow analyses, using interest rates currently being
offered for contracts with similar terms to customers with similar credit
quality. The carrying amounts reported on the balance sheets for contracts
receivable approximate fair value. Fair values for the Company's
off-balance-sheet instruments (contingent liability for contracts sold with
recourse) are not significant. The note payable, bank is a variable rate note
that reprices frequently. The fair value on this note approximates its carrying
value. The carrying amounts reported for variable rate long-term debt
approximate fair value. Fair values for fixed-rate long-term debt are estimated
using a discounted cash flow calculation that applies interest rates currently
being offered for debt with similar terms and underlying collateral. The total
carrying value of long-term debt reported on the balance sheets approximates
fair value.

NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents summarized quarterly financial data.

1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ----------------------------------------------------------------------------------------------------

Net sales $ 22,236 $ 24,233 $ 17,681 $ 31,701
Gross profit 6,297 6,169 4,960 8,455
Net income 1,113 843 356 1,908
Basic earnings per share 0.26 0.19 0.08 0.44
Diluted earnings per share 0.25 0.19 0.08 0.43

1998 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ----------------------------------------------------------------------------------------------------

Net sales $ 15,768 $ 16,936 $ 17,168 $ 20,012
Gross profit 4,008 4,887 4,643 6,159
Net income 269 829 693 1,601
Basic and diluted earnings per share 0.06 0.19 0.16 0.37

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

NONE.

PART III.

Item 10. Directors and Executive Officers of the Registrant.

The information regarding the directors of the Company is incorporated by
reference from pages 3 to 4 of the Company's Proxy Statement dated July 22,
1999.

The information concerning executive officers is included in Part I, Item 1 of
this Form 10-K.

Item 11. Executive Compensation.

This information is incorporated by reference from pages 5 to 7 of the Company's
Proxy Statement dated July 22, 1999. The "Performance Graph" and the "Report of
the Compensation Committee" on pages 8 to 10 are specifically not incorporated
by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

This information is incorporated by reference from pages 11 to 12 of the
Company's Proxy Statement dated July 22, 1999.

Item 13. Certain Relationships and Related Transactions.

NONE

PART IV.

Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.

2. Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts.

10.6 Loan Agreement dated October 14, 1998 between U.S. Bank
National Association and Daktronics, Inc.(4)
10.7 Term Note date February 4, 1999 between U.S. Bank National
Association and Daktronics, Inc. (6)
10.8 Reserved
10.9 Reserved
10.10 Form of Stock Option Agreements effective May 25, 1993
between Daktronics, Inc. and Dr. Aelred Kurtenbach, Dr.
Duane Sander and James Morgan, granted in consideration of
their personal guarantee of performance bonds issued to the
Company.(1)
10.11 Reserved
10.12 Reserved
21.1 Subsidiaries of the Company (6)
23.1 Consent of McGladrey & Pullen, LLP (6)
27.1 Financial Data Schedule (6)

(1) Incorporated by reference under the same exhibit
number to the exhibits filed with the Registration
Statement on Form S-1 on December 3, 1993 as
Commission File No. 33-72466.
(2) Incorporated by reference under the same exhibit
number to the exhibits filed with Amendment No. 1 to
the Registration Statement on Form S-1 on January
12, 1994 as Commission File No. 33-72466.
(3) Incorporated by reference under same exhibit number
to the exhibits filed with form 10K on April 29,
1995 as Commission File No. 0-23246.
(4) Incorporated by reference under same exhibit number
to the exhibits filed with Form 10Q on October 31,
1998 as Commission File No. 0-23246.
(5) Incorporated by reference under same exhibit number
to the exhibits filed with form 8-K on November 30,
1998 as Commission File No. 0-23246.
(6) Filed herewith

(b) 1. Reports on Form 8-K.
None

All Sport(R), OmniSport(R), DakStats(R), Venus(R), Glow Cube(R), Starburst(R),
SunSpot(R), ProStar(R), DataTime(R), MagneView(TM), DataTrac(TM), InfoNet(TM),
ProSport(R) are trademarks of Daktronics, Inc.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized on July 28, 1999.

DAKTRONICS, INC.

By: /s/ Aelred J. Kurtenbach
--------------------------
Aelred J. Kurtenbach, President
(principal executive officer)

By: /s/ Paul J. Weinand
---------------------
Paul J. Weinand, Treasurer and Chief
Financial Officer (principal financial
and accounting officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

By /s/ Roland J. Jensen Director July 28, 1999
- -------------------------------
Roland J. Jensen

By /s/ Aelred J. Kurtenbach Director July 28, 1999
- -------------------------------
Aelred J. Kurtenbach

By /s/ Frank J. Kurtenbach Director July 28, 1999
- -------------------------------
Frank J. Kurtenbach

By /s/ James B. Morgan Director July 28, 1999
- -------------------------------
James B. Morgan

By /s/ John L. Mulligan Director July 28, 1999
- -------------------------------
John L. Mulligan

By /s/ Charles S. Roberts Director July 28, 1999
- -------------------------------
Charles S. Roberts

By /s/ Duane E. Sander Director July 28, 1999
- -------------------------------
Duane E. Sander

By /s/ James A. Vellenga Director July 28, 1999
- -------------------------------
James A. Vellenga

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors
Daktronics, Inc.
Brookings, South Dakota

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule II is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a part of the basic
consolidated financial statements. The schedule has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.

McGLADREY & PULLEN, LLP

Sioux Falls, South Dakota
June 28, 1999

DAKTRONICS, INC. AND SUBSIDIARY SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 1, 1999, MAY 2, 1998 AND MAY 3, 1997
(DOLLARS IN THOUSANDS)

Additions/
Balance at Provisions
Allowance for Beginning (Charged to Deductions Balance at
Doubtful Accounts of Year Expense) (1) End of Year
- ----------------- ------- -------- --- -----------

1999 $ 208 $ 182 $ 178 $ 212
1998 194 179 (165) 208
1997 129 130 (65) 194

(1) Write off of uncollectable accounts

INDEX OF EXHIBITS

3. Exhibits
3.1 Reserved
3.2 Amended and Restated Articles of Incorporation of the Company. (1)
3.3 Amendment to Articles of Incorporation (6)
3.4 Amended and Restated Bylaws of the Company. (1)
4.1 Form of Stock Certificate evidencing Common Stock, without par
value, of the Company. (2)
4.2 Shareholders Rights Agreement (4)
10.1 Amended Daktronics, Inc. 1993 Stock Option Plan. (6)
10.2 Amended Daktronics, Inc. 1993 Outside Directors Stock Option
Plan. (6)
10.3 Daktronics, Inc. Employee Stock Ownership Plan and Trust. (3)
10.4 Daktronics, Inc. 401(k) Profit Sharing Plan and Trust. (2)
10.5 Form of Indemnification Agreement between the Company and each of
its officers and directors.(1)
10.6 Loan Agreement dated October 14, 1998 between U.S. Bank National
Association and Daktronics, Inc.(4)
10.7 Term Note date February 4, 1999 between U.S. Bank National
Association and Daktronics, Inc. (6)
10.8 Reserved
10.9 Reserved
10.10 Form of Stock Option Agreements effective May 25, 1993 between
Daktronics, Inc. and Dr. Aelred Kurtenbach, Dr. Duane Sander and
James Morgan, granted in consideration of their personal guarantee
of performance bonds issued to the Company.(1)
10.11 Reserved
10.12 Reserved
21.1 Subsidiaries of the Company (6)
23.1 Consent of McGladrey & Pullen, LLP (6)
27.1 Financial Data Schedule (6)

(1) Incorporated by reference under the same exhibit number to
the exhibits filed with the Registration Statement on Form
S-1 on December 3, 1993 as Commission File No. 33-72466.
(2) Incorporated by reference under the same exhibit number to
the exhibits filed with Amendment No. 1 to the Registration
Statement on Form S-1 on January 12, 1994 as Commission
File No. 33-72466.
(3) Incorporated by reference under same exhibit number to the
exhibits filed with form 10K on April 29, 1995 as
Commission File No. 0-23246.
(4) Incorporated by reference under same exhibit number to the
exhibits filed with Form 10Q on October 31, 1998 as
Commission File No. 0-23246.
(5) Incorporated by reference under same exhibit number to the
exhibits filed with form 8-K on November 30, 1998 as
Commission File No. 0-23246.
(6) Filed herewith