Basis of Presentation

3 Months Ended

Aug. 01, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Summary of Critical Accounting Policies

Note 1. Basis of Presentation

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

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

Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.  The balance sheet at May 2, 2020, has been derived from the audited financial statements at that date, but it does not include all the information and disclosures required by GAAP for complete financial statements.  These financial statements should be read in conjunction with our financial statements and notes thereto for the year ended May 2, 2020, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission ("SEC").  The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The fiscal year ended May 1, 2021 will consist of 52 weeks and the fiscal year ended May 2, 2020 was a 53-week year; therefore, the three months ended August 1, 2020 contains operating results for 13 weeks while the three months ended August 3, 2019 contains operating results for 14 weeks.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the totals of the same amounts shown in the condensed consolidated statement of cash flows:

	August 1, 2020		August 3, 2019
Cash and cash equivalents	$	44,609	$	20,762
Restricted cash	96		339
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$	44,705	$	21,101

Other Business Developments - Coronavirus Pandemic

During the first quarter of fiscal 2021, we continued to see the global spread of the coronavirus pandemic ("COVID-19"), which grew to create significant volatility, uncertainty and global economic disruption. As disclosed in our Current Report on Form 8-K filed on April 1, 2020, we are taking proactive steps to solidify our financial position and mitigate any adverse consequences. These steps include preserving liquidity by drawing down $15,000 of our existing line of credit, which is included in the "Other long-term obligations" line item in our condensed consolidated balance sheets. In addition, we are pursuing other sources of financing, reducing investments in capital assets, reducing executive pay and board member compensation, and instituting initiatives to reduce other costs in the business. Our board of directors voted to suspend stock repurchases under our share repurchase program and to suspend dividends for the foreseeable future. We believe these measures are necessary to help preserve our ability to borrow for liquidity needs and help us be well positioned when the pandemic passes and economies begin to recover.

During fiscal 2020, we offered special voluntary retirement and voluntary exit incentive program ("Offering") and during the first quarter of fiscal 2021, we conducted a reduction in force ("RIF") to adjust our capacity and reduce on-going expenses due to the uncertainties created by the COVID-19 pandemic. Under the Offering, employees had until June 2020 to choose to participate. During the first quarter of fiscal 2021, 60 employees agreed to participate and completed employment in June 2020. The approximate cost of this Offering was $931. Under the RIF, employment was terminated with 108 employees with severance totaling $1,426.

Various government programs have been announced which provide financial relief for affected businesses that suffered reductions in revenue resulting from the COVID-19 pandemic including the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada, the Australian JobKeeper subsidy in Australia, the Temporary COVID-19 Wage Subsidy in Ireland, and the Job Retention Program in the United Kingdom. During the first quarter of fiscal 2021, we received $812 in total governmental wage subsidies and recorded such as a reduction of compensation expense, which is mostly included in the "Costs of sales" line item in our condensed consolidated statements of operations.

Recent Accounting Pronouncements

There have been no material changes to our significant accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020, other than described in the Accounting Standards Adopted section below.

Accounting Standards Adopted

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for interim and annual periods beginning after December 15, 2019 and will require adoption on a prospective basis. We adopted ASU 2017-04 during the first quarter of fiscal 2021 and the adoption did not have an impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement and recognition of credit impairment for certain financial assets. ASU 2016-13 improves financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. Under the new guidance, the ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted, and will require adoption on a modified retrospective basis. We adopted ASU 2016-13 and its related guidance during the first quarter of fiscal 2021 and the adoption did not have a material impact on our condensed consolidated financial statements.

We estimate an allowance for doubtful accounts using a loss rate method. We measure all expected credit losses for financial assets held

at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

A reconciliation of the beginning and ending allowance for doubtful accounts is as follows:

	Allowance for Doubtful Accounts:
Balance as of May 2, 2020	$	2,828
Charged to costs and expenses	735
Deductions (1)	(241		)
Balance as of August 1, 2020	$	3,322

(1) Includes accounts determined to be uncollectible and charged against reserves.

Accounting Standards Not Yet Adopted

There are no significant ASU's issued not yet adopted as of August 1, 2020.