DAKTRONICS INC /SD/, 10-K405, 2000-07-28

DAKTRONICS INC /SD/
10-K405, 2000-07-28
MISCELLANEOUS MANUFACTURING INDUSTRIES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------

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 April 29, 2000
--------------
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 46-0306862
------------ ----------
(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
--------------------------
(Title of Class)

-------------

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 14, 2000, 8,865,082 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 14, 2000 was approximately
$72,800,000 based on the closing price of $11.25 per share of July 14, 2000 on
the NASDAQ/NMS).

Documents Incorporated By Reference
-----------------------------------

Selected portions of the Definitive Proxy Statement Incorporated
into Part III
Statement for the Annual Meeting of Shareholders to be held
August 16, 2000

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DAKTRONICS, INC.

Table of Contents

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

PART II. ......................................................... 15 - 35

PART III ......................................................... 35

PART IV. ......................................................... 35 - 46

Signatures ....................................................... 37

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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 70 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 2000, sales of products and services under $50,000
represented approximately 27% 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).

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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 desktop 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. Three years ago another technological
breakthrough occurred. The development of a blue light emitting diode that was
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.

Most of the manufacturers of computer programmable displays do not manufacture
large video displays and conversely the large video manufacturers do not
manufacture computer programmable displays. Daktronics, however, manufactures
both computer programmable displays and large video 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 the
information and entertainment presentations that has not been available
previously.

It is the opinion of the Company's management 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) reflective display technology and a manufacturer of printed circuit
boards, and installed its first scoreboard in a major league facility.

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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 the Cleveland Browns, Seattle
Mariners, Indianapolis Motor Speedway, Louisiana State University, (ii)
commercial displays in Glass Houghton Freeport Village, United Kingdom; Times
Square, New York; Las Vegas, Nevada and Branson, Missouri; and (iii) variable
message systems for highway and mass transit use in Virginia, New Jersey,
California, Washington, Delaware, Illinois, Pennsylvania, Mexico and New
Zealand.

Dr. Al Kurtenbach, Daktronics Chairman and CEO, was awarded the 2000 Ernst &
Young Entrepreneur of the Year Awards(R) program of Minnesota and the Dakotas in
the area of manufacturing. 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 pixels (dots or picture elements that make
up an image) 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 links. 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,

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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) LEDs, (ii) Starburst(R) four-color incandescent lamps, (iii)
SunSpot(R) monochrome incandescent lamps, (iv) Glow Cube(R) and other reflective
elements or (v) FibreLite(R) fiber-optic. 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.

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.

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,
Philips Arena, 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) multi-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 Olympic Summer Games, the 1994 Olympic Winter
Games and transportation departments in

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Connecticut, New Jersey and Virginia, and will be providing displays for the
2000 Summer Olympic Games in Sydney, Australia.

Another reflective product, 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.

FIBER-OPTIC DISPLAYS. The Company acquired a fiber-optic display technology in
1999. The Company's FibreLite(R) technology uses fiber-optic strands to deliver
light to a display face from an image generator such as an LCD monitor.
FibreLite(R) technology can provide a very affordable, indoor video display
system for schools and for other applications.

PRODUCT FAMILIES

Daktronics product offering is comprised of three primary product groups:

1) Sports Products
2) Video 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 85% 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) 1500 - low cost, entry-level controller for scoreboards.
All Sport(R) 3100 - controller with enhanced features and packaging over
All Sport(R)1500.
All Sport(R) 5010 - deluxe controller for controlling small and medium
sized scoreboards.
All Sport(R) 5100 - controller for large multi-display, multi-sport scoring
system for large college and professional levels.

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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 complement the controllers.

VIDEO PRODUCTS
The Video product group consists of displays having a large number of display
pixels. The pixels offered are incandescent, LED, reflective Glow Cube(R) or
fiber-optic pixels.

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

Video Product 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 more than 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 CRT video screens used in sports stadiums.
The first ProStar(R) installations were installed in the fall of 1997. Through
fiscal year 2000, 170 ProStar(R) displays have been sold.

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.

Video Product 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
V-Play(TM) controller is scheduled for release in mid-fiscal year 2001. It will
allow for organizing and controlling video and audio clips.

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.

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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), InfoNet(TM), and
Vanguard(TM) product lines intended primarily as text-base message displays.
They cost less than a large matrix display which is 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 5"x7" (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 outdoors. 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.

Vanguard(TM) Displays. This product line consists of a family of outdoor LED
displays used primarily for the transportation markets. Vanguard(TM) displays
are typically installed over roads to help direct traffic and inform motorists.
The Company has developed a control system, also named Vanguard(TM), to operate
a network of displays remotely.

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 to
display 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 (original
equipment manufacturers) 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.

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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 70 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
2000, 1999, and 1998, 9.3%, 11.4%, 9.3% 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.

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.

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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,
Pari-mutuel Gaming and Motor Racing

BUSINESS Banks, Auto Dealers, Shopping Malls, Casinos, Retail
Stores and other businesses.

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

Daktronics has a large and diverse customer base. Due to that diverse customer
base, the loss of a major customer would not have an adverse impact on the
Company.

During fiscal 2000, the Company's net sales to the sports market were
approximately 78% of net sales, while the business and government markets
accounted for approximately 12% and 7%, 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 video, 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 19 service centers in 17 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

10
<PAGE>

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:

o Sports Products
o Video Products
o 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 2000, 1999, and 1998 were approximately
$4,292,000, $3,809,000 and $2,409,000 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.

11
<PAGE>

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
$41 million as of June 30, 2000 and $34 million as of June 30, 1999. 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.

12
<PAGE>

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.

13
<PAGE>

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 24 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 1, 2000, Daktronics employed approximately 713 full time employees and
339 part time and temporary employees. Of these employees, approximately 484
were in manufacturing, 284 in sales, marketing and customer service, 230 in
engineering, and 54 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. (66) is a co-founder of the Company and has
served as a director of the Company since its incorporation. Dr. Kurtenbach is
currently serving as Chairman of the Board of Directors. He also served as
President of the Company until 1999. He served as Treasurer until 1993. Dr.
Kurtenbach has 43 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. (62) 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 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 (53) joined the Company in 1969 as a part-time engineer
while earning his M.S. degree in Electrical Engineering from South Dakota State
University. Mr. Morgan became President and Chief Operating Officer of the
Company in 1999. He served as its Vice President, Engineering, with
responsibility for product development, contract design, project management for
customer contracts, and corporate information and scheduling systems, from 1976
to 1999. Mr. Morgan has also served as a director since 1984.

FRANK J. KURTENBACH (62) 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.

14
<PAGE>

PAUL J. WEINAND (44) 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 236,000 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 30,000 square foot
expansion to its office building facility, with scheduled completion for April
2001. 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.

There are no pending material legal transactions against Daktronics, Inc.

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 2000.

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 April 29, 2000 the Company had 494 shareholders
of record. Following are the high and low sale prices for the Company's common
stock (amounts have been adjusted for the two-for-one stock split approved on
December 7, 1999):

FY 2000 FY 1999
High Low High Low
- ------------------------------------------------
1st Quarter 6 5/8 4 7/8 6 7/16 3 5/8
2nd Quarter 9 3/16 6 5 7/8 3 11/16
3rd Quarter 18 1/4 6 5/8 8 1/4 5
4th Quarter 14 7/8 7 6 1/8 4 1/8

On December 7, 1999, Daktronics approved a two-for-one stock split of the
Company's common stock in the form of a stock dividend. Stockholders of record
at the close of business on December 20, 1999 received one additional share for
each share of common stock on that date of record. Daktronics stock began
trading on the split-adjusted basis on January 10, 2000.

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

15
<PAGE>

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)

The following data has been derived from financial statements audited by
McGladrey & Pullen, LLP, independent accountants. Consolidated balance sheets as
of April 29, 2000 and May 1, 1999 and the related consolidated statements of
operations and shareholders' equity for each of the three years ended April 29,
2000, May 1, 1999 and May 2, 1998 and notes thereto appear elsewhere in this
Form 10-K.

<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales................................... $123,350 $95,851 $69,884 $62,640 $52,507
Operating Income (Loss)..................... 9,711 6,816 5,028 2,501 (319)
Net Income (Loss)........................... 6,224 4,220 3,392 1,508 (215)
Diluted Earnings (Loss) per Share *......... .68 .47 .39 .18 (.03)
Weighted Average Shares Outstanding......... 9,207 8,949 8,673 8,532 8,382

Balance Sheet Data:
Working Capital............................. $20,663 $20,592 $12,229 $10,923 $9,504
Total Assets................................ 72,407 62,619 43,488 37,136 37,767
Long-term Liabilities....................... 8,977 9,503 1,659 2,640 2,568
Shareholders' Equity........................ 36,231 29,501 25,184 21,750 19,861
</TABLE>

*Per share amounts have been adjusted for the two-for-one stock split approved
on December 7, 1999.

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 2000 fiscal year
contained 52 weeks.

16
<PAGE>

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 2000, 1999 and 1998:

<TABLE>
<CAPTION>
YEAR ENDED
2000 1999 1998
-------------------------------------------
<S> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................... 72.4 73.0 71.8
-------------------------------------------
Gross profit............................ 27.6 27.0 28.2
Operating expenses.......................... 19.7 19.9 21.0
-------------------------------------------
Operating income........................ 7.9 7.1 7.2
Interest income............................. 0.7 0.6 0.9
Interest expense............................ (1.1) (1.0) (0.6)
Other income................................ .5 0.2 0.2
-------------------------------------------
Income before income taxes.............. 8.0 6.9 7.7
Income tax expense.......................... 3.0 2.5 2.8
-------------------------------------------
Net income............................... 5.0% 4.4% 4.9%
===========================================
</TABLE>

NET SALES

Net sales for fiscal 2000 were $123.4 million, representing a 29% increase over
fiscal 1999 sales of $95.9 million. The increase was the result of increased
sales in the sports market niches, specifically major league, college and
university, and high school. Increased sales also occurred in the business
niches, primarily the commercial niche. Most of the government niches also
experienced a net increase in 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.

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 2000, 1999 and 1998. 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 $25.9 million in fiscal 1999 to $34 million in
fiscal 2000. 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 27.0% in fiscal 1999 and 27.6% in fiscal 2000.

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.

17
<PAGE>

OPERATING EXPENSES

Selling expenses have increased 30% and 27% for fiscal years 2000 and 1999,
respectively over the previous fiscal years. The increases were primarily
attributable to the expansion of sales staff and higher travel expenses as the
Company continues to expand its marketing efforts and the Company's increased
sales.

General and administrative expenses increased 34% and 17% for fiscal years 2000
and 1999, respectively over the previous fiscal year. The increase in fiscal
2000 over fiscal 1999 was due to the increased administrative support to sustain
the Company's sales growth, including increased depreciation on computer
equipment and office furniture.

Product design and development expenses increased 13% and 58% for fiscal years
2000 and 1999, 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 $.9 million, $.6 million and $.7
million for fiscal years 2000, 1999 and 1998, 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 $1.3 million, $.9 million and $.4 million for the fiscal
years 2000, 1999 and 1998, respectively. The increases in interest expense 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.

INCOME TAXES

The effective tax rates were 37% for each of the fiscal years 2000, 1999 and
1998.

NET INCOME

Net income was $6.2 million, $4.2 million and $3.4 million for fiscal years
2000, 1999 and 1998, respectively. The increases in net income were primarily
the result of increased sales which, was partially offset by increased operating
expenses and fluctuating gross profit margins.

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.

18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Working capital was $20.7 million at April 29, 2000, compared to $20.6 million
at May 1, 1999. The slight increase was primarily the result of an increase in
receivables of $3.3 million which was offset by a decrease in accounts payable
and accrued expenses of $1.4 million and net borrowings on note payable of $4.5
million.

Cash provided by operations for fiscal 2000 was $3.3 million. Net income of $6.2
million plus depreciation and amortization of $3 million were offset by an
increase in receivables of $3.3 million, an increase in advertising rights of
$.8 million, and a decrease in accounts payable and accrued expenses of $1.4
million. The increase in receivables was attributable to the increase in net
sales.

Cash used in investing activities for fiscal 2000 was $7.3 million which
principally consisted of equipment acquisitions and plant expansion.

Cash provided by financing activities was $4.1 million, which consisted
primarily of $1.3 million in borrowings in long-term debt and net borrowings of
$4.5 million on note payable and the Company's line of credit, less 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 2000, 1999 and 1998 were $4.3 million,
$3.8 million and $2.4 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 $20 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% (7.84% at
April 29, 2000) and is due on October 1, 2002. As of April 29, 2000, $7.2
million had been drawn on the line of credit and no standby letters of credit
had been issued by the bank. The credit agreement is unsecured and requires the
Company to meet certain covenants. Financial covenants include the maintenance
of tangible net worth of at least $23 million, a minimum liquidity ratio, 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 $100 million in bonded work
outstanding. At April 29, 2000, the Company had $2.9 million of bonded work
outstanding against this line.

19
<PAGE>

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 April 29, 2000.

YEAR 2000 ISSUES

Many computer programs used 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. The Company did not suffer any
disruption of operations from its own computer applications or from any of its
key suppliers or on any of its product applications.

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 April 29, 2000 year end. The Company's financial
statements, including the disclosures therein, are not expected to be materially
affected by those accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The Company does not believe its operations are exposed to significant market
risk relating to interest rates or foreign exchange risk.

Item 8. Financial Statements and Supplemental Data.

The financial statements of the Company as of and for the year ended April 29,
2000 begin on page (22) of this Annual Report.

20
<PAGE>

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 subsidiaries as of April 29, 2000 and May 1, 1999, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended April 29, 2000. 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
subsidiaries as of April 29, 2000 and May 1, 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
April 29, 2000, in conformity with generally accepted accounting principles.

McGLADREY & PULLEN, LLP

Sioux Falls, South Dakota
June 20, 2000

21
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
APRIL 29, 2000 AND MAY 1, 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ASSETS 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,217 $ 1,050
Accounts receivable (Note 4) 23,562 19,832
Current maturities of long-term receivables (Note 4) 1,541 2,300
Inventories (Note 2) 13,849 13,864
Costs and estimated earnings in excess of billings (Note 3) 5,177 5,374
Prepaid expenses and other 451 311
Income taxes receivable 647 --
Deferred income taxes (Note 9) 1,418 1,476
---------------------------------
TOTAL CURRENT ASSETS 47,862 44,207
Property and equipment, net (Note 2) 16,790 11,743
Advertising rights (Note 5) 824 --
Long-term receivables (Note 4) 6,081 6,048
Intangible and other assets 850 621
---------------------------------
$ 72,407 $ 62,619
=================================

LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------------------
Current Liabilities
Note payable, bank (Note 5) $ 7,202 $ 2,659
Current maturities of long-term debt (Note 5) 2,349 1,951
Accounts payable 7,327 8,815
Customer deposits 1,721 1,292
Accrued expenses (Note 2) 5,521 5,293
Billings in excess of costs and estimated earnings (Note 3) 3,079 2,970
Income taxes payable -- 635
---------------------------------
TOTAL CURRENT LIABILITIES 27,199 23,615
---------------------------------

Long-Term Debt, less current maturities (Note 5) 7,893 8,275
---------------------------------

Deferred Income 312 602
---------------------------------

Deferred Income Taxes (Note 9) 772 626
---------------------------------

Commitments and Contingencies (Notes 4 and 10)

Shareholders' Equity (Notes 6 and 7)
Common stock, no par value; authorized 30,000,000 shares,
issued 2000 8,873,542 shares; 1999 8,749,722 shares 12,232 11,819
Additional paid-in capital 93 --
Retained earnings 23,915 17,691
Less cost of treasury stock 9,840 shares 2000 and 1999 (9) (9)
---------------------------------
36,231 29,501
---------------------------------
$ 72,407 $ 62,619
=================================
</TABLE>

See Notes to Consolidated Financial Statements.

22
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND SHAREHOLDERS' EQUITY
YEARS ENDED APRIL 29, 2000, MAY 1, 1999 AND MAY 2, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OPERATIONS 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 123,350 $ 95,851 $ 69,884
Cost of goods sold 89,319 69,970 50,187
-------------------------------------------------
GROSS PROFIT 34,031 25,881 19,697
-------------------------------------------------

Operating expenses:
Selling 15,091 11,565 9,094
General and administrative 4,937 3,691 3,166
Product design and development 4,292 3,809 2,409
-------------------------------------------------
24,320 19,065 14,669
-------------------------------------------------
OPERATING INCOME 9,711 6,816 5,028

Nonoperating income (expense):
Interest income 923 603 654
Interest expense (1,308) (934) (414)
Other income, net 632 162 110
-------------------------------------------------
INCOME BEFORE INCOME TAXES 9,958 6,647 5,378
Income tax expense (Note 9) 3,734 2,427 1,986
-------------------------------------------------
NET INCOME $ 6,224 $ 4,220 $ 3,392
=================================================

Earnings per share:
Basic $ 0.71 $ 0.49 $ 0.40
=================================================
Diluted $ 0.68 $ 0.47 $ 0.39
=================================================
</TABLE>

<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Treasury
SHAREHOLDERS' EQUITY Stock Capital Earnings Stock Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 and warrants
(Note 6) 97 -- -- -- 97
Net income -- -- 4,220 -- 4,220
-----------------------------------------------------------------------------
Balance, May 1, 1999 11,819 -- 17,691 (9) 29,501
Exercise of stock options (Note 6) 413 -- -- -- 413
Net income -- -- 6,224 -- 6,224
Issuance of warrants (Note 7) -- 93 -- -- 93
-----------------------------------------------------------------------------
Balance, April 29, 2000 $ 12,232 $ 93 $ 23,915 $ (9) $ 36,231
=============================================================================

</TABLE>

See Notes to Consolidated Financial Statements.

23
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 29, 2000, MAY 1, 1999 AND MAY 2, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
2000 1999 1998
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 6,224 $ 4,220 $ 3,392
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 2,656 1,913 1,471
Amortization 351 353 634
(Gain) loss on sale of property and equipment (1) 129 --
Provision for doubtful accounts 252 182 179
Deferred income taxes (credits) 204 (226) 108
Other -- -- 5
Change in operating assets and liabilities (Note 11) (6,396) (7,204) (4,968)
-------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,290 (633) 821
-------------------------------------------------

Cash Flows From Investing Activities
Proceeds from sale of property and equipment 164 387 11
Purchase of property and equipment (6,933) (4,842) (3,265)
Purchase of intangible assets (400) (160) --
Other (87) -- 33
-------------------------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES (7,256) (4,615) (3,221)
-------------------------------------------------

Cash Flows From Financing Activities
Net borrowings (payments) on note payable 4,543 (2,935) 2,919
Proceeds from exercise of stock options 413 97 42
Principal payments on long-term debt (2,133) (1,012) (531)
Borrowings on long-term debt 1,310 10,000 --
-------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,133 6,150 2,430
-------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 167 902 30

Cash and Cash Equivalents
Beginning 1,050 148 118
-------------------------------------------------
Ending $ 1,217 $ 1,050 $ 148
=================================================

Supplemental Cash Flow Disclosures
Interest paid $ 1,315 $ 891 $ 456
Net income tax payments 4,812 2,488 2,298
</TABLE>

See Notes to Consolidated Financial Statements.

24
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
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 subsidiaries (Company) are engaged
principally in one line of business, the design and manufacture of a wide range
of computer-programmable information display systems to customers in a variety
of markets throughout the world. This revenue source represents more than 90% of
the total revenue of the Company.

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
April 29, 2000, May 1, 1999 and May 2, 1998 each included 52 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 subsidiaries, Star Circuits,
Inc., Keyframe, Inc. and MSC Technologies, Inc. Intercompany accounts and
transactions have been eliminated in consolidation.

Acquisitions: During the year ended April 29, 2000, the Company acquired three
small companies. The accounts of the acquired companies have been consolidated
in the accompanying financial statements as of the effective dates of the
related acquisitions. These acquisitions were treated as purchases for
accounting purposes for a total purchase price of $823, of which $443 was
allocated to goodwill.

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 that 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 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 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 $824 as of
April 29, 2000 and $0 as of May 1, 1999. On advertising rights that 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.

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 five to twelve years. Goodwill is amortized on the straight-line
method over three to seven years. Accumulated amortization on intangible assets
was $1,220 and $1,176 as of April 29, 2000 and May 1, 1999, respectively.

25
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
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 two to ten years.

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 carryforwards 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: The Company accounts for stock-based compensation in
accordance with Accounting Principals Board (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 (EPS)
for the years ended April 29, 2000, May 1, 1999 and May 2, 1998 follows.

Net Per Share
Income Shares Amount
------------------------------------------
For the year ended April 29, 2000:
Basic EPS $ 6,224 8,792,745 $ 0.71
Effect of dilutive securities:
Exercise of
stock options -- 414,231 0.03
------------------------------------------
Diluted EPS $ 6,224 9,206,976 $ 0.68
==========================================

For the year ended May 1, 1999:
Basic EPS $ 4,220 8,690,458 $ 0.49
Effect of dilutive securities:
Exercise of
stock options -- 258,564 0.02
------------------------------------------
Diluted EPS $ 4,220 8,949,022 $ 0.47
==========================================

For the year ended May 2, 1998:
Basic EPS $ 3,392 8,624,828 $ 0.40
Effect of dilutive securities:
Exercise of
stock options -- 48,092 0.01
------------------------------------------
Diluted EPS $ 3,392 8,672,920 $ 0.39
==========================================

Options outstanding of 58,000, 50,000 and 194,400 shares of common stock, and
warrants outstanding of 44,000, 0 and 226,624, at weighted average share prices
of $13.04, $5.92 and $3.86 during the years ended April 29, 2000, May 1, 1999
and May 2, 1998, respectively, were not included in the computation of diluted
earnings per share because the exercise price of those instruments exceeded the
average market price of the common shares during the respective year.

On December 7, 1999, the Company declared a two-for-one stock split in the form
of a stock dividend of one share of common stock for each one share outstanding,
payable to shareholders of record on December 20, 1999. All data related to
common shares has been retroactively adjusted based upon the new shares
outstanding after the effect of the two-for-one stock split for all periods
presented.

26
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 2. SELECTED FINANCIAL STATEMENT DATA

2000 1999
--------------------------
Inventories:
Raw materials $ 7,403 $ 8,465
Work-in-process 1,341 1,596
Finished goods 5,105 3,803
--------------------------
$ 13,849 $ 13,864
==========================
Property and equipment:
Land $ 528 $ 532
Buildings 8,008 5,459
Machinery and equipment 16,372 14,036
Office furniture and
equipment 4,258 1,997
Transportation equipment 970 744
--------------------------
30,136 22,768
Less accumulated
depreciation 13,346 11,025
--------------------------
$ 16,790 $ 11,743
==========================
Accrued expenses:
Product warranty $ 2,307 $ 2,161
Compensation 2,208 1,817
Taxes, other than
income taxes 535 791
Other 471 524
--------------------------
$ 5,521 $ 5,293
==========================

NOTE 3. UNCOMPLETED CONTRACTS

Uncompleted contracts consist of the following:

2000 1999
--------------------------
Costs incurred $ 19,140 $ 21,204
Estimated earnings 7,598 6,622
--------------------------
26,738 27,826
Less billings to date 24,640 25,422
--------------------------
$ 2,098 $ 2,404
==========================

Uncompleted contracts are included in the accompanying consolidated balance
sheets as follows:
2000 1999
--------------------------
Costs and estimated earnings
in excess of billings $ 5,177 $ 5,374
Billings in excess of costs and
estimated earnings 3,079 2,970
--------------------------
$ 2,098 $ 2,404
==========================

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 2000, 1999 and 1998, foreign sales were approximately
$11,512, $10,953 and $6,528, respectively. Foreign sales are determined by the
country to which the product is shipped, and vary by individual geographical
area from year to year.

Accounts receivable include unbilled receivables of $7,159 and $1,698 as of
April 29, 2000 and May 1, 1999, respectively. Unbilled receivables are generally
invoiced within thirty days. Accounts receivable are reported net of an
allowance for doubtful accounts of $232 and $212 at April 29, 2000 and May 1,
1999, 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 $7,622 and
$8,348 as of April 29, 2000 and May 1, 1999, respectively. Contract and lease
receivables bear interest at rates of 8.5% to 16.84% and are due in varying
annual installments through January of 2008.

At April 29, 2000 and May 1, 1999, the Company was contingently liable for
contracts sold with recourse of $328 and $517, respectively.

27
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5. FINANCING AGREEMENTS

Long-term debt:

<TABLE>
<CAPTION>
2000 1999
---------------------------
<S> <C> <C>
6.8% - 9.3% Notes payable due to bank, due in monthly
installments of $98, $99 and annual installments
of $260, including interest, through November 2003,
April 2004, and February 2007, subject to credit agreement
financial covenants discussed below, unsecured $ 8,981 $ 9,444
8.6% - 11.4% Contracts payable, primarily related to
advertising rights, due in annual installments,
including interest, from January 2001 to August 2005 506 575
Notes payable to a university, paid in full - 147
Other notes payable, installment obligations secured by
equipment 755 60
---------------------------
10,242 10,226
Less current maturities 2,349 1,951
---------------------------
$ 7,893 $ 8,275
===========================

</TABLE>

Maturities of long-term debt are as follows at April 29, 2000: 2001 $2,349; 2002
$2,528; 2003 $2,553; 2004 $1,904; 2005 $359; and thereafter $549.

Credit agreement: The Company has a credit agreement with a bank. The credit
agreement provides for a $20,000 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% (7.84% at April 29, 2000) and is due on October 1, 2002. As of April
29, 2000, $7,202 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.

28
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
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, reported net income and earnings per common share would have
been reduced to the pro forma amounts shown below:

2000 1999 1998
---------------------------------
Net income:
As reported $ 6,224 $ 4,220 $ 3,392
Pro forma 6,088 4,149 3,350

Earnings per
share:
As reported:
Basic 0.71 0.49 0.40
Diluted 0.68 0.47 0.39

Pro forma:
Basic 0.69 0.48 0.39
Diluted 0.66 0.47 0.39

The pro forma effects are not indicative of future amounts since, among other
reasons, the pro forma requirements have been applied only to options granted
after April 29, 1995.

Fixed stock option plans: The Company has reserved 1,520,000 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. A
total of 1,200,000 shares may be granted to employees under the 1993 Stock
Option Plan (1993 Option Plan). A total of 320,000 options may be granted to
outside directors under the 1993 Outside Directors Stock Option Plan (Outside
Directors Plan). Options in the 1993 Option Plan vest at 20% per year and
options in the Outside Directors Plan vest at 2,000 options annually for options
issued prior to the year ended May 1, 1999, and vest at 33% per year for
subsequent options issued.

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 fiscal years 2000, 1999 and 1998, respectively: no
dividend rate for all years; price volatility of 37% for 2000, 32% for 1999 and
28% for 1998; risk-free interest rates of 6.3%, 4.8% and 6.5% for the 1993
Option Plan and 6.0%, 5.0% and 6.5% for the Outside Directors Plan; and expected
lives of five, five and five to seven years for the 1993 Option Plan, and five,
five and seven years for the Outside Directors Plan.

29
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
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 April 29, 2000, May 1, 1999 and May 2,
1998, and changes during the years ended on those dates follows:

<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Fixed Options Shares Price Shares Price Shares Price
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 827,720 $ 3.85 655,020 $ 3.13 548,560 $ 3.17
Granted 199,600 10.18 233,800 5.84 135,700 2.70
Forfeited (1,500) 4.93 (31,900) 4.10 (3,500) 3.13
Exercised (123,820) 3.34 (29,200) 3.29 (25,740) 1.65
----------- ---------- ----------
Outstanding at end of year 902,000 5.32 827,720 3.85 655,020 3.13
=========== ========== ==========
</TABLE>

Options for 409,768, 379,620 and 295,684 shares were exercisable at April 29,
2000, May 1, 1999 and May 2, 1998, respectively. The weighted average fair value
of options granted were $4.35, $1.56 and $1.30 for the years ended April 29,
2000, May 1, 1999 and May 2, 1998, respectively.

A further summary about fixed options outstanding at April 29, 2000 is as
follows:

<TABLE>
<CAPTION>
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
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.09 to $2.94 272,280 5.8 years $ 2.63 160,224 $ 2.65
$3.23 to $3.81 199,900 3.4 3.56 197,500 3.56
$5.19 to $5.36 90,000 4.8 5.25 24,000 5.23
$6.13 to $6.74 140,220 7.8 6.21 28,044 6.21
$8.30 to $10.25 165,600 8.8 9.83 -- --
$11.28 to $12.84 34,000 6.7 11.92 -- --
----------- -----------
902,000 6.1 5.32 409,768 3.49
=========== ===========
</TABLE>

30
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 7. SHAREHOLDERS' EQUITY

Common stock: The authorized shares of 30,000,000 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
stocks, including the authority to establish the rights and preferences of the
undesignated stock without shareholder approval.

During the year ended May 1, 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: On December 29, 1999, the Company entered into an asset
purchase agreement with another entity to purchase substantially all of the
assets of the entity. As part of the consideration for the purchase, the Company
provided warrants with a computed value of $93, to purchase up to 44,000 shares
of common stock. Such amount has been included in the consolidated balance
sheets as additional paid-in capital. The warrants were exempt from registration
under the Securities Act of 1933 and may be exercised at any time during the
seven-year period beginning on December 29, 1999 at a price per share of $13.11.

The Company, in connection with its public offering, issued the underwriter five
year warrants to purchase up to 226,624 shares of the Company's common stock.
The warrants were exercised at $4.58 per share during the year ended May 1,
1999, in a cashless exercise. The result was to increase common stock
outstanding by 72,102 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 $39, $45 and $13
during the fiscal years ended 2000, 1999 and 1998, respectively. The plan holds
458,580 shares and 535,598 shares as of April 29, 2000 and May 1, 1999,
respectively, all of which have been allocated to plan participants. No
dividends were paid on plan shares in fiscal years 2000, 1999 or 1998, 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 $165, $185 and $115 to the plan for the fiscal years ended 2000,
1999 and 1998, respectively.

NOTE 9. INCOME TAXES

Income tax expense consists of the following:

2000 1999 1998
-----------------------------------------------------------
Current:
Federal $ 3,056 $ 2,433 $ 1,757
State 474 220 121
Deferred taxes
(credits) 204 (226) 108
-------------------------------------
$ 3,734 $ 2,427 $ 1,986
=====================================

31
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9. INCOME TAXES (CONTINUED)

The components of the net deferred tax asset as of April 29, 2000 and May 1,
1999 are as follows:

2000 1999
------------------------
Deferred tax assets:
Product warranty accruals $ 807 $ 772
Legal fees accrual 36 216
Vacation accrual 332 286
Inventories 201 151
Allowance for doubtful accounts
accounts 84 76
Other accruals 42 32
Amortization of intangibles 323 246
Other 13 21
------------------------
1,838 1,800
Less valuation allowance -- --
------------------------
1,838 1,800
Deferred tax liabilities:
Property and equipment 1,192 950
------------------------
$ 646 $ 850
========================

Reflected on the accompanying consolidated balance sheets as follows:

2000 1999
------------------------
Current assets $ 1,418 $ 1,476
Noncurrent liabilities 772 626
------------------------
$ 646 $ 850
========================

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:

2000 1999 1998
-------------------------------------
Computed income tax
expense at federal
statutory rate $ 3,485 $ 2,327 $ 1,882
State taxes, net of
federal benefit 308 145 80
Meals and
entertainment 162 105 75
Other, net (221) (150) (51)
-------------------------------------
$ 3,734 $ 2,427 $ 1,986
=====================================

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company has a commitment for approximately $1.5 million for a building
expansion at its Brookings, South Dakota manufacturing facility.

As of April 29, 2000, the Company is contingently liable for the guarantee of
debt to an unrelated party in the amount of $1,334.

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, based upon
consultation with legal counsel, the ultimate disposition of these matters will
not have a material adverse effect on the Company's consolidated financial
position.

32
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 11. CASH FLOW INFORMATION

Noncash investing and financing activities consist of the purchase of property
and equipment through accounts payable and long-term debt of $94 and $839,
respectively, and the purchase of intangible and other assets through the
issuance of warrants for $93 in 2000; purchase of property and equipment 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, and
the reduction of a long-term receivable of $419 to offset and reduce long-term
debt by the corresponding amount in 1998.

Change in operating assets and liabilities consist of the following:

<TABLE>
<CAPTION>
2000 1999 1998
---------------------------------------------
<S> <C> <C> <C>
(Increase) decrease:
Trade receivables $ (3,982) $ (6,382) $ (1,922)
Installment receivables 726 (2,783) (1,191)
Inventories 15 (2,870) (2,969)
Costs and estimated earnings in excess of billings 197 (3,851) (272)
Prepaid expenses and other (140) 137 (319)
Income taxes receivable (647) -- --
Advertising rights (824) -- 587

Increase (decrease):
Accounts payable and accrued expenses (1,354) 4,771 2,501
Customer deposits 429 1,042 --
Billings in excess of costs and estimated earnings 109 2,325 (430)
Accrued loss on uncompleted contracts -- -- (399)
Deferred income (290) 241 (120)
Income taxes payable (635) 166 (434)
---------------------------------------------
$ (6,396) $ (7,204) $ (4,968)
=============================================

</TABLE>

NOTE 12. MAJOR CUSTOMER

A major customer is a customer to whom sales greater than 10% were made during
the period. Net sales for the year ended April 29, 2000 included sales to one
customer of $12,534. At April 29, 2000, $1,858 was due from this customer.

NOTE 13. 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 and the contingent liability for the guarantee of debt) 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.

33
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents summarized quarterly financial data.

<TABLE>
<CAPTION>
2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 31,467 $ 37,127 $ 27,159 $ 27,597
Gross profit 8,234 9,747 7,549 8,501
Net income 1,767 2,343 1,006 1,108
Basic earnings per share 0.20 0.27 0.11 0.13
Diluted earnings per share 0.20 0.26 0.11 0.12

<CAPTION>
1999
--------------------------------------------------------------------------------------
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 0.13 0.10 0.04 0.22
Diluted earnings per share 0.12 0.10 0.04 0.21
</TABLE>

34
<PAGE>

Item 9. Changes 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 2 to 3 of the Company's Proxy Statement dated July 19,
2000.

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 4 to 6 of the Company's
Proxy Statement dated July 19, 2000. The "Performance Graph" and the "Report of
the Compensation Committee" on pages 7 to 9 are specifically not incorporated by
reference.

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

This information is incorporated by reference from pages 10 to 11 of the
Company's Proxy Statement dated July 19, 2000.

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.

3. Exhibits

<TABLE>
<S> <C>
3.1 Reserved
3.2 Amended and Restated Articles of Incorporation of the Company.(1)
3.3 Amendment to Articles of Incorporation.(5)
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.(5)
10.2 Amended Daktronics, Inc. 1993 Outside Directors Stock Option Plan.(5)
10.3 Reserved
10.4 Daktronics, Inc. 401(k) Profit Sharing Plan and Trust.(2)
</TABLE>

35
<PAGE>

<TABLE>
<S> <C>
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.(3)
10.7 Term Note date February 4, 1999 between U.S. Bank National Association and Daktronics, Inc.(5)
10.8 Term Note date February 2, 2000 between U.S. Bank National Association and Daktronics, Inc.(6)
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
10Q on October 31, 1998 as Commission File No. 0-23246.
(4) 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.
(5) Incorporated by reference under same exhibit number to the exhibits filed with Form 10K
on July 28, 1999 as Commission File No. 0-23246.
(6) Filed herewith.
</TABLE>

(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.

36
<PAGE>

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 27, 2000.

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 27, 2000
---------------------------------
Roland J. Jensen

By /s/ Aelred J. Kurtenbach Director July 27, 2000
-------------------------------
Aelred J. Kurtenbach

By /s/ Frank J. Kurtenbach Director July 27, 2000
-------------------------------
Frank J. Kurtenbach

By /s/ James B. Morgan Director July 27, 2000
---------------------------------
James B. Morgan

By /s/ John L. Mulligan Director July 27, 2000
----------------------------------
John L. Mulligan

By /s/ Charles S. Roberts Director July 27, 2000
---------------------------------
Charles S. Roberts

By /s/ Duane E. Sander Director July 27, 2000
----------------------------------
Duane E. Sander

By /s/ James A. Vellenga Director July 27, 2000
---------------------------------
James A. Vellenga

By /s/ Nancy D. Frame Director July 27, 2000
---------------------------------
Nancy D. Frame

37
<PAGE>

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 20, 2000

38
<PAGE>

DAKTRONICS, INC. AND SUBSIDIARIES SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED APRIL 29, 2000, MAY 1, 1999, AND MAY 2, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Additions/
Balance at Provisions
Allowance for Beginning (Charged to Deductions Balance at
Doubtful Accounts of Year Expense) (1) End of Year
----------------- ------- -------- --- -----------
<S> <C> <C> <C> <C>
2000 $ 212 $ 250 $ (232) $ 230
1999 208 182 (178) 212
1998 194 179 (165) 208
</TABLE>

(1) Write off of uncollectable accounts

<PAGE>

INDEX OF EXHIBITS

<TABLE>
<S> <C>
3. Exhibits
3.1 Reserved
3.2 Amended and Restated Articles of Incorporation of the Company.(1)
3.3 Amendment to Articles of Incorporation.(5)
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.(5)
10.2 Amended Daktronics, Inc. 1993 Outside Directors Stock Option Plan.(5)
10.3 Reserved
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.(3)
10.7 Term Note date February 4, 1999 between U.S. Bank National Association and Daktronics, Inc.(5)
10.8 Term Note date February 2, 2000 between U.S. Bank National Association and Daktronics, Inc.(6)
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 10Q
on October 31, 1998 as Commission File No. 0-23246.
(4) 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.
(5) Incorporated by reference under same exhibit number to the exhibits filed with Form 10-K
on July 28, 1999 as Commission File No. 0-23246.
(6) Filed herewith.
</TABLE>