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filename1.htm

    secresponsefy10.htm

    March 2,
2010

    via EDGAR and U.S.
Mail

    Mr. Rufus
Decker

    Accounting
Branch Chief

    United
States Securities and Exchange Commission

    100 F
Street, NE

    Mail Stop
4631

    Washington,
DC  20549

    Re:  Letter
dated January 29, 2010 regarding certain matters related to the Daktronics, Inc.
Form 10-K for the fiscal year ended May 2, 2009, Forms 10-Q for the periods
ended August 1, 2009 and October 31, 2009 and Schedule 14A filed July 1,
2009.  File No. 000-23246

    Dear Mr.
Decker:

    We have
received your comment letter dated January 29, 2010 requesting explanation and
supplemental information on the above-referenced filings and have provided the
underlying information in response.  We welcome comments you make on
our filings, as our goal is to ensure that the filings are in accordance with
all applicable rules and regulations.  Each of your comments are
included and numbered in the same order as your letter and are followed by our
response.

    Please
note that the timing of your inquiry and our response corresponds to the timing
of the filing of our Quarterly Report on Form 10-Q for the third quarter ended
January 30, 2010 and, therefore, you will have the benefit of reviewing the
changes we have made to our disclosure in the Quarterly Report on Form 10-Q
based on your comments.

    FORM 10-K FOR THE YEAR ENDED
MAY 2, 2009

    Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations, page
18

    Liquidity and Capital
Resources, page 29

              1.

              We
      note your credit agreement contains certain covenants including the
      maintenance of tangible net worth of at least $75 million, a minimum
      liquidity ratio and a minimum adjusted fixed charge coverage ratio, among
      other restrictions. In future filings, please ensure that you clearly
      disclose the specific terms of any material debt covenants and whether you
      were in compliance with the covenants as of the reporting date. In
      addition, if it is reasonably likely that you will not be in compliance
      with any of your material debt covenants, please disclose the required
      ratios/amounts as well as the actual ratios/amounts as of each reporting
      date. This will allow readers to understand how much cushion there is
      between the required ratios/amounts and the actual ratios/amounts. Please
      also consider showing the specific computations used to arrive at the
      actual ratios/amounts with corresponding reconciliations to US GAAP
      amounts, if necessary. See Sections I.D and IV.C of the SEC Interpretive
      Release No. 33-8350.  Please show us in your supplemental
      response what the revisions will look
like.

              Response:    Based
      on your comments, we revised our disclosure regarding our credit agreement
      in the Liquidity and Capital Resources section by replacing the paragraph
      that discusses our primary credit facility in our Quarterly Report on Form
      10-Q  for the quarter ended January 30, 2010 (“2010 Q3 Form
      10-Q”) with the following
disclosure:

    Revised Disclosure: We have a
credit agreement with a bank that was amended on November 12, 2009, which
provides for a $35.0 million line of credit and includes up to $15.0 million for
standby letters of credit.  The line of credit is due on November 15,
2010. The interest rate ranges from LIBOR plus 125 basis points to LIBOR plus
175 basis points depending on the ratio of interest-bearing debt to EBITDA, as
defined.  EBITDA is defined as net income before income taxes,
interest expense, depreciation and amortization.  The effective
interest rate was 1.0% at January 30, 2010.  We are assessed a loan
fee equal to 0.125% per annum of any non-used portion of the loan.  As
of January 30, 2010, there were no advances under the line of
credit.

    The
credit agreement is unsecured.  In addition to provisions that limit
dividends to the current year net profits after tax, the credit agreement also
requires us to be in compliance with the following financial
ratios:

              a.

              A
      minimum fixed charge coverage ratio of 2 to 1 at the end of any fiscal
      year.  The ratio is equal to (a) EBITDA less dividends, a
      capital expenditure reserve of $6 million, and income tax expense, over
      (b) all principal and interest payments with respect to debt, excluding
      debt outstanding on the line of credit,
and

              b.

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

    We were
in compliance with all applicable covenants as of January 30, 2010 and expect to
be in compliance with all applicable covenants at the end of fiscal year
2010.  The minimum fixed charge coverage ratio as of May 2, 2009 was
7.1 to 1, and the ratio of interest-bearing debt to EBITDA as of January 30,
2010 was approximately 0.04 to 1.

    We
believe that if our growth extends beyond current expectations or if we make any
strategic investments, we may need to increase our credit facility or seek other
means of financing.   We anticipate that we will be able to
obtain any needed funds under commercially reasonable terms from our current
lender or other sources.  We believe that our working capital
available from all sources will be adequate to meet the cash requirements of our
operations in the foreseeable future.

    Item 8 - Financial
Statements and Supplementary Data, page 33

    Nature of Business and
Summary of Significant Accounting Policies, page 39

              2.

              We
      note your overall decreases in net sales and net income for the six months
      ended October 31, 2009 as compared to the six months ended November 1,
      2008, specifically the significant decreases in your Commercial segment.
      To the extent that any of your reporting units have estimated fair values
      that are not substantially in excess of the carrying value and to the
      extent that goodwill for these reporting units, in the aggregate or
      individually, if impaired, could materially impact your operating results,
      please provide the following disclosures for each of these reporting units
      in future filings:

              ·

              Identify
      the reporting unit;

              ·

              The
      percentage by which fair value exceeds the carrying value as of the
      most-recent step-one test;

              ·

              The
      amount of goodwill;

              ·

              A
      description of the assumptions that drive the estimated fair
      value;

              ·

              A
      discussion of the uncertainty associated with the key assumptions. For
      example, to the extent that you have included assumptions in your
      discounted cash flow model that materially deviates from your historical
      results, please include a discussion of these
  assumptions;

              ·

              A
      discussion of any potential events and/or circumstances that could have a
      negative effect to the estimated fair
value.

    If you
have determined that the estimated fair value substantially exceeds the carrying
value for all of your reporting units, please disclose this
determination.  Please also provide the above disclosures, as
applicable, for any long-lived assets or asset groups for which you have
determined that fair value is not substantially in excess of the carrying value
and to the extent that the asset amounts, in the aggregate or individually,
could materially impact your operating results or total shareholder's equity.
Please refer to Item 303 of Regulation S-K and Sections 216 and 501.14 of the
SEC's Codification of Financial Reporting Policies for guidance. Please show us
in your supplemental response what the revisions will look like.

    Response:  As
disclosed in our prior filings, we analyze impairment for goodwill on an annual
basis as of the first business day of our third quarter.  Therefore,
we have completed our analysis during the third quarter, which was reported in
our 2010 Q3 Form 10-Q as follows:

    Revised Disclosure: We
account for goodwill and intangible assets in accordance with ASC 350, Goodwill and Other Intangible
Assets.  Under these provisions, goodwill is not amortized but
is tested for impairment on at least an annual basis.  Impairment
testing is required more often than annually if an event or circumstance
indicates that an impairment or a decline in value may have
occurred.  In conducting our impairment testing, we compare the fair
value of each of our business units (reporting unit) to the related carrying
value.  If the fair value of a reporting unit exceeds its carrying
value, goodwill is not impaired.  If the carrying value of a reporting
unit exceeds its fair value, an impairment loss is measured and
recognized.  We conduct our impairment testing as of the first
business day of the third quarter each year.

    We
utilize an income approach to estimate the fair value of each reporting
unit.  We selected this method because we believe that it most
appropriately measures our income producing assets.  We considered
using the market approach and cost approach, but concluded they were not
appropriate in valuing our reporting units given the lack of relevant and
available market comparisons.  The income approach is based on the
projected cash flows which are discounted to their present value using discount
factors that consider the timing and risk of the forecasted cash
flows.  We believe that this approach is appropriate because it
provides a fair value estimate based upon the reporting units’ expected
long-term operating cash performance.  This approach also mitigates
the impact of the cyclical trends that occur in the industry.  Fair
value is estimated using internally-developed forecasts and
assumptions.  The discount rate used is the average estimated value of
a market participant’s cost of capital and debt, derived using customary market
metrics.  Other significant assumptions include terminal value margin
rates, future capital expenditures, and changes in future working capital
requirements.  We also compare and reconcile our overall fair value to
our market capitalization.  While there are inherent uncertainties
related to the assumptions used and to our application of these assumptions to
this analysis, we believe that the income approach provides a reasonable
estimate of the fair value of our reporting units.   The
foregoing assumptions to a large degree were consistent with our long-term
performance with limited exceptions.  We believe that our future
investments for capital expenditures as a percent of revenue will decline in
future years due to our improved utilization resulting from lean initiatives,
and we believe that long-term receivables will decrease as we
grow.  We also have assumed that through this economic downturn, our
markets have not contracted for the long term; however it may be a number of
years before they fully recover.  These assumptions could deviate
materially from actual results.

    We
performed an analysis of goodwill as of the first business day of our third
quarter in fiscal 2010.  In addition, due to revisions in our
forward-looking 12 month forecast during the month of January 2010, resulting
from lower than expected order bookings and increased near-term uncertainty,
primarily in our Live Events business unit, the significance of orders being
delayed in all business units and the decline in our stock price, we believed
that an additional goodwill impairment test was required as of January 31,
2010.  Based on our test, we determined that the goodwill associated
with the Schools and Theatres business unit, totaling $685 was impaired and that
the goodwill associated with our International business unit of $725 was
impaired.  Because step two of the goodwill impairment testing is not
complete, an estimated impairment charge of $1,410 was recorded as of January
30, 2010. Given the timing of the circumstances which led to the impairment we
were unable to complete the step two fair value computations as this requires us
to obtain appraisals of various assets.  The impairment testing will
be complete by the end of the fourth quarter of fiscal 2010 at which time any
adjustments to the estimate will be recorded.

    Goodwill
was $3,262 at January 30, 2010, and $4,549 at May 2, 2009.  Of the
total of goodwill as of January 30, 2010, $2,388 related to the Live Events
business unit, $716 related to the Commercial business unit and $158 related to
the Transportation business unit.  Goodwill increased $123 during
fiscal 2010 as a result of the impact of foreign currency translation on
goodwill denominated in functional currencies other than the U.S.
dollar.  The fair value, carrying value after impairment and the
percentage in excess of carrying value of each business unit as of January 30,
2010 is as follows:

              Estimated
      Fair Value

              Carrying
      Value

              Percentage
      of Fair Value in Excess of Carrying Value

              Live
      Events

            $
            187,000

            $
            92,024

            51
            %

              Schools
      & Theatre

            31,000

            31,593

            (3
            %)

              Commercial

            121,000

            45,985

            62
            %

              Transportation

            66,000

            26,183

            60
            %

              International

            9,000

            10,803

            (20
            %)

    We face a
number of risks to our business which can adversely impact cash flows in each of
our business units and cause a significant decline in fair values of each
business unit.  This decline could lead to an impairment of goodwill
to some or all of our business units.  Since the fair values of the
business units are based in part on the market price of our common stock, a
significant decline in the market price of our stock may offset the benefits of
the foregoing efforts and lead to an impairment.  Notwithstanding the
foregoing, events could cause an impairment in goodwill in other business units
if the trend of orders and sales worsens and we are unable to respond in ways
that preserve future cash flows or if our stock price declines
significantly.

    Regarding
the Commission’s comments relating to long-lived asset impairment, we disclosed
the following in our 2010 Q3 Form 10-Q:

    Revised Disclosure:
Long-lived assets other than goodwill and indefinite-lived intangible
assets, which are separately tested for impairment, are evaluated for impairment
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable.

    When
evaluating long-lived assets for potential impairment, we first compare the
carrying value of the asset to the asset's estimated future cash flows
(undiscounted and without interest charges). If the estimated future cash flows
are less than the carrying value of the asset, we calculate an impairment loss.
The impairment loss calculation compares the carrying value of the asset to the
asset's estimated fair value, which may be based on estimated future cash flows
(discounted and with interest charges). We recognize an impairment loss if the
amount of the asset's carrying value exceeds the asset's estimated fair value.
If we recognize an impairment loss, the adjusted carrying amount of the asset
becomes its new cost basis. For a depreciable long-lived asset, the new cost
basis will be depreciated (amortized) over the remaining useful life of that
asset.

    Our
impairment loss calculations contain uncertainties because they requir