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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended January 30, 2021

 

or

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

For the transition period from ___ to ___.

Commission File Number: 0-23246

 

dakt20210111b_10qimg001.jpg

 

Daktronics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

South Dakota

  

46-0306862

(State or Other Jurisdiction of

Incorporation or Organization)

  

(I.R.S. Employer Identification No.)

    

201 Daktronics Drive

Brookings,

SD

 57006

(Address of Principal Executive Offices)

 

(605) 692-0200

(Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, No Par Value

DAKT

NASDAQ Global Select Market

Preferred Stock Purchase Rights

DAKT

NASDAQ Global Select Market

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

 

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

   

Emerging growth company

 

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

 

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

 

The number of shares of the registrant’s common stock outstanding as of March 1, 2021 was 44,966,381.

 

 

 

  

 

DAKTRONICS, INC. AND SUBSIDIARIES

FORM 10-Q

For the Quarter Ended January 30, 2021

 

Table of Contents

 

 

   

Page

Part I.

Financial Information

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of January 30, 2021 and May 2, 2020

1

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January 30, 2021 and February 1, 2020

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended January 30, 2021 and February 1, 2020

3

 

Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended January 30, 2021 and February 1, 2020

4

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 30, 2021 and February 1, 2020

6

 

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

     

Part II.

Other Information

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 3.

Defaults Upon Senior Securities

23

Item 4.

Mine Safety Disclosures

23

Item 5.

Other Information

23

Item 6.

Exhibits

23

     

Signatures

24

Index to Exhibits

25

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS

 

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

  

January 30,

  

May 2,

 
  

2021

  

2020

 

ASSETS

        

CURRENT ASSETS:

        

Cash and cash equivalents

 $76,877  $40,398 

Restricted cash

  3,884   14 

Marketable securities

  248   1,230 

Accounts receivable, net

  63,212   72,577 

Inventories

  72,312   86,803 

Contract assets

  30,310   35,467 

Current maturities of long-term receivables

  1,736   3,519 

Prepaid expenses and other current assets

  7,554   9,629 

Income tax receivables

  87   548 

Property and equipment and other assets available for sale

  2,020   1,817 

Total current assets

  258,240   252,002 
         

Property and equipment, net

  61,805   67,484 

Long-term receivables, less current maturities

  754   1,114 

Goodwill

  8,262   7,743 

Intangibles, net

  2,396   3,354 

Investment in affiliates and other assets

  23,608   27,683 

Deferred income taxes

  13,382   13,271 

TOTAL ASSETS

 $368,447  $372,651 
         

LIABILITIES AND SHAREHOLDERS' EQUITY

        

CURRENT LIABILITIES:

        

Accounts payable

 $32,692  $47,834 
Contract liabilities  53,292   50,897 

Accrued expenses

  26,664   36,626 

Warranty obligations

  10,766   9,764 

Income taxes payable

  2,079   844 
Total current liabilities  125,493   145,965 
         

Long-term warranty obligations

  15,696   15,860 

Long-term contract liabilities

  10,587   10,707 

Other long-term obligations

  23,059   22,105 

Long-term income taxes payable

  554   582 

Deferred income taxes

  490   452 

Total long-term liabilities

  50,386   49,706 
         

SHAREHOLDERS' EQUITY:

        

Common Stock, no par value, authorized 115,000,000 shares; 46,264,576 and 45,913,209 shares issued at January 30, 2021 and May 2, 2020, respectively

  60,575   60,010 

Additional paid-in capital

  46,091   44,627 

Retained earnings

  95,759   85,090 

Treasury Stock, at cost, 1,297,409 and 1,343,281 shares at January 30, 2021 and May 2, 2020, respectively

  (7,297)  (7,470)

Accumulated other comprehensive loss

  (2,560)  (5,277)

TOTAL SHAREHOLDERS' EQUITY

  192,568   176,980 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $368,447  $372,651

 

 

See notes to condensed consolidated financial statements.

 

 

1

 

 

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

January 30,

   

February 1,

   

January 30,

   

February 1,

 
   

2021

   

2020

   

2021

   

2020

 

Net sales

  $ 94,139     $ 127,657     $ 365,150     $ 482,824  

Cost of sales

    70,198       103,175       272,134       372,750  

Gross profit

    23,941       24,482       93,016       110,074  
                                 

Operating expenses:

                               

Selling

    12,004       16,552       36,214       51,026  

General and administrative

    6,389       8,640       20,777       26,698  

Product design and development

    5,784       8,442       20,053       29,063  
      24,177       33,634       77,044       106,787  

Operating (loss) income

    (236 )     (9,152 )     15,972       3,287  
                                 

Nonoperating (expense) income:

                               

Interest income

    52       233       203       664  

Interest expense

    (92 )     13       (249 )     (53 )

Other (expense) income, net

    (913 )     (331 )     (2,377 )     (652 )
                                 

(Loss) income before income taxes

    (1,189 )     (9,237 )     13,549       3,246  

Income tax expense (benefit)

    (975 )     3,497       2,880       1,676  

Net (loss) income

  $ (214 )   $ (12,734 )   $ 10,669     $ 1,570  
                                 

Weighted average shares outstanding:

                               
Basic     45,064       45,189       44,908       45,139  
Diluted     45,064       45,189       45,061       45,412  
                                 

(Loss) earnings per share:

                               

Basic

  $ 0.00     $ (0.28 )   $ 0.24     $ 0.03  

Diluted

  $ 0.00     $ (0.28 )   $ 0.24     $ 0.03

 

 

See notes to condensed consolidated financial statements.

 

2

 

 

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

January 30,

   

February 1,

   

January 30,

   

February 1,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Net (loss) income

  $ (214 )   $ (12,734 )   $ 10,669     $ 1,570  
                                 

Other comprehensive income (loss):

                               

Cumulative translation adjustments

    1,296       51       2,717       (329 )

Unrealized gain (loss) on available-for-sale securities, net of tax

                      44  

Total other comprehensive income (loss), net of tax

    1,296       51       2,717       (285 )

Comprehensive income (loss)

  $ 1,082     $ (12,683 )   $ 13,386     $ 1,285  

 

See notes to condensed consolidated financial statements.

 

3

 

 

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

(unaudited)

 

                                               
   

Common Stock

   

Additional Paid-In Capital

   

Retained Earnings

   

Treasury Stock

   

Accumulated Other Comprehensive Loss

   

Total

 

Balance as of May 2, 2020

  $ 60,010     $ 44,627     $ 85,090     $ (7,470 )   $ (5,277 )   $ 176,980  

Net income

                7,467                   7,467  

Cumulative translation adjustments

                            1,037       1,037  
Share-based compensation           539                         539  

Treasury stock reissued

          26             173             199  
Balance as of August 1, 2020     60,010       45,192       92,557       (7,297 )     (4,240 )     186,222  

Net income

                3,416                   3,416  

Cumulative translation adjustments

                            384       384  

Share-based compensation

          508                         508  
Tax payments related to RSU issuances           (125 )                       (125 )

Balance as of October 31, 2020

    60,010       45,575       95,973       (7,297 )     (3,856 )     190,405  
Net loss                 (214 )                 (214 )
Cumulative translation adjustments                             1,296       1,296  
Share-based compensation           516                         516  
Employee savings plan activity     565                               565  

Balance as of January 30, 2021

  $ 60,575     $ 46,091     $ 95,759     $ (7,297 )   $ (2,560 )   $ 192,568  

 

See notes to condensed consolidated financial statements.

 

4

 

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(continued)

(in thousands)

(unaudited)

 

                                               
   

Common Stock

   

Additional Paid-In Capital

   

Retained Earnings

   

Treasury Stock

   

Accumulated Other Comprehensive Loss

   

Total

 

Balance as of April 27, 2019

  $ 57,699     $ 42,561     $ 93,593     $ (1,834 )   $ (4,356 )   $ 187,663  

Net income

                7,030                   7,030  

Cumulative translation adjustments

                            (526 )     (526 )

Unrealized gain (loss) on available-for-sale securities, net of tax

                            41       41  

Share-based compensation

          643                         643  

Employee savings plan activity

    779                               779  

Dividends declared ($0.05 per share)

                (2,250 )                 (2,250 )

Treasury stock purchase

                      (1,187 )           (1,187 )

Balance as of August 3, 2019

    58,478       43,204       98,373       (3,021 )     (4,841 )     192,193  

Net income

                7,274                   7,274  

Cumulative translation adjustments

                            146       146  

Unrealized gain (loss) on available-for-sale securities, net of tax

                            3       3  

Share-based compensation

          541                         541  

Tax payments related to RSU issuances

          (199 )                       (199 )

Employee savings plan activity

    798                               798  

Dividends declared ($0.05 per share)

                (2,250 )                 (2,250 )

Treasury stock purchase

                      (495 )           (495 )
Balance as of November 2, 2019     59,276       43,546       103,397       (3,516 )     (4,692 )     198,011  
Net loss                 (12,734 )                 (12,734 )
Cumulative translation adjustments                             51       51  
Share-based compensation           550                         550  
Dividends declared ($0.05 per share)                 (2,256 )                 (2,256 )
Treasury stock purchase                       (647 )           (647 )

Balance as of February 1, 2020

  $ 59,276     $ 44,096     $ 88,407     $ (4,163 )   $ (4,641 )   $ 182,975  

 

See notes to condensed consolidated financial statements.

 

5

 

 

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

   

Nine Months Ended

 
   

January 30,

   

February 1,

 
   

2021

   

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net income

  $ 10,669     $ 1,570  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    12,848       13,197  

Gain on sale of property, equipment and other assets

    (244 )     (6 )

Share-based compensation

    1,563       1,734  

Equity in loss of affiliates

    1,740       430  

Provision for doubtful accounts

    1,551       (477 )

Deferred income taxes, net

    (21 )     (223 )

Change in operating assets and liabilities

    20,115       (10,035 )

Net cash provided by operating activities

    48,221       6,190  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Purchases of property and equipment

    (6,935 )     (13,646 )

Proceeds from sales of property, equipment and other assets

    470       244  

Proceeds from sales or maturities of marketable securities

    982       24,665  

Purchases of and loans to equity investment

    (1,328 )     (1,229 )

Net cash (used in) provided by investing activities

    (6,811 )     10,034  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Principal payments on long-term obligations

    (431 )     (2,140 )

Dividends paid

          (6,756 )

Payments for common shares repurchased

          (2,329 )

Tax payments related to RSU issuances

    (125 )     (199 )

Net cash used in financing activities

    (556 )     (11,424 )
                 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

    (505 )     (166 )

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

    40,349       4,634  
                 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

               

Beginning of period

    40,412       35,742  

End of period

  $ 80,761     $ 40,376  
                 

Supplemental disclosures of cash flow information:

               

Cash paid for:

               

Interest

  $ 195     $ 3  

Income taxes, net of refunds

    1,491       460  
                 

Supplemental schedule of non-cash investing and financing activities:

               
Demonstration equipment transferred to inventory   $ 56     $ 10  

Purchases of property and equipment included in accounts payable

    527       954  

Contributions of common stock under the ESPP

    565       1,577  

 

See notes to condensed consolidated financial statements.

 

6

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollar amounts in thousands, except per share data)

(unaudited)

 

Note 1. Basis of Presentation

 

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

 

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

 

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

 

Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The fiscal year ending  May 1, 2021 will consist of 52 weeks and the fiscal year ended  May 2, 2020 was a 53-week year; therefore, the nine months ended January 30, 2021 contains operating results for 39 weeks while the nine months ended February 1, 2020 contains operating results for 40 weeks.

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the totals of the same amounts shown in the condensed consolidated statements of cash flows. We have bank guarantees that are secured with cash collateral which is maintained in the restricted cash account.

 

  

January 30,

  

February 1,

 
  

2021

  

2020

 

Cash and cash equivalents

 $76,877  $40,316 

Restricted cash

  3,884   60 

Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows

 $80,761  $40,376 

 

Other Business Developments - Coronavirus Pandemic

 

During the first nine months of fiscal 2021, we continued to see impacts of the global spread of the coronavirus pandemic ("COVID-19") and restrictions, which created and continues to create significant volatility, uncertainty and global economic disruption. As disclosed in our Current Report on Form 8-K filed on April 1, 2020, we have taken proactive steps to solidify our financial position and mitigate any adverse consequences. These steps included preserving liquidity by drawing down $15,000 of our existing line of credit, which is included in the "Other long-term obligations" line item in our condensed consolidated balance sheets. In addition, we are pursuing other sources of financing, reducing investments in capital assets, have reduced executive pay and board member compensation, and have or are continuing to institute initiatives to reduce other costs in the business. Our board of directors voted to suspend stock repurchases under our share repurchase program and to suspend dividends for the foreseeable future. In addition, during the third quarter of fiscal 2021 and throughout fiscal 2021, we have temporarily furloughed employees to manage our cost structure to align with decreased demand. We believe these measures help to preserve our ability to borrow for liquidity needs and position us well for when the pandemic passes and our customers and economies begin to recover.

 

During fiscal 2020, we offered a special voluntary retirement and voluntary exit incentive program ("Offering") and during the first nine months of fiscal 2021, we conducted two reductions in force ("RIF") to adjust our capacity and reduce on-going expenses due to the reduced revenue and uncertainties created by the COVID-19 pandemic. During the first quarter of fiscal 202160 employees agreed to participate in the Offering and completed employment. The approximate cost of this Offering was $931 during the first quarter of fiscal 2021. Under the RIF, employment was terminated with 108 employees with severance totaling $1,426 during the first quarter of fiscal 2021 and 150 employees with severance totaling $2,742 during the second quarter of fiscal 2021.

 

We received governmental wage subsidies from various governmental programs related to COVID implications of $254 and $1,632 during the three and nine months ended January 30, 2021, respectively and recorded as a reduction of compensation expense, which is mostly included in the "Costs of sales" line item in our condensed consolidated statements of operations. We also have elected to defer payments of the employer portion of social security taxes during the payroll tax deferral period, which ended on December 31, 2020. As of January 30, 2021 the total amount of such deferral was $5,122, which is included in the "Accrued expenses" and in the "Other long-term obligations" line items in our condensed consolidated balance sheet. Per the terms of the deferral program, 50 percent of the deferred amount is due on December 31, 2021 with the remaining 50 percent due on December 31, 2022.

 

Recent Accounting Pronouncements

 

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

 

Accounting Standards Adopted

 

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

 

7

 

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

 

We estimate an allowance for doubtful accounts using a loss rate method. We measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

 

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

 

  

Allowance

 
  

for Doubtful

 
  

Accounts:

 

Balance as of May 2, 2020

 $2,828 

Charged to costs and expenses

  2,724 

Deductions (1)

  (1,392)

Balance as of January 30, 2021

 $4,160 

(1) Includes account collections and write offs

 

Accounting Standards Not Yet Adopted

 

There are no significant ASU's issued not yet adopted as of January 30, 2021.

 

 

Note 2. Investments in Affiliates

 

Investments in affiliates over which we have significant influence are accounted for under the equity method of accounting, recording the investment at cost and then subsequently adjusting to account for our share of the affiliates profit or losses, in accordance with the provisions of Accounting Standards Codification ("ASC") 323, Investments – Equity Method and Joint Ventures. Investments in affiliates over which we do not have the ability to exert significant influence over the affiliate's operating and financing activities are accounted for under the cost method of accounting, recording the investment at cost and then subsequently adjusting for any changes in ownership or dividends, in accordance with the provisions of ASC 321, Investments – Equity Securities. We have evaluated our relationships with our affiliates and have determined that these entities are not variable interest entities. Cash paid for investments in affiliates and loans to affiliates are included in the "Purchases of and loans to equity investment" line item in our condensed consolidated statements of cash flows. Equity method investments as a whole are assessed for other-than-temporary impairments whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.

 

The aggregate amount of investments accounted for under the equity method was $15,517 and $17,257 at January 30, 2021 and May 2, 2020, respectively. Our proportional share of the respective affiliates' earnings or losses is included in the "Other (expense) income, net" line item in our condensed consolidated statements of operations. For the nine months ended January 30, 2021 and February 1, 2020, our share of the losses of our affiliates was $1,740 and $430, respectively. We purchased services for research and development activities from our equity method investments. The total of these related party transactions was $661 for the nine months ended January 30, 2021, which was included in the "Product design and development" line item in in our condensed consolidated statement of operations and $201 of this remains unpaid and is included in the "Accounts payable" line item in our condensed consolidated balance sheet.

 

 

Note 3. Earnings Per Share ("EPS")

 

We follow the provisions of ASC 260, Earnings Per Share, where basic EPS is computed by dividing income attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution which may occur if securities or other obligations to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock which share in our earnings.

 

The following is a reconciliation of the net income and common share amounts used in the calculation of basic and diluted EPS for the three and nine months ended January 30, 2021 and February 1, 2020:

 

  

Net (loss) income

  

Shares

  

Per share (loss) income

 

For the three months ended January 30, 2021

            
Basic (loss) earnings per share $(214)  45,064  $(0.00)
Dilution associated with stock compensation plans         
Diluted (loss) earnings per share $(214)  45,064  $(0.00)

For the three months ended February 1, 2020

            

Basic (loss) earnings per share

 $(12,734)  45,189  $(0.28)

Dilution associated with stock compensation plans

         

Diluted (loss) earnings per share

 $(12,734)  45,189  $(0.28)

For the nine months ended January 30, 2021

            
Basic earnings per share $10,669   44,908  $0.24 
Dilution associated with stock compensation plans     153    
Diluted earnings per share $10,669   45,061  $0.24 

For the nine months ended February 1, 2020

            

Basic earnings per share

 $1,570   45,139  $0.03 

Dilution associated with stock compensation plans

     273    

Diluted earnings per share

 $1,570   45,412  $0.03 

 

8

 

Options outstanding to purchase 2,337 shares of common stock with a weighted average exercise price of $8.70 for the three months ended January 30, 2021 and 2,193 shares of common stock with a weighted average exercise price of $9.92 for the three months ended  February 1, 2020 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

 

Options outstanding to purchase 2,268 shares of common stock with a weighted average exercise price of $9.29 for the nine months ended January 30, 2021 and 2,223 shares of common stock with a weighted average exercise price of $9.95 for the nine months ended February 1, 2020 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

 

 

Note 4. Revenue Recognition

 

Disaggregation of revenue

In accordance with ASC 606-10-50, we disaggregate revenue from contracts with customers by the type of performance obligation and the timing of revenue recognition. We determine that disaggregating revenue in these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors and to enable users of financial statements to understand the relationship to each reportable segment.

 

The following table presents our disaggregation of revenue by segments:

 

  

Three Months Ended January 30, 2021

 
          

High School

             
  

Commercial

  

Live Events

  

Park and Recreation

  

Transportation

  

International

  

Total

 

Type of performance obligation

                        

Unique configuration

 $2,087  $14,006  $3,604  $7,880  $5,155  $32,732 

Limited configuration

  24,630   4,536   10,424   3,273   7,391   50,254 

Service and other

  3,368   4,788   616   616   1,765   11,153 
  $30,085  $23,330  $14,644  $11,769  $14,311  $94,139 

Timing of revenue recognition

                        

Goods/services transferred at a point in time

 $25,092  $5,720  $9,163  $3,436  $7,785  $51,196 

Goods/services transferred over time

  4,993   17,610   5,481   8,333   6,526   42,943 
  $30,085  $23,330  $14,644  $11,769  $14,311  $94,139 

 

  

Nine Months Ended January 30, 2021

 
          

High School

             
  

Commercial

  

Live Events

  

Park and Recreation

  

Transportation

  

International

  

Total

 

Type of performance obligation

                        

Unique configuration

 $14,322  $83,283  $16,363  $24,579  $15,534  $154,081 

Limited configuration

  69,796   14,566   52,808   15,364   24,268   176,802 

Service and other

  10,829   14,777   1,994   1,647   5,020   34,267 
  $94,947  $112,626  $71,165  $41,590  $44,822  $365,150 

Timing of revenue recognition

                        

Goods/services transferred at a point in time

 $71,210  $18,670  $48,249  $15,740  $25,432  $179,301 

Goods/services transferred over time

  23,737   93,956   22,916   25,850   19,390   185,849 
  $94,947  $112,626  $71,165  $41,590  $44,822  $365,150 

 

  

Three Months Ended February 1, 2020

 
          

High School

             
  

Commercial

  

Live Events

  

Park and Recreation

  

Transportation

  

International

  

Total

 

Type of performance obligation

                        

Unique configuration

 $7,209  $27,459  $1,511  $7,857  $9,195  $53,231 

Limited configuration

  26,304   6,436   12,422   5,580   10,609   61,351 

Service and other

  3,367   6,676   842   479   1,711   13,075 
  $36,880  $40,571  $14,775  $13,916  $21,515  $127,657 

Timing of revenue recognition

                        

Goods/services transferred at a point in time

 $26,555  $8,614  $11,080  $5,683  $11,008  $62,940 

Goods/services transferred over time

  10,325   31,957   3,695   8,233   10,507   64,717 
  $36,880  $40,571  $14,775  $13,916  $21,515  $127,657 

 

  

Nine Months Ended February 1, 2020

 
          

High School

             
  

Commercial

  

Live Events

  

Park and Recreation

  

Transportation

  

International

  

Total

 

Type of performance obligation

                        

Unique configuration

 $29,181  $114,459  $12,727  $32,173  $35,415  $223,955 

Limited configuration

  80,193   25,662   60,349   19,550   33,663   219,417 

Service and other

  11,192   19,075   2,357   1,541   5,287   39,452 
  $120,566  $159,196  $75,433  $53,264  $74,365  $482,824 

Timing of revenue recognition

                        

Goods/services transferred at a point in time

 $81,562  $30,903  $55,791  $19,901  $34,696  $222,853 

Goods/services transferred over time

  39,004   128,293   19,642   33,363   39,669   259,971 
  $120,566  $159,196  $75,433  $53,264  $74,365  $482,824 

 

9

 

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

 

Contract balances

Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables. Unbilled receivables, which represent an unconditional right to payment subject only to the passage of time, are reclassified to accounts receivable when they are billed according to the contract terms. Contract liabilities represent amounts billed to the customers in excess of revenue recognized to date.

 

The following table reflects the changes in our contract assets and liabilities:

 

  

January 30,

  

May 2,

  

Dollar

  

Percent

 
  

2021

  

2020

  

Change

  

Change

 

Contract assets

 $30,310  $35,467  $(5,157)  (14.5)%
Contract liabilities - current  53,292   50,897   2,395   4.7%

Contract liabilities - noncurrent

  10,587   10,707   (120)  (1.1)%

 

The changes in our contract assets and contract liabilities from May 2, 2020 to January 30, 2021 were due to the timing of billing schedules and revenue recognition, which can vary significantly depending on the contractual payment terms and the seasonality of the sports markets. We had no material impairments of contract assets for the nine months ended January 30, 2021.

 

For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred. Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities" line items in our condensed consolidated balance sheets. Changes in unearned service-type warranty contracts, net were as follows:

 

  

January 30,

 
  

2021

 

Balance at beginning of period

 $24,490 

New contracts sold

  49,471 

Less: reductions for revenue recognized

  (48,818)

Foreign currency translation and other

  194 

Balance at end of period

 $25,337 

 

 

As of January 30, 2021 and May 2, 2020, our contracts in progress that were identified as loss contracts were immaterial. For these contracts, the provision for losses are included in the "Accrued expenses" line item in our condensed consolidated balance sheets.

 

During the nine months ended January 30, 2021, we recognized revenue of $42,851 related to our contract liabilities as of May 2, 2020.

 

Remaining performance obligations

As of January 30, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligations was $248,643. We expect approximately $211,787 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter. Remaining performance obligations related to product and service agreements at January 30, 2021 are $194,534 and $54,109, respectively. Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate.

 

 

Note 5. Segment Reporting

 

We organize and manage our business by the following five segments which meet the definition of reportable segments under ASC 280-10, Segment Reporting: Commercial, Live Events, High School Park and Recreation, Transportation, and International. These segments are based on the customer type or geography and are the same as our business units. Separate financial information is available and regularly evaluated by our chief operating decision-maker (CODM), who is our president and chief executive officer, in making resource allocation decisions for our segments. Our CODM evaluates segment performance to the GAAP measure of gross profit. We exclude general and administration expense, product design and development expense, non-operating income and expense, and income tax expense (benefit) in the segment analysis.

 

10

 

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

 

  

Three Months Ended

  

Nine Months Ended

 
  

January 30,

  

February 1,

  

January 30,

  

February 1,

 
  

2021

  

2020

  

2021

  

2020

 

Net sales:

                

Commercial

 $30,085  $36,880  $94,947  $120,566 

Live Events

  23,330   40,571   112,626   159,196 

High School Park and Recreation

  14,644   14,775   71,165   75,433 

Transportation

  11,769   13,916   41,590   53,264 

International

  14,311   21,515   44,822   74,365 

Total company net sales

  94,139   127,657