UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
DAKTRONICS, INC.
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(Name of Registrant as Specified In Its Charter)
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DAKTRONICS, INC.
331 32nd Avenue
Brookings, South Dakota 57006
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
21 AUGUST 2002
To the Shareholders of Daktronics, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Daktronics,
Inc., will be held at Daktronics, Inc., 331 32nd Avenue, Brookings, South Dakota
57006 on Wednesday, August 21, 2002 at 7:00 p.m. Central Daylight Time, for the
following purposes:
1. To elect directors duly nominated for a term expiring in 2005:
Aelred J. Kurtenbach, Robert D. Dutcher, Nancy D. Frame.
2. To ratify the appointment of Ernst & Young, LLP as independent
auditors for the Company for the fiscal year ending May 3, 2003.
3. To consider and vote upon the proposal to approve the Daktronics, Inc.
2002 Employee Stock Purchase Plan.
4. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
Only the shareholders of record of Daktronics Common Stock at the close of
business on 3 July 2002 will be entitled to receive notice of and to vote at the
meeting or any adjournment thereof.
You are cordially invited to attend the meeting. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED AT THE MEETING. THEREFORE, WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you later desire to revoke your proxy,
you may do so at any time before it is exercised. Shareholders who are present
at the meeting may withdraw their Proxy and vote in person if they so desire.
By order of the Board of Directors,
Carla S. Gatzke, Secretary
22 July, 2002
DAKTRONICS, INC.
TABLE OF CONTENTS
Pages
Information About the Meeting............................................ 1
Proposal #1-Election of Directors........................................ 2
Director Compensation.................................................... 4
Executive Compensation................................................... 5
Performance Graph........................................................ 7
Report of the Audit Committee............................................ 7
Report of the Compensation Committee..................................... 8
Security Ownership of Certain Beneficial Owners and Management........... 9
Proposal #2-Ratification of Appointment of Independent
Certified Public Accountants.......................................... 10
Proposal #3-Approval of Daktronics, Inc. 2002 Employee Stock
Purchase Plan......................................................... 10
Other Matters............................................................ 14
Shareholder Proposals for the Next Annual Meeting........................ 14
ii
DAKTRONICS, INC.
331 32nd Avenue
Brookings, South Dakota 57006
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 21, 2002
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors of Daktronics, Inc. ("Daktronics"
or the "Company") for use at the Annual Meeting of Shareholders to be held on
Wednesday, August 21, 2002, at Daktronics, Inc., 331 32nd Avenue, Brookings,
South Dakota at 7:00 p.m. Central Daylight Time, and at any adjournment thereof,
for the purposes set forth in the Notice of Annual Meeting of Shareholders.
Shares of Common Stock represented by proxies in the form solicited
will be voted in the manner directed by a shareholder. If no direction is made,
the proxy will be voted (1) for election of the three nominees for Directors for
terms expiring in 2005, Aelred J. Kurtenbach, Robert G. Dutcher, Nancy D. Frame,
(2) for ratification of appointment of Ernst & Young, LLP as independent
auditors for the Company for the fiscal year ending May 3, 2003, and (3)
approval of reserving shares for the proposed Daktronics, Inc. 2002 Employee
Stock Purchase Plan. A shareholder may revoke his or her proxy at any time
before it is voted by delivering to the Secretary of the Company a written
notice of termination of the proxy's authority, by filing with the Secretary of
the Company another proxy bearing a later date, or by appearing and voting at
the meeting. This Proxy Statement and the form of proxy enclosed are being
mailed to shareholders commencing on or about July 21, 2002.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed by the Company for the meeting, and the
number of shareholders present in person or by proxy will determine whether or
not a quorum is present. The inspectors of election will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum for all matters. Shares abstaining will be treated as
un-voted. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares will
not be considered as present and entitled to vote by the inspectors of election
with respect to that matter. The three persons receiving the most votes will be
elected for directors and the other issues will be determined by a majority of
the votes cast.
Only the holders of the Company's Common Stock whose names appear of record
on the Company's books at the close of business on July 12, 2002 will be
entitled to vote at the annual meeting. At the close of business on April 26,
2002, a total of 18,251,404 shares of Common Stock were outstanding. The holders
of one-third of the shares of Common Stock issued and outstanding and entitled
to vote at the 2002 Annual Meeting, present in person or represented by proxy,
will constitute a quorum for the transaction of business. If a quorum should not
be present, the 2002 Annual Meeting may be adjourned from time to time until a
quorum is present. Holders of Common Stock are entitled to one vote per share on
all matters submitted to a vote of shareholders, except that with respect to the
election for directors every shareholder shall have the right to vote, in person
or by proxy, the number of shares owned by the holder for as many persons as
there are directors to be elected, or to cumulate the holder's votes by giving
one candidate the number of votes which is equal to the number of directors to
be elected multiplied by the number of the holder's shares, or by distributing
such cumulated votes among any number of candidates.
Participants in the Company's 401(k) plan who have Daktronics shares as one
of their 401(k) investment selections are entitled to instruct the trustee of
the 401(k) plan how to vote their shares of Common Stock. Each participant will
receive a voting instruction card to direct the trustee to vote that
participant's shares. If a participant does not timely
return a completed voting instruction card, the trustee will vote the shares
allocated to that participant in the same proportion as the shares which are
voted by all participants under the 401(k) plan.
The Company will pay expenses in connection with the solicitation of
proxies. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their services may solicit proxies by telephone, email or
personal calls. The Company may reimburse brokerage firms and others for their
expenses in forwarding solicitation materials to the beneficial owners of Common
Stock.
A copy of the Company's Annual Report for the fiscal year ended April 27,
2002 is being furnished to each shareholder with this Proxy Statement.
PROPOSAL # 1 - ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Incorporation, the Board of Directors
is divided into three classes serving staggered three-year terms expiring at
each successive annual meeting of shareholders. The terms of Aelred J.
Kurtenbach, Charles S. Roberts and Nancy D. Frame expire at the 2002 Annual
Meeting, Frank J. Kurtenbach, James A. Vellenga and Roland J. Jensen expire at
the 2003 Annual Meeting, and James B. Morgan, John L. Mulligan and Duane E.
Sander expire at the 2004. Dr. Roberts is retiring from the Board after serving
as a Director for 33 years, since the Company's incorporation.
The persons named in the accompanying proxy will vote for the election of
the three nominees described herein, unless authority to vote is withheld. The
Board of Directors has been informed that each of the three nominees is willing
to serve as a director; however, if any nominee should decline or become unable
to serve as a director for any reason, the proxy may be voted for such other
person as the proxies shall, in their discretion, determine.
The following table sets forth certain information as of July 3, 2002
concerning the three nominees for election as directors of the Company and the
continuing directors:
Name and Age Position with Company
- ------------ ---------------------
NOMINEES FOR TERMS EXPIRING AT THE 2002 ANNUAL MEETING
Aelred J. Kurtenbach (68) Chairman and Director
Robert G. Dutcher (57) Director
Nancy D. Frame (57) Director
DIRECTORS FOR TERMS EXPIRING AT THE 2003 ANNUAL MEETING
Frank J. Kurtenbach (64) Vice President, Sales and Director
Roland J. Jensen (71) Director
James A. Vellenga (67) Director
DIRECTORS FOR TERMS EXPIRING AT THE 2004 ANNUAL MEETING
James B. Morgan (55) President, Chief Executive Officer and Director
Duane E. Sander (64) Director
John L. Mulligan (63) Director
2
AELRED J. KURTENBACH, PH.D. 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 and CEO until 2001. He served as Treasurer
until 1993. Dr. Kurtenbach has extensive experience in the fields of
communication engineering and control system design, technical services,
computer systems, electrical engineering education and business management. Dr.
Kurtenbach holds 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.
ROBERT G. DUTCHER is chairman, president and CEO of Possis Medical, Inc, a
medical device company located in Minneapolis, MN. Prior to joining Possis
Medical in 1985, Dutcher was with Medtronics, Inc. for twelve years, most
recently as Director of Research and Development. He previously worked in an
engineering capacity for Control Data Corporation and Honeywell, Inc. He is the
inventor of twenty-one U.S. medical device patents. Mr. Dutcher holds a B.S.
degree in Electrical Engineering from South Dakota State University (SDSU) and
an M.S. in Electrical Engineering from the University of Minnesota.
NANCY D. FRAME was elected as a director in 1999. Prior to her retirement,
Ms. Frame was the Deputy Director of the United States Trade and Development
Agency in Washington, D.C., a position she held from 1986 to 1999. From 1976 to
1986 she held various positions in the legal profession, specializing in
international trade and commercial law. She obtained her law degree from
Georgetown University, Washington, D.C.
FRANK J. KURTENBACH 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 SDSU. Aelred Kurtenbach and Frank Kurtenbach are brothers.
ROLAND J. JENSEN worked in various capacities from 1960 to 1990 with
Northern States Power Company, an electric and natural gas utility, ending his
service as Senior Vice President of Power Supply. From 1990 to his retirement in
January 1994, he was Chairman and CEO of NRG Energy, Inc., a Minneapolis-based
energy services company. Mr. Jensen has served as a director of the Company
since 1994.
JAMES A. VELLENGA was elected as a director in 1997. Mr. Vellenga is
President, CEO and Chairman of the Board of Uptech Automation Inc. From 1988 to
1998 he held various senior management positions at Aetrium Inc., most recently
as the Vice President of Technology. Prior to joining Aetrium Inc., Mr. Vellenga
was a founder and Vice President of Operations of Lee Data Corporation. During
the formative years of the computer industry, (1957-1979) Mr. Vellenga worked at
Remington Rand Univac, Control Data Corporation and Data 100 Corporation
involved in the design and management of computer products. Mr. Vellenga holds a
B.S. degree in Electrical Engineering from SDSU.
JAMES B. MORGAN 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 and Chief Executive Officer in 2001. He served as its Vice
President, Engineering, with responsibility for product development, contract
design, project management for customer contracts, and corporate information
systems, from 1976 to 1999. Mr. Morgan has also served as a director since 1984.
DUANE E. SANDER, PH.D. is a co-founder of the Company and has served as a
director since its incorporation. He also served as Corporate Secretary from
incorporation until 2001. Dr. Sander is currently employed at the South Dakota
State University Foundation. He served as Dean of Engineering at SDSU from
1990-1999, and taught electrical engineering courses and directed biomedical
research projects since 1967.
JOHN L. MULLIGAN was elected as a director of the Company in 1993. Since
1995, he has been employed as Vice President and financial advisor with Morgan
Stanley Dean Witter, in the same capacity as when he was employed with Mesirow
Financial from late 1990 through mid 1993. In 1993 and 1994, he served as
principal of Mulligan Financial, a financial services firm that he founded. From
1967 to March 1990, he served as President, Chairman, Chief Executive Officer
and director of American Western Corporation. Mulligan maintains his Certified
Public Accountant certification.
3
DIRECTOR COMPENSATION
The current non-employee directors of the Company include Mulligan, Sander,
Roberts, Jensen, Frame, and Vellenga. During fiscal 2002 each non-employee
director received, for their services as a director, a $2,000 retainer, $1,500
for each meeting attended in person, $500 for each committee meeting attended in
person (telephonic participation in all meetings at one-half rate), and
reimbursement of all out-of-pocket expenses incurred in attending meetings. The
non-employee directors also receive stock options under the Company's 2001
Outside Directors Stock Option Plan. In August 2001, Mr. Mulligan and Mr. Sander
each received 12,000 shares for each of the three years of their term under the
2001 Outside Directors Stock Option Plan, for a total of 36,000 shares, which
are subject to vesting restrictions under the plan and have an exercise price of
$10.09 per share. Dr. Sander did not receive any additional compensation for
serving as Secretary of the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit Committee consisting of
John L. Mulligan (chair), James A. Vellenga and Duane E. Sander; and a
Compensation Committee consisting of Roland Jensen (chair), Charles S. Roberts,
and Nancy Frame. The Company has no standing nominating committee. The Board as
a whole performs the functions that would otherwise be delegated to a nominating
committee.
The Board of Directors held four regular and 1 telephone meeting during
fiscal 2002. All incumbent directors attended at least 75% of the Board
meetings. The Board also passed one resolution during fiscal 2002 by written
consent.
The Audit Committee held two meetings in fiscal 2002. The Audit Committee
reviews the activities of the Company's independent accountants and the results
of audits made by these professionals. None of the members of the Audit
Committee are employees of the Company.
The Compensation Committee held three meetings during fiscal 2002. The
Compensation Committee is responsible for making recommendations to the Board of
Directors regarding compensation of the Company's executive officers and stock
option awards under the Company's 2001 Incentive Stock Option Plan as amended.
None of the members of the Compensation Committee are employees of the Company
and all executive officers that serve on the Board of Directors abstain from
voting on compensation affecting those executive officers that are Board
members.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no compensation committee interlocks with other companies and
none of the members of the committee has been an officer, employee or insider of
the Company or its subsidiaries.
4
EXECUTIVE COMPENSATION
CASH AND OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Company's Chief
Executive Officer, and each of the other executive officers, whose total annual
salary and bonus exceeded $100,000 during fiscal 2002.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation(1) Awards
---------------------- ------
Fiscal Securities
Year All Other Underlying
Name and Principal Position Ended Salary Bonus(2) Compensation(3) Options (#)
--------------------------- ----- ------ -------- --------------- -----------
Dr. Aelred J. Kurtenbach 2002 $242,596 $0 $2,733 10,000
Chairman 2001 271,154 75,000 3,750 30,000
And Director 2000 225,385 62,500 1,531 40,000
James B. Morgan 2002 $241,346 $0 $3,699 10,000
President, Chief Executive 2001 222,571 62,500 3,000 24,000
Officer and Director 2000 181,217 50,000 1,577 32,000
Frank J. Kurtenbach 2002 $127,431 $0 $3,632 5,000
Vice President 2001 127,960 33,000 2,789 8,000
And Director 2000 118,389 31,250 1,584 12,000
- -----------------------
(1) Annual Compensation excludes personal benefits received by the named person
to the extent that the aggregate amounts thereof were less than 10% of the
total of that person's annual salary and bonus.
(2) Reflects bonus earned during the fiscal year.
(3) Company match to employee contributions under the Company's 401(k)
Retirement and Savings Plan.
5
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information relating to stock options and stock
appreciation rights (SARs) awarded to the executive officers named in the
Summary Compensation Table under the Company's 2001 Stock Option Plan during
fiscal 2002. No SARs have been awarded by the Company.
OPTION/SAR GRANTS IN FISCAL 2002
Individual Grants
--------------------------- Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation for
Underlying Granted to Exercise or Option Term
Options/SARs Employees Base Price Expiration -----------------------
Name Granted (#) in 2002 ($/share)(4) Date 5% 10%
---- ----------- ------- --------- ---- -- ---
Dr. Aelred J. Kurtenbach 10,000(1) 5.7% $7.5400 11/12/2011 $47,419 $120,168
James B. Morgan 10,000(1) 5.7% $7.5400 11/12/2011 47,419 120,168
Frank J. Kurtenbach 5,000(2) 2.9% $7.5400 11/12/2011 23,709 60,084
- ------------------
1. The options were granted under the 2001 Stock Option Plan and become first
exercisable as follows: 2,000 on November 13, 2002, 2,000 on November 13,
2003, 2,000 on November 13, 2004, 2,000 on November 13, 2005, and 2,000 on
November 13, 2006.
2. The options were granted under the 2001 Stock Option Plan and become first
exercisable as follows: 1,000 on November 13, 2002, 1,000 on November 13,
2003, 1,000 on November 13, 2004, 1,000 on November 13, 2005, and 1,000 on
November 13, 2006.
OPTION/SAR EXERCISE AND HOLDINGS
The following table sets forth information relating to unexercised options
held as of April 27, 2002 by the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2002
AND OPTION/SAR VALUES AT APRIL 27, 2002
Number of Unexercised Value of Unexercised
Shares Securities Underlying In-the Money
Acquired Options/SARs at 4/27/02(#) Options/SARs at 4/27/02($)
on Value ---------------------------- ----------------------------
Name Exercise (#) Realized ($) Exercisable Un-exercisable Exercisable Un-exercisable
---- ------------ ------------ ----------- -------------- ----------- --------------
Dr. Aelred J. Kurtenbach 40,000 $282,456 82,000 98,000 $461,933 $411,930
James B. Morgan 31,500 213,373 153,300 65,200 1,083,734 237,788
Frank J. Kurtenbach 0 0 31,200 25,800 207,225 97,163
6
PERFORMANCE GRAPH
The following graph illustrates a comparison of cumulative total returns
for the Company vs. the NASDAQ Market Index and the Media General Industry Group
Index from May 02, 1997 to April 27, 2002. The graph assumes $100 invested May
2, 1997. No dividends were issued during that time.
[PLOT POINTS CHART]
1997 1998 1999 2000 2001 2002
DAKTRONICS, INC 100.00 203.13 246.88 453.13 1165.05 925.00
MG GROUP INDEX 100.00 142.34 139.53 306.87 194.08 147.39
NASDAQ MARKET INDEX 100.00 148.53 196.14 304.76 170.17 136.74
REPORT OF THE AUDIT COMMITTEE
The Board of Directors maintains an Audit Committee comprised of three of
the Company's outside directors. The Board of Directors and the Audit Committee
believe that the Audit Committee's current member composition satisfies the rule
of the National Association of Securities Dealers, Inc. ("NASD") that governs
audit committees, including the requirement that audit committee members all be
independent directors.
In accordance with its written charter adopted by the Board of Directors
(included in the 2001 Proxy Statement), the Audit Committee assists the Board of
Directors with fulfilling its oversight responsibility regarding the practices,
quality and integrity of the accounting, auditing, and financial reporting
practices of the Company. In discharging its oversight responsibilities
regarding the audit process, the Audit Committee:
1. Reviewed and discussed the audited financial statements with
management;
2. Discussed with the independent auditors the material required to be
discussed by Statement on Auditing Standards No. 61; and
3. Reviewed the written disclosures and the letter from the independent
auditors required by the Independence Standards Board's Standard No.
1, and discussed with the independent auditors any relationships that
may impact their objectivity and independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended April 27, 2002 as filed with the Securities and Exchange
Commission.
AUDIT COMMITTEE
John L. Mulligan, Chair; James A. Vellenga; Duane E. Sander
7
REPORT OF THE COMPENSATION COMMITTEE
CASH COMPENSATION
The Company's compensation philosophy is to target executive salaries close
to the median market rate paid for comparable positions within the Midwest
region for similar size companies. The Compensation Committee reviewed base
salaries for executive officers in November 2001. Company fiscal 2001
performance was also considered. Based upon this review, the Committee approved
a 10% increase for Aelred Kurtenbach (after reduction to half-salary for change
to part-time status) and James Morgan, and a 3% increase for Frank Kurtenbach.
[These increases were not implemented during the fiscal year based on management
consensus. In addition, company management salaries were further reduced by 10%
for the 2nd half of Fiscal 2002.] Salaries are reviewed annually.
For fiscal 2002, the Committee approved a formula based performance bonus
plan for executive officers, consisting of one month's salary if after tax
earnings exceed 14.5% of beginning stockholders equity, and increasing linearly
with performance to a maximum bonus of three month's salary if after tax
earnings exceed 18.5% of beginning stockholders equity. For Fiscal 2002, the
executive officers earned no bonuses under the plan.
EQUITY BASED COMPENSATION
In August 2001, the shareholders approved Daktronics 2001 Incentive Stock
Option Plan. The Compensation Committee determines awards under this plan for
executive officers and approves awards for other employees based upon the
recommendation of the Company's executive officers. In November 2001, the
Committee awarded Aelred Kurtenbach and James Morgan options to purchase 10,000
shares each of Common Stock and allowed 170,000 options to be granted per James
Morgan's discretion.
The exercise price per share of these options was established as the
average between the closing bid and asked price quotations for the Common Stock
as reported by the National Association of Securities Dealers Automatic
Quotation System (NASDAQ) on November 13, 2001, which was $7.54. Subject to
accelerated vesting upon "change in control" of the Company as defined in the
Option Plan, the outstanding options generally vest 20% each year commencing
November 13, 2002.
The Committee's basis for these awards was the Company's performance, as
measured in increased net sales and results of operations, over the last three
years and review of awards by comparable companies. The number of options
granted to the executive officers, including the Chief Executive Officer, was
less than the average of comparable companies for similar positions. The terms
of these options, including duration, vesting, and exercise price were similar
to that of comparable companies.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee determined the Chief Executive Officer's compensation in the
same manner described above for all executive officers of the Company. The
Committee recommended Aelred Kurtenbach's salary to be $165,000, concurrent with
his change to part-time status and the transition of CEO title from Kurtenbach
to James Morgan. The Committee recommended James Morgan's salary be $275,000.
[Both deferred their 10% increases and accepted a further 10% reduction for the
2nd half of Fiscal 2002]. Based upon the bonus plan described above, Kurtenbach
and Morgan earned no bonuses for fiscal 2002. The Committee awarded to Aelred
Kurtenbach and James Morgan OPTIONS to purchase 10,000 shares each of Company
Stock at exercise price of $7.54.
COMPENSATION COMMITTEE
Roland J. Jensen, Chair; Charles S. Roberts; Nancy D. Frame
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 27, 2002, regarding
the beneficial ownership of Common Stock of the Company by (i) each person or
group who is known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock, (ii) all directors and nominees of the Company,
(iii) each individual named in the Summary Compensation Table and (iv) all
directors and executive officers of the Company as a group. The Company believes
that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole voting and investment power (or
share such powers with spouse) with respect to the shares, subject to the
information contained in the notes to the table.
Name and Address Percent of
(if applicable) of Shares Outstanding
Beneficial Owner Beneficially Owned(1) Shares(1)
- ---------------- --------------------- -----------
Daktronics, Inc.
401(k) Retirement and Savings Plan(2) ............ 1,170,903(2) 6.4%
James B. Morgan.................................... 813,490(3) 4.5%
John L. Mulligan................................... 69,000(4) *
Dr. Duane E. Sander(5)............................. 824,400(6) 4.5%
Dr. Aelred J. Kurtenbach(5)........................ 1,575,797(7) 8.6%
Charles S. Roberts, M.D............................ 121,216(8) *
Frank J. Kurtenbach................................ 666,893(9) 3.6%
Roland J. Jensen................................... 69,600(10) *
James A. Vellenga.................................. 60,000(11) *
Nancy D. Frame..................................... 39,000(12) *
Robert G. Dutcher.................................. 0 *
All executive officers, directors, and nominees
as a group (10 persons)................. 4,263,021 23.2%
Wellington Management Company...................... 1,283,800(13) 7.0%
- -----------------------
* Represents less than 1%
(1) For purposes of this table, a person or group of persons is deemed to
beneficially own shares issuable upon the exercise of options that are
currently exercisable or that become exercisable within sixty days after
the date hereof.
(2) The Common Stock held by the Daktronics, Inc. 401(k) Retirement and Savings
Plan and allocated to the plan participants are voted by the Trustee,
according to the instructions of the plan respective participants.
(3) Morgan includes 153,300 shares issuable pursuant to currently exercisable
stock options and 18,446 shares held in the 401(k) plan.
(4) Mulligan includes 60,000 shares issuable pursuant to currently exercisable
stock options.
(5) Kurtenbach's address is 331 32nd Avenue, Brookings, South Dakota 57006.
(6) Sander includes (i) 60,000 shares issuable pursuant to currently
exercisable stock options, (ii) 352,040 shares owned by spouse and (iii)
50,160 shares owned by son.
(7) Aelred Kurtenbach includes (i) 82,000 shares issuable pursuant to currently
exercisable stock options, (ii) 55,737 shares held through the 401(k) plan,
and (iii) 745,680 shares owned by spouse.
(8) Roberts includes 24,000 shares issuable pursuant to currently exercisable
stock options.
(9) Frank Kurtenbach includes (i)31,200 shares issuable pursuant to currently
exercisable stock options and (ii) 15,573 shares held through the 401(k)
plan, and (iii) 140,000 shares owned by spouse.
(10) Jensen includes 40,000 shares issuable pursuant to currently exercisable
stock options.
(11) Vellenga includes 40,000 shares issuable pursuant to currently exercisable
stock options.
(12) Frame includes 36,000 shares issuable pursuant to currently exercisable
stock options.
(13) Shares reported as of 31 March 2002.
9
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
(SEC) and furnish copies of those reports to the Company. Based on a review of
the copies of such forms furnished to the Company, and written representations
from the executive officers and directors, the Company believes that Section
16(a) filing requirements were complied with during fiscal 2002, except for the
following filings of Form 4 reports for option grant or exercise transactions
that were inadvertently not timely: one report for one transaction for James
Morgan, one report for one transaction for John Mulligan, and one report for one
transaction for Duane Sander.
PROPOSAL #2 - RATIFY APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, at the recommendation of the Audit Committee,
recommends that the shareholders ratify the appointment of Ernst & Young, LLP as
independent auditors for the Company for the year ending May 3, 2003.
McGladrey & Pullen, LLP served as independent auditors for the Company for
the year ended April 27, 2002. McGladrey & Pullen, LLP provided services in
connection with the audit of the financial statements of the Company for the
year ended April 27, 2002, assistance with the Company's Annual Report submitted
to the Securities and Exchange Commission on Form 10-K and quarterly reports
filed with the Securities and Exchange commission, and consultation on matters
relating to accounting and financial reporting. Representatives of McGladrey &
Pullen, LLP are not expected to be present at the Annual Meeting.
AUDIT FEES
The aggregate fees billed by McGladrey & Pullen, LLP for professional
services rendered for the audit of annual financial statements, for assistance
with Form 10-K, review of quarterly Forms 10-Q, attendance at Audit Committee
meetings and consultation on audit and accounting matters were approximately
$99,000 for the year ended April 27, 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
McGladrey & Pullen, LLP or associated entities provided no systems design
and implementation services for the company.
ALL OTHER FEES
The aggregate fees billed by McGladrey & Pullen, LLP or associated entities
for all other non-audit services, including services in connection with the
Company's tax returns were approximately $86,000 for the fiscal year ended April
27, 2002.
The Company's Audit Committee has considered whether provision of the above
non-audit services is compatible with maintaining the McGladrey & Pullen, LLP's
independence and has determined that such services are compatible with
maintaining McGladrey & Pullen, LLP's independence.
PROPOSAL #3 - APPROVE EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved, subject to the shareholder approval,
the Daktronics, Inc. 2002 Employee Stock Purchase Plan, which includes a total
of 500,000 shares of the company's common stock reserved for issuance under the
Plan. The Plan is intended to qualify under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"). The provisions of the Plan shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code. A general description of the Plan
is set forth below, but such description is qualified in its entirety by
reference to the full text of the Plan.
10
DESCRIPTION OF THE PLAN
Purpose The purpose of the Plan is to provide eligible employees with an
opportunity to increase their proprietary interest in the success of the Company
by purchasing Common Stock from the Company on favorable terms and paying for
such purchases through periodic payroll deductions.
Administration The Plan is administered by the Compensation Committee of
the Board (the "Committee"). The Committee interprets the Plan and makes all
other policy decisions relating to the operation of the Plan.
Eligibility Any employee of the company (or any designated subsidiary)
whose customary employment is for more than five (5) months per calendar year
and for more than twenty (20) hours per week and who has been employed for at
least six months at the start of an offering period is eligible to participate
in the Plan. Employees become participants under the Plan by delivering to the
company an enrollment form authorizing payroll deductions within a specified
period of time prior to the commencement of each offering period. No employee is
permitted to purchase Common Stock under the plan if such employee owns more
than five percent (5%) of the total combined voting power or value of all
classes of stock of the Company or any parent or subsidiary of the company
(including shares which may be purchased under the Plan or pursuant to any other
options). In addition, no employee is entitled to purchase more than $25,000
worth of shares in any calendar year.
Contribution Period Each calendar year, two offering periods each with a
duration of 6 months will commence on November 1 and May 1. Each offering period
contains one six-month contribution period, with purchases occurring at the end
of each six-month contribution period. The first offering and contribution
periods will commence on November 1, 2002 and terminate on April 30, 2003.
Purchase Price The price of each share of Common Stock purchased under the
Plan will be 85% of the lower of (i) the fair market value per share of common
stock on the last trading day of the offering period or (ii) the fair market
value per share of common stock on the last trading day before the offering
date. The purchase price of the shares is accumulated by payroll deductions over
each contribution period. The deductions may not exceed 15% of an employee's
compensation and no more than 4,000 shares may be purchased on any purchase
date. All payroll deductions of a participant are credited to his or her account
under the Plan and such funds may be used for any corporate purpose.
Termination Employees may end their participation in the Plan at any time
during the contribution period, and participation ends automatically upon
termination of employment with the Company.
Change of Control In the event of a change in control, all offering periods
and contribution periods will terminate and each outstanding purchase right will
be exercised.
Amendment The Board may amend or terminate the Plan at any time. However,
the Board may not, without stockholder approval, increase the number of shares
of Common Stock reserved for issuance under the Plan.
Antidilution Provisions The Board of Directors shall equitably adjust the
maximum number of shares of Common Stock reserved for issuance under the Plan in
the event of stock splits or consolidations, stock dividends or other
transactions in which the Company receives no consideration.
TAX INFORMATION
The Plan is intended to be an "employee stock purchase plan" within the
meaning of Section 423 of the Code. Under such a plan, no taxable income is
recognized by participants either when a purchase right is granted at the
beginning of the offering period or when shares are purchased at the end of a
contribution period.
11
The IRS has in the past stated that participants will recognize income in
the year in which they make a disposition of the purchased shares. The term
"disposition" generally includes any transfer of legal title, whether by sale,
exchange or gift. It does not include a transfer to a participant's spouse, a
transfer into joint ownership if the participant remains one of the joint owners
or a transfer into a participant's brokerage account. Hence, a participant will
be subject to federal income tax on the purchased shares only when he or she
disposes of them.
A participant's federal income tax liability will depend on whether he or
she makes a qualifying or disqualifying disposition of the purchased shares. A
qualifying disposition will occur if the sale or other disposition of those
shares is made after the participant has held the shares for (a) more than two
years after the start date of the applicable offering period, and (b) more than
one year after the actual purchase date. A disqualifying disposition is any sale
or disposition which is made before either of these two holding periods is
satisfied.
If a participant makes a qualifying disposition, he or she will recognize
ordinary compensation income in the year of the qualifying disposition equal to
the lesser of (a) the amount by which the fair market value of the shares on the
date of the qualifying disposition exceeds the purchase price paid for those
shares, or (b) 15% of the fair market value of the shares on the start date of
the offering period during which those shares were purchased. The company is not
entitled to an income tax deduction with respect to such disposition. Any
additional gain recognized upon the qualifying disposition will be treated as
long-term capital gain. In general, the current maximum federal income tax rate
on long-term capital gain is 20%. If the fair market value of the shares on the
date of the qualifying disposition is less than the purchase price a participant
paid for the shares, there will be no compensation income, and any loss
recognized will generally be a capital loss.
If a participant disposes of the shares acquired under the plan prior to
meeting the above described holding period, he or she will recognize ordinary
compensation income in the year of disposition equal to the difference between
the fair market value of the stock at the date of exercise and the purchase
price and capital gain or loss equal to the difference between the amount
realized on the sale and the fair market value on the date of exercise. The
capital gain or loss realized will be treated as long-term if the participant
held the stock at least twelve months. The company is entitled to an income tax
deduction in the amount of the ordinary compensation income recognized by the
participant with respect to the disqualifying disposition provided the company
report such ordinary compensation income to the participant on Form W-2 or 1099
in the year of the disqualifying disposition.
The IRS has historically treated the difference between the fair market
value at the date of purchase over the purchase price, known as the spread, as
not being deemed wages and subject to FICA, FUTA and income tax withholdings.
The IRS had previously issued proposed regulations to be effective for stock
acquired under Employee Stock Purchase Plans after December 31, 2002. Subsequent
to these proposed regulations, the IRS issued a moratorium for an indefinite
amount of time, and a notice that employers would not be required to implement
the changes until at least two years after the regulations have been issued in
final form. When the proposed regulations become effective, the spread would be
considered wages under FICA and FUTA rules at the time of purchase and therefore
subject to FICA and FUTA withholding at that time. No change has been proposed
to the timing or amount of recognition of ordinary compensation income for
income tax purposes.
The foregoing is only a summary of the general effect of the U.S. federal
income taxation upon participants and the company with respect to the purchase
of shares under the Plan and the subsequent sale of such shares. This summary
does not discuss the income tax laws of any state or foreign country in which a
participant may reside. A participant should consult his or her own tax advisor
as to the tax consequences of any particular transaction under the Plan.
12
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to approve the plan. Abstentions will be considered shares entitled to
vote in the tabulation of votes cast on the proposal and will have the same
effect as negative votes. Broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether this matter has been
approved.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the proposed
Daktronics, Inc. 2002 Employee Stock Purchase Plan.
STOCK OPTION PLAN DISCLOSURES (data in thousands except price per share data)
During fiscal year 2002, the Company established the 2001 Incentive
Stock Option Plan and the 2001 Outside Directors Option Plan ("2001 Plans"), and
ceased granted options under the 1993 Incentive Stock Option Plan, as amended
and the 1993 Outside Directors Option Plan, as amended ("1993 Plans"). These
plans were approved at the 2001 Annual Shareholder meeting.
The 2001 Plans and the 1993 Plans authorize awards of incentive stock
options to employees of the Company and nonqualified stock options to
non-employees and outside directors as compensation for services rendered. Under
both the 2001 Plans and the 1993 Plans, options granted may have a maximum term
of 10 years in the case of the Incentive Stock Option Plan and seven years in
the case of the Outside Directors Stock Option Plan and contain exercise prices
equal to the market value at date of grant or 110% of market value at date of
grant in the case of an employee who owns more than 10% of all voting power of
all classes of the Company's stock then outstanding. The options generally vest
ratably over a five-year period in the case of options granted under the
Incentive Stock Option Plans and over a three-year period in the case of options
granted under the Outside Directors Option Plans although under the 2001 Plans
and the 1993 Plans the actual period of vesting is determined at the time of the
grant.
The total number of shares of stock reserved and available for
distribution under the 2001 Incentive Stock Option Plan and the 2001 Outside
Directors Pan are 1,200 and 400 shares, respectively. At April 27, 2002, there
were 1,353 shares available for granting of options under the 2001 Plans. The
total number of shares reserved under the 1993 Plans was 3,040. Although the
1993 Plans remain in effect for options outstanding, no new options are expected
to be granted under the 1993 Plans.
A summary of the status of the plans at April 27, 2002, April 28, 2001 and
April 29, 2000, and changes during the years ended on those dates follows:
- ----------------------------------------------------------------------------------------------------------------
(thousands except per share data) 2002 2001 2000
Fixed Options Shares Weighted Shares Weighted Shares Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
Outstanding at beginning of year 1,876 $3.46 1,804 $2.66 1,655 $1.93
Granted 255 8.11 302 7.09 399 5.09
Forfeited (27) 3.77 (9) 5.21 (3) 2.47
Exercised (219) 1.90 (221) 1.83 (247) 1.67
---- ---- ----
Outstanding at end of year 1,885 4.32 1,876 3.46 1,804 2.66
Options for 1038, 916 and 820 shares were exercisable at April 27,2002, April 28,2001 and April 29, 2000,
respectively. The weighted average fair value of options granted were $3.51, $2.99 and $2.18 for the years ended
April 27, 2002, April 28, 2001 and April 29, 2000 respectively.
================================================================================================================
13
OTHER MATTERS
The Board of Directors of the Company knows of no other matters that may
come before the meeting. However, if any matters other than those referred to
above should properly come before the meeting calling for a vote of the
shareholders, it is the intention of the persons named in the enclosed proxy to
vote such proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the 2003 Annual Meeting
must be received at the Company's principal executive offices, 331 32nd Avenue,
Brookings, South Dakota 57006, addressed to the Secretary of the Company, not
later than March 20, 2003.
BY ORDER OF THE BOARD OF DIRECTORS,
Carla S. Gatzke, Secretary
Dated: 22 July 2002
14
DAKTRONICS, INC.
Annual Meeting of Shareholders - August 21, 2002
PROXY
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Aelred J. Kurtenbach and Carla S. Gatzke, or
either of them, as proxy of the undersigned, with full power of substitution,
for and in the name of the undersigned, to represent the undersigned at the
Annual Meeting of Shareholders of Daktronics, Inc., to be held at Daktronics,
Inc., 331 32nd Avenue, Brookings, South Dakota 57006 on Wednesday, August 21,
2002 at 7:00 p.m. Central Daylight Time, and at any adjournments thereof, and to
vote all stock of the undersigned, as designated below, with all the powers
which the undersigned would possess if personally at such meeting.
1. To elect directors duly nominated for a term expiring in 2005 (If you wish
to cumulate your votes as described in the Proxy Statement, please contact
Investor Relations at Daktronics, Inc. to record your vote):
Aelred J. Kurtenbach, Robert D. Dutcher, Nancy D. Frame.
FOR WITHHELD FOR ALL WITHHELD FOR THE FOLLOWING ONLY
(Write nominee's name)_________________
2. To ratify the appointment of Ernst & Young, LLP as independent auditors for
the Company for the fiscal year ending May 3, 2003.
FOR AGAINST ABSTAIN
3. To consider and vote upon the proposal to approve the Daktronics, Inc. 2002
Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
4. To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE GIVEN FOR
VOTING ON THE MATTERS ABOVE, THIS PROXY WILL BE VOTED FOR THE MATTERS ABOVE.
Shareholders who are present at the meeting may withdraw their Proxy and vote in
person if they so desire.
The undersigned acknowledges receipt of the Proxy Statement for the 2002 Annual
Meeting. Please sign below exactly as name(s) appears on this Proxy. If shares
are registered in more than one name, the signatures of all persons are
required. If a corporation, sign in full corporate name by a duly authorized
officer, stating title. If trustee, guardian, executor or administrator, sign in
official capacity, giving full title as such. If a partnership, sign in
partnership name by authorized person.
Date ____________________________, 2002
_______________________________________
Signature
_______________________________________
Signature if held jointly
PLEASE SIGN, DATE, AND RETURN THIS PROXY PROMPTLY. No postage is required if
returned in the enclosed envelope. This Proxy may also be returned via fax to
605/697-4700.