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
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1.
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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.
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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:
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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.
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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
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b.
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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.
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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
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2.
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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:
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·
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Identify
the reporting unit;
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·
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The
percentage by which fair value exceeds the carrying value as of the
most-recent step-one test;
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·
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The
amount of goodwill;
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·
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A
description of the assumptions that drive the estimated fair
value;
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·
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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;
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·
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A
discussion of any potential events and/or circumstances that could have a
negative effect to the estimated fair
value.
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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 $123 during
fiscal 2010 as a result of the impact of foreign currency translation on
goodwill denominated in functional currencies other than the U.S.
dollar. The fair value, carrying value after impairment and the
percentage in excess of carrying value of each business unit as of January 30,
2010 is as follows:
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Estimated
Fair Value
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Carrying
Value
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Percentage
of Fair Value in Excess of Carrying Value
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|||||||||||
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Live
Events
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$ | 187,000 | $ | 92,024 | 51 | % | |||||||
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Schools
& Theatre
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31,000 | 31,593 | (3 | %) | |||||||||
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Commercial
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121,000 | 45,985 | 62 | % | |||||||||
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Transportation
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66,000 | 26,183 | 60 | % | |||||||||
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International
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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 require
management to make assumptions and to apply judgment to estimate future cash
flows and asset fair values, including forecasting useful lives of the assets
and selecting the discount rate that reflects the risk inherent in future cash
flows. We have not made any material changes in the accounting
methodology we use to assess impairment loss during the past three fiscal
years.
We do not
believe there is a reasonable likelihood that there will be a material change in
the estimates or assumptions we use to calculate long-lived asset impairment
losses. We also believe that recent changes in indicators in our business, such
as the decline in orders, the losses in the third quarter of fiscal 2010 and the
impairment of goodwill, among other things, were an indicator of impairment for
our business units. As a result, we tested for recoverability in
accordance with ASC 360, Property, Plant, and
Equipment, by comparing the undiscounted cash flows expected from the use
and eventual disposition of the assets compared to the carrying amount of the
assets. We grouped the assets at the lowest level for which there are
identifiable cash flows that are independent of the cash flows of other assets
and liabilities. Based on this analysis, the undiscounted cash flows
significantly exceed the carrying amount of the long-lived assets and therefore
it was determined that there was no impairment. If actual results in
the future are not consistent with our estimates and assumptions used in
estimating future cash flows and asset fair values, we may be exposed to future
losses that could be material.
Item 15 - Exhibits and
Financial Statement Schedules, page 62
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3.
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We
note that you did not include the documents constituting your credit
facility with U.S. Bank National Association as an exhibit to your annual
report on Form 1O-K. Based on your disclosures in the Management's
Discussion and Analysis section of the annual report, it appears that this
credit facility represents a potentially significant source of liquidity
for you, although we acknowledge you disclosure in the annual report that
no amounts were outstanding under the credit facility as of May 2, 2009.
We further note that you have filed the November 12, 2009 amendments to
the credit facility via your current report on Form 8-K filed on November
12, 2009. To provide investors with access to all of the documents
constituting the credit facility, please file all of the operative
documents constituting the credit facility, including all of their
operative exhibits and schedules, with your next periodic report or, if
you prefer, a current report on Form
8-K.
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Response: We
previously filed the documents referenced as Exhibits 10.1, 10.2, 10.3 and 10.4
in our 2010 Q3 Form 10-Q. The following is the list of exhibits
included in Item 6 of our 2010 Q3 Form 10-Q; as permitted by Rule 12b-32(a)
under the Securities Exchange Act of 1934, we have incorporated by reference the
documents previously filed:
Revised
Disclosure:
Item
6. EXHIBITS
Certain
of the following exhibits are incorporated by reference from prior
filings. The form with which each exhibit was filed and the date of
filing are as indicated below.
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10.1
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Loan
Agreement dated October 14, 1998 between U.S. Bank National Association
and Daktronics, Inc. (4)
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10.2
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Sixth
Amendment to Loan Agreement dated January 23, 2007 by and between
Daktronics, Inc. and U.S. Bank National Association. (3)
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10.3
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Eighth
Amendment to Loan Agreement dated November 12, 2009 by and between
Daktronics, Inc. and U.S. Bank National Association. (1)
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10.4
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Renewal
Revolving Note dated November 12, 2009 between Daktronics, Inc. and U.S.
Bank National Association (2)
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31.1
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Certification
of the Chief Executive Officer required by Rule 13a-14(a) or Rule
15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. (5)
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31.2
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Certification
of the Chief Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. (5)
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32.1
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Certification
of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (5)
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32.2
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Certification
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (5)
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(1)
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Incorporated
by reference to Exhibit 10.1 filed with our Current Report on Form 8-K
filed on November 12, 2009.
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(2)
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Incorporated
by reference to Exhibit 10.2 filed with our Current Report on Form 8-K
filed on November 12, 2009.
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(3)
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Incorporated
by reference to Exhibit 10.1 filed with our Current Report on Form 8-K
filed on January 25, 2007.
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(4)
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Incorporated
by reference to Exhibit 10.6 filed with our Quarterly Report on Form 10-Q
filed on December 11, 1998.
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(5)
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Filed herewith
electronically.
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DEFINITIVE PROXY
STATEMENT FILED JULY 1, 2009
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Fiscal Year 2009 Director
Compensation, page 8
Stock Ownership and
Retention Guidelines, page 9
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4.
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We
note that your directors have five years to meet the thresholds set forth
in your stock ownership guidelines. In future filings, please disclose the
then current status of your directors' compliance with your stock
ownership guidelines.
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Response: We
will disclose the current status of our directors’ compliance with our
stock ownership guidelines in our upcoming definitive Proxy
Statement. We will use disclosure substantially similar to the
following:
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Revised
Disclosure:
Stock Ownership and
Retention Guidelines. In January 2007, the
Board of Directors implemented stock ownership guidelines for
Directors. Under these guidelines, each Director is expected to
achieve a target of 5,000 shares owned, excluding shares subject to options.
Directors had five years from January 2007 to achieve this level of
ownership. As of the Record Date, Mr. Morgan, Dr. Kurtenbach, Mr. F.
Kurtenbach, Dr. Sander, Mr. Mulligan, Ms. Frame, Mr. Dutcher and Mr. Vellenga
had met these guidelines. As of the Record Date, Mr. Anderson owned
____ shares.
Compensation Discussion and
Analysis, page 10
Setting Executive
Compensation, page 11
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5.
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We
note your disclosure that the compensation committee tries "to keep cash
compensation levels for executives in the lower one-third of the companies
in the peer group list." With a view towards future disclosure,
please tell us where cash compensation levels actually fell with respect
to this goal.
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Response: Cash
compensation, defined as base salary plus non-equity-based incentive
compensation, levels for executive officers for fiscal 2009 were at the
following levels as compared to the peer group
list:
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Chairman
of the Board – Bottom 35%
Chief
Executive Officer – Bottom 10%
Chief
Financial Officer – Bottom 14%
Vice Presidents – Bottom 17%
Base Salary, page
12
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6.
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With
a view towards future disclosure, please provide us with a materially
complete discussion and analysis of the adjustments made to the base
salaries of your named executive officers for fiscal 2009. In this regard,
we note from the summary compensation table that each of your named
executive officers received an increase. In your response, you should
address the factors that went into setting and adjusting the base salaries
for fiscal 2009.
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Response: None
of the named executive officers received an increase of their base
salaries for fiscal year 2009. The table shows an increase as a
result of an increase granted in November 2007 which affected base
salaries for only one half of fiscal 2008 as compared to all of fiscal
2009. Please refer to our Current Report on Form 8-K filed on
December 4, 2008, which states that there were no increases in base
salary. In future filings, we will clarify the amount and
source of any increases during the fiscal
year.
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Non-Equity-Based
Incentive Compensation Plan, page
12
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7.
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We
note your disclosure that "[t]he maximum level of the bonus varies from
4.5 months' compensation to 7 months' compensation for each officer." With
a view towards future disclosure, please tell us how you define
"compensation" for this purpose.
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Response: Compensation
in this regard refers solely to base salaries as described elsewhere in
the filing. We will clarify this in future filings by using
disclosure in our proxy statement substantially similar to the
following
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Revised Disclosure: “[t]he
maximum level of bonus varies from an amount equal to 4.5 months of base salary
to 7 months of base salary.”
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8.
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With
a view towards future disclosure, please provide us with a materially
complete discussion and analysis of how you determined the amounts of the
cash incentive bonuses received by your named executive officers for
fiscal 2009. In doing so, you may wish to address how the committee
determined the percentage of base salary used to determine the amount of
the cash incentive for each named executive officer. In addition, you may
wish to address where the actual cash incentives received by the named
executive officers fell with respect to the percentages of base salary
that they could receive.
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Response: The
amount of cash incentive bonuses received by our named executive officers was
determined as described on page 12 of our proxy statement filed on July 1,
2009. In the section entitled Non-Equity-Based Incentive
Compensation Plan, we disclosed that each named executive officer’s bonus
consists of 30% of the maximum bonus amount if after-tax-earnings exceed 13% of
shareholders’ equity at the beginning of the fiscal year, and increases linearly
with performance to a maximum bonus if after-tax earnings exceed 20% of
beginning shareholders’ equity. The maximum is determined based on
reference to the comparable companies identified, current economic conditions,
opportunities for increased earnings and projected results for the
year.
To
further clarify and enhance our discussion and analysis of the cash incentive
bonuses, we will add to our future proxy statement disclosure substantially
similar to the following within the section titled “Non-Equity-Based Incentive
Compensation”:
Revised Disclosure: The
maximum amount of non-equity-based incentive compensation is based on our goal
of providing a material amount of incentive compensation to be at risk based on
the performance of the company, while ensuring that total cash compensation
(base and incentive) remains in the lower one-third of the companies in our peer
group. To achieve this result, the maximum non-equity-based incentive
compensation may actually be greater than the same type of compensation of the
lower one-third of the peer companies provided that total cash compensation
remains in the lower one-third of the peer group.
For
fiscal 2010, the maximum and the actual non-equity-based incentive compensation
and total cash compensation for each of the named executive officers were as
follows as compared to the peer group list:
Non-Equity-Based
Compensation:
|
Actual
|
Maximum
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||
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Chairman
of the Board
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Bottom
53%
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Bottom
53%
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Chief
Executive Officer
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Bottom
55%
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Bottom
62%
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Chief
Financial Officer
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Bottom
45%
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Bottom
62%
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Vice
Presidents
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Bottom
38%
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Bottom
62%
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Total
Cash Compensation:
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Actual
|
Maximum
|
||
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Chairman
of the Board
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Bottom
35%
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Bottom
35%
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Chief
Executive Officer
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Bottom
10%
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Bottom
24%
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Chief
Financial Officer
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Bottom
14%
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Bottom
20%
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Vice
Presidents
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Bottom
17%
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Bottom
24%
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9.
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With
a view towards future disclosure, please provide us with a materially
complete discussion and analysis of how you determined the size of the
equity award received by each of your named executive officers for fiscal
2009. In doing so, you may wish to address how the committee measured
company performance for purposes of the equity award determinations. In
addition, you may wish to address why the named executive officers
received equity awards of different
sizes.
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Response: Based on our
understanding of your comment, we will replace the second paragraph under
the section titled “Equity-Based Compensation
Program” in our future proxy statements with disclosure
substantially similar to the
following:
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Each
year, the Board of Directors, based on recommendations of the Compensation
Committee, determines the number of shares that may be subject to equity awards
for all employees, including the Named Executive Officers. The total
number of shares subject to equity awards is constrained by our Board’s desire
to limit dilution to shareholders to a level consistent with our historical
levels which is generally less than 1% total dilution. The 1% dilution is based
on our assessment of a conservative amount relative to high tech growth
companies. We believe this level is low compared to high tech growth
companies on average. In recommending grants of equity awards, the
Compensation Committee and Chief Executive Officer consider trends in
equity-based compensation and whether they are consistent with our compensation
philosophy. They also consider our “overhang” percentage; that is, the
number of our shares that are subject to outstanding options and other equity
awards and that are available for the grant of options and other equity awards
as a percentage of the number of our shares outstanding. The
Compensation Committee then determines the aggregate number of shares subject to
options and other equity awards to be granted to Named Executive Officers and
other officers as a whole based on a historical split of grants between this
group and all other employees. In the past fiscal year, approximately
10% of all options and other equity awards were granted to the Named Executive
Officers. The allocation among Named Executive Officer is based on
historical grants, the value of past grants and the Company’s performance, all
being subject to the objectives listed under the section titled “Compensation Philosophy and
Components.” The number of shares subject to options and other
equity awards granted is generally not compared to the peer group equivalent
number.
The Chief
Executive Officer determines the grants of options and other equity awards to
other key employees within the limits set forth by the Compensation Committee,
keeping in mind the factors described in the foregoing paragraph. To
facilitate the grant of stock options to employees and executive officers, the
Board of Directors authorized James B. Morgan to grant individual stock options
during fiscal 2009 to such employees and executive officers, subject to the
guidelines and limitations imposed on him by the Compensation
Committee.
Post-Employment
Compensation, page 19
Potential Payments upon
Termination of Employment or Change in Control, page 19
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10.
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In
future filings, please add to the table a row showing the total amount
that would be received by each named executive officer under each of the
circumstances covered by the table.
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Response: In
future filings, we will add to the table a row showing the total amount
that would be received by each named executive under each of the
circumstances covered by the table.
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We
hereby acknowledge to the Commission
that:
|
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·
|
Daktronics,
Inc. is responsible for the adequacy and accuracy of the disclosure in its
filings;
|
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·
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Staff
comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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|
·
|
Daktronics,
Inc. may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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We
appreciate the opportunity to respond to the Commission’s comments, and we would
welcome any follow-up questions or concerns you may have after reviewing our
responses. You may feel free to contact me directly at
605-692-0214. Also, please note that we have copied our securities
attorney and auditors with this letter, as they obviously are closely involved
in reviewing our disclosures and reporting practices.
Sincerely,
/s/ William R.
Retterath
William
R. Retterath
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
cc: Michele
D. Vaillancourt, Winthrop & Weinstine, P.A.
Christopher Larson, Ernst & Young
LLP