Bill Retterath – CFO Jim Morgan – CEO

Good day, ladies and gentlemen, and welcome to the Daktronics third quarter fiscal year 2010 earnings results conference call. As a reminder this conference is being recorded Tuesday, February 23rd, 2010 and is available on the company’s website at www.daktronics.com. I would now like to turn the conference over to Mr. Bill Retterath, Chief Financial Officer for Daktronics, for some introductory remarks; please go ahead, sir.

Thank you. Good morning, we appreciate your participation on our third quarter conference call. As usual we will start out with some comments about the quarter and the future and we will open it up for a limited time for some Q&A. I would like to first offer our disclosure cautioning investors and participants in addition to the statements of historical facts, this call and in our quarter-end news release contains forward-looking statements reflecting our expectations and belief concerning future events, which could materially affect our performance in the future. We caution you that these and similar statements involve risks and uncertainties, including changes in economic and market conditions, management of growth, timing and magnitude of future orders, and other risks as noted in our SEC filings, which may cause actual results differ materially. Forward-looking statements are made in the context of information available to us as of the date of this call. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. With that, I will turn it over to Jim Morgan, our Chief Executive Officer, for some comments on the quarter.

Thanks Bill, and thanks everyone for being with us this morning. This quarter was somewhat of the perfect storm for Daktronics. Q3 is typically our lightest quarter anyway. We went into the quarter with a smaller backlog and the orders didn’t come along during the quarter for us to achieve the sales level we would have hoped to achieve. We announced about a month ago there were no large baseball projects happening this year. In the past years, we have had anywhere from $10 million to $30 million of worth of large baseball projects at this time of the year. And this is the most notable gap, but orders were slower pretty much across the board with some orders been delayed and off those some booked near the end of the quarter and others are still out there to be booked. For example, in live events, we had equipment out in our rental program that was planned to be purchased during the quarter for more than a $1 million and this got pushed out now to this quarter. Also we had a nice project with the University of Louisville that we have booked that’s got caught up an extended contract negotiations. In our commercial market, we had a multimillion dollar Times Square contract get pushed out as well as a multimillion dollar national account order. So neither of these commercial projects are booked yet today, but we still expect to book them. I wanted to emphasize this point just to point out that we don’t see this level as indicative of the future, but we do see greater uncertainty and greater time involved in closing orders. Our plants worked reduced hours through the quarter; it was just a slow quarter for us. And if there is a small positive here,…

Thanks, Jim. I will start with a few comments on gross profit, which was noticeably worse than expected for the quarter. The biggest impact to gross profit was due to the lower level of sales. In the short-term, our manufacturing costs are generally fixed, and when sales come in so much less than expected, a significant impact on gross profit percent. This accounted for somewhere between four and five margin points. Margins were also negatively impacted by higher than expected inventory write-downs and higher customer maintenance costs. Inventory was about a point and maintenance contracts had another other point to the margin decline. During the third quarter, our domestic manufacturing costs did decrease by a $1 million sequentially from the last quarter. Much of those came from the shorter work time and reductions we have made by closing down the plants for a limited periods of time as Jim mentioned earlier. We are continuing to work on cost reductions in manufacturing to adjust to the sales level. We continue to be down on warranty costs quarter-over-quarter which is another good sign. There are a little bit higher than expected, but we are still down significantly, almost $3 million as compared to the third quarter one year ago with part of that obviously being due to decline in sales, but still long-term trending fairly well in that regard. We mentioned in the press release the backend loading of the revenue stream in the fourth quarter, which adds a little more detail and that it turns out that based on timing of orders, customer expectations in the DVX video display introduction timing, some shipments and their related revenues therefore are backend loaded and delayed in the March and April, so manufacturing is actually dealing with a bulge during late March and throughout…

Thank you. Today’s question-and-answer session will be conducted electronically. (Operator Instructions). And at this time, we have no questions, so I will now turn the call back over to management for any additional or closing remarks.

All right, well, thank you everyone for being with us. Apparently we explained things very clearly, we have no questions. And Bill and I are going to get back to work here.

This does conclude today’s conference. Thank you for your participation.