Good day, ladies and gentlemen and welcome to the Daktronics Fiscal Year 2008 Third Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded on Wednesday February 13, 2008 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.

We appreciate your participation in our third quarter conference call. We’d like to, as is our custom, make some preliminary comments about the quarter, after which we’ll open it up for a limited timeframe for questions. I would like to start off by offering our disclosure cautioning investors and participants that in addition to statements of historical facts, this call and our quarterly news release contains forward-looking statements reflecting our expectations and beliefs 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 growth, timing and magnitude of future orders, and other risks as noted in our SEC filings, which may cause actual results to 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 would like to turn it over to Jim Morgan, our Chief Executive Officer.

Good morning, everyone. Thank you for joining us this morning. Maybe just a comment to start to put third quarter in perspective to our other quarters, third quarter first of all has, with the holidays, fewer workdays, so we tend to have fewer days to ship products from the plant. And also with the seasonality of our sports market, it tends to be our lightest quarter, especially in the sports area for business. So on a relative basis, third quarter is lighter, especially less than second and fourth quarters. Results this quarter were mixed for us overall. Revenues were above our estimates as we were functioning well on the operations side through the quarter. Our investments in lean manufacturing are delivering well for us and there are certainly more opportunity in that regard. At the same time, we continue to be challenged on the cost side of equation for several reasons which Bill will give some more color to that in a bit. Our orders are strong. We announced three large orders for new sports facility this quarter, the Yankees, the Mets, and the Indianapolis Colts. And we also received a verbal order and normally we don’t comment on orders that aren’t confirmed yet. But as this information was made public by others and so we did confirm that, so that the message was consistent, that was for the University of Minnesota’s new football stadium that was just north of $9 million order. We are very excited to be working with JCDecaux; they are based in Paris, France. They are doing their first major rollout of digital billboards, actually in the U.K., and as has been announced, they will be installing 20 units in the U.K. in the next couple of months. So we are very excited to see activity in the billboard area in Europe. On the cost side, as we’ve come off the rapid growth of the past two years ago, we grew top line 34%, last year 40%. This year we are so far at little more a typical rate and we’ve even challenged to adjust our cost structure growth rate as we’ve come into this year. However, we have been and we continue to scrutinize hiring very carefully to contain our payroll growth, which is the main driver of SG&A, which is a big focus for us. One other thing we are doing is making significant investments in systems, which we need to more effectively handle our increased level of business. This will help us further on the cost side as we can streamline some of our business processes and just operate more efficiently with that. So again, we have a strong focus on the cost side of the equation even as we work to grow the business. With that, I will turn it over to Bill for a few comments on our numbers.

Thanks, Jim. In the press release we added in some details on sales and orders by business unit. Just a word of caution, I would strongly discourage investors from projecting each business unit’s orders and sales on a quarterly basis. It’s generally a discussion that we don’t think necessarily has value given the current marketplace we operate in, the timing of some of these large orders, how customers’ schedules can change, and not only that, but our own flexibility in terms of manufacturing, how we move large projects around and get them through the plant. We would encourage focus more so on the total sales and ordered numbers, corporate wide, and then over the long term look at the business units. Now, some background on orders and sales. In the live events market, we thought that going into the year, we could be up 10% plus on orders. Timing here will ultimately tell that. But for the year, our growth in orders could still range in the live events area between 0% and 20% due to timing of some of the big orders that are out there potentially and whether we win them or not. And whether they, if we are fortunate to earn that business, whether they book in this quarter or going into the first quarter of next fiscal year. Sales for the year are likely to be flat, but again a lot can happen. We still don’t have our schedule in manufacturing locked in completely on the timing of some of these mega contracts from the last quarter. But I don’t think changes there will affect the numbers materially regardless. Also on the last conference call, we talked about the potential of $14 million of orders between two contracts in this segment. One of those orders was…

(Operator Instructions) We will take our first question from Jim Boyle - CL King & Associates. Jim Boyle - CL King & Associates: I am not sure I heard the digital billboard color correctly. If you could give us that detail again on how it was in fiscal Q3 and fiscal Q4 year-on-year?

In Q3, last year if you remember our sales actually went down because of the winter months and that was a little bit of a surprise a year ago at this time, so it was roughly at about $9 million. This current past quarter was at just over $20 million in sales. Jim Boyle - CL King & Associates: And how about fiscal Q4 expectations?

Q4 expectations are to be up just slightly sequentially from Q3. And from Q4 a year ago, it should be up over what it was Q4 a year ago. Jim Boyle - CL King & Associates: What was it a year ago?

Just slightly from Q4 a year ago, it was roughly about $19 million a year ago. I am sorry, Jim, I said $9 million for Q3 last year. It was a little bit higher than that actually in Q3. It was about $15 million in Q3 last year. Jim Boyle - CL King & Associates: And is the JCDecaux likely to be in fiscal Q4 of this year?

Yes, JCDecaux, we are not putting that. It is in Q4, but we put that in our international business unit, and it’s not in these billboard numbers. When we talk billboard, we generally talk about it as part of our commercial business unit. But I should also clarify that I’ve gotten some questions since that release went out. The size of that deal was actually north of $6 million. It’s not our typical Valo billboard product; I’ll just throw that in.

That’s a higher resolution product than we’ve typically sold in the U.S. Jim Boyle - CL King & Associates: Jim, your two biggest digital billboard customers, CCO and Lamar, have about 150, 155,000 domestic billboards. JCDecaux appears to have about 200,000 billboards in Europe. So it seems like your newest client has some decent potential. Given your chats with them, do you think they’re as enamored of digital as the very aggressive Lamar, or are they closer to Clear Channel Outdoors somewhat slower digital ramp?

Well I think this is kind of a pilot project for them, and they’re going to be I’m sure evaluating it in as far as how it works for them as a business and as an investment. So, that will be a decision they will make and that’s probably a question you need to ask them. But we’re certainly hopeful, and we’re encouraged to see their interest in digital billboards and we’re certainly hopeful that it will be something that will move forward. Jim Boyle - CL King & Associates: So they really haven’t indicated future potential, it’s early, you said they are still evaluating?

Yes, this is a project to be evaluated, right, correct. So we’re not making any presumptions of what’s beyond this. We’re obviously going to work very hard to support them and do everything from our point of view to make it a success. Jim Boyle - CL King & Associates: Looking at your segment breakout, it appears orders are up over 20% year-on-year for the first nine months of the fiscal year. Is that trend expected to continue in this potentially tough economic times?

During the quarter, or…

Jim, we missed the first part of your question. What you’re asking is the 20% year-to-date? Jim Boyle - CL King & Associates: Yes, apparently orders are up over 20% year-over-year fiscal year-to-date, is that trend expected to continue?

So for how long into the future? We haven’t put together our numbers for next fiscal year yet. We’re in the planning process right now, so by next quarter, we’ll have some more visibility into the next year, but we’re just going through that process now. And I think as we mentioned in the release, I think we could be up 20% at the end of the year for the year, but there is the uncertainty of when some orders might book. So, we could be up 20% for the year, that’s certainly within the realm of possibility. Next year, we don’t really have numbers for that at this point.

But, Jim, also to clarify historically what we’ve said is the commercial market we believe as we look in from a broad-based view that that can be a 20-plus percent gross, or growth marketplace. We look at our schools and theaters and our transportation and we’ve said long term that’s a 15-plus percent business. And international has actually got some nice opportunities up there. I think there’s a little bit more volatility in projecting what that will be, but that could be some very nice growth. It’s hard to pick a number. Then finally on the live events business unit, that’s the one area for growth next year that I’d rather get our planning process completed before I make estimates on that. Only because of the impact of these big deals and where we think those would shake up, so that would be the one market I’d just reserve comment on until we get our planning process done with. Jim Boyle - CL King & Associates: But prior to that planning process finishing, given the tough economic times, have you been seeing any cancellations of size?

At this point we don’t have anything and that’s a question we get quite a bit actually. The word “recession” is out there a lot, and we haven’t seen any real evidence that that’s affecting our business at this point. Not to say that it could never, depending on what happened in the economy, but we’ve always felt our businesses is somewhat at least recession-resistant. Obviously large sports facilities are in planning for many years, and people aren’t going to change their mind on finishing out that plan just because the economy takes a dip. So, advertising I think with our Galaxy displays, even when the economy is down a little bit, people still have to advertise. Looking at our displays as an advertising media, it’s a very cost-effective way to advertise. If a main street business or any business that’s doing on-premise advertising, there are alternatives for them to reduce their advertising budget and still have a display out there. It’s an alternative to newspaper and radio and television and other things. So, I think it may be a very attractive solution during the little tougher times, is how I look at it. Jim Boyle - CL King & Associates: Jim, you had mentioned in the past on the focus on cost control that you had wanted to get back towards 10% operating income margins in the fiscal year, not apparently hit it, but get close to it. At this point would you say you are going to be above or below 9% operating income margins for the year?

Jim, as you put through our operating margin, or our earnings guidance here, it’s going to be below for the year as a whole unless some upside happens. We’re working hard on that, and I’ll tell you the real positive thing is to see our employment growth numbers shrinking each quarter, this is the third quarter in a row, and that will long-term help us drive that. Jim Boyle - CL King & Associates: Well, prior to your results and guidance, the street consensus had you at 8.6% operating income margins for the year.

Yes.

We will take our next question from Michael Friedman -Noble Financial.

For the quarter, what kind of tax ratio should we have used? When you take out the one-time gain, what would the EPS look like?

That one time gain on Arena Media has the same effective rate, so it doesn’t change what our year-to-date effective rate is. So I think you look at year-to-date and extrapolate that into the next quarter.

But if you were to factor that out in the third quarter, what would your EPS look like on a normalized basis, minus the gain?

I’d have to compute that Michael, you just add back the $2.8 million after tax, so I can compute that if you go onto the next question.

What about the backlog, do you have a sense for the fourth quarter whether you’d be up sequentially over the third? Seemed to hedge on that, but I mean given where we are in the quarter, any sense? Can you give us a little more clarity?

Yes, I think if things go as well as we can expect and timing holds true, backlog could grow. There is a few deals out there. Looking at backlog, Michael, at the exact date at the end of the year, I’d rather focus in have we verbally won these deals. Timing, as mentioned with these other big contracts we had originally thought these big contracts would actually be booked in our second quarter. It wasn’t, gosh, until January that one of them actually got booked, so, it’s so hard to predict timing. If everything went perfectly, I would like to see it up, and I think we have a good chance for it to be up, but I can’t control the timing. I just want to know we are going to get the business. If it falls into May, we are just fine with that. But we’ll add color on that, whether backlog is real high or low at the time.

And can you give us an estimate as to the size of the addressable market in dollars? Do you guys have an idea of what you’re really going after?

On these mega projects?

Just in all your addressable markets, everything, or if you could break it out by segment, that would be fine.

Yes, we don’t really have a number for that. I think we continue to be pleasantly surprised in the sports world of the interest in larger, more capable systems, adding more pizzazz to the entertainment experience and the acceptance of color displays for advertising at the retail level as well as the outdoor third party advertising level. So, I would say, one is that -as part of our planning process, again, we’re actually going to try to calibrate that a little better at least in some areas. I guess what we’ve tried to zero in more is what do we feel the growth rate is, and that’s a challenge in itself to get that number calibrated. But we are trying to do some work, more along the line of your original question, and as we have an idea that we could share it, but it would be a rough estimate in any case. Because it’s tough to get it measured and project out into the future of a industry that is as dynamic as ours is right now. You won’t see a lot of people who would make attempts at that, but I question the validity of a lot of their assumptions.

You mentioned growth for the industry, what kind of growth do you expect for the industry over the next five years? Do you have a sense?

Again, as Bill mentioned earlier, and this is as much based on our historical trends and we ask is there any fundamental reason that this would be different. And that is, at this point, we see that commercial could have maybe a little longer term, a little higher growth rate, longer term, and maybe up in that 20% range. Sports at this point may be more in the 15% range. That’s just an estimate at this point, kind of as much of a probably a gut feel as anything, based on experience and just the interest we see in our products out there.

And then lastly, is there any new players in the HD display market? Do you see more competition in that area?

Noting really materially different, no, it’s nothing significantly different there.

Michael, the Arena Media gain after tax was about four and half cents.

We’ll take our next question from Jim Ricchiuti - Needham & Company.

Bill, a question on gross margins, you talk a little about Q4 gross margin given the mix of business, seeing some limited pressure. Are you using your gross margin in Q3 ex the warranty cost because ex warranty cost, it looks like your gross margins were around 30.5%, 30.6%? I am not sure how we should think about gross margins in Q4, whether we should use the actual reported gross margin or back out some of the stuff.

Yes, good question. I think that you should take Q3 reported margin and we think we could be down slightly, not a full point. It’s just down a little, but our business and our gross margins have been really doing well. The things that we can control, things like warranty expense and that kind of stuff. So, right now, I’d say where we are with our margin expectations, we’ve always said that could be that number plus or minus percentage point. I don’t want to get too optimistic. And the other thing that’s going on is our manufacturing schedule. When I was talking about that, depending upon some of these international projects I mentioned, we may bring in some projects and move off some others. And we’ll know that here with the next month and that can impact, some of these big projects, can really impact your margins. So, overall, again the answer to your question is down from the reported one slightly, but we, at the same time, remain optimistic on them.

Okay, then you talked about some operating expense items, lines maybe being flat sequentially. I am now still frankly trying to get my arms around your selling expense. It was up; it looks like 8% sequentially. Your revenue is down 10%. Should we begin to see the selling expense again to level off? Or is that just a function of you guys spending more to pursue some of these larger deals?

No, I will tell you, my internal goal here is that we can take SG&A going sequentially Q3 to Q4 and hold it flat. That, to me, is my goal and maybe even down to some degree. But, there are things like these healthcare costs. We’re self-insured and it cost us a lot more over the long term to get fixed price. But over the long term, it makes no sense to change it to make it more predictable. But, I think now, and the clear evidence of this is if you look at our rate of employee growth the last three quarters, in the third quarter, it is half the level as a percent growth of non-manufacturing employees as it was in the first quarter. It’s at half level, and so we have done a lot to scale it back and I can just say on the selling part of SG&A, our payroll cost there did mirror the head count growth. And so, I know we’re headed in the right direction. I really felt good when I saw that Q3 was down from Q2 and previously, Q2 was down from Q1. We just got to keep headed that direction.

Bill, it looks like orders, by my calculation, are at around 137 million in the quarter, is that...

Yes. They are in the press release, the orders for the quarter.

Were there any large deals that fell after the quarter end that were not in the booking backlog number?

Well, Jim mentioned the University of Minnesota.

Right, besides that $9 million?

You are asking did orders slipped as compared to what we thought they were going to be going into the quarter.

Yes, just wondering if after the quarter ended besides the University of Minnesota, were there any other large orders that came in?

No, not really at this point.

Nothing now.

I wonder if you could just spend a little bit of time talking about the pipeline. It sounds like you have some opportunities on the international front. I wonder if you could add a little bit more color to what types of deals you are talking about China. And then maybe a broader question, with respect to the live events business and the sports market, in particular. We’ve seen the awards of a number of large projects, and I think people are still trying to get a sense as to what’s out there. Is there a healthy upgrade business that you see? Was there still a fair amount of new construction both at the professional and college level?

In international, first question, without getting too specific about it, there is in addition to the actual Olympic venues in China, they are doing some other things that are being done. Just kind of ancillary improvements and so there is some projects going on there. And there is one in particular there that’s a significant project that we’re said to have a verbal on. And you know things are a little different in China, so we are not taking that one to the bank yet. The Chinese New Year holiday is officially over, They are back at work and we are back engaging discussion with them. And if we are successful in getting that firmed up there, and it’d have to happen here fairly quickly. Because the delivery on it is fairly quick, which is a good thing. Because it would become revenue fairly quickly, part in Q4 and part in Q1 so one significant project in particular there. There are some other projects we are seeing some interest in the outdoor and the billboard side of things. It looks like some things could come there. But, time will tell and, I think, certainly in few months from now we will know more about that and have more specifics. But on the sport side, there certainly is a lot of interest in upgrading. The interest in going to high definition is certainly all that division one level universities as well as professional sports. So we see a lot of opportunity there. And again, one of things we’re working on through the planning processes to get a little better handle on what the status is of the sports universe out there, and that will be helpful to us as well as we try to calibrate that a little better. But certainly there is a lot of interest out there. And the fact that it’s big projects, it makes a little bit lumpy. There are a number of new construction projects coming down the pike yet, and the sports business journal actually has those listed, and I guess that’s the best we can provide.

You can get them off the Internet; they just re-updated their whole facilities construction renovation study and so, they are not...

There are quite a few in the pipeline, in other words the companies that are involved in the stadium design and construction management, they’re booked here for the next two years pretty heavy.

So, it’s still even with the number of awards that we’ve seen, it sounds like there is still a very strong pipeline of new construction as well as upgrade business out there which, if things play in your favor, potentially the sports growth rate could be in excess of 15%?

It’s possible. Again, that’s not unreasonable that it could happen. It’s just the way these things flow; it can be a little jerky.

We will take our next question from Steve Dyer - Craig-Hallum.

I may have missed the last question. Is the University of Minnesota in your backlog, and I know, normally you wait for deal to be official before putting it.

It was not in our backlog at the end of the quarter.

When would you expect, you know, something official with that? Is that something you expect within this next quarter?

Yes. Imminently, it’s what our expectation is.

Just keep in mind that we believe that on some of these other big projects as well and the point is we’re in a good position, if it books now this quarter that’s great. If there are some things that work out that go into next quarter, we’re not as concerned about that. As long as we know it, that’s our business and it doesn’t represent declines in the likelihood of us booking it.

And the revenue for that is out of the way anyways. So, even if for some reason which we don’t expect it didn’t book till beginning of next quarter, it wouldn’t affect when we would get the revenue coming in on it since its new construction.

Okay, and then jumping over to the digital billboard side, is your expectation that you maintained market share at both Clear Channel and Lamar in the quarter?

Yes, to the best of our knowledge.

Okay, any color you can give as to sort of the rate of growth for both of those customers? It seems a little bit like Lamar kind of hit the 325 to 350 a year and that seems to be a comfortable run rate for them. Is your expectation that that grows beyond that, or is that kind of what we should expect?

I don’t know that I can add any color to it. I think that’s a very good question to ask them actually is what their expectation is. Again, and I honestly just don’t have an answer on that. Part of our planning process we’re going through is to gather that kind of information going forward here, what the expectations might be, but for the most part we like to let them comment to the world about what their expectations are.

Then looking out beyond this next quarter where you think margins will be down a little bit, how should we think about gross margins in time when you have a higher degree of sports business? It’s always kind of hung right in that 30% area, does that feel too aggressive given the larger mix of these mega deals?

I’ll tell you that’s a very tough question because of where the sports are going and that’s part of our planning process. One of the things that is key to understanding that is what is the volume in the sports business that we’ll see Q1 and Q2 that I call more our routine sub $2 million projects and how big that is. If you look at the last two years there was a great deal of volatility in fiscal ‘07. It was a tremendous volume and we haven’t had quite that volume. If you remember in ‘07, I think through the first half of the year somewhere up 40% in that area. So, right now in terms of going through our planning process, our goal is to lock that in and it’s too hard for us to make a comment on that at this point. If gross margins do go down maybe that lower business, it will not be as great as we would expect. So, it’s just too hard to foresee at this point.

Then how should we think about operating expense growth going forward? Your revenue was up this quarter 10% year-over-year and your operating expenses were up 25% year-over-year. Is that a number that should go up kind of a small amount each quarter? I know it’s been a continued theme that we are going to stop hiring and so forth. But it just keeps, I think, growing faster than anybody has expected, how should we think about that next year?

I think next year we’ve got to see significant leverage, we’ve got to.

Yes, we are committed again that long-term. The cost line has to grow slower than the revenue line. So that’s the big focus for us to get that to happen.

Bill, you had mentioned that stock comp was abnormally high in the quarter. What was that amount and how big is it relative to the other quarters?

Yes, last year it was abnormally high. It’s just we granted options during that quarter and so our expense went up. I think the impact in selling was about a $100 grand. I will look up the total. It is in our 10-Q that we should file quickly. Let me get the total number here and I will take the next question and answer it, Steve, when I get a in-between question.

We’ll take our next question from Cregg Watner - Elm Ridge Capital Management.

Could you just talk about the competitive environment at Lamar? Has anything changed? Have they split the businesses by posters and billboards, is there anything going on there?

Nothing really changed here just recently, still two major vendors, Daktronics and YESCO. And it’s kind of been sorted out as the smaller units are being done by YESCO and the larger units being done by Daktronics. That’s kind of how its evolved, so I think that’s at least the direction for the time being.

Has their order flow between the large and the small shifted at all?

I don’t want to answer that. I think we are still seeing order flow from Lamar and I don’t have a sense of what the ratio is, if it’s shifted. I can just say that we are still seeing nice order flow from Lamar.

But the competitive pricing that went on in the poster business, that hasn’t spilled over to the large boards yet?

Pricing is very competitive and will remain competitive in the future. I mean it’s a competitive situation. Obviously Lamar has given us a nice amount of business. They expect us to give them pricing that reflects the level of business they have given them. We are continually working to take costs out of our product and also the cost out of the installation process for them, so we have made progress along that line. That’s an ongoing effort, so yes; it’s a very competitive pricing situation.

My understanding was that that poster business got a little bit out of hand and I was just wondering.

Yes I think there was some real aggressive pricing there in that poster size. We’ll take one more question here.

Our next question comes from Steve Altebrando - Sidoti & Co. Steve Altebrando - Sidoti & Co.: You sound pretty optimistic that you are reining costs in here, yet on the other hand the guidance you are providing for the fourth quarter it just looks like the margin problems actually kind of getting worse through this quarter and next quarter as well. What kind of conviction do you have that you are going to be able to improve that going forward?

Well one thing, as I mentioned, we are working on some systems. There are some areas hat we are not operating as efficiently as we need to. And so there are some underlying factors that we have to address to get really where we want to be on that but it’s kind of a shift of gears. After two years of growing the rate we did, that kind of shift down to the growth rate we have and it is just, I think we’ve accomplished that mindset. We have to do it; I mean it’s as simple as that, we are committed to doing it. We don’t really have a choice. Steve Altebrando - Sidoti & Co.: Bill, I think you had previously said CapEx would be somewhere around $50 million. Is it realistic now to be more like $40 million?

I think it will be a little bit higher than $40 million, somewhere in that range. Ultimately, it depends on when some projects just fall in during this quarter. So there is some things out there, I think it should be in excess of $40 though. Steve Altebrando - Sidoti & Co.: Do you have a break down of revenue by segment in the quarter?

That is in the last page of the press release.

Thank you everyone for your questions this morning. And operator thank you for your service today, we will close it off.