Good day and welcome, ladies and gentlemen, to the Daktronics financial year 2009 second quarter earnings results conference call. As a reminder, today’s call is being recorded Tuesday, November 25, 2008, and is available on the company’s website at www.daktronics.com. I would now like to turn the program over to Mr. Bill Retterath, Chief Financial Officer for Daktronics, for opening remarks. Please go ahead, Sir.

Thank you. Good morning. We appreciate your participation in our second quarter conference call. We’d like to make some preliminary comments about the quarter, after which we’ll open it up for a limited time frame for questions. I’d like to first offer our disclosure cautioning investors and participants that in addition to statements of historical fact this call and our quarterly news release contain 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 of 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’d like to turn it over to Jim Morgan, our chief executive officer, for some highlights on the quarter.

Good morning, everyone. We are very pleased with the financial results this quarter. Our top line was strong. We had solid gross profits margins. Operating expenses were kept in line. And we were able to generate in excess of 11.5% operating margin for the quarter. First and foremost I want to thank all of our employees for the great effort this quarter and for the great job generating these nice results. I would like to review how our sales revenue breakout amongst our business units for the quarter. As is typical for us, our second quarter is characterized by the fall sports season rush and in line with this our live events business unit lead the way with an outstanding performance this quarter. Of the approximately $170 million in revenue approximately 46% was live events. International contributed another 7% of revenue. And operations in these two areas are highly aligned internally as we manufacture most of the product for these two in the same factory here in Brooking, so we tend to look at them together operationally. Interestingly enough, even though both of these areas tend to do a lot of large projects and are thus each quite lumpy, when we look at the sales combined for the two they are very consistent at 53% of our revenue, both for the quarter and year to date. Commercial contributed 28% for the quarter and 29% year to date. Of that billboard is about half, so in the 15% to 16% of total revenue. Our schools and theatres unit had 13% of the revenue for the quarter and 12% year to date. Transportation was a little over 5% of the revenue both for the quarter and year to date. A little more on orders, taking into account the backlog and the imminent…

Thanks, Jim. Starting out I want to go over our growth outlook for each of our business units. We still see sales in the live events business, continuing to outpace our expectations that we set at the beginning of this fiscal year. Leading off growth is the recently announced new Meadowlands Stadium for the Jets and Giants. Just to recap where we are on this project. We booked $13 million in the second quarter of which a little bit more than half is still in our backlog at the end of the second quarter. We have since booked an additional $27 million in November which would fall into our third quarter. And finally, we’re expecting one final change order for about another $6 million making the total contract value approximately $45 million. We were also verbally awarded two additional transactions for Major League Baseball facilities that are still subject to contract completion and those two total approximately $16 million. We expect to book them both this quarter. Keep in mind that the awards on these two Major League Baseball facilities are not contractually committed at this point. They’re subject to some uncertainty as we move forward. We’re starting to see less new construction work in our pipeline, but we do have a number of transactions in the pipeline for the rest of the year that could exceed $5 million each. The likelihood of all these occurring this fiscal year is not high, but the important thing to note is they’re all existing facilities. In closing, we can see a growth rate of order bookings for the year of more than 40% in live events and we should end up definitely exceeding our goals for large projects that we set forth at the beginning of the fiscal year. Moving on to…

Thank you. The question and answer session will be conducted electronically. (Operator Instructions). Your first question comes from Jim Ricchiuti – Needham & Company. Jim Ricchiuti – Needham & Company: Hi. Good morning. The question I had is just with respect to operating expense. You had a very strong quarter operating margin-wise in the current quarter. Now, given the decline that we’re expecting in sequential revenue in Q3, clearly there will be a sequential decline in operating margins. But would you expect your operating margin to be up versus last year?

Jim, this is Bill. Thanks for the question. It’s going to depend on how our sales come. There’s a chance it could be up over last year, but it’s going to ultimately depend on the sales level that we get and the gross margin. I apologize I can’t answer that specifically. There’s variables that impact that. We have a chance to exceed last year’s. Last year’s was at 5.9%. Jim Ricchiuti – Needham & Company: Right. And you’re assuming, it sounds like you think, Bill, your gross margins can continue to show some improvement even at these lower sales levels.

Yeah, not as much as what it would have been nice to have seen, but we think so. Yes. Jim Ricchiuti – Needham & Company: Okay. Now, just with respect to the order pipeline, would you still be taking orders at this point, booking orders for the Major League Baseball season and I wonder how you’d characterize the activity that you’re seeing right now in that market. You alluded to two orders that you got some verbal commitments on, but I wonder if you’d talk a little bit about what else you see out there.

Just as far as the timing, yeah, we’ll be booking, expect to book orders for the next, really through Q3 that would be delivered, could be delivered for baseball. There’s a number of orders out there, opportunities out there that are just, we have a really pretty decent pipeline not only on baseball but for other sports too that are in the pipeline. These are very real life projects. There’s opportunities out there and we’re still pretty confident in the live events business. Jim Ricchiuti – Needham & Company: Jim, on the MLB projects there is a pipeline out there. At this point it sounds like you’re not seeing an impact from the economy, some of that potentially being pushed out. If it gets pushed out it gets pushed out of season, is that correct?

Yeah. Occasionally there will be a project that’s an upgrade project, maybe a smaller upgrade project. That’s happened in previous years too that they’ll get pushed out for whatever reason. Sometimes it’s a financing type of reason. So certainly there’s that possibility that there will be more likelihood that some of these will be pushed out. On the other hand, a lot of these projects are planned ahead of time and things are lined up, the financing’s lined up ahead of time. I think it will be a mix in that regard. There’s certainly that possibility of some being delayed because of the economy, but we feel a lot of these that are in the pipeline will be funded. Jim Ricchiuti – Needham & Company: Okay. And last question for me. Looking at the small college/university market, are you seeing any signs of caution on the order front there in terms of maybe folks feeling a little bit more concerned about the economy and maybe pushing out some business with you?

At this point, Jim, we really haven’t seen that. Will we see it in the future? I guess that time will tell, but at this point we have not really seen that. Jim Ricchiuti – Needham & Company: Is it an active pipeline in that market right now, Jim? How would you characterize it?

Yeah. No, it’s a very active pipeline in that market right now. Jim Ricchiuti – Needham & Company: Okay. Thank you.

Your next question comes from Steve Dyer – Craig-Hallum Capital Group. Steve Dyer – Craig-Hallum Capital Group: Bill, you talked a little bit about improving gross margins. What percentage of that would you expect to come from warranty expenses versus overall cost reductions?

The warranty expense we hope is at least a percentage pick up in the next quarter. At least a percentage point. Steve Dyer – Craig-Hallum Capital Group: Okay. And you think this is achievable even though you know you’re kind of, the mix seems to be shifting away from commercial, which is the higher gross margin business, more towards sports?

Yes. Now, keep in mind though that much of the commercial impact is on billboard, which we’ve always said has the lower profit margin. So it’s probably not as much as you would think on the surface. Steve Dyer – Craig-Hallum Capital Group: Okay. And how should we think about operating expenses overall on an absolute basis going forward? It typically hasn’t fluctuated a significant amount with the sales level. Are we kind of at a level you think is fair going forward?

Yeah. And you know, as Jim said on operating expenses, our goal is to see those decline over the next two quarters in dollar amounts. Okay? And our approach Jim described is primarily through attrition and cutting, as much discretionary spending as we can see. Now, how quickly that comes out is kind of the unknown, which gives rise to one of Jim’s earlier comments about saying at the end of Q3 where we’re at and where the business is going. There’s still some nice opportunities out there in the pipeline and we don’t want to risk that opportunity pipeline that we’ve got. I think bottom line to answer your questions, I think you’ll see sequential declines over the next couple of quarters. Steve Dyer – Craig-Hallum Capital Group: Okay. And then with respect to CapEx, it looks like you’ve spent about 24 of the 32 that you’re planning on spending this year. Is that right?

That is in the press release, yeah. Steve Dyer – Craig-Hallum Capital Group: What was the expenditure this quarter that was in the highest in quite some time?

Tim (sic), the number is actually $16 million. Steve. Sorry. The number is $16 million for the CapEx through the first six months. Steve Dyer – Craig-Hallum Capital Group: Okay. Gotcha.

And what was your question? Steve Dyer – Craig-Hallum Capital Group: That negates the second question then. Then my final question and I’ll hop back in the cue. The Yankees and Mets, I assume that the Colts has shifted and been recognized. What about the Yankees and the Mets using your percentage of completion?

Oh, let me look that up. We’ll take the next question.

The majority of that’s in. Steve Dyer – Craig-Hallum Capital Group: Okay. All right. Thank you.

Your next question comes from Michael Kupinski – Noble Financial Group. Michael Kupinski – Noble Financial Group: Thank you for taking the question. I appreciate that. I just have, in terms of the warranty expenses, I know that you’ve been investing in product quality and that sort of thing, but gives you the visibility and the percentage pickup that you expect in the coming quarter on the warranty expense line?

Just that some of the things we have this time were kind of one-time occurrences on a new product and we just don’t expect a recurrence. Michael Kupinski – Noble Financial Group: Okay. And then I was wondering if you could just give me your thoughts on the stock buyback. At current levels, given your pristine balance sheet, what your thoughts are there.

We have no comment on that. Michael Kupinski – Noble Financial Group: Okay. That’s all I have. Thank you.

Your next question comes from Jim Boyle – C. L. King & Associates. James Boyle – C. L. King & Associates: Good morning. You have mentioned in your preamble second half revenue decline. Was that met on an absolute or a percentage term compared to year on year?

Sequential first half to second half. James Boyle – C. L. King & Associates: Okay. Second. The digital boards have seen a drastic disruption with [Lamar’s] announcement especially. What’s the digital billboard order pace at your other sizable outdoor clients?

Some of the future there is a little uncertain yet. We haven’t got as clear a picture as we would even like. I will say that there’s a couple tier two companies that are very serious about doing some nice orders, but it may be a little too soon to call there. Maybe, we’re not sure if there’s going to be a credit issue there or not, for example. With today’s credit situation could that have an effect? That’s just an unknown at this time from our perspective. But there is still certainly interest out there in rolling out digital billboards and some internationally as well. They’re going to think the same applies as how does the, will the credit situation that we’re in these days have an effect or not. James Boyle – C. L. King & Associates: Okay. And with the excluded $27 million for the new Meadowlands added in to your $134 million backlog it’s sequentially just modestly off of the quarter ago backlog. Would that suggest another maybe $65 million to $70 million or so sales for live events in fiscal Q3?

We should keep rolling on Q3 and Q4 on live events. I don’t want to give estimates to narrow the amount, but we’ve got plenty of work to do in that area. James Boyle – C. L. King & Associates: Okay. Although you have updated the top line fiscal year guidance do you have any feel for the bottom line range for the fiscal year that this point?

Well, it’s going to depend. We had said earlier we still think there’s a chance to achieve well into the operating margin guidance that we had set out at the beginning of the year of 8% to 9.5%. We’re still shooting for that. Sales on some of the upside can certainly help us in that regard and we’ve got to wait and see how some of these opportunities pan out. James Boyle – C. L. King & Associates: So no EPS range forecast?

No, no. We’re not forecasting EPS at this point. James Boyle – C. L. King & Associates: Okay. Thanks.

Your next question comes from Dick Ryan – Dougherty & Company. Richard Ryan – Dougherty & Company: Bill, what level is your service revenue at?

Less than 5% of our total. Richard Ryan – Dougherty & Company: Less than 5%. How are the margins on that and are you working to improve those as well? Where do they stand?

Yeah, the margins are, I guess we haven’t really disclosed margin. It really varies quite a bit in the different areas depending on how we’re structured and how we approach it. It’s really a kind of wide variety there. Our service restructuring is we are number one strategic initiative for this year and so we’re investing in that area as much as anything. In our structuring process things don’t run as efficiently when you’re moving things around and changing things. I’d say we’re in a transition year and we expect to be performing better at both ends, delivering service to our customers and being profitable in that area in the future. I will say that we had a nice milestone here about two weeks ago. We rolled out the next phase of our software system that is supporting our service. So that was a nice milestone along the line of helping us out there in our processes. Richard Ryan – Dougherty & Company: Good. When you look at the live events and large projects that have worked their way through in the last year and a half or so do you have a visibility looking out beyond 2009? What could be out there for live events? Are we moving down larger projects for HD? Are you starting to see that as far as visibility at all?

Well our pipeline certainly has products that would be out in the 2010 range, but we haven’t made any projections in that range. Certainly our pipeline has projects out in that area, in that time frame. Richard Ryan – Dougherty & Company: Okay. Thank you.

You have a follow-up question from Jim Ricchiuti – Needham & Company. Jim Ricchiuti – Needham & Company: I wanted to do a follow up on that potential order that you see internationally. I wonder if you could talk a little bit about that. Is that a potential order that would come in the current quarter or is it something that could go out into Q4?

Jim, you’re talking about the order as an example I mentioned in my prepared comments? It’s Bill. Right? Jim Ricchiuti – Needham & Company: Yeah. Bill, this was I think an order that you suggested international order that could be in excess of $10 million.

Yeah, you know, that’s kind of, I brought that up as an example of the kind of difficulty we face right now. The timing of booking, I guess honestly when you think about orders that size, to get it in this quarter might be tough, but this fiscal year and to get revenue off of it this fiscal year is a possibility. I bring it up as an example because $10 million will be the second half of the year can affect it pretty dramatically. So I don’t know that it would book this quarter, but it is possible. Jim Ricchiuti – Needham & Company: And Bill, at the same time you mentioned, or maybe it was you, Jim, that there was a piece of business that did get pushed out internationally. I think you alluded to it being in the gaming area. Has that market softened for you and is this particular order that you’re targeting or looking at something that’s in the gaming area as well?

No, it’s not in the gaming area. It’s sports related, Jim. Jim Ricchiuti – Needham & Company: Okay. And I’m just wondering if you could just comment on the competitive landscape. What you’re seeing out there both in North America, the US market, as well as overseas. Any competitive pressures perhaps as the market has softened a little bit on the commercial side? It sounds like the sports market things haven’t changed a whole lot, but I wonder if you’d comment about that.

Well, referring to the same group of competitors out there, I would say that certainly as times get a little tighter it can be a little more competitive. And there can be some pressure on margins. That is a possibility that certainly could be in the offing here. But generally our relative position in the industry is we believe remains as it has been and we see opportunities out there. Jim Ricchiuti – Needham & Company: But isn’t that initially, you haven’t noticed any change in the environment that would suggest pricing pressure intensifying, Jim?

I would say that probably in the digital billboard market there’s some competition that’s taken a run at it. I don’t know if it’s trying to buy some work to get their foot in the door, but that’s not a new thing. That’s kind of an ongoing thing in our industry that that happens. So whether it’s an economy driven thing or just continuation of the way things are in the industry is kind of hard to say. But certainly there’s always new people taking a run at things. Jim Ricchiuti – Needham & Company: And then on the CapEx side it looks like you’re bringing that down versus where you had been forecasting earlier in the year by about $10 million. Can you talk a little bit about where that reduction’s taken place.

Certainly in terms of, we’re not investing in some capacity some of our equipment. We’re holding back. We were going to expand a little bit. It wasn’t a big expansion at Redwood Falls, just a little space addition. We’re holding that back. We delayed, we actually have a commitment that we made some time ago to eventually buy some property adjacent to our Brookings property. That is about a $3 million deal that’s been pushed out into next fiscal year. Also, we’ve looked at the IT side of things. We’ve found some savings there, too. Just the fact that we’re not hiring as fast, just the cost of equipment people with technology these days there’s a savings by not hiring as fast. So that factors in. Jim Ricchiuti – Needham & Company: And last question from me is, you talked a little bit about lead times in the school and theatre market, as well as for Galaxy. I thought that maybe business was sharpening a little bit for Galaxy just as a result of the weaker economy, but it sounds like it’s also a case of your lead times being a little longer than you’d like to see for that product.

Yeah, that’s true. Some of those, like I said, there’s some areas that we’ve identified where we can improve on operationally that we can do better on that in the future. But that was a factor. The lead times were a little longer and that always gives the competition a little opening. Jim Ricchiuti – Needham & Company: Just from an economic standpoint as it relates to Galaxy, Jim, are you seeing any signs of softness in that market for that product? Just given the customer base.

Yeah, we have seen some softening in the Galaxy area, yes. Jim Ricchiuti – Needham & Company: Okay. And on the school and theatre market do you anticipate any potential change in demand as a result of funding issues for state/local governments for education? I know a lot of that is oftentimes funded outside of the districts by local advertisers, but how do you see that business shaping up over the next couple of quarters?

You’re right. It’s not, most of the scoreboards are products that we install or sell to schools are not funded by state funds. It’s through the local sponsorships and advertising. I think that’s the funding source we have to keep an eye on and see how that holds up here over time. At this point we haven’t seen an effect there yet. Jim Ricchiuti – Needham & Company: Okay. Thank you.

We’ll take one more question.

Your final question comes from Steve Altebrando – Sidoti & Company. Stephen Altebrando – Sidoti & Company: Hi, guys. I was wondering in terms of this pro sports environment, are you seeing any type of credit impact from funding $10 million, $15 million plus type projects?

At this point we have not seen that.

There have been articles, though, Steve, where some mixed stadiums had financing issues, but we don’t, we haven’t seen it affecting us. Stephen Altebrando – Sidoti & Company: How about more of replacements rather than new construction?

There has been kind of a wave of new construction that tends to kind of go in ways. We’ve been working through one of those high points of those waves here in the last year or two.

Steve, if I could add something, there is more interest by our customers to look at financing alternatives that we can help facilitate. I think that question is coming up more often. Stephen Altebrando – Sidoti & Company: Okay. And then I guess the last one would be, I mean, you talked about the big wave of new construction and probably maybe $75 million or so in revenue in this fiscal year. I know it’s a little too early for fiscal 2010, but do you see enough interest that the pull back won’t be substantial in that segment?

Well, maybe to add some colour, we’re just kicking off much of our planning process now. but when we look at the deals that we booked for this last year that were over, let’s just say $8 million, we see that definitely going down. The nice thing about the live events area are those smaller projects, those under $8 million which is really the bread and butter of our business. We do a lot of transactions that are $2 million and less. Subject to some things coming up in the economy that we’re not seeing now, that business should see some good growth rates that should offset the decline in those big transactions. The question that we don’t know is how much will that be offsetting. That business historically has been in the 15-plus per cent growth rate and for the long term we think it can offset what’s going on in the economy today. As long as that doesn’t affect it. Stephen Altebrando – Sidoti & Company: Okay. That’s helpful Thanks, guys.

That would conclude our question-and-answer session. At this time I’d like to turn the program back to our speakers for any additional or closing comments.

All right. Well, thank you, guys, for your questions. Thanks to all of you for being with us this morning. We appreciate your time. We wish everyone a happy Thanksgiving holiday.

Thank you, everyone, for your participation in today’s program. You may disconnect at this time.