Daktronics Inc (DAKT) 2004 Q3 法說會逐字稿

Welcome to the Daktronics third quarter fiscal 2004 earnings conference call. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded Wednesday, February 18th, 2004.

I would now like to turn the conference over to Mr. Mark Steinkamp, Investor Relations Manager for Daktronics.

Please go ahead, sir.

Good morning everybody.

Welcome to our third quarter conference call.

As the operator mentioned, we are recording this call, and that call will be accessible via the Internet or by telephone.

To access the webcast replay or the phone numbers for the phone recording, you can click on the investor’s button at Daktronics.com.

With me today are Jim Morgan, our President and CEO, and Bill Retterath, our CFO.

Before we begin I need to caution investors and participants that in addition to statements of historical fact this conference call and our quarterly earnings news release contains forward-looking statements reflecting the Company's expectations and beliefs concerning future events, which could materially affect the Company's performance in the future.

The Company cautions that these and similar statements involve risks and uncertainties, including changes in economic and market conditions, the management of growth, timing and magnitude of future contracts, and other risks noted in the Company's 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 conference call.

The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

Now I will turn it over to Jim Morgan.

Good morning everyone.

Thank you for joining us this warning.

It is a beautiful sunny winter day here in Brookings.

We're pleased to announce another solid quarter for the third quarter here at Daktronics.

Our employees just did an excellent job again this quarter.

As we have said in the past, our third quarter is typically our weakest quarter, primarily due to the fact that we have the holiday season, and so there just aren't as many plant days to operate.

But we came through strong this quarter.

I will turn it over to Bill Retterath here to give some insight into the numbers.

And I will come back and make a few other comments.

Good morning to everybody.

As usual most of the comparisons I mention today will be comparable to the same quarter of last year.

Let me start with the top line.

Sales for the quarter were up over 17 percent quarter over quarter in what is traditionally our weakest quarter of the year.

Year-to-date we're up 16.5 percent to 152 million, which is consistent with our long-term goal to grow net sales in excess of 15 percent.

As evidenced by our backlog we also had a good quarter for order bookings.

And net sales fell within our previously announced estimates of 40 to 46 million.

Earnings per share at 13 cents compared to 10 cents a year ago.

And year-to-date earnings per share of 68 cents compares to 47 cents one year ago.

The earnings for the quarter were within our estimates of 9 to 16 cents per share for the quarter.

Both net sales and net income were records for the third quarter of a fiscal year.

Within net sales we continued our success of prior quarters with double-digit percentage growth for the quarter and year-to-date in both the sports and commercial portions of our market, while the transportation market net sales were down quarter over quarter.

Within the sports business our small venue business, our major league sports business, both performed exceptionally well, primarily due to the expansion of video systems to high schools and major league sports orders, including the work we did with the Cleveland Indians practice in the quarter, whose revenues exceeded 10 percent of our quarterly net sales.

Also within the small venue portion of the sports market, primarily high schools, our standard order business was up in excess of 12 percent.

The major league sports business does perform much better than anticipated for the year, while the college and university market has been slightly weaker than expected.

Within the commercial market we continued our growth from the prior quarter with revenues up in both standard order portion of the business, which includes most of our national account business, and in the custom larger project business which included transactions with casinos, horseracing, tracks and auto dealerships, to name a few.

As I previously mentioned, the transportation business was down for the quarter and now year-to-date.

This decline is primarily due to the decline in order bookings from the first half of the fiscal year.

For the quarter order bookings in this portion of the business were actually up nicely, but on a year-to-date basis are down slightly.

Looking at our sales on an international basis, we continue to see much higher rates of growth internationally as compared to domestic.

Net sales year-to-date have more than tripled internationally, while domestic sales have increased, but not as much in percentage terms.

In the mix of orders between standard product orders and large contract orders our mix also improved for quarter, with standard product orders comprising less than 35 percent of total net sales as compared to slightly less than 25 percent last year.

This certainly helped margin although a large portion of the growth is fueled to the national account business which generally carries lower margins than other standard product orders.

Finally within our services business our maintenance revenues are up almost 25 percent year-to-date while the rest of our core services business is up slightly.

Now for a quick overview of our order bookings and backlog.

As we reported, our backlog at the end of the quarter was 43 million as compared to 51 million one year ago.

We also announced that we expect revenues in the range of 51 to 56 million for the fourth quarter, which leaves us for the year at a net sales figure of 203 to 208 million, within our original guidance of between 195 to 210 million.

We based our estimates on projects currently in the backlog plus projects we're expecting that still book in the quarter.

And finally our expectations of standard product order of business, which typically represents orders with quick delivery time frames.

The backlog going into the quarter does not include the number projects under letters of intent, for example, the $6 million project with the Memphis Grizzlies and a few others that we have been working on.

So overall our backlog is strong.

For the quarter orders are strong, as I previously mentioned.

And all three of our primary markets lead in terms of dollars by the major league sports market, which included the Cleveland Indians and the Anaheim Angels projects.

In addition to that, however, the small school venue orders commercial and transportation were all up double-digit percentage increases, while the midsized sports business, primarily college and university orders, were relatively flat.

I would like to point out that within the transportation market, as some of you know, much of the spending aside from the airline portion of that business is funded from federal government spending relating to the highway bill that is currently working its way through Congress.

The Senate recently passed legislation raising that spending bill from $218 billion to $318 billion.

And the house is expected as well to pass some level higher than previously passed limits.

The President has made it known he favors 256 billion, so we will have to wait and see how this turns out.

But from all fronts it appears as those sometime over the next year we will start to see significantly more spending on highways, which should fuel growth in that segment for us.

In terms of some of the significant projects that contributed to net sales for the quarter, as I mentioned, the Cleveland Indians.

We still are finishing up the work on Glendale Arena in Phoenix, sport stadiums in Qatar, Cumberland Gap Tunnel Authority, the Athens Olympic Games, Gold Coast Hotel and Casinos, the Arrowhead Pond of Anaheim, the Philadelphia Phillies projects, and the Edison International Field where the Anaheim Angels play.

Gross margins for the quarter was 33 percent, which was up from one year ago levels of 32.3, and down from last quarter's levels of 37.3.

Much of the decline for the quarter as compared to the second quarter of this current fiscal year was due to the concentration of multimillion dollar transactions, including for example, the Cleveland Indians, which made up as I mentioned over 10 percent of net sales.

As we have said in the past those larger project typically carry lower gross margin levels.

When comparing this quarter to the third quarter one year ago many of the same factors from previous quarters were present, including the mix between standard and custom projects, the effects of raw materials pricing and various other factors we had mentioned in previous quarters.

For the fourth quarter we expect that our margins will be a range similar to the fourth quarter one year ago which was 33.1 percent.

This estimate, however, is subject to variability which as you know in the short-term can swing as a result of a number of factors, especially the mix of the business.

In the long-term we believe that the reductions in raw materials prices and other factors that are affecting us in a positive way will be reflected in large selling prices.

Operating expenses were 11.2 million or 25 percent of net sales compared to 9.2 million and 24 percent of net sales last year.

Across all areas of operating expense, and in fact included in cost of sales, was an accrual for anticipated profit-sharing contributions not previously accrued in prior quarters.

We remain confident that for the year we can keep operating expenses at the 21 percent range plus or minus a percentage point depending on the ultimate sales level.

Selling expenses at 6.8 million or 15.2 percent of sales compared to 5.9 million and 15.4 percent of net sales one year ago.

Year-to-date selling expenses are 13 percent of net sales compared to 14.3 one year ago.

The increase in spending in the third quarter was due primarily to higher travel and entertainment costs due to the increased sales level, higher personnel costs related to the expansion of the sales force and its related infrastructure.

We expect that for the fourth quarter sales expenses will be flat or down slightly from the third quarter's level.

G&A costs were at 2.5 million or 5.6 percent of net sales compared to 1.8 million and 4.8 percent of net sales last year.

Year-to-date they are at 4.5 percent compared to 4 percent the first three quarters of last fiscal year.

We had a couple of factors leading to the high increase in G&A for the quarter.

First and most importantly, and as mentioned in previous filings, over the last year we had a couple of unions come in attempting to gather votes for union representation.

During the last quarter a union petitioned the NLRB to have a vote.

The vote was held and supported our belief that relations with employees are strong, as the vote opposed union representation by approximately a 4 to 1 margin.

As a result of the union activities, however, we spent a fair amount on professional fees to counter the attempts by the union.

And those costs are included in G&A for the quarter.

Most of the work was concentrated in the third quarter of this last year.

And we believe those costs are behind us now.

In addition we also started to see some of the financial effects of the Sarbanes-Oxley Bill and related regulation.

While we believe that much of the intention of the regulation was positive, we are starting to see some significant costs associated with compliance.

For example, during the quarter we began all the documentation requirements of Section 404 of the Act dealing with internal control documentation and testing.

We have, as aside, outsourced much of that work to have someone help us get the documentation in accordance with the requirements of the Act.

In the fourth quarter I think we can expect to see some additional costs with the upcoming proxy filing and corporate governance issues raised by all the regulation.

Finally, G&A was also affected by a higher cost of information systems and some employment costs associated with the purchase of the business in Canada a few years ago.

We certainly expect that G&A costs will go down in the fourth quarter.

Our product development investment for the quarter of 1.9 million was 4.2 percent of net sales compared to 1.5 million and 4 percent last year.

Year-to-date it is at 4.1 percent of net sales, which approximates our long-term goal of 4 percent.

Jim will be making more comments on product development later in the call.

The results of the above was a 7.6 percent operating margin as compared to 8.2 percent one year ago.

If you would factor in the some of, what we considered to be one time costs, for example the costs of the union, the Section 404 Sarbanes-Oxley documentation costs, and the effect of the anticipated profit-sharing plan contributions, the operating margin would have exceeded last year's level for the quarter.

On non-operating items, as most of you know, interest expense is declining due to reduced fed levels that we expect to continue.

Interest income is increasing due to the investments in long-term receivables and income on cash investments.

And finally during the quarter we realized approximately $250,000 which is included in other income from the sale of our voting business.

Our income tax provision warrants some mentioned as you will see that the overall effective rate is (indiscernible) 39.6 percent due to the first two quarters to 38.7 percent, which caused the quarter's effective rate to decline.

This decline is primarily due to the mix of our business in the states and the effects of state income taxes.

Cash provided by operations was approximately 1.2 million, and year-to-date 12.1 million.

This compares to 3.6 and 14.1 million for the third quarter and year-to-date last year.

The decline in cash flow from operations is mainly attributable to the growth in long-term receivables.

During the quarter we also invested heavily in capital assets, including additions to manufacturing information systems infrastructure and demonstration equipment.

We also completed the move of our metal fabrication operations to our Sport Link (ph) Building.

We're projecting that capital spending will go down in the fourth quarter, but at the same time, we're evaluating limited expansions to our current facility which is expected to be less than $1 million and included in fiscal year 2005.

As mentioned previously, we are expecting revenues in the 51 to 56 million in the fourth quarter, and earnings to be in the range of 17 to 25 cents per share.

These numbers put us at the upper third of our annual revenue guidance which was previously 195 to 210.

These expectations obviously did could vary due to a number of factors, including the timing of order bookings and the actual timing of revenue recognition on contracts.

We are also just underway with our fiscal year 2005 planning process.

And we expect at the end of year we will issue top line guidance for fiscal year 2005.

And we expect that guidance to be generally consistent with our long-term goal to grow the top line in excess of 15 percent.

With that I will turn it back over to Jim for more comment.

I will start by just -- with some listen comments on some of the business that we have worked on in the third quarter, and will be working on in the fourth quarter.

If you were to tour the plant right now you would see a lot of large baseball systems sections of video ProStar displays on the floor.

The two big projects we have going are the Cleveland Indians on Jacobs Field and the Anaheim Angels, which is Edison Field.

And these -- both of these projects are really good examples of Daktronics' ability to provide a complete integrated system.

And we also act on these as both a manufacturer and the contractor.

We're responsible for the full installation of these two systems.

The Cleveland board is noteworthy -- the main video display for Cleveland is going to be the largest display in a sports facility in the world actually, about 40 feet high by 150 feet wide.

In comparison, if you need a reference point on that, the larger screens in the NFL typically have been about 20 feet high by approximately 100 feet wide.

Those are the large ones.

So this is significantly larger.

So it will be definitely a reference point in the industry.

In addition to that, the main video board, there is a large, what is called the out-of-town game board.

That is actually going to be mounted at the outfield fence.

And that is even longer.

That is actually 170 feet long and about 10 feet high.

So it is -- square footage is a smaller, but also that will be a very large display.

Both of these systems -- we call these supersystems actually -- being that they've got multiple video display.

They've got the ProAd digital advertising displays.

And they are all controlled by Daktronics integrated control system.

And again that is one of the unique capabilities of Daktronics in the industry to provide that entire system -- really assume a system from one vendor.

Just as a note, the San Diego Padres and the Philadelphia Phillies, they will both be opening new stadiums this season, and Daktronics has products in both of those as well.

We're pretty much finished with both of those projects at this point.

Another interesting project, we have mentioned this before, that we're seeing the interest of high schools in our ProStar video display.

We just booked a nice order with the Denton Heights, Texas High School districts for a ProStar display.

That is on the order of $500,000.

So that is actually in our backlog at the moment.

Commercial market, we booked a very nice order with Churchill Downs at about about a $1 million order for ProStar.

Churchill Downs is a long-standing customer of ours.

We installed incandescent tote board displays there back in the '80s.

So we have been working with them for a long time.

So it is nice to continue doing business and supporting Churchill Downs.

A relatively new product for us, our 46 mm ProStar, 46 mm refers to the pixel pitch.

We just installed, or shipped -- that is our second 46 mm.

It went out to Longo (ph) Toyota in Los Angeles.

And that is -- Los Angeles, if you have given the freeways in Los Angeles, there are many displays, primarily at the auto dealers out there.

And many of those incandescent displays were manufactured by Daktronics originally.

And so this 46 mm ProStar will be our first ProStar display at an auto dealer in Los Angeles.

And it will be nice reference project for us out in that area.

Also we just installed -- delivered and it is now installed a billboard at the border crossing at Tijuana.

So if you happen to come across the border there you can see some Tektronix product in action.

National accounts continues to be an important segment of our business in our commercial market.

We continue to have good business across the border in both the fast food and also the convenience pharmacies stores business.

A number of orders we turned around, and national accounts -- actually several million dollars worth of orders we actually turned around within the quarter.

So just to point out that not all the business that we do in the quarter shows up in our backlog at the beginning of the quarter.

The transportation area, as Bill mentioned, our business is relatively flat for the year.

But we do see certainly growth opportunities long-term.

We have a couple of nice orders we have booked there in the transit area.

One is the Long Island Railroad.

MTA is the acronym that it goes by.

That was just under $1 million.

Also we have a nice order for an international airport for about three-quarters of $1 million.

As Bill mentioned, we are on track for approximately 4 percent investment in our product development.

We are slightly over that this quarter.

That is due to the investment in (indiscernible) some video products accelerated efforts there in the video products area of development.

And in general in our product development in video products and what we call our business products, which is our Galaxy Matrix display, the displays that we sell for retail type advertising.

Our efforts there are to add models.

In case of business products we are adding more color products in addition to our monochrome products.

And continue to improve the control systems, improve the color definition on these products, and also continue to reduce the cost -- our manufacturing costs on these products.

Transportation products area we continue to add models, and again improve the functionality and reduce the cost of building the product, while at the same time increasing the capability of the product.

And likewise in our sports products, our scoreboards, we continue to add models and streamline the manufacturing of existing models there.

As Bill also mentioned, our selling expenses were up into the dollars.

This is primarily due to the investment in our sales and service force, a regional sales and service force.

And included in that in the last couple of quarters really is development of our Frankfurt office.

We're very pleased with how that is coming long.

Third quarter we incurred some legal expenses to get our GmbH up and running over there.

And that is pretty well taken care of that this point.

And our staffing is coming along very nicely over there.

We've got strong leadership as well as strong technical people on the ground there.

I am very pleased with how that is coming along.

On the operations side, we have increased our capability in both our metal shop and our electronic assembly.

The metal shop -- especially our extrusion processing area, we added some equipment and actually moved that portion of the operation to another separate building to have some more space.

That is working out very well.

In electronic assembly we brought on additional machines there for inserting the LEDs into the circuit boards and also for the soldering process.

And that equipment was online in early January.

That has proven very important for us as we're working these large projects with tight deadlines.

That is working out very well.

So operations-wise we're pretty well set.

We're looking at a small addition to the plant that we will probably do in the summer.

And we're just in the planning stages of that.

That would be primarily to add some shipping -- in the shipping area, especially for business and transportation products.

Bill mentioned the voting system business.

I just want to comment on that.

Those of you who follow the Company may know that we -- the voting system business is actually -- was a very important business for Daktronics when we first started back in the early '70s.

It is a very customized business.

Of course we're engineering company and at that time before we had products, we were very much in a custom business.

And it was a very good fit for us back at that time.

And as we have evolved to be focused on the display business and become more of an engineering company but with a strong manufacturing component, the voting system business no longer fits us so well.

And it is not a business that has grown.

It is still under $1 million, and so we didn't make a big announcement on it.

But just as a point of information, that is what has transpired there.

There is one other -- was one other competitor in that business, and we have worked out a deal with them.

We are going to provide displays to them in that business and they will carry on and service our customers.

So that is kind of the end of an era for those of us who have been with the Company since early days in that we've spent a lot of time in early years in that business.

It was a very interesting business, but I no longer a fit for Daktronics.

And as Bill mentioned, our backlog is -- we have a good backlog going into fourth quarter, and that in addition to the orders that we have commitments on that we anticipate booking here, we are projecting a very strong fourth quarter.

And we're very confident in our ability to deliver on that.

And we're on track to deliver on our goal of exceeding 15 percent growth on the top line.

So with that I will open up to questions here.

(OPERATOR INSTRUCTIONS) Lee Schaefer from Fieldstone Research.

Congratulations guys.

Nice results.

I just wanted to talk about one thing and that is your opportunity in Europe.

You mentioned that your international business is up, but I believe it is up from a very small base.

So how big is your international business currently?

And what do you think, Jim, your opportunity is butting heads with the likes of Barco in Europe?

Yes, the year-to-date we're a little in excess of 20 million in sales.

And for the quarter -- I am just looking at some numbers and hold on a second.

And you're right, last year was not so strong.

One thing about international we will say it is a little bit -- it is going to be probably a little lumpier than our domestic business just because at the moment there is a larger complement of large projects versus small standard product there.

So that can come a little bit in streaks.

Certainly with regard to competing with Barco there and others, it is very importantly we feel to have a presence on the ground in Europe in order to do that effectively.

And that is the reason that we have opened our office in Frankfurt.

We hope to be in on projects earlier and be able to present our ability to service them more readily.

And so we feel that will make a big difference in our ability to go after -- against Barco.

What kind of resources did you dedicate to your Frankfurt office?

A half-dozen guys more or less?

At the moment we have three people from the U.S. who have transferred over there.

And they are all very strong.

We have the manager and two technical people.

They're not only good technical people, they are also very good in the sales and marketing side of things.

So they are very capable.

We have in addition to that we have a couple of people from Germany we brought on board.

You can tell from your request for quotes in that kind of sales activity -- is European sales a significant opportunity in your fiscal '05 year?

We certainly believe it is, Lee, absolutely.

There's a lot of quoting activity.

And we feel we're in a much better position to follow up on those quotes now with our presence there.

(OPERATOR INSTRUCTIONS).

David Reeder (ph) from CSFB.

Essentially you talked a little bit about expanding your facility.

And Jim mentioned a little bit about essentially that expansion will relate to seemingly the shipping docks.

I guess could you provide a little color in terms of what kind of capacity you're at right now?

And with expected 15 percent gross going forward on top line sales, do you expect any type of further expansion of your facility?

Yes, certainly with 15 percent ongoing top line growth we will have to add again -- in the future add some more manufacturing space.

Just to give, I guess, a sort of an idea of the -- to quantify this addition I mentioned as we expect to this next addition to be under $1 million dollars.

It is not a huge addition.

And it is sort of -- not to get into too much detail, but sort of an interface building for a potential add-on beyond that as we see the need going forward.

But we would see that that would hold us for a year to two years, and then we might have to add some more.

Again that $1 million would translate into Capex going forward?

That's correct.

Switching gears a little bit, you mentioned you experienced some higher costs related to international expansion, compensation and professional fees.

Is there any way to get a breakout of those costs?

Are you going to make that available?

Not the detail of those.

I can just give you some rough numbers so to speak.

You know, there is profit-sharing -- hit in third quarter was $300,000 or something.

Some of the professional fees for both international and the union activities were probably a couple of hundred thousand.

One other question real quick pertaining to -- I don't know you don't give a whole lot of specifics regarding national accounts.

But just out of curiosity what is Daktronics doing or what is the sales force doing to proactively going out to capture those markets?

We have a group that just focuses on national accounts.

That is their mission.

That is their whole mission.

Do they do anything differently than any of your other competitors, whether it is Barco in the U.S. or Translux or what have you?

I'm not sure exactly how they're going about what they're doing in that area.

We haven't seen a lot of Barco, Translux in that particular market, at least up to this point.

Not to say that they won't at some point.

What we're doing there -- it takes a lot of dedicated attention on these national accounts.

It is a significant business for one thing.

And there is -- what we're doing is working with entities to install a lot of this displays at a lot of different sites.

And just to make sure all about go smoothly we have a project manager full-time signed on each of the accounts to make sure that things are going smoothly.

We are also working on the software side of things.

One of the challenges as you roll out hundreds or maybe even thousands of displays for a given entity is the challenge of getting the information out to the displays and having the control of that as a corporate program is something we are providing -- offering now software to accomplish that.

I'm not aware of any of our competitors that have something of that nature at this point.

Those are some of the unique things that we're doing.

Mark Robbins from the Robbins Group.

Nice quarter.

Help me better understand the bite that Sarbanes-Oxley is putting on you folks.

Let me ask the question a different way.

I was out chatting with another company here just last week, about the same size, internationally oriented, maybe a little more so than you.

And they said it was going to add about 1.5 million in costs for 2005 -- their current 2004 calendar.

It is that the idea that is going to hit you folks as well is about that much?

I don't think it will be that much.

There is a significant amount of bureaucracy, and I will give you some color in terms of what we have done here in the third quarter.

The biggest out-of-pocket cash flow is the Section 404 documentation.

And we have hired, as I mentioned, an outside provider to help us do that.

That project is going to be a little bit north of $100,000.

And we have probably taken a hit on two-thirds of that already.

And then during this quarter we're working with our Board of Directors and doing all of the governance types of issues.

And when we get up on our proxy filing at the end of the quarter there is substantial changes there.

And I think for the most part we're doing most of that work in-house, but at the same time you end up needing some outside legal help to review this.

And there is a much greater involvement by the Board members to do a lot of other things that maybe the Board was not required to handle in the past, or at least maybe they weren't required to do it at that level -- shareholder communications, nomination of directors.

On the testing requirements of internal control, the formalities of that which we will start doing in the first quarter of fiscal 2005, I'm estimating we will add a headcount or two just to comply with 404.

So I don't think it is $1.5 million, but it is sure -- out of the shoot it is certainly in the hundreds of thousands of dollars.

And there is a significant amount of bureaucracy that -- it is not changing the ethical manners in which Jim and Al and Frank Kurtenbach box and some of these other guys have built and run the Company, it is documentation and paperwork to a large degree.

Just more expense, bureaucratic expense.

Yes.

Must all my other questions were answered.

Thanks fellows.

Again, good luck.

Michael Friedman from Sidoti and Company.

I had a question about the long-term receivables.

Obviously it is more than 12 months, but do you know what the average turn over period would be for those?

Not off the top of my head, but if you give me a minute I will come up with an estimate.

Do you have a follow-up question while I look, Michael?

Yes.

Related to that, are there one or two companies that make up the bulk of that, or is it spread throughout a bunch of different customers?

It is spread throughout a bunch of different customers.

I will give you an idea on the maturities first -- your first question and I will come back.

We've got 1.6 million maturing in the fourth quarter, next year 2.6, then 3.6, 1.8, 1.7 and thereafter 3.8 million.

If you take those numbers -- I am guessing the average life is probably four years or something.

Now remember in terms of that business, a lot of that is a key strategic area for us.

That is our Daktronics sports marketing business.

And we're seeing a lot of nice work in there, especially exciting in the high school market.

We end up financing that through in essence ownership of the advertising rights there.

So it is a good business.

It is a strategic business.

It also is an area that I'm focused on in the next six months though at the same -- and to find ways to off load that.

It is getting financing of intangibles really.

And I think we've got some ideas there.

So I don't want to see that continue to grow at that rate, but on the other hand it is a great business.

Jim, I don't know if you want to add any color to that?

No, I think is just another facilitator for us in our business, and we are selective on it.

Two other quick questions.

Have you added any new national accounts over last quarter?

In other words sequentially have you added any new ones?

No major new ones.

And then lastly the competitive landscape -- a few people have asked, I guess, in a roundabout way on the larger, the Barco, etc.

Are you seeing any more competition on the more medium to smaller size displays?

Well certainly Barco/Translux are our competitor on those projects.

And at times they have come in quite aggressive.

So they are there.

We see -- there is always an ebb and flow in this industry.

We have seen -- I think we may have mentioned this last quarter, but LightHouse which is very aggressive in the professional sports business.

For a couple of years they seem to have backed out of it in the US.

So that is kind of a fluid industry, but they come and they go.

I will say this, Barco is a large company, a public company.

We don't expect them to go away.

Gentlemen, at this time there no further questions.

I will now turn the call back to you.

Please continue with your presentation or your closing remarks.

Well, thank you.

Thank you again everyone for all the questions.

I appreciate that.

One -- just to comment, you may have seen the news release on this, but Daktronics is now listed on the S&P Small Cap 600 Index.

That did create a little bit of a buying spike in our stock here in the last couple of weeks.

So just (inaudible).

Another just, I guess, a news item, Al Kurtenbach, one of the cofounders of Daktronics is now a member of the South Dakota Senate.

He was appointed to the Senate to fill a vacancy by another senator who is actually going to run for Congress.

So Al is actually out in Pierre, and hoping to lead the state at the moment.

We enjoy getting reports from Pierre on a regular basis.

It just turns out that South Dakota has one the shorter sessions in the country.

And they are actually -- they are out of session here in the next, I think, it is two or three more weeks, and our session is over for the year.

So it is a rather short but intense session.

We congratulate Al on his appointment to the Senate.

Fourth quarter earnings announcement is Wednesday, May 26th.

And I think that is all we have for today.

Thanks again everyone for joining us.

And we will see you in a few months.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation, and we ask that you please disconnect you lines.