William R. Retterath - Chief Financial Officer, Principal Accounting Officer and Treasurer James B. Morgan - Chief Executive Officer, President and Director

Morris Ajzenman - Griffin Securities, Inc., Research Division Stephen Altebrando - Sidoti & Company, LLC James Ricchiuti - Needham & Company, LLC, Research Division Robert Hoffman

Good day, ladies and gentlemen, and welcome to the Daktronics Fourth Quarter and Fiscal Year 2012 Earnings Results Conference Call. As a reminder, this conference is being recorded today, Wednesday, May 30, 2012, and is available on the company's website at www.daktronics.com. [Operator Instructions] I would now like to turn the conference over to Mr. Bill Retterath, Chief Financial Officer for Daktronics, for some introductory remarks. Please go ahead, sir. William R. Retterath: Thank you. We appreciate everyone's participation this morning in our year-end conference call. I'd like to first offer our disclosure, cautioning investors and participants that in addition to statements of historical facts, this call and our news release contain forward-looking statements, reflecting expectations and beliefs on 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 the economic and market conditions, management of growth, timing and magnitude of future orders and other risks, as mentioned during this call and in our press release and our SEC filings. Forward-looking statements are made in the context 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'll turn it over to Jim Morgan, our Chief Executive Officer, for some comments, after which I'll follow. And then we'll open it up for some questions. James B. Morgan: Thanks, Bill. Good morning, everyone. Obviously, this was a very challenging quarter for us. Our first challenge was that we didn't generate as much revenue in the quarter as we needed to, to have a good quarter. This was a combination of delivery on some projects being delayed and some projects that we were awarded and which could have generated revenue in the quarter not being booked before the quarter end. Some of this pent-up demand ended up in inventory, which Bill will talk about in a minute. Secondly, we did have a couple large projects for the site work ended up creating some problems for us, which hurt our gross profit. While there's always some risk of costs overruns on fixed price in installations, overruns this extent are very unusual for us as we pride ourselves in our project management capability, which we've been doing for many years. We are studying these situations carefully and making adjustments to make sure we don't have repeats of this nature. Our Live Events business top line was relatively flat for the year. We lost some gross profit points including some onetime hits, as described here, above, that will be working very hard to make sure don't recur. We will be focusing on reducing our overall cost to deliver in this area to improve gross profit margins. International revenue for the year was actually up partly due to the higher backlog we took into the fiscal 2012. The gross profit was off of the unusually high levels we experienced in fiscal 2011. We continue to see good activity internationally, but due to its concentration on large project work, it does tend to be the most lumpy of our businesses. The strongest performance for the year overall from a financial perspective were our Transportation and Commercial business units. It was great to see the increase within commercial for the year, as noted in the press release, with all aspects of the business having a strong year led by billboards and large contract business. One of the opportunities for us going forward, which we're excited about, is participating in the replacement or updating of displays that have reached their end of life. That's both for on-premise and third-party advertising customers. For smaller displays, this will also mean this is a complete replacement of the display. For larger billboard site displays, there is an interest by our customers to minimize the CapEx investment, so we will be working with them to identify what the best approach is. As a minimum, it would mean a module replacement. The Transportation business unit has continued strong through the downturn and continued to perform well this year. We have started off fiscal 2013 with specially strong orders in this business unit. We have talked about warranty fair amount in the past. We did see a meaningful improvement in warranty costs over the previous year. And with the increased emphasis on reliability testing that we have been doing for the past few years, we are expecting warranty cost to improve further in fiscal 2013. As mentioned in our news release, our largest investment in product development will be in surface mount LED products. We do offer some surface mount LED products now, but these new products will be based on a new platform to allow us to more cost effectively offer a wider range of pixel pitches. We are seeing increased opportunities for this surface mount technology and out-of-home third-party advertising, especially in international markets. IPTV for sports facilities and architectural lighting continue to be developing opportunities for us. We believe our offerings in each of these areas offers unique features and benefits. We have some nice reference installations to both of these product areas and have a good sales pipeline going in both areas as well. We are off to a great start with orders in the first month of the quarter, which we just finished. Our average weekly run rate for orders for the first month of the year ran about 80% higher than our weekly run rate for all of the fourth quarter. And the point of mentioning, this is not to say we expect to maintain that level for the quarter, but that this fundamental element of lumpiness in our business can cost quarterly fluctuations like it did this past quarter. We are expecting a much better look in first quarter. Regarding the longer-term outlook, we have developed a strategic goal over the next 3 years to get our operating margin up to 10%. To do this, we will be taking a hard look at all of our cost structure and looking for ways to simplify our operation to take costs out while driving -- still driving some top line growth. We have a high sense of urgency to execute on this to get back to more consistent and positive financial performance. We fully understand our investors are expecting much better results than we delivered this quarter. With that, I will turn it over to Bill with few comments on the numbers before we open it up to questions. William R. Retterath: Thanks, Jim. As Jim noted in the press release, our top line was less than expected. One of the biggest factors were some Live Events projects, which at the beginning of the quarter, we had projected to generate $7.5 million of revenue in the fourth quarter. Actual revenue on these 2 projects came at about $4.5 million. Both of these projects involve a significant amount of site work in subcontracting, which increases the potential for scheduling changes, which is what happened here. This revenue pushed on the first quarter of fiscal '13. In the Commercial business unit, we mentioned orders experienced delays that negatively impacted net sales for the quarter. Although we ended up with a great quarter for billboard orders, which were almost $20 million, including almost $4 million maintenance agreements, the timing of the billboard orders and actual deliveries of billboards to customers hurt sales, and therefore, increased our backlog for billboards going into the first quarter. This also caused an increase of about $4 million in inventory going into this quarter. For fiscal 2012, orders in the billboard area were just under $60 million compared to just under $40 million in fiscal '11. In addition, our large contract order business in the commercial segment was less than expected in the fourth quarter, causing a couple million dollar decrease in net sales for the quarter. Finally, as mentioned on the press release, we received a commitment for a large replacement program for a national account customer. We expect that this full replacement business between fourth quarter and first quarter will exceed $5 million in orders, and we have received approximately $2 million through the end of the first -- for the fourth quarter. Jim mentioned the positive start for the quarter on orders so far this month and additional large contract mentioned in the release. We booked orders in excess of $3 million for the University of Minnesota, for Syracuse University in our Live Events business unit. We've also booked over $9 million quarter to date in our International business unit. Again, we have the pipeline of opportunities to drive a great quarter for orders to position us for the second and third quarter of this fiscal year. I want to focus now on gross profit margin. At last quarter's conference call, we mentioned a few concerns that caused lower expected gross profit in that third quarter including higher health care costs service utilization and lower margins on large contracts. Overall, we have said that gross profit percentages could be more or less flat to up in the fourth quarter compared to the third quarter. Although we have seen improvements in services and benefits costs as we thought we could and better overall contract performance, the misses that Jim mentioned were too significant to prevent the decline in gross profit. As we move forward, we believe the gross profit will increase in the fourth -- first quarter of fiscal '13 as compared to the fourth quarter of fiscal '12 as we keep improving our services utilization and costs contained, warranty expense and health care costs and keep reducing our conversion cost [ph] as a percent of sales. Turning now to operating expenses. We stated during last quarter's conference call that operating expenses would be flat and actually increase. And going through the components of OpEx, selling expenses were generally in check aside from a $300,000 commission expense related to business booked during the quarter. Although our model does not generally include commissions, as we penetrate into some international markets, notably Asia, we realize that commissions are a bigger factor and are difficult to predict. This could cause some volatility in selling expense internationally as we expand our business there. With regard to G&A expense, the issue here was professional fees. We accelerated a few international initiatives and some tax planning opportunities that generated recognition of tax benefit. We also have higher HR costs associated with international issues and finally from outsourcing of IT projects that ended up being a little more costly. Finally, our product development expenses. During the quarter, we decided that our 10-millimeter outdoor surface mount module that we introduced approximately 1 year ago needed to be redesigned to improve its manufacturability and incorporated into a product platform strategy for surface mount technology. As a result of this determination, we wrote down the value of tooling and other items that related to the product as new tooling will be required. We also had higher patent fees related to various items, including a case with a patent rolled that's been put behind us and work associated with new patents. Finally, there was a small amount of the increase related to the mix of timeline engineers spent on product development versus contract in favor of higher costs of product development. In spite of these increases, as Jim mentioned later in operating expenses, we remain committed to driving these costs down over time, and we believe we will see reductions in the first quarter of fiscal '13 as compared to the fourth quarter of '12. Our inventory balances were higher than expected in part due to the commitments we made on the national account business, which is a quick turn, a large major university opportunity in our Live Events business, so we're in the process of negotiating now, and the billboard inventory that I mentioned earlier. Overall, we're well positioned for the first quarter and expect net sales to rise from the levels of the fourth quarter. Exceeding the level of 1 year ago will be dependent on timing of orders and other factors. Much of the airport project we mentioned in the release is scheduled for the second and third quarter versus the first quarter, which should help us as our business naturally declines in the late second quarter and the third quarter. Finally, just a bit of clarity on the income tax benefit for the quarter. There are a number of discrete items that contributed to the positive effect, including a preliminary positive result from the completion of an IRS audit and adjustment of tax assets as we completed a significant project, reassessing our transfer pricing practices, and finally, a lower state income tax rate based on completion of last year's returns. Overall, our long-term effective rate is declining as more of our business comes from our non-U.S. footprint. But that decline assumes that Congress will put back in place the research and development tax credit, which is a significant item for us. With that, I'll open up the call for questions and answers.

[Operator Instructions] Our first question comes from the line of Morris Ajzenman from Griffin Securities. Morris Ajzenman - Griffin Securities, Inc., Research Division: Just on the guidance here, we talked about, in the fourth quarter release, cost overruns, change in costs and schedules, et cetera, impacting gross margins. And then you highlighted the operational expenses being up in the fourth quarter. But then looking at into the first quarter, which I think a number of these items start alleviating, I presume they do, you did talk about revenues rising in the first quarter versus the fourth quarter sequentially, but then you only talked about -- well, actually, you gave guidance to gross profit percentage to rise slightly and operating expenses to decline slightly. I would presume, based on what you've laid out the fourth quarter, that the gross profit percentage would be rising more than slightly, again I'll let you clarify that, and operating expense will decline also more than slightly. What is it that's inhibiting the first quarter based on the rebound in the trends of orders, the one-off items that happened in the fourth quarter that's not allowing gross profit and operating expenses from your perspective guidance to improve greater? William R. Retterath: Well, it's a good question, Morris. We've stayed away from giving specific guidance and gross profit. Historically, our contract business does have volatility, and we've stayed away from describing more than -- describing what the word slightly means. But overall, what I would say is x the misses that we have of 1.5 points, that's an opportunity. But it gets offset and maybe diluted by the range of about comps that we can have on our large contract business. So we maintain our belief that we've got lots of opportunities in gross profit to improve it maybe more than what you're thinking slightly means. But again, the outcomes are a wide range that we can experience in general. As for operating expenses, there are a lot of opportunities to reduce -- I mentioned some of the tax planning opportunities that we took advantage of that increased professional fees. Those go away sequentially. There's a lot of things that we intend to do to decrease costs in G&A and in product development not to get those hits that I mentioned. So I apologize that we're not defining the word slightly. I'll say there's plenty of opportunity for us to decrease costs and improve gross profit. Morris Ajzenman - Griffin Securities, Inc., Research Division: One last follow-up, and I'll get back in queue here. Pricing pressures, competitive pricing, which is a big issue for you guys right now as far as improving gross margins? Is it what you can do internally, having a big impact on gross profits decline? Or is it the competitive landscape that's having a bigger impact on gross profit decline? James B. Morgan: Morris, this is Jim. I think both of those are factors, of course. And so we -- the internal one, of course, we have control of that, and we have a continuous effort in that regard. And we're, of course, very -- our product costs are very [ph] material intensive, so that's a -- sourcing one of the key materials that we work on to reduce costs on that side. On the other side of it, on the internal side is just that we're looking at really all of our internal business processes and how we can streamline those so we can just take time out of the process and time and effort out of it, and hence, costs. So those are some of the things we're focusing on internally. Certainly, the price pressure is a factor, and we have to respond to that. And we have a good value proposition for customers, but there certainly is that -- certainly is price pressure out there. Hope that at least partially answers your question.

And our next question comes from the line of Steve Altebrando from Sidoti & Company. Stephen Altebrando - Sidoti & Company, LLC: I know you typically get some visibility into the fall sports season, generally about now. How is the fall season panning out? James B. Morgan: What we're seeing is that in the professional side, there's not any real big projects out in front of us. There's some smaller operate-type projects in the professional side that we're -- we've been -- we have in the pipeline or we're already involved in. So the majority of the opportunities in the Live Events is in the college, university side. And we're seeing there's quite a bit happening there. Stephen Altebrando - Sidoti & Company, LLC: Okay. And then you had mentioned the shift towards surface mounting technology. How material is the CapEx associated with that? Or maybe more generally, if you have a CapEx projection for fiscal '13. William R. Retterath: Well, I think we'll spend maybe a couple of million dollars for CapEx this year related to the surface mount platform. Overall, we're going to work aggressively to find ways to reduce CapEx from the level it was in fiscal '13. So to get below $16 million is going to be our goal, and we're going to scour it, especially during this quarter, to keep that as low as possible. Stephen Altebrando - Sidoti & Company, LLC: Okay. And then I know how -- and you had mentioned in the script International typically is very lumpy for you guys. Is there any material projects out there that there is any particular optimism on for fiscal '13? James B. Morgan: Certainly, there are. There's factors. One that we -- certainly large project that we were expecting to book in fourth quarter that's still in the discussion stages. I think it's about $8 million or $9 million project, which is an architectural lighting-type project, just as an example. And then certainly, there's, yes, numerous other projects in the pipeline.

[Operator Instructions] Our next question comes from the line of Jim Ricchiuti from Needham & Company. James Ricchiuti - Needham & Company, LLC, Research Division: I wonder, if you look at your backlog and the -- just in general, looking at the orders you took in, in the quarter, how would you characterize the margin profile of that business? William R. Retterath: On a sequential basis, like Q3 to Q4, we're hanging in there on gross profit margins from -- looking at it from when we booked it, what we expect the margin to be, so Q2, Q3, Q4, we've hung in there on gross profit margin estimates at the time of booking. James Ricchiuti - Needham & Company, LLC, Research Division: And I think, Jim, you alluded to your operating margin goals looking out over the next 3 years. Can you talk a little bit of, perhaps, some intermediate goals just given the low levels of operating margins we've seen this past year? James B. Morgan: Yes. So we have to start where we're at. Of course, that's point A. And what we'll be doing here, Jim, is we're taking a hard look at really all aspects of the organization from a cost structure point of view where we can be more aggressive and taking cost out. Really, it's kind of comprehensive in that regards to look at those kind of things. How can we simplify some of the things we're doing internally that we've grown over the years. We have -- certainly, some of our internal business process, as we look at them, and then there's ways that we can, in fact, simplify those to have fewer hand-offs in the processes and those sort of things. So it's really a matter of taking a look at all those things immediately and find the ways to just take cost out. That's a big part of it. James Ricchiuti - Needham & Company, LLC, Research Division: But if you look at the operating margin in 2012, it's probably -- if we assume that you're working towards, I would think, 100 basis points or more of operating margin improvement, just given the low level typically in the second half of the fiscal year. William R. Retterath: Jim, to make sure I understand your question, you're saying in this fiscal year, to make progress... James Ricchiuti - Needham & Company, LLC, Research Division: I mean, basically, yes. Bill, I'm sorry, I should be clear. Just given the levels of operating margins, we understand that you're working toward a longer-term goal. But can you give us some sense as to even a range of what we might think in terms of operating margins for the current year? William R. Retterath: Well, I hesitate to give guidance, but I'll say for us to be on track to get to 10%, we know that this year, we've got to make a significant improvement from operating income, which was for fiscal year, 2%. I mean, for us to get on track to that 10%, I know we've got to at least double that this next year. And we remain committed, especially during this first quarter. As Jim mentioned, too, we've got to find ways to cut costs out of our infrastructure here to get us on the path to that level. Now we'll need some sales help, but we believe, overall, that our business on the top line can grow over these next 3 years at 10-plus percent. Our plan to get us to 10% operating income is based on the low end of where we think sales can grow. So we're been fairly conservative in the, call it, the glide path to get us there. But without giving guidance, I can say we've got to do everything possible to at least double it this year. Now one the earlier questions that was asked by Morris, I believe, earlier, is the competitive environment versus internal. We do, at the gross profit level, have plenty of opportunities to improve gross profit margin. We have a lot of opportunities to turn around the profitability of Daktronics and get us on that path. And one of the key things is to prevent some of these misses that we talked about. To lose 1.5 points on projects, as Jim mentioned, is just not in our core to do that on projects. And we can't let those things happen in the future. James Ricchiuti - Needham & Company, LLC, Research Division: Okay. That's very helpful. Looking at the Commercial business, you had a tremendous bookings quarter. And I wonder if -- Bill, I think you mentioned. Was it is a $20 million in billboard orders? William R. Retterath: Yes. Just under $20 million. Now keep in mind, though, Jim, the quarter booked below the quarter prior to that, was, as I want to say, was in the $10 million range, as I recall. You get some volatility. But even with that, it was a great quarter for orders. James Ricchiuti - Needham & Company, LLC, Research Division: So for the year as a whole, for fiscal '12, in terms of billboard revenues, did you -- what were your revenue in billboards for the full fiscal year? William R. Retterath: Well, they're north of $50 million. This product alone was $50 million and then services on top of that. James Ricchiuti - Needham & Company, LLC, Research Division: Okay. So just given the start to the year, it looks like the outlook for that portion of the business seems pretty positive. William R. Retterath: Well, keep in mind what the major billboard companies out there are saying on their public comments, is generally, they're saying flat deployments in calendar 2012 versus 2011. So we're not expecting to see significant growth in billboards, certainly the rest of this calendar year, aside from we believe we've increased our presence with one of the major billboard providers. But we don't look at that as making a major change in the top line, a noticeable change. So -- and then maybe in late '13 to calendar 2014, that's when maybe the replacement cycle starts to happen, which is an exciting thing. So we don't look for the billboard this fiscal year to be a dramatic growth area for us. James Ricchiuti - Needham & Company, LLC, Research Division: Okay. That actually that clarifies it because I thought you were assuming more upgrade business earlier in the fiscal year. So you don't really see that happening until later in the year? William R. Retterath: Well, we don't see it happening until our fiscal '14. James Ricchiuti - Needham & Company, LLC, Research Division: Okay. No, that's helpful. And then on international, can you just talk a little bit more about the condition of that market? Just given concerns people have about Europe and even some signs of slowing in parts of Asia, what are you seeing on the International business? And also, should we assume that the cost of that business is certainly going to be higher? Because it seems like you're moving in certain regions toward a more other [ph] commission model. James B. Morgan: So I guess, first of all, just in terms of the -- you heard a lot about the European economy. I don't know that we're seeing a direct connection to our opportunities there at this point. Now one of our biggest project we installed last year in Europe was actually in Madrid and Spain. And at that time, there was a lot of discussion even then about the challenges they were having. So -- but I think this remains to be seen a little bit as to how things will play out there in that economy. And a lot of these projects are done by individuals or entities that have cash and have the wherewithal to do these things. They're not really backed by government funding. So it's not really clear how those will connect going forward, and certainly, it's something we'll keep an eye on. What was your next question? William R. Retterath: Commission. Let me just clarify the commission. Jim, our model is not designed to increase our -- necessarily our commission. I'd say it's the cost of projects that we built into our pricing. And in Asia, we ran into the need to pay more commissions. Our overall operating income target, as a result of those commissions, remains unchanged that we still -- we've just got to, in some respects, maybe mark up the product a little bit higher and cover those costs. And so it's not really changing the model. We just run into it more often in Asia because we don't have the penetration, and we would have to rely on third parties more. Hopefully, over the long longer term, that dependence on commissions will reduce.

Our next question comes from the line of Jared Allegan [ph] from ST Investment Office [ph].

When you talk about the costs internally that you're able to -- or you hope to be able to target, you've embarked on the Lean manufacturing processes for a number of years, which should have give -- or at least shine light on those opportunities to take costs out. Where will you focus now to take further costs out in that process? James B. Morgan: First of all, just to say, our Lean manufacturing efforts have been -- really have been very successful. It already transformed our manufacturing operates. And in the last few years, we've been working, focusing on what we call Lean out of manufacturing, Lean in the offices is one term we use, really, which is talking about all our business processes and everything else really outside of manufacturing. And a lot of the same principles can be applied. You look at any process and look at how you can take steps out of it. And so really, it's all of our business processes, and every one of our business units has opportunities there. And service is probably one of our bigger ones, just how we go about delivering service. We have service delivery really worldwide in a wide range of products. And we've made a lot of progress in that area. But there's still a lot of opportunities to take costs out of that process while still delivering excellent customer satisfaction. So it's really -- the focus of -- to a large degree, is on the outside of manufacturing. But certainly, the Lean manufacturing effort continues with -- and that's our way of our life there. It's not something we didn't know if we post on it. That's -- it really becomes a way of how you do business.

One more question on the gross margin, operating margin target. It seems like ever since the downturn, your gross margin especially took a step change down. And we've heard a lot of companies who are premier in their industry, and we consider you guys to be among those, have realized that they gave up too much during the downturn with respect to pricing. Have you guys experienced -- experimented with exerting a little more pricing power? And how elastic is the top line if you consider some of that? James B. Morgan: In some areas, we've been able to exert some pricing power on some of these big projects. The bidding is -- in many cases, we -- some cases, we get the last look. Even then, we have -- so we have a choice of taking it or leaving it. And there are occasions where the pricing gets down to the point we've decided not to take a project. So it varies. Some of our standard products would be the areas where we have a little more opportunity to, in fact, consider some small price increases. Some materials are, in fact, increasing in the price of the smaller displays that can affect our cost structure there. And they would, of course, affect the competitor's cost structure as well.

And we also have a question from the line of Robert Hoffman from Princeton Opportunity Partners.

Two different areas. Unless I missed it, did you talk about some of the site-specific expenses that you took? Can you kind of characterize what happened and how you can avoid that in the future? James B. Morgan: I'm sorry, can you repeat the question, please? I'm sorry, I missed...

In your discussions of your margins, you talked about a couple of projects where you had site-specific cost overruns. And so I was just trying to get a handle on what those were and how you can avoid those in the future. Is it a process thing? Is it not bidding on a bigger type of project? Can you just flush that out a little bit more? James B. Morgan: Yes. So a couple of factors involved. These were new construction projects, which complicates the whole -- the scheduling in the site work, interacting with other trade, all of those things that make it more complex. I think one of the things that we're going to be doing, just providing better oversight on these things, in one case, maybe looking at how we bid, too. I mean, it certainly starts with how you bid the project, you have to make sure that you understand the scope of work. And we're good at that, quite frankly. We're very good at getting thorough scopes of work, getting good bids on the project. And part of the problem was, in some cases, we get wrapped up in the deadline at the end, and you have no choice but to scramble and hit the deadline. And so some costs came in there that maybe with a little better foresight, some of those could have been avoided. So our pioneers do -- as they were studying those situations very carefully and understanding exactly what did happen there. And in some cases, I think it's reviewing -- it will be understanding -- or maybe we have missed some things on the bidding. But mostly, it's how we're executing on the project management side.

So it's -- I mean, you can't look back and say, "oh. well, we wanted to bid x, and we were convinced to bid x minus 10%. And there it was right there, so we just have to be" -- you can't look back and say, "Well, we had it priced right, but we just took on to the think the pressure winning the deal." So was it something like that? James B. Morgan: For the most part, it was on the execution side. So we're certainly doing our bidding on the thing, but we've identified a number of areas where we just missed on the project management side and then upward overruns on it.

A slightly different question. When you talk about surface mount LEDs, is that an area in which a competitor has an advantage? Or can you tell us a little bit more about kind of the evolution of why that's better and how you decided that you need to move in that direction? James B. Morgan: Well, we've been doing -- first of all, we've been doing surface mount technology for quite some time. The majority of indoor displays have been surface mount for a number of years. And again,essentially what surface mount is, is you have the 3 LED diode in one package. Sometimes it's called 3-in-1 because of that. And I have those in one package. The LED is one package, all 3 colors, red, green and blue. You get the LEDs closer together and get that higher resolution. So that's been the norm for indoor here for a number of years. The challenge has been for the technology to have that bright enough for outdoor use. Now that's been available for a few years now. And the second challenge there is to have that properly protected environmentally because of the different package. It requires a different approach to making sure that it's robust enough to stand up in the outdoor environment. So we've been doing this for some time. It's not a new thing for us. We have had -- I think we mentioned in the -- or Bill mentioned, we had a 10-millimeter outdoor that we've been actually shipping for a number of years. We need to expand that to address the market, to have other pixel pitches in. So we've come up with a platform strategy that we want to get all of this for the development based on -- which overall, allows for a lower cost increment for each new pixel pitch that we would offer because we would have some common elements -- more common elements amongst those. So it's really a revolutionary thing, but it is a step into this platform approach for this technology.

And is that platform applicable to billboards? And if so, is the new orders that are coming in dependent upon you getting that at the door? James B. Morgan: So in the U.S., billboards tend to be very large and along the highways. And for the larger billboards, the through-hole packages as it's called, the lamp-style package for LEDs is still preferred. And one of the reasons for that -- well, the main, big reasons for that, in addition to the fact that's viewed from a distance, and it's not -- your eye can blend the colors very well anyway without having them all in one package, is that energy usage is a very important parameter for the billboard companies because these are displays that are -- if not 24/7, they're at least, say, 18 hours a day, 7 days a week. And so with the lamp package, there's a -- the light can be focused straight, more toward narrower viewing home, which is where the audience is on the highway. You don't need a wide viewing that's like in the stadium. So that's still -- for the large billboards in the U.S., the lamp style package is still the preferred and the superior technology. When we get into International, there tends to be more smaller outdoor advertising displays, which you could think of as small billboards, but they don't typically call them billboards over there in the international environment. So in those cases, because the overall size is smaller, to get the resolution, the number of dots in that space, you need to get the dots closer together. And so I think that's why, as I mentioned, in the International out-of-home advertising, that's where we see the real trust here for the surface mount.

And our next question is a follow-up from the line of Morris Ajzenman from Griffin Securities. Morris Ajzenman - Griffin Securities, Inc., Research Division: Bill, Jim, when do you think you will have enough time and confidence where you can lay out a roadmap for us to look at this strategy you have to drive up operating margins and what you can do to reduce costs? I understand it's kind of early you laying this out for us, but do you think you'll be able to in the next quarter to -- so you'll be able to give us a roadmap that we can kind of look along with what you ultimately talk to get to? James B. Morgan: Certainly, we'll give an update on that in the next -- this quarter. And we'll try to give more visibility. Certainly, what we have accomplished in terms of -- and what we have focused on in terms of cost reduction and understand the -- your interest in having more visibility there. Morris Ajzenman - Griffin Securities, Inc., Research Division: Okay. And is this something that -- you guys internally or you have hired outside consultants on? What's the process on how this works out? James B. Morgan: We did have some consulting assistance in the development of the process. At this point, it's internally driven. Morris Ajzenman - Griffin Securities, Inc., Research Division: Okay. And one last question, and I'll stop there. This target of 10% operating margins several years down the road, I guess 2, 3 years, whatever that timeframe means, what target can we get gross profit margins to assuming the competitive price -- competitiveness of the industry remains where it is now? Hopefully, it doesn't intensify. But assuming it stays at the current level, to get to 10% operating margin, where will gross profit margin be? William R. Retterath: Well, we're still working on the details on this, but we believe that if the pricing environment stays the way it is, that we can get gross profit through internal efficiencies up 26%, 27% over the next few years. It's internal initiative to the extent pricing get tougher or weakens or improves, I should say. They can drive higher than that. So I think our general view is it's going to get north of 26%, 27%.

And that concludes our question-and-answer session for today. I would like to turn the conference back to Jim Morgan for any closing remarks. James B. Morgan: Thank you for being with us this morning. Thanks for the questions, gentlemen, and have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.