IntriCon Corporation (IIN) 2011 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the IntriCon Third Quarter 2011 Earnings Conference Call. (Operator Instructions) This conference is being recorded today, Tuesday, the 8th of November. I would now like to turn the conference over to Mr. Scott Longval, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Joining me on today's call is Mark Gorder, IntriCon's CEO. But before we begin, I'd like to preface our remarks with the customary Safe Harbor statement. Today's conference call contains certain forward-looking statements. These statements are based on current estimates and assumptions of IntriCon's management and are subject to uncertainty and changes in circumstances. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Actual results may vary materially from the expectations contained in today's call. Important factors that could cause such differences include, among others, those set forth under the headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations in our 10-K filing for the year ended December 31, 2010.

With that, I'd now like to introduce Mark for a strategic look at IntriCon's third quarter.

Thank you, Scott, and thank you, everyone, for joining us today. I would like to begin by reviewing our 2011 third quarter results and key highlights for the Company. After that, Scott will cover the financials in more detail, and then we'll open up the call for questions.

By this time, most of you have had a chance to review our third quarter press release. Although economic softness has continued to adversely impact our year-over-year results, we believe the long term fundamentals of the markets we serve remain strong. In addition, our strategic commitment to increasing R&D investment over the last five years should better position IntriCon to meet the demand for small and lightweight, advanced body-worn medical devices.

As evidence, developing a larger portfolio of core technologies has allowed us to produce--pursue several high potential initiatives for future growth. Hi HealthInnovations, the United Health Group business, is an example of this. Over the past five years, we have worked to create a platform of technically advanced hearing devices that can be manufactured cost effectively and meet the needs of a broad population. Additionally, we have a recently FDA-approved cardiac monitor that offers key patient benefits, and we continue to incorporate our innovative PhysioLink and nano DSP technology into our product lines.

Looking at revenue for our three businesses, third quarter hearing health revenue was flat with the prior year third quarter and down 7.3% when compared sequentially to the 2011 second quarter. As I said in the press release, the hearing health industry remains very fluid and continues to be constrained by low consumer confidence in the economy. We believe continued market acceptance of our innovative digital signal processing circuits, such as our nano DSP Overtus, DSP amplifier, and complete systems, such as our APT and [LOON], will drive future growth in this business. In addition, the previously announced hi HealthInnovations agreement holds tremendous potential.

Medical sales declined 8.9% year over year and increased 1.1% sequentially. What we're hearing from our large medical customers is that they continue to face economic headwinds on several fronts, including regulatory delays and sluggish demand. Though current sales levels remain soft, our large OEM customers, such as Medtronics' diabetes division, are optimistic about their long term prospects with us. Furthermore, we anticipate our two wireless cardiac diagnostic monitoring devices, the Centauri, which received FDA 510(k) approval in August, and the Sirona, which was submitted for FDA 510(k) approval in September, will provide growth in 2012.

On the professional audio communications side, sales were down 8.3% from the prior year third quarter. However, they did rise 8.7% sequentially from the 2011 second quarter, benefiting from an increase in our securities business as contracts secured in the 2011 second quarter began to ship. We expect these contracts to augment professional audio sales during the fourth quarter and into 2012.

I'll now touch briefly on key highlights for the Company. At the top of our list is our agreement to become hi HealthInnovations' supplier of hearing aids. Hi HealthInnovations has launched a suite of high tech lower cost hearing devices for the estimated 36 million Americans with hearing loss. They will offer consumers technically advanced hearing aids, including those based on IntriCon's new APT opened in the canal hearing aid platform. An estimated 75 to 80% of people who could benefit from hearing devices do not use them partially due to the high cost. That's why we're so excited about this opportunity and what hi HealthInnovations is doing to bring high quality hearing aids at affordable prices to an expanding population. We expect to realize meaningful revenue from this program beginning in 2012 first quarter.

As we previously disclosed, we devoted considerable time and resources during the year securing the agreement preparing for the program's launch. This had a significant adverse impact on the Company's financial performance in 2011, which Scott will expand on later. As I said earlier, the Company received 510(k) marketing clearance from the FDA for the Centauri ambulatory patient ECG, our first generation wireless cardiac diagnostic monitoring system.

The Centauri combines event recording with wireless transmission of patient data allowing physicians to continuously monitor patient cardiac events remotely. We anticipate modest revenue contributions from this product in the 2012 first quarter with more substantial revenue generated in the latter half of 2012.

On the core technology front, PhysioLink, our wireless technology, is currently being incorporated into various product platforms. PhysioLink enables audio and data streaming to ear-worn and body-worn applications over distances of up to five meters. This advanced wireless technology has applications across multiple markets, including medical, hearing health, and professional audio communications. The first product platform to incorporate the PhysioLink wireless technology will be Sirona, our second generation wireless CDM device. This small rechargeable product platform can be used as an event recorder, a halter monitor, or a wireless event recorder. We submitted the Sirona for 510(k) approval with the FDA in the third quarter.

Now, I'd like to turn the call back over to Scott for a discussion of our financials.

Thank you, Mark. I'll begin by reviewing our third quarter financial results in more detail. The Company reported net sales of 13.9 million versus net sales of 14.7 million for the prior year period. IntriCon reported a net loss in the 2011 third quarter of 489,000, or $0.09 per diluted share, compared to net income of 243,000, or $0.04 per diluted share, for the prior year third quarter.

Gross profits for the 2011 third quarter were 22.2%, down from 25.9% in the prior year period, mainly due to lower sales volumes, costs related to establishing the Company's Indonesian facility, and ramp up costs associated with the hi HealthInnovations agreement. The decrease in gross profits were partially offset by the impact of various profit enhancement programs.

Operating expenses for the third quarter were slightly higher than the 2011 second quarter and the prior year comparable period. Sales and marketing were relatively flat as compared to the prior year period. However, general and administrative expenses and research and development increased over the prior year period, primarily due to investments to support product offerings under the hi HealthInnovations manufacturing agreement and the ramp up of the new Indonesian manufacturing facility.

Looking at the nine-month period, IntriCon reported net sales of 41.6 million, and a net loss of 1.1 million, or $0.19 per diluted share. This compares with 2010 net sales of 44.2 million and net income of 530,000, or $0.10 per diluted share. Gross profits for the 2011 nine months were 22.4%, down from 26.1% in the prior year period, again, primarily due to the factors I listed above.

During the third quarter, we amended our credit facilities with a private bank and trust company. The $12 million amendment consists of an $8 million revolving credit facility and a $4 million term note. The extended terms and increased borrowing capacity of nearly $2 million enhances our financial flexibility and strengthens the Company both in the short and long term. We're using these facilities to fund current growth opportunities, expand our low cost manufacturing footprint, and meet anticipated working capital requirements. The total debt at the end of the third quarter was 9.4 million, compared to 8.6 million at the end of the--at the end of 2010.

Looking at other financial metrics, IntriCon generated approximately 530,000 in positive operating cash flow during the first nine months of 2011. Our total cash cycle days at September 30, 2011 was 81 days versus 85 days for the comparable 2010 period. Cash cycle days are comprised of days sales outstanding, which was 49, plus days sales in inventory, which was 81 at the end of the third quarter, less days payable outstanding, which stood at 49 days.

Now, I'd like to turn the call back over to the Operator, so we can take your questions.

Thank you, sir. (Operator Instructions) And our first question comes from the line of Mr. Sam Bergman from Bayberry Asset Management. Please go ahead.

Good afternoon, Mark and Scott. How are you?

Good. How are you doing, Sam? How are you today?

Good. Beautiful weather, 70-degree weather. Unexpected. A couple of questions I have. Regarding the PhysioLink products and that particular technology going into your second generation monitor, what are the advantages over current technology with that particular product?

The Sirona offers three types of monitoring in one device - the traditional halter monitoring, the event recording, and also wireless event. The PhysioLink technology in there in the first rendition of Sirona is used to allow the technician to wirelessly connect with a PC and during the setup make sure that the device is properly recording the ECG signals. We will layer on--add a second device we call a remote monitoring cell phone device that will pick up the data from the Sirona and transit it to a service center, doing in a similar fashion what our Centauri does. But the first generation the wireless is only doing the setup mode for the technician. But this is a very miniature device comparing to other devices that are out there. It's also waterproof and the small size and the waterproof makes it a very appropriate device to replace what's currently being used, in our opinion.

(Inaudible).

Sam, you cut out there. Can you repeat that question?

A person using that product would have no issue taking a shower and getting it wet, like the older versions?

That's correct. That was the reason that we made it waterproof, because the patient has to wear these things for up to 30 days. And so, we wanted to be able to make it very user friendly, very robust.

Was that product designed in mind of a specific OEM that requested that design or several OEMs that requested that design, or was it done by your R&D team on its own merits?

It was done--and I would say it's a product platform that's geared at serving the whole market and there are several accounts that we have--we talked to during the development to make sure that the platform was flexible enough to serve the needs of several accounts. So it's not tied to any one manufacturer. It's really a platform developed for the whole market.

And going to the first generation, the Centauri, has that had any sales as of yet, or is that not in the sales channel?

It--there are--with these type of devices we also have to bridge the gap that--our customers have their own monitoring software that we have to (inaudible). Even if you have a device, we still have to work with the customer to develop software interfaces, so that our product will deliver the data to their PC monitoring software in a format that allows them to do the types of monitoring and analysis that they want to do. So we don't anticipate sales (inaudible) the product probably till the second quarter of 2012.

So the--so then, the Sirona would even come far later than that, right?

Yes. It would be towards the second half of the year for the Sirona. There are similar software issues with the Sirona as well, because the--in all cases the customers have software that they either download the data directly or remotely or--and then, they want to do some analysis, so we have to provide these software interfaces.

So how user friendly are these products, I mean, once they are up and running and the patient is using them?

They're very user friendly. Once you set it up, the--for example, in the case of a halter monitor, the patient doesn't really have to do anything. They just--the technician sets it up, makes sure it's running, and then you bring it back in the required amount of time and the data gets downloaded into the PC and they do their analysis. In the case of the--.

--So--.

--Wireless event, the patient may have to press one of the buttons on the front screen to indicate that an event has occurred and that they should start recording. And in the case of the Centauri, the data is automatically transmitted so the patient really doesn't have to do any interfacing with the device.

So you just--on both those products, did you foresee this type of delay for the integration of software by the providers when the product was being R&D'd and finally put to the FDA, and then afterwards trying to launch it in the sales channel? It just seems to me that it's a very long cycle once it got its FDA approval to actually bring in some revenues for the Company.

Well, I think the--we anticipated the software cycle as--there were delays in getting the product completed. There were some technical hurdles we ran into. It was much--the wireless connectivity with the cell phone technology was much more complex than we anticipated and that development took us a lot longer. Once we've submitted it for FDA, I don't think the cycle is any longer than we anticipated. But our development cycle was much longer than we had anticipated. So it took us much longer to get it to the FDA for review than we had anticipated.

I see. And just one--oh, sorry.

There's several months' delay of that that we didn't--some of the technical difficulties we underestimated.

And going to hearing health and the announcements by you and United Health on the distribution of the product--of the hearing product, I mean, it's a great announcement. And it seems like if it's utilized by their customers, there is a lot of potential there. But let me ask you, in terms of going online and buying a hearing aid, is there a hearing test that's done online for these United Health customers? And is that an adequate test for a person to go ahead and buy a hearing aid and feel that it's going to do the job for that person once he receives it and puts it in?

Well, let me answer that--first of all, I think that United will be a much better source of information regarding to the efficacy of their test. But I can tell you this, that as the supplier of devices we're giving them state of the art digital devices with features that have been proven beneficial to people with hearing loss. They include features like directional microphones, excellent feedback cancellers, automatic game control, and wide dynamic range compression, noise management, multiple programs and so forth. So we think that they have very high quality device.

Now, we know that they have worked on a test that we think is very innovative. And I think I would direct you to their press releases and website to talk about the--how that test is structured, what it does and what kind of scientific research has been done to support the test.

Okay. Thank you.

Thank you. Our next question comes from the line of Dick Ryan with Dougherty and Company. Please go ahead.

Thanks for taking my questions this afternoon. A couple of follow-ups to the HealthInnovations program. You mentioned adverse impact for investment in 2011. Can you give a sense of what sort of investments you made to get this program to where it is now and how we should look at the spend going forward?

Sure. This is Scott. Thanks for the question. I'll break it down in two different components. We had a tremendous amount of spend not only in capital in regards to tooling to prepare ourselves for the products that we will be supplying hi HealthInnovations, but there was a tremendous amount of research and development and sales efforts that ran through the P&L through the year. From a cash impact perspective for the first nine months, I would say approximately about $1.4 million of cash was outlaid for this program. Of that, about $800,000 has run through the P&L. And if you look at this last quarter, it was probably the bulk of those costs went through.

We anticipate that we'll continue to incur a substantial chunk of those costs here in the fourth quarter and probably bleed over into the first quarter. So that's kind of the investment focus that we've had on that program for 2011 and how we see that continuing to impact us going forward.

Okay. And while the announcement is still pretty fresh, what's been the response from your traditional customers regarding United Health announcement?

Well, there's always concern when there's change, but what we've tried to emphasize to our customers is we think that what United--what hi HealthInnovations is doing we think we'll expand the market. There is good data out there that says that insurance covered--coverage and affordability increase the adoption of hearing devices and move the point at which you would treat your hearing disability to a much lower level of loss than you would have without full insurance coverage. This means you're going to bring people into the system earlier. And what they're doing is very innovative and provides more access. So we think the combination of these things is going to draw a lot of people into the market that are not now being served. So we're--we think this is going to help our customers. And our association with United obviously makes us a stronger company, and anything that makes us a stronger company also makes us a better supplier to all of our customers.

Do you think other potential partners or entities are looking at what United is trying to do and maybe entertaining their own thoughts regarding this marketplace as well?

That's possible, but nothing that I'm aware of.

Okay. Great. Thank you.

Thanks, Dick.

Thank you. (Operator Instructions) And our next question is a question from the line of Mark Spiegel with Stanphyl Capital. Please go ahead.

Yes. Hi. Thank you. Can you provide a little bit of color as to what the margins will look like on this United Health deal? I mean, is it a 50-50 revenue share? Are you going to wind up with sort of your traditional 20-something-percent gross margins?

We don't get specific into programs. What I can tell you though is this program, as well as some of the other programs that Mark highlighted, will contribute to our corporate goal, which is increasing our overall gross margins. And right now, we are in the low 20s to mid-20s, and clearly we need to accelerate expansion of those margins. And so, if you look at corporate strategies that we've laid out in the past of getting to that 30% hurdle, the 35% hurdle, we believe all the programs that we're working on will contribute to us achieving those goals.

Okay. And then, sort of a follow up to a question that was asked by the last person about other potential health insurance companies or anybody else doing this, are you allowed to supply this product to other companies or is this an exclusive situation with United?

We--yes, we cannot provide this type of an offering to any other healthcare provider.

Okay. Cannot?

Cannot.

Cannot. But I would--to further on Mark's comment, the device--the APT device, we are able to offer that platform to our other OEM customers.

Yes. It does not preclude us from serving our existing customer base. But--.

--So what--so what you--what is it that you can't offer? Is it that you can't offer like an internet-based hearing test direct sale thing, or is it the actual--could you do that if you just designed a slightly different product for somebody else? In other words, is it the design of the product or is it the method of marketing that you are not allowed to do with a competitor?

Well, we're an OEM supplier and basically we're going to stick to our niche as being an OEM supplier and work with people like United or Medtronic or the existing hearing health customers in our channel. I don't see that as our business stepping out and getting into internet sales.

Right. But I mean--but that's sort of what United is doing. So what I'm wondering is, if somebody else wanted to come along and do internet sales, could you slightly modify this product and supply them?

No. We can't provide this to any other health insurer. That's part of our agreement with United.

Okay. So it's a health insurer exclusive? Is that what it is?

Yes. Correct.

Okay, very good. Thank you.

Thank you. And our next question is a follow-up question from the line of Sam Bergman, Bayberry Asset. Please go ahead.

On the hearing health again, have you had any OEM customers that have come back to you and have told you they are going to stop purchasing product from IntriCon because of the United Health deal?

No. We've not had that--anybody come and tell us that at this point.

Okay. If I go back to a conference call we had at year-end 2010, it seems to me that I was led to believe--and I think shareholders were led to believe--that the Centauri and the Sirona, one of them would have much more of an immediate impact on revenue, sort of timeframe would have been the third quarter of this year, no later. It seems to me that it has been pushed out by nine months to a year. And so--I mean, that's a significant change for trying to estimate where your revenues are going to be for a shareholder because of the delays in adoption of these two products. So I'm just wondering, if you're looking at those two products and delays occurring after they're being approved by the FDA, where do you expect the short term revenue growth to occur knowing that you have these delays in the product acceptance and there aren't that many other design wins that are--that have been mentioned for fourth quarter, first quarter of 2012?

Let me--I'll let Scott deal with the revenue projection on the Centauri. But as far as design wins, we've had several design wins in all of our businesses. I think the--well, like obviously, United Healthcare is probably the most predominant. But in our business relationship with other medical customers we've got some design wins that will--in the Medtronics arena, the Smiths medical arena, some of our other large medical OEMs, where business will be increasing next year. We've also got the government contracts that are--that we have won that were delayed but are now starting to ramp up in Q4 and Q1 of next year. So there isn't just the United contract that we won. We've also got other initiatives going in the other businesses which we're excited about and are going to contribute to the growth going forward. Maybe, Scott, you can talk about the Centauri.

Yes. Well, I'll echo Mark's comments. First of all, we don't announce every design win or contract win. There's a number of our customers that we're under strict NDAs with, so it precludes us from announcing some of these wins. If we look at growth coming from each of our markets, we have significant potential with a lot of our current medical customers. Mark mentioned the Medtronic diabetes group. We think there's an opportunity to expand that business with them. Within our professional communications business, we talked about some of the wins on the security business side. And on the hearing health, obviously, we believe the HealthInnovations will be a great driver of growth.

As we were--as you talked a little bit about the Centauri specifically, I think Mark mentioned we did have some technical delays. But with those delays, we're not going to sacrifice the safety and efficacy of these devices. These are complex devices and it's something that we take great pride and focus to make sure that we're delivering high quality devices, and when we go to the FDA, we go with something that we have a high level of confidence that we'll meet our objectives. So we did have a delay. And I think Mark talked about that. And I would say the delay was six to nine months. And I think we'll--as Mark mentioned, we'll start to see revenue of that come in the first part of next year with more meaningful revenue towards the latter part. But I think all of these things that I've highlighted will help drive IntriCon to achieve their corporate strategies. And one of those strategies is double-digit growth in each one of our markets. And we feel that these opportunities can drive that type of growth.

But is it possible that even though you didn't know these delays were going to happen that you're also overestimating the type of growth that you potentially can have from these products because they're somewhat new markets or they're to new OEM customers, and up to now we don't really have any feedback from these OEM potential customers and what their revenues are going to be to you guys on purchases going forward?

I think the preliminary feedback that we've received has been positive. While these devices have not been FDA approved, we have--at least the Sirona--we have demo'd the Centauri. And there has been a positive feedback on the Centauri. And we feel that the advantages that the Sirona has over the current products in the marketplace can hold a tremendous amount of upside. We're not quantifying that today because it's difficult to quantify because of those factors that you noted. But we do feel comfortable that they will provide revenue growth and we're anticipating in a meaningful way in the latter half of next year.

And--I'm sorry, Sam. We also have gotten some positive feedback. Some of our customers were experiencing FDA delays in getting their products approved on the medical side, and we're now hearing that some of that is starting to move forward, that there is some momentum building. We've heard some people that have received FDA approval on programs that we're designed into and we expect some of those to start moving forward early next year. So those are all positive things we're hearing.

I'm sure, Mark, you're not happy with the delays and nor are the shareholders. But it all goes back to comments made nine months ago where we thought that revenue and the bottom line numbers were going to finally start growing by the second or third quarter of 2011. And it seems like it's been pushed out several quarters forward, probably not until the middle of 2012. So it's kind of a disappointment on my end and I'm sure it's a disappointment with you and the board. And just one last question - Indonesia. What were the expenses for getting the Indonesia plant up and running?

We had some renovation there and we have also hired a number of people. I think to date we have about 30 people there. And the total cost of that has been $200,000. And that was incurred in the--pretty much or primarily all in the third quarter.

And what types of products are going to be made there, or is it just a specific product that is being made there?

It--because we're a global manufacturer, a lot of the--depending on what kind of product we're making, for example, a lot of the high technology firmware and microelectronics are done here in Minnesota. And we tend to do--we'll tend to do the things in Indonesia that are very labor intensive and we'll put the--we'll assemble the product using the plants that most optimally will produce the quality and the cost that we need. So because we're global, there is no one plant producing any one product entirely.

Okay, thank you.

Thank you. And our next question is a follow-up question from the line of Mark Spiegel with Stanphyl Capital. Please go ahead.

Hi. Thank you. One more question, a follow-up on the United Health deal. Can you talk about how much manufacturing capacity you have for the hearing aids, if this thing really takes off--how many you can crank out a year?

I--we've--that's a difficult question to answer because we don't really--we don't know the exact numbers that are being expected from us. But we've got ample footprint in Singapore, Indonesia, and Minnesota to handle almost any reasonable number that United Healthcare could require of us.

So I mean, let's say you could sell--I mean, I'm pulling a number out of the air, but let's say you could sell 100,000 a year of these. You can handle that?

Yes, that would be no problem for us.

Okay, thanks. And last question - is this actually a different design from the other OEM designs you're doing?

No. These are standard technologies that we've developed over the years that provide some of those inner--they're state of the art digital devices that we've developed over the last few years and there is nothing unique about the digital devices. They're high quality state of the art and products that we offer both to the conventional channel and to United.

Okay, thank you very much. Good luck with it. It's an interesting deal you have there.

Thank you. Good question.

Thank you. And our next question is a follow-up question from the line of Dick Ryan with Dougherty and Company. Please go ahead.

Thank you. Just a couple more on United. Was there a minimum order commitment with this agreement or timeframe?

No, there was not.

Okay, thank you.

Thank you. (Operator Instructions) Your next question is from the line of [Cameron Marksberry] of (inaudible) Capital. Please go ahead.

Thanks for taking the question, and congratulations on the United deal.

Thank you, Cameron.

Do you have any concept on--of the marketing budget that United plans to put behind this?

No, we do not. We're strictly acting as an OEM manufacturing partner for them. And we know that they're doing a lot of things there to develop their channel, but we don't really know--we don't have any access to the specific budgets and/or tactics that they're trying to employ here.

Can you talk a bit about their strategy? Is United's aim--I mean, they're such a big company--is this a revenue profit driver for United, or is it internally for them seen as a service to make their members lives better? What's the primary motivation?

I don't--Cameron, I'm not really in a very good position to comment on their strategy. I know that there are several good documents on their website talking about their various strategies and I've gone on there and read those. I guess I would direct you there. It's very insightful when you read what's on their website and I can direct you there and I think you can draw your own conclusion.

I've looked and I'm not able to reach a conclusion. So maybe I'll finally--can discuss that further.

Well, maybe I can--might be able to provide you with some links to specific things on their website. So maybe--.

--Okay--.

--Scott and I can get your--.

--Okay, great. Sure, we can--.

--Follow-up information.

We'll email you after. And then, if I go to Wal-Mart or Costco, I see a little hearing aid alcove popping up and I don't know if it's Sonova or who the OEMs are. But with reference to a prior question, are you able to take your products to such channels? Because when I look through your P&L it really doesn't make sense to me. The gross margins of the business for competitors are in excess of 70%. And I realize you're an OEM. But are you able to take your completed product to other channels, or is that--would that be in violation of the United deal?

The particular example you gave of Wal-Mart, I know that several of the conventional manufacturers in the current channel have relationships with people like Costco and Wal-Mart. And I think the--I don't know if they have exclusive relationships or if there is more than one supplier that is involved with serving Wal-Mart and/or Costco. But that's really not our business. Our business is providing devices on an OEM basis to people who are creating channels to provide hearing aids to the hearing impaired. That's not our area of expertise. We're high technology manufacturers of body worn devices.

Okay. And then, just a small number of placements on a relative scale for this market would add up to 50,000 or 100,000 hearing aids would be incrementally very meaningful to you. Are you in a position to project significant profitability in the coming year? I know you'll defer, but do you agree with the conclusion?

I think it goes back to what I stated earlier. We think this program, amongst others that Mark mentioned, are going to help us achieve our goals, which is revenue expansion and margin expansion.

Okay, great. Thanks so much for the call.

Thank you.

Thank you. And at this time, we have no further questions. I'd like to hand the call to Mr. Mark Gorder, Chief Executive Officer.

Once again, we appreciate you taking time out of your day to join the call. We're encouraged about our long term prospects and future growth opportunities. We look forward to supporting all of our customers by creating cost effective, high quality, and technically advanced body worn devices based on proprietary IntriCon technology. We look forward to updating you on our progress in the future. Thanks again for participating in the call.

Ladies and gentlemen, this concludes the IntriCon Third Quarter 2011 Earnings Conference Call. If you'd like to listen to a replay of today's conference, please dial 1-800-406-7325, using access code 4483138. ACT would like to thank you for your participation. You may now disconnect.