Gentherm Inc (THRM) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Amerigon Inc. 2008 fourth-quarter and year-end results conference call. At this time, all participants are in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, February 10, 2009. I would now like to turn the conference over to our host, Ms. Jill Bertotti. Please go ahead.

Good morning and thank you, everyone, for joining us today for the Amerigon Inc. fourth-quarter and year-end results conference call. Before we start today's call, there are a few items I would like to cover with you. First, in addition to disseminating through PR Newswire this morning's news release announcing Amerigon's results for fourth quarter and year-end ended December 31, 2008, an e-mail copy of the release was also sent to a number of conference call participants. If any of you need a copy of the news release, you may download a copy from either the Amerigon website at www.amerigon.com or the Allen & Caron website at www.allencaron.com. Additionally, a replay of the conference call will be available via a link provided on the Events page of the Investors section of Amerigon's website.

Finally, I have been asked to make the following statements. Certain matters discussed on this conference call are forward-looking statements that involve risks and uncertainties and actual results may be different. Important factors that could cause the Company's actual results to differ materially from its expectations on this call are risks that sales may not significantly increase, additional financing if necessary may not be available, new competitors may arise and adverse conditions in the automotive industry may negatively affect its results. The liquidity and trading price of its common stock may be negatively affected by these and other factors. Please also refer to Amerigon's Securities and Exchange Commission filings and reports, including, but not limited to, its Form 10-K for the year ended December 31, 2008.

On the call today from Amerigon, we have Dan Coker, President and CEO; Bud Marx, Chairman and Barry Steele, Chief Financial Officer. Management will provide a review of the results, after which there will be a question-and-answer period. I would now like to turn the call over to Dan. Good morning, Dan.

Good morning, Jill and thank you for joining us and thank everyone for dialing in this morning. We have a very brief overview that we would like to go through. Barry is going to give some numbers. We are going to get to Bud to get an update on the Advanced Technology team and then we're going to try to open the floor for questions as quickly as possible.

In summary of 2008, it was a very interesting and exciting year and a lot of developments occurred during the year that would take a long time to go through all now. But suffice it to say, we had two separate years. The first half of the year was a normal year for us; although it was plagued with a strike by General Motors Corporation. The middle part of the year, the second half of the year started out with a petroleum crisis worldwide and prices soared out of sight and that caused a very big disruption in the purchasing patterns of a lot of people, particularly here in the US. And in the fall of the year 2008, we saw a credit crunch that closed down all the credit markets and made it extremely difficult for people to be able to finance capital purchases, including automobiles. So we basically had two separate years with two separate halves. It was a very difficult period for the industry. It has been very difficult for all the suppliers of the industry to keep up with the automotive trends.

In general, we did focus ourselves on increasing penetration in the marketplace, which we were thankfully able to do. As it turns out, with the increased penetration and the offsetting market declines, we nearly exactly broke even on revenue from 2007 to 2008. It took a lot of hard work on a lot of people's part to be able to achieve that rather modest goal, but we were able to achieve it. We also were able to achieve a profit in all four operating quarters for 2008, some things that we were very proud of.

Our Advanced Tech team, which Bud is going to give you an overview in just a few minutes, did a great job of pulling the technology forward and pushing a lot of technological initiatives to success. We were able to sign a deal with our first direct nonautomotive application for the Sealy bed company. We are working together to try to develop heating and cooling equipment to provide year-round comfort for occupants of beds, as well as car seats.

So what we are going to try to do now is we're going to have Barry go through some of the numbers. I will have Bud speak to the Advanced Technology progress and then we will open the floor for questions. Barry?

Thanks, Dan. Good morning, everybody. Our revenue for the fourth quarter 2008 was $12.8 million as comparing to $16.4 million in the fourth quarter of 2007, a decrease of $3.6 million, or 22%. This brought our full-year revenue to $63.6 million, basically even with the prior year.

As Dan mentioned, a number of issues affected our revenue levels that decreased it. If we look at sort of our same program revenue as compared to a 2007, the vehicles that we run in both years, we actually saw decreases of $20 million to $25 million in revenue. So our new programs that we launched during the year fully offset these decreases that we have seen.

Moving on, our gross margin percent for the full year was 29.1%. That is a decrease from the full year of 2007 of 33.5%. In the fourth quarter, our gross margin was 22.3%. A number of factors contributed to the decrease that we see in this period. Partly product mix; secondly, higher raw material costs, particularly with regard to tellurium, our raw material that we use in thermoelectrics and also for some charges we took on inventory related to programs that will be ending in the coming year where we see lower volumes than we had anticipated and so we took some charges for that.

Moving on, our R&D spending for 2008 was $6.8 million. It was $5.1 million in the previous year. For the quarter, it was $1.7 million, representing an increase of $545,000 for the quarter and $1.7 million for the year. That is primarily attributable to increased spending on our advanced thermoelectric program, BSST. Of the $1.7 million increase for the year, BSST represented $1.2 million. We also had higher costs on our CCS business just for program watches that occurred throughout the year.

SG&A for 2008 was $7.2 million versus 2007 levels of $8.5 million. That is a decrease of $1.3 million. For the fourth quarter, SG&A was basically $1 million, down $1.2 million from the prior year. Primarily driving that was a reduction in management bonuses for the year given the results.

Moving onto our balance sheet, our cash reserves are now $25.3 million. That is basically equal to where it was at the end of the third quarter. Although, during the fourth quarter, we did prepurchase some stock, about 947,000 shares and we spent $3.5 million to do that. So we were able to keep our cash reserves level and were able to purchase shares back at the same time. Our cash flow included depreciation and amortization for the year of $1.4 million. For the quarter, it was a $393,000. And that is what I have for the financial results.

Okay. Well, thank you very much, Barry. Bud, if you are still with us, we would love to hear an update on the Advanced Technology teams. How are they?

Well, Dan, thanks very much and good morning, everyone. I think we have had very good results in the technology development arena in 2008 and our plan is to continue to run at this rate to further develop the technology.

Things that were notable, we won a Department of Energy program in cooperation with Ford Motor Company and Visteon and a couple of research institutions and notably Ohio State to develop heating and cooling technology from thermoelectrics. The objective of this is to develop systems that will function effectively in the electrified vehicles, not just electric vehicles, but hybrids and other vehicles that have now got an electronic base that is very suitable for TEs. We actually anticipate additional awards from DOE and other government sources based on the progress of the technology that we are showing.

We also made important progress on materials. I think if you haven't seen it, we were able to announce, or Ohio State was able to announce and then we supplemented that, that material had been developed that was of such a character that it is patentable and it involves enhanced performance at high temperatures. That is obviously suitable for power generation, not for heating and cooling. But with this promise, we expect to drive very hard for development of materials that will be suitable for heating and cooling and also to drive for the utilization of the high temperature materials for products in the power generation arena. And without going into more detail because of confidentiality and other competitive reasons, we are continuing to make progress elsewhere in the materials arena that is very encouraging.

We have now put in place capability for test and characterization of these materials that we believe is the equal of any in the world, which makes us a center to see these materials from many sources and to be in a position to work with those who are creating the most promising results.

Just really one other thing that is worth saying and that is that I know it is a challenge to be spending at our R&D rate at a time when the bottom has fallen out of the automotive industry. So Dan will cover later, but obviously we are expecting a tough 2009. I have seen, first of all, we think that, in and of itself, the promise of the research and development effort is well worth pursuing. But I have seen in recent weeks some literature from studies that have been done in academia that actually study the stock performance of companies that, in these times, maintained or increased their R&D spending compared with those who have cut. And the data suggests that those who continue to drive the technology and take competitive advantage, in the end, their stock prices did considerably better. And then the examples of IBM and Intel I think are also very illustrative.

So we have taken steps to strengthen our organization and we are bringing onstream a very seasoned executive that has capability in development and in manufacturing in automotive climate control products. So we are making progress in that arena and that is all I have to report.

Thank you very much, Bud. One thing I would like to note to our listeners. Bud has a hard schedule close in about 17 minutes. So when we open the floor for questions, which we are about to do, if you could be so kind as to direct your questions to the Advanced Technology team early on in our discussion. You'll probably get a better answer if we get those out of the way first. So Kim, we would like to open the floor for questions and we would like to lead off those questions with any comments or questions about the BSST or the Advanced Technology team.

(Operator Instructions). Brett Hoselton, KeyBanc Capital Markets.

Good morning, gentlemen. Okay. Well, let's start with -- and I guess I will circle back with Bud. Bud, as we think about -- and in particular I'm looking at the two of the milestones here -- the waste heat recovery program with the DOE and then the Ford and Visteon program with the DOE -- and my understanding -- is my understanding correct that those are two distinct programs? And then secondly, at what point in time do you think that these have the potential to generate revenue for the firm? And I am more interested in the latter.

Yes, they are two distinct programs. The waste heat was an initial program about three years ago. It is coming into the end of its fourth phase this year in 2009. And without committing to it, we believe that the DOE is sufficiently impressed with the work that is going on that we will be able to drive this technology further toward actually being able to demonstrate that it is installable in vehicles and that vehicles will perform in terms of fuel economy.

The heating and cooling program was awarded very late last year, so it will run for three years at least and its objective is to create what we will call zonal heating and cooling so that we can first supplement very dramatically and effectively in performance and comfort existing climate systems, which are being really compromised by the switch to electrification and by the lack of heat coming off the engine and the lack of cooling power when the engine comes to a halt as they do when they switch the engine on and off and also before starting the vehicle. So we are seeing that as a very significant program. And I think kind of watch this space because we think more will develop.

In terms of product revenues, you guys are probably familiar with automotive cycles and in the power generation arena, because this is pretty intimate to the vehicle, I wouldn't expect to see revenue before the 2012 in let's say sample and [field] minor programs to test out the technology and then 2013 and 2014.

There are, I think, opportunities earlier in the heating and cooling side not necessarily coming from the DOE program itself, but if I were pressed for the timeframe, I would probably say the heating and cooling will come on relatively faster because we have been working on power gen for quite a while and the same timeframe I have outlined is likely the same timeframe for heating and cooling in terms of significant revenue.

And then just to kind of expand on the two programs. First, with the initial DOE program, how is that potentially helping in the development of your current products and therefore, potentially helping to generate revenue today if that is in fact the case? And then secondly -- well, let me ask that question first and then I would like to go on and just talk a little bit more about the Ford Visteon.

Interesting question. The principals involved in taking the waste heat and turning it into electrical power are certainly the same for other such applications coming off of stationary heat sources or even in power generation from primary sources. So the fundamental base technology is similar and we would hope and expect that we could derive revenue earlier from such kinds of products than the automotive revenue.

Brent, if I could offer a follow-up on that, we have also -- if you look at was that has happened in the history of Amerigon and our heating and cooling seat technology -- in the last six or seven years, particularly in the last five years, we have been able to double our electrical efficiency and reduce our package size by more than half. And we are also working on adapting some of the other things we learned from our advanced teams into our new circuit designs for the 2009, 2010 models that we will be launching.

So your question I think is well put. We do actively drag the technology gains over into our heating and cooling products, which allow us to go after broader markets. By reducing the power load and increasing the thermal output, we have been able to go after broader classes of vehicles in the marketplace because we simply don't take so much power as we did five years ago.

Then one final question for Bud and then I will circle back. Visteon, the Ford Visteon DOE program, in your description of it, is my understanding correct that essentially what we are doing is, and this may be a very crass way of saying it, but we are kind of dismantling the traditional HVAC system used in an automobile and going to a more, let's say, regionalized or specific heating and cooling function in different parts of the vehicle?

Yes. The first step is to develop a system that will supplement these heating and cooling systems, which are now heavily stressed and likely to underperform in terms of people's demands for comfort and in terms of the added functionality that they function when the vehicles stops, but they precondition the vehicle so that when you get in, you are comfortable. And for plug-ins, it means that you are able to extend the range of the vehicle because you are preconditioning it from the wall socket. You pull the plug and you are not going to be draining the electricity for HVAC so heavily, heating and cooling.

And Visteon is a Tier 1 and at these kind of efforts, generally a Tier 1 is important and Visteon has been a partner with us for quite some years because the automotive companies themselves have lost that kind of deep systems capability and we, as a second tier supplier, really don't have it. It would be a huge effort and not very productive for us to try to develop it ourselves.

Excellent. Thank you very much, Bud. I will circle back.

Rick Hoss, Roth Capital Partners.

Good morning, gentlemen. Questions have to do more with the income statement. Gross margins -- Barry talked a little bit about that. Is there also less absorption factored into that and if so, can we expect depressed gross margins going forward with the assumption that tellurium has come down in pricing and that eventually works its way through?

A couple things. The absorption effect is there. It is not -- it doesn't impact us as much as other companies given our variable cost structure. In other words, we have contracted out our supply for all our raw materials. So as our volumes change, our cost changes. There's not that much fixed cost built in if you will. The other question -- what was your other question? Sorry?

Well, I am assuming tellurium has come down quite a bit and that eventually works its way through and should prove to be a benefit, right?

It has stabilized; however, it is going to be a while to work through our system to be an impact on us, the decreases that we have seen, which are moderate. Just in as much as when tellurium went up in the first quarter of last year, the market did, it took until the third quarter for it to impact us. So there is going to be a delayed effect when we come to that point in time.

Okay.

Just to amplify that. So our suppliers, because of the drop in volume, have a fair backlog of high-priced tellurium to work through their system and then through ours.

Okay, that's understandable. On the SG&A line, you talked about a reduction in bonuses. Were there any headcount reductions as well?

Yes, we eliminated several, what we call, contract positions where we hire people in for specific skills and we have them around for the length of the job. We eliminated three of those key positions. We have also eliminated a couple of other positions where we felt like we could double up in other areas. So there have been headcount reductions.

Okay, but it doesn't sound like it is going to be to the point where it would impact operations under a resuming growth scenario?

No, absolutely. We focus on trying to make sure that we are able to, number one, continue our R&D effort. That is our number one priority and also make sure that we are servicing all of our growing customer base needs. That is the key -- two key focuses for us.

Okay. And then, Dan, your perspective from many years in the auto business. SAAR looks like it has been leveling just above $10 million. Backing out the effect of the fleet sales in January's number, it looked like it was probably maybe around $10.2 million. Do you have an opinion on this or an outlook? Do you see this leveling?

I think we're going to see a flat first quarter, a very flat first quarter and we are going to see slight improvement in the second half. I think that is as early as we are going to see a dramatic change in the SAAR for 2009. I think that all of the good work that the new administration is doing, all the efforts being put forth to try to stimulate and free up capital through the credit markets, through the banking systems and being able to try to shore up some of the job losses that we are seeing now should carry over for most of the first half. In the second half, we will start seeing some positive impact from the efforts that are being put forth today. So I think we are going to see some improvement. Perhaps in the 2010 model launches, people will start needing cars or thinking about replacing cars at that time.

Okay, and then, Dan, the buyback is still out there and do you have a view on that based on the price stay below $4?

Our current view is that the buyback plan was put in when we were seeing all stock prices in the market collapse completely and we decided that that was a very good investment for some of our excess cash. Today, with the markets the way they are, we don't see anything as excess cash. So we have put a hold on the acquisition of additional shares until we are more certain of the financial stability of the markets that we serve and we have 100% certainty that our resources will allow us to ride out the current storm.

Okay, that's good. And then quickly, BSST expense, Barry, do you have a total or preferably a net for the quarter?

Yes, the net for the quarter for BSST was $667,000.

$667,000. Okay. Perfect. Thanks a lot, guys.

Steve Denault, Northland Securities.

Good morning, everybody. The first question is for Barry. Barry, what was the absolute level of inventory write-offs in the quarter?

It was about $400,000 or so.

Okay. And what programs were those on?

I don't know if we normally get into the specifics by program, but there are a couple of programs that will be redesigned in the coming year.

So a nameplate that is getting redesigned that you don't anticipate you will be on, is that --?

We will -- on the replacement in these vehicles. But the form factor and the part number has changed, so we had -- it looked like -- because of the lower volumes we are seeing into the first couple of quarters, we have excess levels on hand.

In absolute terms again, where are the current prices for tellurium?

They have stabilized right at $200 a kilo. We have seen a few dips below $200 and then a few pops back up around $205 to $210. So there has really been no change in the price of tellurium since the middle of last fall. They did spike at, as you know, well above $300 per kilo. They kind of stabilized at $250 and they have now drifted down to $200 and they are staying very, very stubbornly at $200 per kilo.

Okay. How should we think about both SG&A and R&D for 2009? I mean SG&A at $1 million was awfully low. What is a good run rate to assume?

I think a good run rate would be somewhere around the $2 million per quarter range for SG&A.

Okay. And then how about R&D?

R&D will be consistent with the third and fourth-quarter spend rates.

Okay. Perfect, thank you.

Steve Dyer, Craig-Hallum.

Good morning, guys. Thanks for taking my call. Can you talk a little bit more about Sealy, when that initial I guess stocking order might come in, when you might see that impact the P&L?

Well, that is, of course, completely up to Sealy. What we are doing currently is making sure that all of the components that we will be required to supply to Sealy are ready, tested and validated and ready to go. Their half of our partnership involves them designing the bed structure itself and getting certificates and approvals to sell the devices in the marketplace, as well as prepare a marketing plan to enter the market.

The general unrest in the economy globally is affecting everybody. It is not just an automotive market or a housing market or a credit market issue, it is a market problem for everyone that I have been able to talk to and our partners at Sealy are seeing the same problem with people buying beds and their businesses are also being pressured. So we are working with them. We would like to see a summer launch of the product and we are prepared to support that, but it will really rely completely upon Sealy's master plan as to how they want to introduce the product to the market and we are prepared to support any timing they have.

Sure. Okay. I understand that the ASP of your content might be a little bit higher for the bed than it is for the seats. How should we think about I guess revenue, assuming let's just say that it is a midsummer launch, how should we think about revenue I guess later this year and then on an annual basis in broad terms?

In broad terms, we are supplying more content to the Sealy bed program than we typically do for the average two-seat set-up in a car. So you could look at that and speculate that it would be somewhere in excess of $200 per unit for our side.

Okay. And then are you prepared to kind of venture a guess as to the number of units on an annual basis that you may see or has Sealy shared any of their goals with you that you could comment on.

We have shared goals, but those were under normalized market conditions and there is nothing normal about any of the market conditions that we see in any of the markets that we are serving or envious of at the moment. So right now, we don't want to put any numbers or any commitments as to -- on either side. When we get ready to launch and we see a stable market for the product, we are very excited about the quantities that will ensue when Sealy goes to market with the product. But right now, these are not normal times, so it would be very tough to introduce a high-end feature into the current climate.

Okay. Understood. And then any other BSST, or I guess I should say non-core products, we can expect in 2009 in addition to that?

This is Bud. I am coming up against my hard stop. We anticipate at least one product to be introduced that has not yet been introduced in 2009. But as Dan said, the economic conditions for anybody that is selling product are that it is very slow. So we are a little bit uncertain about the timing of it, but we are pretty confident of the fact of an intro. So guys, I have to go. I am glad you saved all the hard questions for Dan and Barry. It's been a pleasure. Bye.

Thanks for your time, Bud.

I guess I will just ask a couple more then if I may. So if -- just kind of doing some quick math on the gross margin and the one-time inventory write-downs, a normalized level for Q1, my math would lead me to something like a 26%. Is that reasonable?

The one thing that I would add is that product mix does have a dramatic impact on us from quarter to quarter. So where that sort of falls out for our future is not always that certain. So that does levelize it, if you will, for the fourth quarter, but that is not necessarily how the product mix will fall out in future quarters.

Okay, okay. I will hop back in the queue. Thanks.

Tyson Bauer, Wealth Monitors Inc.

Good morning, gentlemen. Let's just follow-up on that last question and Barry, could you then provide a bracket expectation on gross margins given the unknowns of product mix and some of the other raw material costs? You have always targeted 30% in the past. Obviously, that was under normal conditions. Where would you think a range would be more likely you are going to fall in than not fall in?

We think it would be below 30%, probably not as low as we saw in the first quarter obviously, but 28%, 29%, somewhere in there maybe.

Okay. And that has to do with the structure you intentionally put in of those variable costs to protect you in these situations?

That would be one of the drivers on how we can keep our margins up and see lower volumes.

On the R&D side, how much flexibility do you have on that going through the year? Or are you fairly inflexible, the programs you are working on now, that you are going to do those regardless of what happens on the normal CCS business?

Well, our R&D programs are long term, so we don't drift in and out of them based upon economic conditions. And our commitment to these types of programs are multiyear in many cases. Programs that we have as an example was a university system where we go in. We don't go in for a quarter; we go in for the length of a project. And these projects do tend to run into multiple years to see results. And we have been in several of these programs for three years and the benefits are just now starting to be realized.

Bud gave the example of the Ohio State University high-temperature material gains that were revealed this last fall. That is a lot of work by Ohio State and our own scientists to try to figure out a better way to do something. And these are the types of commitments that you make on a long-term plan. So we are fairly inflexible with what we want to do in the R&D, but probably more importantly, we are very excited about what we are seeing and what we are yielding out of those programs. So we think this is definitely the time to push hard on the Advanced Technology area.

Okay. And Barry, a quick bookkeeping question. What was the cash flow from operations for the year?

$5.5 million.

Okay. And then the last question for me is, Dan, are there any platform or model changes still awaiting decisions by the OEMs that may impact how '09 or going into '10 will positively or adversely impact your business on the CCS side?

Actually '09 is fairly stable. There could be some shift or drift as inventories are continually adjusted down. 2010, there is potential for delay, but we haven't seen any delay and we haven't heard any and times have been pretty tough. So we're fairly confident that we are going to see another nice batch of new, very solid platforms added in 2009. We know who they are and we know when they launch. Some of the people have been talked about in both the Detroit and Chicago and LA auto shows. We haven't made any press releases ourselves on those because we haven't been given permission by the car companies. But you're going to see another five or six new platforms in 2009 and probably more than that or at least that again in 2010. So we continue to make good penetration gains in the marketplace.

What is the status of the GMT 900 platform and your involvement with that?

The status of the platform is still solid and growing for us and we are quite delighted to be involved in the 2009 and 2010 launches of the GMT 900s.

All right. Thank you.

Kevin Tynan, Argus Research.

Good morning, everyone. Dan, I was hoping to get Bud, but I was hoping you could speak to this. In terms of the DOE programs and especially those and that one in Phase IV, what is your take on the role of the DOE post program in terms of commercialization, how involved are they, if at all in terms of endorsing results? Anything like that, support from them after the program ends?

Well, the DOE is getting involved in these types of projects to push the technology, particularly those involved in either energy or transportation in our particular case. And they do a very good job of publicizing the results of programs that they deem to be significant. So a successful program would bring, I believe, a probably not what you would think of as a product endorsement, but certainly a lot of publicity and a lot of attention can be drawn through success in the Department of Energy projects. We have two -- one for power generation, which has been very well developed in the last three years and is now moving into a fourth phase and we have a new one that is launching right now actually that has to do with zonal heating and cooling for vehicles with a more electrified view of the world.

So we think that the success of these programs, part of it will be the pure science of being able to understand and do what we intend to do and the second part, of course, will be the Department of Energy's success -- they are helping us by publicizing and broadcasting these results.

They have a specific sort of commercialization department that you work with or is it simply they give you a manila envelope full of results and put their stamp on it or do you have any insight on how that works?

Actually it is a little bit the reverse of that. We give them a manila envelope with results in it and then they validate those results. These particular programs will be -- as an example, the HVAC program we are doing with Ford and Visteon. There will be independent testing done by the National Renewable Energy Laboratory in Colorado. So it is a collaborative effort between government and industry to be able to move the needle forward in a very key technological area. The Department of Energy recognizes thermoelectrics as being a significant alternative to some of the traditional means of power generation and HVAC systems. And they are doing what they think is necessary to seed the industry to move the technology forward to try to help propagate products from these technologies.

Okay. And just really quick, when you say HVAC systems, is there a ventilation component or are you guys simply doing the thermoelectrics in heating and cooling?

Our role, our challenge here is to provide a device that converts the electrical power into thermal energy. We do not really intend to do the entire system. So we would be partnered with whoever the OEM uses for their specialty and support for heating and ventilation systems for cars.

Okay, very good. Thanks. That's all I have.

Brett Hoselton, KeyBanc Capital Markets.

Great. Hi, gentlemen. In terms of -- you said new platforms, five to six in 2009 and five to six in 2010 if I heard you correctly. My question is are any of those new platforms with new automaker customers?

The majority of all of our new projects are on existing programs and expansion programs within our existing customers. But I am not saying that we are not going to have any new or what you would call brands available on our product in the next few years. But we do see a lot of great opportunity even within all of our existing customer base.

As you think about your penetration into other automakers and potential programs that you are currently working on, I mean how many other automakers -- again, apart from current automakers -- are you currently working in development programs with -- one, two, three?

More than three.

And then switching down to new products, you obviously talked about your milestones in your press release. What can we -- what should we expect potentially in terms of introductions in terms of new automotive products, let's say, over the next year to two years?

Well, we did introduce the heated and ventilated seat system this year. So that is a new innovation for us and it extends the capacity of our products to some of the midrange and entry-level vehicles. We have already talked about the TED product. We have talked about electronics heating and cooling. You'll see heating and cooling products coming out this summer and fall and then I think you're going to see a lot of different varieties of that type of particular application where the current designs that we are working on happen to be focused on cell phone tower gear, but there is a lot of places where either the electronics themselves or the backup battery systems or some other element that generates heat or is damaged or is hampered by heat will be adapting our type of thermoelectric devices to provide a better operational efficiency for those types of programs.

You will also see, as I think we have hinted in the past, that things inside the car, like cupholders, people and storage boxes, cold storage boxes have become a kind of an interesting issue for several people, particularly the European customers are interested in -- instead of cupholders, which they seem to have some disdain for, but they don't mind a cold storage box. So those types of products you will see both in and outside of the automotive industry.

And do you see those products being introduced -- I guess if you were to kind of aggregate that and say, well, look, I think we may introduce X number of products in these areas in 2009, X number of products in these areas in 2010, I mean do you have any sense of what you might be doing?

Yes, we will probably introduce categories probably a couple per year for the next few years. That is kind of what our goals are.

And then as we think about the potential revenue impact of those new categories and those new products, should we think about those as kind of a slow ramp-up, small impact near term or is there the potential for them to have, let's say, a material or meaningful impact, i.e. like 5% of revenue over the next two years or so?

The prior description is what we actually prefer. We would rather see something start off slow. We would like to learn as we grow and then before we go mass-market or broad market, we would like to have a good firm grip on how things are going to perform. So we purposely like to see a slow steady ramp-up on all of the new programs that we talk to.

Outstanding. Thank you very much, gentlemen.

Steve Denault, Northland Securities.

A follow-up question for Barry. Was there an accrual reversal in the fourth quarter within SG&A?

Yes, there was.

And that was management bonus-related I am assuming?

That is correct. We accrued normal levels for the first half of the year, stopped accruing in Q3 and the reversal we had in the first half of the year in Q4.

Okay. What was the size of that reversal? Was it like $1 million?

About $700,000.

$600,000 or $700,000, yes.

Okay, perfect. Thanks.

Steve Dyer, Craig-Hallum.

Hi, again. Other than the Cadillac SRX, which is a pretty small platform, any other discontinued platforms that you are aware of for this year?

You mean the Cadillac XLR?

XLR, yes. I'm sorry.

The convertible. I am not directly aware of any programs that have just been completely dropped. There are some vehicles, as Barry was referring to earlier, that had been in the market for its normal lifespan, for five years and the current variation of that platform will be shelved and a new version of that will be introduced in 2009. And that is what I think he is referring to.

What we faced when we came into the second half of last year in a couple of these cases is a normal run-out and we plan our inventories and we plan our productions with the car companies and with the Tier 1s to balance out a nice uniform glide path down to zero. This year, because of the way the market collapsed, a lot of the inventory commitments we had made are ahead of the actual demand and draw from the customers. So we wound up getting stuck with some material that, under normal circumstances, would have been quite tight and frugal, but under the current circumstances of a collapsing -- just total collapse in the market in the fourth quarter and the first quarter of this year, we wound up with some excess inventory that we had to, because of our own very conservative accounting principles, we have chosen to write those off completely. And that did cost us about $400,000 in the fourth quarter.

Okay. Circling back to the heated and ventilated discussion, how has the first platform been received and what would you expect potentially as a follow-up?

I think actually it has met all of my expectations for introductions. As you know, it is an Asian major market product. It is not sold here in the US. And from my understanding and talking to the Tier 1 and to the OEM, they are quite pleased with the performance and they are very pleased with the customer acceptance in those target markets. And again, the target markets are primarily the developing countries. China, Russia and some of the Southeast Asian countries are the target market for these vehicles and they are being very well accepted.

Any additional wins at this point that you can talk about, not necessarily naming the platform, but anything close?

Not that we can talk about, but yes, there are additional wins in that area.

Okay. And then competitively, have you seen any change, specifically WET, any wins that they have had or noise that they have made that concerns you?

They always concern me, but there has been nothing dramatic or earth shattering. They are a small player in the market. They are working very hard to try to get their product up to our standards.

And there is no intellectual property violation that you are aware of?

Nothing that we can comment on at this time.

Okay. I guess, and then finally as it relates to take rates, have you seen any material difference kind of with the overall collapse in your take rates kind of averaging right around 70%?

There has been absolutely no noticeable change in the take rate. The biggest problem has been the fact that the take -- the customer buying cars is what has caused all the hate and consternation within the industry. When people do buy a car, they do tend to looks for these types of features still. We are getting more people asking about this type of feature for the midrange vehicles, which is where a lot of people expect -- some of the consumers who were concerned about fuel economy to be drifting. In that sense, it is still a positive trend. But we have seen no shift, market shift at least in the desire of the consumer, particularly on the high-end types of vehicles, which is where we are predominant, we haven't seen any change at all.

Okay. That's it for me. Thanks, guys.

(Operator Instructions). At this time, there are no further questions in the queue. I would like to turn it over to management for closing remarks.

Well, thank you very much, Kim, and thank you, everyone, for joining us and thank you for all your usual pointed questions. As we said earlier, Amerigon and the industry and I think perhaps the global economy has suffered greatly during the latter part of 2008. We are still seeing the serious impact of that in the early parts of 2009. And as we spoke earlier to the question about how we see our specific little end of the world being impacted, we do see a very, very bad impact on the global automotive marketplace and therefore, Amerigon in the first two quarters of this year. And we do see a modest improvement in the second half of the year. So it is going to be a tough year.

We are going to do everything we can to make sure that all of our operational objectives are met. But it is going to be a very, very difficult first half for our Company and we are dedicated to increasing the penetration and moving the technology forward. Those are our two key goals and we promise to do everything we can to achieve those goals while watching costs. So I thank everyone for joining us and we will see you again in about 90 days.

Ladies and gentlemen, this does conclude the Amerigon Inc. 2008 fourth-quarter and year-end results conference call. Thank you for your participation. You may now disconnect. Thank you and have a great day.