Gentherm Inc (THRM) 2009 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Amerigon, Inc., 2009 second quarter and six-month results conference call.

During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions)

I would now like to turn the conference over to our host, Jill Bertotti. Please go ahead.

Good morning, and thank you, everyone, for joining us today for the Amerigon second quarter and six-month results conference call.

Before we start this morning's call, there are a few items I'd like to cover with you. First, in addition to disseminating through PR Newswire this morning's news release announcing Amerigon's results, 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 this conference call will be available via link provided on the events page of the investor section of Amerigon's website.

Finally, I've 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 Securities and Exchange Commission filings and reports, including, but not limited to its Form 10-Q for period ending June 30th, 2009, and its Form 10-K for the year ended December 31st, 2008.

On the call today from Amerigon we have Dan Coker, President and CEO 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'd now like to turn the call over to Dan. Good morning, Dan.

Good morning, Jill, and thank you, everyone, for dialing in. We're going to follow our normal format here and to try to give a very brief introduction and overview of the operations of our second quarter. I'll give a very broad view. Barry will give a little bit of the detail, and then we'll pop back and talk about the BSST operation for just a moment, and then we'll open the floor for questions.

In general, as we advertised at the end of the first quarter, that we felt the second quarter would be very, very similar, if not, I believe the term we used is a carbon copy of the first quarter. It was pretty close to that, I think you've seen from the numbers.

The economic activity worldwide was very consistent for the first half of this year. The automotive industry was pretty much on hold, which is where our primary customer base is. We had many customers that were shut down for a majority of the first and second quarters and our sales falloff is a direct result of that inactivity of many of our customers at a low demand.

During this period, however, the consumers did buy a few vehicles and that has put some pressure on the inventory available in the marketplace today, particularly in North America. And the government's recent stimulus package driven cars program, or Cash for Clunkers it was called, showed that there's -- sporadic demand can be sparked. And there were some shortages of vehicles, some of the more popular vehicles, as people ran to the dealer lots to try to take advantage of the $4,500 advantage that the government was going to pay.

So we see a, I believe, a close to the inventory adjustments in the slack market, and we begin to see, I think, in the third and fourth quarter a recovery back to normal operating levels. It will be a slow and painful recovery, but we do believe that the corner has been turned both in general economic conditions and that the automotive market worldwide will slowly begin to come back beginning in the third and fourth quarter of this year.

Barry is going to give us a financial overview, and then I'll give a brief comment about BSST. Barry.

Thank you, Dan. During the second quarter of 2009, our revenue was $10.7 million. That is a $6.1 million decrease, or 36% decrease from last year's second quarter, but a slight increase from the first quarter of $500,000, $0.5 million, or up 5%. This significant decline is primarily related to the automotive market decline. The seasonal selling rate for the second quarter was down 32% from the prior year. But more importantly, product levels, as Dan pointed out, OEMs reduced their production levels to reduce their inventories. Production levels for the quarter were down 51%, and that is what most currently drives our product revenue.

Additionally, the GMP 900 program, which is an important program for us, had shut down for most of the second quarter. It was actually down about 70% from the levels from the prior year. These decreases were partly offset, however, by revenue that we had on new programs that we launched since the second quarter of last year. There are a number of those programs.

We do expect to increase revenue for the third quarter. We're saying 30 to 40% increase as production levels start to more closely reflect actual selling rates in the marketplace for automotives.

Moving on. Our gross profit margin for the second quarter was 24%. That's pretty consistent with the prior quarter, but a decrease from the prior year, which was 31%. We still see impact from higher cost of Tellurium, which is a major component of our product. We do expect that the lower market prices for Tellurium that we're seeing in the marketplace will begin to affect our purchase activities and our costs late in the third quarter. The Tellurium market has softened fairly significantly, not down to the low points that we had seen in early 2008 -- or in 2007, rather, but certainly down from what we had seen in the last few quarters.

We also had an unfavorable product mix affecting our margin somewhat, as well as the lower revenue levels having [thrown] a lower fixed cost coverage. So there was an impact on our margin for that.

Moving on. Our net R&D was $1.6 million. That compared to about $1.5 million for the prior year and $1.7 million for the previous quarter, for the first quarter. Now, that primarily reflects increased cost at BSST, or related to our advanced material program and advanced thermoelectric programs, offset partially by decreased spending for Amerigon's outright -- for our ongoing CCS program.

Moving on. SG&A were really about the same as in prior quarters. We did see an increase in prior year, primarily related to some stock option compensation or stock option issuances from the last couple quarters. We also have slightly higher legal fees primarily related to our proxy filing this year, which included an amendment to our stock option plan.

Our pre-tax loss was $1.2 million. That compares to pre-tax earnings from the prior year of $2 million, and, again, compared to the previous quarter there was a slight improvement, as we had $1.4 million pretax loss in the first quarter.

Earnings per share were very consistent with the first quarter, $0.04 loss, and off significantly from the prior year, which had a $0.06 positive earnings per share.

Moving on to our balance sheet. We do have cash and cash equivalents at the end of the second quarter of $26.2 million. That is an increase of over $800,000, from where we were at the end of the year, which we had $25.3 million in our cash and cash equivalent. That's about a 3% increase. And that's primarily due to positive cash flow. In the first half of the year, we had $924,000 of variable operating cash flow. In Q2 alone, we had over $2 million, almost $2.5 million in positive cash flow. And also is benefited by lower capital expenditures for the year, compared to the prior year. And we did have depreciation and amortization for the quarter of $334,000, $704,000 for the half.

And that's about what I have. Dan.

All right. Thanks, Barry. A brief comment on BSST. We're continuing our efforts, as you know, to advance the science of the thermoelectric device itself. We have ongoing programs with government and industry, where we are trying to push the use of thermoelectric devices for waste heat recovery systems and power generation systems, as well as the development of advanced heating and cooling systems.

During the quarter we continued to strengthen our team that is focused on adapting new materials and working on the materials projects for our BSST program. This team is making extremely good progress, as well as our partners, at the various universities that we support around the country.

So we continue to be pleased with the progress that is being made by the advanced development teams and we hope to be pointing out some good news maybe as early as the second half of this year.

In general, though, we are seeing, as I mentioned earlier, and as Barry has pointed out, we are seeing the return to production of most of our base customers and we are also enjoying the new program platforms that have signed up for us that are joining the fold of fleet vehicles. I think there's something like 41 or 42 vehicles today that offer heated and cooled seats as an option or a standard feature in the marketplace. Some of the more important ones that we are beginning to see now in terms of volume being generated for us are the new 2010 Ford Taurus, which is just getting ready to launch. The new Lincoln MKT, which is a fine looking vehicle is also getting ready to launch. The Nissan Infinity coupes and a couple of the Kia models are coming into the production in the second half.

So that, coupled with the resurgence of the manufacturing efforts by the existing customers to serve what is even a very soft demand, should generate us a pretty good solid 30 to 40% growth in the third quarter over the run rate for the first half of this year.

So we believe we're seeing a turnaround in things. The general economy seems to be still stagnant, but a little bit more hopeful. So we hope we're beginning to see a return to normalcy for us and a continued growth rate for us beginning in 2010.

With that, Jill, I think we'll open the floor for questions and see what we forgot to mention.

Thank you. We will now begin the question-and-answer session. (Operator instructions) And our first question comes from the line of Brett Hoselton with KeyBanc. Please go ahead.

Good morning, Dan. Good morning, Barry.

Good morning.

Let's see. A few questions here. First of all, Barry, is there any way to break out or give us an idea of how much of your revenue in the second quarter was related to non-automotive products?

It was very, very small, much less than even the last quarter. I think about 30 or 40,000.

Okay. And then as you look into the back half of the year, Dan, and you're thinking about product announcements, whether they be automotive or maybe new automakers or non-automotive products, anything -- should we have any expectations in those three areas as you move to the back half of the year?

I think you're going to see some announcements for maybe one or two more vehicles, particularly in the area where vehicles are being refreshed and the new 2010 models will be a redesigned vehicle, an existing customer that could be getting a redesign.

You may see some industrial applications. We did have, during the second quarter, an announcement of an effort that we're putting forth to try to adapt our technology to the automotive aftermarket here in North America. We signed a deal with a company called Custom Soft Trim. This is a Texas-based company with operations all over the country. And they have people currently in training to learn how to adapt our base components into their existing seat recovery programs where they actually put new trim covers on seats in the automotive aftermarket field.

So I think you'll see some things like that in the second half, but it's not going to be a blaze of new vehicle activity as we kind of have approached more slowly, perhaps, this year. We've had already seven or eight new platforms announced for the 2010 model year, and you might see one or two more.

And can you expand on, at all, your comments about maybe some of the good news in the back half of 2009, regarding some advancements at BSST?

Well, as I pointed out, we're continuing to push very hard on trying to get better electrical efficiency out of the devices by focusing on the materials that are used and the processes that are used to formulate those materials into metalized parts that we can then take and use into our heat pumps.

We have, I'd say very, very good results from the scientific approach to this, and we are beginning now to turn our attention to how we would process these new developments in terms of if you would -- I apologize for the analogy here. The only one I can think of is a recipe. We've got a very good recipe, and now we need to figure out how to actually make something out of that recipe. And that's the effort that we're putting forth today.

And then have you been affected at all negatively by the [Leer] bankruptcy, materially?

Well, only that we're like everyone else. We're all frightened of anybody who files for bankruptcy. But I think that our exposure has been, I'd say marginal at best. Barry has got a bunch of analysis on that. But currently the Leer people have said that they aren't following the GM model for bankruptcy, where they did, in fact, pay up beforehand, before they -- prior to filing. I think they paid through pretty much the middle of the month of the filing. And then they've since come out and engaged us in conversations about a full repayment plan and schedule to make sure that all of our past-due invoices will be covered.

So we don't really think that there should be any direct negative impact on us, other than one of our customers is under stress.

Okay. And then in terms of the Tellurium pricing, it sounds like, at least sequentially, Tellurium pricing is going to start to become a little bit of a tailwind as it moves through the third quarter. As we think about the benefit of that potentially, as you move into the fourth quarter, maybe any sense of the order of magnitude? I mean, is this like $50,000? Is this like $1 million? I mean, what kind of order of magnitude might you see from a tailwind standpoint there in the fourth quarter? I understand you're not going to get much in the third quarter.

The third quarter is going to be a continued -- we're balancing out inventories and some of that inventory's been purchased at higher rates. The materials that we're able to buy today at the market rate of about $175 per kilo, as that comes in to the third quarter and beginning of the fourth quarter, the maximum impact, I think you'd be able to see on the bottom line would be someplace between one and two percent at the gross line.

Excellent. Gentlemen, thank you very much. Very helpful.

Thank you, sir.

Thank you. Our next question comes from the line of Rick Hoss of Roth Capital Partners. Please go ahead.

Good morning, gentlemen.

Morning.

Morning.

First, Barry, BSST expenses, I guess in the net sense, do you have that number available?

Yes. For the quarter, BSST's net number was $966,000 expense.

66, okay. And then expectations for tax rate for the remainder of the year?

The rate we have is, I think is 30% or something of that magnitude. The year-to-date rate is what you should expect for the full year.

Okay.

It's somewhat difficult to sort of forecast that. As you approach breakeven, the rate sort of has a tendency to move around a lot.

Right. Okay. And then, Dan, taken into consideration that the inventories have been drawn down quite a bit, and assuming that new auto sales do continue to ramp and whether they're pushed up from their Cash for Clunkers program going on or other various factors, do you see a situation where if sales remain strong that inventories were drawn down too much, inventories would have to be built back up and there could be an acceleration of CCS shipments?

Yes, that scenario I think does exist. I believe that the automakers and they're under pressure from the market, have driven inventories down to very, very dramatic levels. There's a lot of reports here in the Michigan area of people not being able to match a dealer inventory and a desire to buy a car. And that will impact it and the car companies are aware of this and they are going to be bringing their production back up.

So I believe the third quarter might actually see a bit of a bounce as the auto assemblers try to build up these inventories of these vehicles. And I think you may see a stronger third quarter than a lot of people are anticipating right now. And you might even actually see a little bit of a softer fourth quarter as these inventory levels are achieved.

So my bet would be that you would see a pretty good bounce in the third quarter.

Okay. And then last question. We're on version three for the CCS, is that correct, or two?

We're on version three and we're kind of migrating slowly toward version four.

Okay. And this coincides with your desire to continually reduce the Tellurium content in each of these iterations, correct?

That is correct.

Okay. Perfect. Thanks a lot, gentlemen.

Thanks, Rick.

And our next question comes from the line of Steve Dyer with Craig-Hallum. Please go ahead.

Thank you. Good morning. Just relating to a couple other questions. The tax rate, Barry, that you had indicated at kind of 30 percent'ish, seems a fair amount lower than sort of the 37.5% that we've been modeling. Is that just kind of for the remainder of this year or is that sort of a new way to look at the out year as well?

Well, it -- again, as you approach breakeven, the rate has a tendency to act very strangely because of permanent differences or things that are not deductible for tax purposes. So it's kind of hard to answer that question.

When we are showing profits, we do show a higher tax rate than when we show losses. So when we get into the profitable -- when we become pre-tax profitable again, I believe that will be back up to 37% range.

Okay. And then the Tellurium at $175 a kilo, assuming, let's just say, that that's the run rate going forward, what would that mean to your gross margin? Does that get you kind of back into kind of the low 30s, or not yet?

That by itself will not get us into the low 30s. But the combination of things we're working on in terms of general cost reductions, market mix shifts, and the reduced Tellurium pricing, will help us get back on our path toward a targeted low 30 gross margin.

And how much -- and that's probably a 2010 event more so than Q4?

I think that's definitely going to be a 2010 event, based on what we see today.

Okay. And then as it relates to the new R&D level, or I should say, what I'm wondering is the R&D has been running kind of $1.7 million, $1.8 million. There was some talk at some time that it might go up a fair amount, and then it dipped down to $1.5 million or $1.6 million, this quarter. Is this a good run rate to use or is the $1.7 million, $1.8 million, more like it going forward?

Well, it's really hard to pinpoint and detail exactly. We spend what we need to on the R&D programs. But I would say that somewhere between that $1.5 million and $1.6 million run rate ought to be pretty close for us for the next few quarters.

Okay. Okay. And then, if you could spend a little bit of time on the Custom Soft Trim. Sort of what are your expectations of that program? Do you expect it to be meaningful? And, if so, how soon?

Well, our expectations are that we find a way to address the needs of people who either have vehicles or have vehicles that don't offer heated and cooled seats and would like to have that option. We don't really know how big that market is.

We selected Custom Soft Trim because the unique set of skills and resources that they have. The first resource, of course, is that they have their own ability in house to produce trim sets for seats and they do that as a primary part of their living. In other words, if you have a damaged or you want to change the look of your car, you can go in and buy new leather or I guess they also sell cloth trim kits, and you can have your car freshened.

If you happen to be a, as an example, I saw some I thought were pretty cool. If you happen to be a Lakers fan, you can go in and get your two front seats outfitted in Lakers purple and gold with Lakers emblems. So there's a lot of things that you can do with that and they have a lot of skill and experience in doing that.

The second thing that attracted us to them was that they actually have their own delivery and distribution points around the country. So they actually control the installation of their products into the customers' vehicles and they usually work through a dealer or, in some cases, through individuals. But I think usually their work is through dealers.

They also have some experience in dealing with electronic items. So we felt with their skills and experience in handling seats and handling electronics that they would make a very good path for us to get our product, which has been designed for a general market application for a couple styles of vehicles, for them to install in the marketplace for us.

So in terms of what my expectations are, my expectations are that we hope that this is something that's very successful and takes off. We're prepared to support it. They're very good partners so far. They've been working on training their people and they work together with our engineers to try to design standard installation procedures and routines. And we think that the program should be successful. So we're going to see how that works.

People have asked us many times about how the aftermarket would react to this type of product development, and we're going to go find out.

Okay. And then two more quick ones. One, as you look out into 2010, the calendar year, so presumably 2011 model year, how should we think about kind of the number of new platforms anecdotally? You know '09 you've said for a long time was going to be a little bit less than 2010, and it was. Does 2010, for example, compare more favorably to this year or last year or combination of?

Well, I certainly hope the first half of 2010 doesn't compare to this year.

And I guess I should clarify and just say the number of new platform announcements.

Okay. The number of new platforms that we're expecting for next year is probably in that five to eight range again. Again, it depends on how the announcements come. But I would expect it to be very consistent with our normal traditional pattern of trying to add somewhere between five and eight new platforms a year.

Okay. And then finally, next year, and I know it may be difficult to say as you think about sort of non-auto or especially non-auto seat revenue, do you expect it to be meaningful and material next year or are we still too far off from that?

Well, I think we're too far off and I think that the current recession has really shook a lot of the, not just automotive industry, but also non-automotive industry business plans. An awful lot of companies are struggling right now trying to keep their heads above water and to try to move forward to survive and get into next year.

So it's very difficult for us to say what our future partners are going to be doing as we move forward. We would have hoped for a much more, I'd say active set of programs in the non-automotive area. But, unfortunately, most of the world's economy is suffering kind of uniformly and together. So we hope next year that we see some of these programs start to blossom and take off and that there is some meaningful reality in our revenue lines. But in, and I'd say a sobering reality that the odds are still pretty low for that to happen in a meaningful way.

Okay. Thank you.

Thank you, sir.

Thank you. Our next question comes from the line of Richard Holt with Wealth Monitors. Please go ahead.

Good morning, gentlemen. I've just got one -- most of my questions have been answered. But is the expansion in the Cash for Clunkers, is that built into your expectations of growth for Q3?

Not really. Most of the vehicles being purchased in the Cash for Clunkers program are usually entry-level vehicles or fuel economy focus vehicles and they don't offer heated and cooled seats as an option. The only exception to that is the F150 seems to have been a very popular trade-up model. But we don't really see any gigantic push from the Cash for Clunkers project.

Okay. And finally, the Sealy Corp. agreement, there's supposed to be, I think you originally slated mid-2009 for an introduction. Is that still on track?

No, sir, it is not. Unfortunately the mattress and maybe the household, house goods industry suffered the same distraction that the rest of us has, and Sealy has put that program on hold and is focusing on selling their standard mattress products. They're the leader in the mattress industry and they're pushing very hard to stay that way and to keep their business competitive in the marketplace.

Do you have a time frame?

I do not at this moment. I think it's probably going to be as late as next spring.

Okay. Sounds great. Thank you very much.

Thank you, sir.

Thank you. And our next question comes from the line of Greg Weaver with Invista Capital. Please go ahead.

Hi. Could you give us a sense of how much the inventory bleed down and plat shutdowns impacted you in the second quarter?

The impact on our business from the first and second quarter actually has been pretty much the attempt by the industry to adjust their somewhat bloated inventory of 2009 models prior to the 2010 launches, which are occurring right now.

So I'd say that everything that you saw from -- well, if you look at our 2008, you saw about a $17 million, $16 million average revenue for the first three quarters. The fourth quarter, when this event occurred, we dropped down to $12 million. And then the first and second quarter of this year, the next two sequential quarters, we've been about $10 to $11 million.

So I think that you could place a good bet that somewhere between 25 and 30% drop in revenue was directly attributed to these guys trying to balance their inventory and make room for the 2010 launches whenever they occur.

Maybe I'm not as familiar with this SAARs statistic then. This is the actual vehicle sales, though, right?

The SAARs is the vehicle sales. But the selling rate and the production rates are definitely not always aligned. And in this particular case, they have not been building to the rates they've been selling to. And you probably heard here in North America a SAAR rate of about 10 million annualized rate. Their actual production or output rate has been less than seven million. It's been like 6.8 million for the first six months of this year.

So the difference between what they've actually built, which is where we get involved and what they've sold at the retail level is their reduction of inventory of the available fleet of vehicles on the dealer lots.

Right. Right.

And that's what we see.

Exactly. So what was the statistic you just gave me? You said 10 to 11 is what you were down to for the first or second quarter?

The SAAR rate has been about 10 million. That's the seasonally adjusted annual retail rate. That's the sales rate. And the production rate has been just under seven million for North America. So --

Yes. So if we take the production from Q3 to say Q1, what happened to that number?

Q3 to Q1?

Or Q2. It dropped a lot more than 20 or 30%, right, because you just stated they were bleeding off the inventory?

Yes. Yes. Yes. Here in North America the production, compared to last year -- that was what Barry was comparing, the first half of this year to the first half of last year was off about 50% here in North America.

Right. Okay. That's kind of where I'm going with this. So while your guided growth is 30 to 40% sequential's a great number. But I guess I'm trying to understand if we just get back to -- you had three effects here, the inventory bleed off, and at the same time we have auto sales are going up, and then layered on top of that, you've got these new platforms coming on. So I guess that's why I'm a -- why wouldn't the snapback be harder?

Well, I don't think -- maybe we have -- maybe the Obama Administration may be overstating the impact of the Cash for Clunkers program. It's my understanding that somewhere less than 200,000 vehicles have been pushed or pulled into the market by this advance. And that's not really enough to move the need to the types of numbers that we're looking at. I don't think you're going to see a jump from the 10 million average retail sales rate to something back to normal, which was more like the 15 to 16 million per quarter in the past.

I understand. I understand you there. But I'm saying if the output was seven, right, and you just go back to normalized sell through from seven to 10, right, that's a 40% increase, right?

Well, I guess I see your point. What we're trying to do is if they're going to go back to the normalized production rate, which has been about seven million in North America and they're going to start maybe building up to the sales rate, which is about 10 million, so there will be a jump and I think we're advertising that jump in our retail sales. And I'm not sure where you're going beyond that.

Okay. I just -- well, we can take it offline. I'm just trying to understand the sequential guide here, if we're getting straight pull through, now we're done bleeding inventories, right? Is that correct?

I believe we're done bleeding inventory and we've gone a little bit too far into the inventory if the consumer demand does solidify and come back on its own.

Okay. Thank you.

Thank you. And our next question comes from the line of Walter Ramsley with Walrus Partners. Please go ahead.

Good morning, Dan. Congratulations. Got a couple of follow-ups here. The take rates during the most recent quarter and even right now, have they been maintained or how are they doing?

Actually, through all of this, Walter, the take rates have remained surprisingly steady. The sales of vehicles have dropped off, but the people who are buying vehicles are still looking for a certain set of -- in particularly our customers who seem to be the -- maybe not buying the entry-level cars. They're looking for the normal features that they expect. So we've seen a pretty steady run rate on the take rates. And we're also still seeing people shift us from being a high take rate option over to the standard feature list. So that's been a very promising turn of events during this downturn for us.

Yes, I was going to ask about that. Can you quantify that? How many -- what percentage of the total of business is standard equipment as opposed to options at this part?

I can't really off the top of my head.

Okay. All right.

We have seen a trend toward more people looking at us as a standard feature, particularly on the very high end vehicles where the take rates for us were in the 80 to 90% range. So there's not a huge jump for us in terms of the additional revenue, but it is something that we are very pleased to see that people are associating their high-end brand name with our very high-end comfort and convenience feature.

Yes. Definitely. The ventilated product, getting any increased interest in that and maybe some potential expansion into the foreign markets?

Yes, we are. Actually, the product has been very well received in Asia, which is its primary target market. The platform that we introduced, the take rates are very, very solid and we're right on projection. And I think that success is going to definitely lead to new platforms coming in the future for the heated ventilated product.

Good. And then just one last thing. I know there was some thought being given to expanding into the medical industry. Anything happening there?

Yes, actually. We are working very hard on finding ways to adapt our standard heated and cooled technologies over to the medical market. There's a couple of things that seemed fairly obvious to us when we looked at how a Sealy bed product was put together and how that could be adapted to long-term healthcare situations. Also a car seat and a wheelchair looked pretty similar to us. So we've had several people looking at how we could adapt our thermoelectric heat pumps to those types of applications. And there are others as well, but those are the two that seem pretty opportunistic for us.

Is there a chance that's going to happen in the near future or is that kind of a longer term situation?

I think it may happen -- I'm not sure what your definition of the near and long term are. In the auto industry they talk about three to five years as being near term. We would think that that should probably -- you'd see something happening on that maybe as early as 2010.

Great. Okay. Thanks again. Congratulations.

Thank you, sir.

Thank you. (Operator instructions) One moment please for the next question. And our next question comes from the line of Ailon Grushkin with Nano-Cap Growth Funds. Please go ahead.

Hi. My question also relates to BSST. Last quarter you spoke about trials in cell phone towers.

Yes.

Has anything -- well, what's the situation there?

Well, the companies that we are working with there are primarily in Europe. We made, actually I think a nice opening shipment to them. Those devices are being installed in the European marketplace today. And I think that, from what I hear, the program's going very well. But, then again, the recession that we've all been talking about all morning has also settled itself into Europe and there are tight operating and maintenance budgets over there as well. So they're saying that things are going to be a little slow for a while.

Okay. And Herman Miller, that C2 product, is that gone or is that run finished with?

We've produced our runs on that. And Herman Miller also is having an extremely difficult time. We don't anticipate any new, big orders for the C2 product.

Is there any plans for possibly having heating and cooling office chairs in the near future?

That's certainly something that I would personally like to see, but it's not something that's been at the top of our agenda with the Herman Miller folks. But it is something that we certainly have the capability to do if anybody was interested in it.

All right. Well, thank you so much.

Thank you.

Thank you. And at this time, there are no further questions. I'd like to turn the call back over to management for any closing remarks.

Thank you, Brandi. For those still on the line, I would like to thank everybody for tuning in. I'd also very much like to thank all of our employees and our team partners around the world, our vendor base that have helped us pull together and hunker down during this very difficult first half of 2009.

We're all hoping here that the worst is past and that we're going to start off now in the second half on a path of recovery and getting back, hopefully, at some point during maybe 2010 back to normal operating conditions for our company.

We've got a lot of exciting new things happening, a lot of new opportunities that we're looking at. We believe that the company has ridden through this economic storm with all of our parts intact. We still have a nice cash hoard put away. We have no debt. Our company is still very whole and very solid and prepared to take advantage of these opportunities in the future.

So we hope that the second half will be better, it looks better right now. And we invite everybody back in about 90 days to join us and let us see how the third quarter really does come out. Thank you very much.

Ladies and gentlemen, this concludes the Amerigon, Inc., 2009 second quarter and six-month results conference call. Thank you for your participation. You may now disconnect.