Gentherm Inc (THRM) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Amerigon Incorporated fourth-quarter and year-end conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Thursday, February 17, 2011.

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

Good morning, everyone, and thank you for joining us today for the Amerigon Incorported 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, 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 either download a copy from 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 a link provided on the Events page of the Investors section of Amerigon's website.

Finally, I've been asked to make the following statement. 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, 2010.

On the call today from Amerigon, we have Dan Coker, President and CEO; Barry Steele, Chief Financial Officer; and Bud Marx, Chairman. 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 good morning, everyone. Thank you for dialing in and standing by while we get ourselves organized here on our call.

We're going to follow our same format. We're going to try to give a very, very high-level overview. We're going to let Barry discuss some of the details. We'll ask Bud to give us kind of his Chairman's 60,000-foot view of how things have been going. And then we will open the ground for questions from the [crowds].

Essentially, what we would like to focus on, the fourth quarter was a good quarter for us generally speaking. The year of 2010 wound up being a very good year, considering the conditions of the auto industry worldwide and the economy worldwide. I think we have a reasonable performance for our business.

We broke $100 million for the first time in revenue. That's a big milestone for a small company trying to survive in a tough world. We managed to make a few dollars at the end of the day.

We moved forward a couple of new very big products for us that we're very excited about. The heated and cooled bed was introduced very late in the year 2010. We also introduced in the fourth quarter our new heated and cooled cupholder design that's available in the new Chrysler 300.

So we've had a lot of positive news. There's a lot of bad news in the world, particularly in the auto industry worldwide. We're still in what would basically be called a depression in the auto business. We're struggling under this problem, and we're working hard to try to accommodate and adjust our operations to be able to reflect the reality.

But in general, I think that 2010 proved to be a satisfactory year, and we're trying to work hard on trying to get 2011 in shape right now.

So with that very broad overview, I would like to introduce our CFO, Mr. Barry Steele, who will delve a little bit deeper into some of the detailed numbers. And then we will go back to Bud to see how things are going in California. Barry?

Thanks, Dan. It was a very good quarter for us. We had quarterly revenue, product revenue of $28.9 million. That actually is a decrease from the prior quarter, which had $30.5 million, and that's a decrease of $1.6 million or 5%, but is a significant increase from the prior-year $7.3 million increase or 34%.

When we look at the prior-year difference, we see new program launches, rampup of additional -- of programs that launched last year. On the new program launches, there's many new Hyundai and Kia programs that you've probably seen in our press release and we've been announcing.

As far as rampup, there's a couple of Nissan programs there that contributed to that, and rear-seat applications on some Jaguar Land Rover programs.

We've also seen higher production levels generally, primarily in our North American market. The decrease from the prior quarter is primarily seasonal, unlike in past years. Our seasonality was usually masked by the program launches in the fourth quarter. That was a little bit more even for us this year as far as new launches, and so we actually saw the regular seasonal shutdown for Christmas, and that affected our topline revenue.

As we look forward to 2011, we see back to kind of our run rate that we had been. And so we've been staying slightly up over the 2010 fourth quarter and probably a little bit even from the 2010 third quarter.

We did not ship any beds in the fourth quarter. Our fourth-quarter shipments really were all booked in the very last tailing part of -- or the third quarter, but we will see some bed shipments in the first quarter of 2011.

Our cupholder program also launched during 2010 fourth quarter, but really, this is the very tail end, so we will see some rampup affect in the first quarter.

Our gross margin percentage was 29.7% for the fourth quarter. That compares to 29% for the prior year, an improvement of 0.7%, and 28.9% for the prior quarter, an improvement, about the same, of 0.8%. This is mainly driven by our mix in our products over these prior periods, as well as fixed overhead coverage improvements.

If you look at net R&D, we see our spending increase here in the fourth quarter. We had spending of $2.7 million. That is double what it was last year. A primary driver there is the ZT Plus materials efforts that we took on. We lost our partner on that program, and so we have a little higher spending for ourselves. We also had development costs for some of the new products, including this cupholder, the mattress, and improvements that we're working on with the CCS product. Compared to the prior quarter, the increase in net R&D was about $400,000 or 17%.

Moving on to SG&A, we had $3.5 million in SG&A spending for the quarter. That's about $1 million or around high 30s or 40% increase from both the third quarter, as well as the prior year. We did book an accrual for our lawsuit with a major competitor in the fourth quarter. That was an increase over the prior year of about $100,000 -- the amount we booked was $607,000, which, compared to the third quarter, was about a $500,000 increase.

Other increased spending for the fourth quarter compared to the prior year include our European office that we opened, as well as efforts in China and Korea to expand our capability for our prospects that we see in those markets. We also had a slightly higher bonus expense for the fourth quarter.

Moving on, we had an actual benefit on our tax provision line for the quarter. It was a -- we showed a benefit of $690,000, which is a negative tax rate of 28%. The reason for that is we booked a change in our valuation allowance related to our net operating losses that were derived prior to a change-of-control imitation that happened in 1999. So we increased the value of our deferred tax assets. The amount of that adjustment was $1.3 million -- $1.375 million, actually. If we were to take that back, our tax rate was more like 35% for the year, which, going forward, we would forecast about -- between 36% and 37% for our tax rate on a normalized basis.

We still have net operating losses that will probably protect our profitability or our earnings or cash flow for 2011, but then as we get into 2012, we predict that we will start actually being a real cash taxpayer at that point.

Moving on to the balance sheet really quick, we had $36.3 million in cash and short-term investment reserves, so our liquidity is very high still. We have about $15 million available under our revolving credit line.

And for those of you working on your models, depreciation for the quarter was $354,000, and the BSST discrete spend that was in R&D was $1.6 million for the quarter -- that is actually $1.626 million; and $5.9 million for the year -- $5.914 million for the year. That's what I have.

Okay, Barry. Thank you very much for your comments and all that insight. I would like to check and see if we've got Bud Marx on the line, and if Bud is with us, perhaps he could give us an overview of how things are going from the Chairman's seat.

Yes, Dan, I am here -- thank you -- in sunny Laguna. We did see whales spouting a week ago, so all is well.

We had quite an eventful quarter, and right up to year-end. Lon Bell has retired. This was not something that was unexpected for us. We've been talking about it and putting people in place to sustain the organization after his full-time departure.

He has agreed to consult with us for, effectively, 40 hours per month. We are making good use of that time in the first several months, so I'm pleased with that.

We took the occasion of his retirement to rationalize the ownership in BSST, so we purchased his outstanding interest of 15%, and we also purchased all of the underlying technology rights, where he had certain rights and privileges from day one in the technology. So we took advantage of the timing to make that all a part of the consolidated [MTTs] under Amerigon, and so BSST is a wholly owned subsidiary.

We are working to deliver a prototype thermoelectric generator for a major customer under a deal we programmed, but this is a customer that is highly interested in taking this product on toward production. These are long-term events, and there will be prototypes and other things as part of a process over the next couple of years.

But we are encouraged that we have a customer who is highly interested in utilizing the technology. So that is a very positive development of our DOE program on waste-heat power. And we are evaluating new program support opportunities from DOE going forward. So that is, I think, very good progress.

In addition, we are pursuing the development of the program in heating and cooling with the DOE and other partners, including Ford Motor Company. The objective of this program is to demonstrate that zonal heating and cooling, which is essentially enabled by our thermoelectric devices and uses our seat as a core of the system, can first supplement existing heating and cooling systems, where they particularly do a very poor job, as in hybrids and electric vehicles, electrified vehicles.

Any of you have a hybrid and find that your actual mileage is 30% worse than your stated mileage can attribute that difference largely to the operation of the heating and cooling system within the vehicle, because the tests, up until now, have been done without it in operation. And suddenly, these things place a big load on a stress system.

So the objective is to, first of all, downsize and to limit the full-out operation of the existing heating and cooling system. So the TEs would be a supplemental system. We believe there is a potential improvement in the utilization of the conventional A/C system and heating system by about 25% to 35%. And if that is true, that has obvious implications for fuel economy improvement.

So that program is moving forward, and we're very pleased with the results. As I said, we have people in place behind Lon that had been moved into position anticipating his retirement. And we think this new organization, which is more integrated into Amerigon, is functioning well.

The other element of this equation on the R&D side is our research and development and materials. We are looking at this as finding possible partners for it -- there are some discussions underway -- increasing the level of government support for this very important technology, obtaining customer support for applications that look as though they may lead toward production. And the material performance is key to enabling a number of products and especially in our automotive environment, where we're actually working in an advanced way.

So we have a very valuable asset. We want to make sure we take the best advantage of its potentials. So we're taking a bit longer to be certain of the right pathway. So that is where we are, and so we are, in a way, wiffing out on our promise we would have this all resolved by the end of the year. It's going to take some more time.

But this is not an ongoing burden to our long-term profitability. So we have the ability to deal with it and to make the best economic case of it once we are certain of the appropriate direction.

I think that is the report from Laguna.

Okay. Thank you, Bud, very much for your report and your insight.

One other thing that we should mention before we open the floor for calls is one of our key elements, or actually two of our key elements, copper and tellurium, have both spiked in the early part of the first quarter of this year. They didn't actually impact our earnings too badly in the fourth quarter.

But the first quarter, we have seen a broad increase in the cost of tellurium from somewhere in the low to mid-$200 per kilo range during most of 2010. For some odd reason, during late January and early February, we have seen spikes coming through to the point that we actually have taken some steps to protect ourselves a bit, hoping that this will be one of the traditional spikes that we've seen the last couple of years in the early parts of the year.

But there are issues that we have to deal with. As I mentioned earlier, the automotive industry is still in what would be considered a depression mode globally. We have seen some early signs of recovery. There are some hopeful people here in the Michigan area that are projecting that maybe the North American numbers next year may be as high as 12.5 million units.

That would all be a very pleasant and delightful outcome, but we still see global weakness in the auto world, and we need to make sure that we stay focused on the fact that we're having to operate under some constraint.

With all that, we would certainly like to open the floor now for questions. So, Luke, if you can put your finger on the calls, we will be ready.

(Operator Instructions). Steve Dyer, Craig-Hallum.

Just going back to the materials comment that you've made, Dan, how would you visualize that impacting your gross margin in Q1 or even Q2? I know you're probably going to be hesitant to give a number, but should we think of it in mid-20s, high 20s? I assume 30% is probably off the table, given the current price.

Well, yes, I'm definitely going to be hesitant to give you a number because it is a very fluid situation. As I think I mentioned earlier, we did take a couple of steps to protect ourselves a bit. And certainly, I think that will be helpful in the first quarter.

But, yes, a strong copper and a strong tellurium market are detrimental to our bottom line. As any company's raw material increases, there's problems. I don't think it's going to be -- at the current levels, I don't think it's going to be catastrophic. But there should be some issues that we have to deal with, and we have to keep our costs in line.

But it depends on how far, how deep and how long this lasts. We have seen some softening in the market that was resistant to the $300-per-kilo range, and we will see where it settles.

Okay. And then the accrual for the lawsuit, would you anticipate that covers the legal expenses for all of 2011, as it did when you accrued last year?

We're certainly hoping so.

Okay. Anything new there that you can say on the lawsuit or the status of it, or what you're hoping to achieve?

Nothing new I can say without incurring additional legal costs.

Okay. How should we think about R&D expenditures this year? I think at one point in time, I know you're still looking for partners to help offset some of that. Where do we sit with that, and how should we think of it even directionally for 2011 versus '10? Is it up, down, flat, just generally?

In general, I think that you will see that we are hoping to find a partnership relationship. We are also examining opportunities within the government for additional funded programs. But we have to look at that as an expense that in tough times we need to keep under control.

So I don't think you're going to see any -- certainly you're not going to see any dramatic increase in the run rate in R&D. And our goal is to be able to try to reduce that run rate by either partnering, finding additional funding or keeping the costs under control.

Okay. Could you give a little color on sort of the cadence of your program wins this year? I know the Explorer is obviously already in production, but how will that look this year? Is that kind of it until the fall, or are they going to be interspersed throughout the year again?

I think you're going to see a range of programs throughout the year. But I think it is going to be a similar period in terms of new wins for us during 2011.

Now, the Explorer is obviously a big one for us. That's a very -- it's a beautiful car. We believe it's going to sell very well. I think it's a car that kind of hit its mark in the marketplace. I think there's going to be very strong interest. And, frankly, we're seeing very good response in the very early orders for heated and cooled seats in the Explorer line.

Okay. And then inventory kind of popped up this quarter. Do we make anything of that, or is that just kind of gearing up for production increases?

I would argue that we've been trying to get inventory up this whole year. So the fourth quarter gave us an opportunity with the slightly lower volumes to catch up. It is probably over -- a little higher than we would like, and so we will probably try to work it back down a little bit. But we ought to be able to support particularly our North American customers, where we have long logistics lines.

And we also need to recognize the fact that we are well above a $100 million company now. So we are now kind of being called upon to service a lot more programs in a lot more areas. So we are going to require a little bit of inventory to cover those requirements supply chain links.

Yes, okay. And then my last question -- what is the status of the waste heat recovery initiative? I know that was something that we were all pretty excited about here a couple of years ago. What is new with that, or what should we expect going forward?

Well, I think as Bud mentioned in his preamble, we have a program with the DOE that is being delivered. We have an industrial application that is being worked as we speak. And part of our DOE program is the delivery of a fully functional unit to our partner, BMW, for their in-vehicle evaluation, which is actually happening as we speak.

So, generally speaking, I would say that things are proceeding. They're proceeding slowly, and we are making good progress. I think you will see some pretty good news, hopefully, about the fact that our prototypes have been built and delivered and have successfully been tested.

Beyond that, we need to look at how the these prototype-type products become rationalized for possible production applications in the future. So that is our next big test, is to figure out how to productionize and build these things for commercial use in an OEM vehicle.

Okay. That is it for me. Thanks.

Rick Hoss, ROTH Capital Partners.

On the R&D reimbursements, there was a pretty decent sequential decline. And just looking over the last couple years, it was the lowest quarter. Is there a reason for that?

I can probably take that. We essentially came to the end of a phase in the DOE program, and we're evaluating new DOE funding opportunities for programs going forward. So we had what I will call a dip due to the calendarization of programs.

Also, it is fair to say, we took longer to develop the [take] to prototype mission, and so some of the delay is not funded by DOE. So we think we have that largely behind us, and we're going forward. That is probably about as much as can be said.

Okay. So for modeling purposes, we should assume that that doesn't continue, and that if you're able to announce something, then we can adjust our models accordingly?

I'm not sure of the thrust of your question. We have lower DOE funding at the moment because we have completed the phase of the program that the DOE funds. We're looking at new program opportunities with them. And so we're probably going to be low, but our heating and cooling program is going forward. So we probably have some lower funding for the next quarter or two and then assuming we are successful, it should pick up again.

Okay, very good. That answers my question.

And then, Dan, is there a way that you can illustrate the effect of tellurium on the gross margin line just by using a unit relationship based on about $100 million in revenue? And you pick, but it kind of gives us an appreciation for if tellurium spikes $100, then it's worth X amount on the gross margin line.

Actually, I'm not really qualified to make that guess. But I would tell you that -- I would remind you, actually, that we've kind of suffered through this in 2008 and part of 2009. And one of our reactions was to try to redesign our kind of future circuits to reduce the amount of tellurium that we consume per module. And that has been put into effect pretty much across the board for us.

But there's not really a good formula where you can say every $100 of tellurium adds $1 to our costs cleanly, because it shifts around in a couple of different places. And right now, what we're seeing -- we're not actually buying any of the superexpensive tellurium right now because we have a little bit of a hedge.

So I don't want to commit any number [schemed] in any of your minds because we don't really know what it's going to be, and I don't want to skew your thinking. But we are aware that tellurium is volatile. We are also aware that copper is at all-time highs. We use a lot of copper and a lot of tellurium, so it's important to us in terms of that element of our cost of goods sold.

Dan, this is Bud. Don't you still have some percentage of our production that has yet to pick up the new design, so there is some effect of that stirring in there also?

We've got -- we do have some that has -- basically, how that works is we kind of transition from old platforms to new platforms as they roll through. So, yes, there's definitely still some good news to come as the models roll over.

Okay. And for iteration, 4, is that correct?

We're on generation 4, yes.

Okay. And then as far as W.E.T. goes, as I understand, they are on a traverse family, the Enclave, the Acadia. Are they in anything else? Are you able to comment on that?

Nope, I am not actually able to comment for W.E.T. at all.

Okay. That wraps it up. Thank you, guys.

Brett Hoselton, KeyBanc Capital Markets.

It's Matt Mishan in for Brett. I just wanted to go back to this tellurium issue. And is this simply a price issue as prices run from $200 into the $300 range, or is there a supply issue going on as well?

There is absolutely no supply issue. Oddly enough, when these prices bounce around and fluctuate, we get calls from suppliers worldwide wanting to ship us additional tellurium.

What we observe -- I can't prove this or I can't show this -- but it appears to be the result of some element of speculation in the materials market. So it appears to be somewhat transitory in nature. It kind of comes and goes. But the lower levels of the ranges that we have seen are $200 per kilo. The upper ranges we've seen in the $300 range, and there's a lot of price resistance at that level.

So somewhere between those two is probably a moderate market price range, and we have accommodated to that. And we try to do what we can to protect ourselves from these kind of short-term swings. And by short-term swings, I mean something in the -- like a 90-day range. So there is absolutely no shortage of supply of tellurium that we've been able to observe.

And when do you think you will start seeing the impact? I know there's going to be a lag of some sort. Is this more of a back-half issue, or are we looking at this first and second quarter?

Well, there will be some impact in the first quarter, there will be some impact in the second quarter, and there will be impact in our business until the prices stabilize. And I sure as heck couldn't give you a projection on what is going to happen on tellurium in the fourth quarter of 2011.

Matt, this is Barry. It is true that there is a lag in these types of products working through our inventory and our suppliers' inventory as well. So [we're really on] a quarter lag if we see anything at all.

Okay. And I know you mentioned some steps that you have taken. If you wouldn't mind, like, detailing a couple of those? And also, a lot of suppliers have had a lot of success within the recent year or two reworking some contracts with the automakers and passing along more of the cost. Have you been having those kind of discussions with your customers?

Well, let's see which of those two questions we address. Let's take the easy one first. It's one of our goals not to go to our customers and to try to pass through market inefficiencies to them. So we take every step that we can possibly think of to keep from having to increase the cost to our customers. That is kind of subdivision number one.

How we actually redesign -- we're always trying to think about more efficient ways to design our product. Especially when we're kind of forced into a corner when some outside or external factor we can't control confronts us, we try to rethink ourselves.

So when we look at our next generations or upcoming program platform opportunities, we always try to look in and see what the most effective way to design these parts in are. And we have slightly changed the geometry of some of our newer models to include better configurations, which include a much more efficient use of tellurium.

As you will recall, we spend a lot of money thinking and working on R&D and design and materials factors. So we have a pretty good advantage over a lot of general use of these types of materials in the market in that we pretty much have been at this for 15 years, and we have some pretty good leads on technology, and we have some things that we can actually do that other people can't do.

Great. And moving on to R&D and SG&A, I just want to get a sense of why R&D has moved up $400,000 from the previous quarter, from 3Q. And on SG&A, there was a $1 million increase, I guess $600,000 that was for the accrual for litigation. Is the other $400,000 the European rollout, the Chinese rollout? And is that a good number going forward, or are we still going to see some increased costs coming out of SG&A?

Matt, this is Barry. The European offices are about $250,000, maybe a little bit more, and all of them together per quarter. That's what we saw this quarter. We will probably see that go up just a little bit for the China office that we're working on. But for the most part, the run rate, if you take back the $607,000, is pretty good. [It's not just] -- so slightly lower than that, I think.

And then the increase in R&D as well? Is that a one-time issue associated with Lon Bell's stake coming back in, or is that going to --

I should think the one-time impact that we're seeing from the R&D line happens to be what we were speaking about earlier, is that there was a bit of a shortfall on the program funding that we were receiving from outside parties. And that caused it to spike in the fourth quarter.

Okay. And then on the Explorer launch, did you get a full run rate of the Explorer launch in 4Q, or is that something that will benefit you in going forward next quarter versus the fourth quarter?

Actually, there were some serious delays in the launch of the Explorer, and I think we barely got a month's worth of revenue in. So it was definitely the full impact won't occur until the first and second quarters of this year.

And are you still thinking going into next year six to eight kind of new program launches?

We would certainly like that. That would be good.

Is that something you can comment on? I mean, do you like that, or is it you think that that is doable and achievable?

I think it is doable. Our goals are to try to add about five or six new platforms a year, and that is certainly our goal this year. You already know one of them; that is the Ford Explorer, and that is a very big program for us. We're very excited about that. And I think you will see a few more during the year. And again, our goal is to see five or six new programs a year.

Okay. Thank you very much.

(Operator Instructions). Jeff Osher, Harvest Capital Strategies.

Thanks for taking my questions. Two questions. On the inventory, can you give us a breakdown, Barry, maybe on the breakdown of raw versus finished there?

Sure. It will be disclosed in our 10-K, which we're hoping to file later today, but it's mostly finished. I have a very small amount of raw inventory.

Okay. And the (multiple speakers)

We buy most of the things completed from our contract manufacturers and sell them directly.

Got it. And the right way -- should we think about those terms kind of being in the mid-2s, where they've been historically, or closer to the 1.3 that they were in Q4 on a go-forward basis?

I think it will probably improve a little bit from where we were in Q4. Our inventory does sort of have some level of cyclicality because we have to bring large containers into the US to satisfy our North American customers. So it will probably move around a bit, but I think we'll be a little bit better than what you saw in the fourth quarter.

The right answer there is you guys were smart envisioning the commodity increases, so you built inventory ahead of those. But that would be the answer that really makes you guys look even more thoughtful.

Okay. And then any way to quantify the mattress contribution we should expect for 2011?

Again, that is a brand-new product. We don't really have a good sense of what the actual results are going to be. I can tell you that the early results have been pretty favorable. And as we have kind of indicated in the past, we like to start out with kind of our arms around programs when we bring in something new.

We will, working with our partners, the Mattress Firm team, on the retail basis and, of course, [Kana people] on the contract assembling basis on the bed, try to make sure that we're sensitive to the market and the growth and we listen to the customers. But so far, everything we've heard has been very positive, and we expect -- I'm going to say that we're expecting a significant contribution to our revenue line during 2011 from the bed program.

So I can't really give you a number, but as I think I've said in the past, if we sell 5000 beds the first day, I'm going to buy Barry a beer.

I would just add to that that we do believe there is more of a seasonality to this business and that the summer months a little bit better selling season for that. So you may not see as much activity in the first quarter, but might be more in the second and third quarters.

Okay. And then last question. With the Q1 guide of up slightly, that will be four straight quarters for us with kind of high 20s, just peeking above 30s of revenue, even with auto production continuing to strengthen. How do we, given the fact that you guys are picking up platforms, is there anything we should read into that as far as pricing pressure or -- help us understand what is going to get us over the hump here with four quarters of flattish sales sequentially.

Well, I think there might be a disconnect between your comments and your question. Pricing pressure exists in our life every day, and it's not really aggravated by a recovery -- usually actually aggravated in the other direction. When times are really bad, we used to get a lot of cheerful and lively phone calls from our customers.

We try to work and be very good citizens and cooperate with our customers and try to find innovative ways to bring down the total cost of our systems, and we pass those things through as much as we can. Of course, we also have a goal to try to make a little bit of money at the end of the year for us as well.

And we have been pretty good about being able to cooperate with the customers, bringing costs down, but keeping a little bit of the innovative aspect of our business to ourselves.

So there's not really any direct relationship between pricing and what we expect the market to be. And we do expect the market -- the markets are not -- I can't emphasize this enough. The markets are not booming right now.

We saw about 11.5 million build rate last year. That is build depression territory. There is no imminent spike in the market that we see. But every year we have a year less than 12 million units, I think you're seeing some built-up or pent-up demand kind of building its steam back in the back of the economy.

So I don't think 2011 is going to be a breakout year for anybody in the automotive business, and we're trying to gear ourselves to focus on that. We're trying to bring in as many new programs as we can and keep all the ones that we have and to make sure that we learn to operate in the current environment. If it gets better, we're going to be very happy.

Great. Hey, guys, thanks again for taking my questions, and nice work in 2010.

(Operator Instructions). There are no further questions in the queue. Management, please proceed.

All right, Luke. We very much appreciate your help. We very much appreciate everybody's time and attention during our call.

Again, to summarize for our view, we believe we had a reasonable 2010. We capped it off with I would say an acceptable fourth quarter. 2011 presents its own set of challenges and opportunities. And just please stick with us and watch where this goes.

We're all looking forward to a better overall economy here in the US and on a global basis, and we hope that eventually trickles down to the automotive industry and ultimately down to us here at Amerigon.

So, we thank you again, and thank you for coming. Goodbye.

Ladies and gentlemen, this concludes the Amerigon Incorporated fourth-quarter year-end results conference call. Thank you for your participation. You may now disconnect.