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Audiovox Corporation (NASDAQ:VOXX)

F4Q08 Earnings Call

May 15, 2008 10:00 am ET

Executives

Glenn Wiener – Investor Relations

Patrick M. Lavelle – President and Chief Executive Officer

Charles M. Stoehr – Senior Vice President and Chief Financial Officer

Analysts

Richard L. Greenberg - Donald Smith & Co.

Jim Barrett – CL King & Associates

Thomas Kahn – Kahn Brothers & Co.

Operator

Good day ladies and gentlemen. And welcome to the First [sic Fourth] Quarter 2008 Audiovox Corporation Earnings Conference Call. My name is Serita and I will be your coordinator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Mr. Glenn Wiener.

Glenn Wiener

Thank you and good morning. Welcome to Audiovox’s Fiscal 2008 Year End Conference Call. Today’s call is being webcast on our website, www.audiovox.com, under the Investor Relations section.

Speaking for management this morning will be Patrick Lavelle, President and CEO, and Michael Stoehr, Senior Vice President and Chief Financial Officer. John Shalam, the company’s Chairman, is also here with us and will be available during the questions and answer portion of today’s call.

Before turning the call over to Pat, I have been instructed by legal counsel to read the following Safe Harbor language. Except for historical information contained herein, statements made on today’s call and on today’s webcast that would constitute forward-looking statements may involve certain risks and uncertainties. All forward-looking statements made are based on currently available information and the company assumes no responsibility to update any such forward-looking statements. The following factors, among others, may cause results to differ materially from the results suggested in the forward-looking statements. These factors include, but are not limited to, risks that result in changes in the company's core business operations; our ability to keep pace with technology advances; significant competition in the mobile and consumer electronics businesses and accessories business; relationships with key suppliers and customers; quality and consumer acceptance of our newly introduced products; market volatility; non-availability of products; excess inventory; price and product competition; new product introductions; and the possibility that a review of our prior filings by the SEC may result in changes to our financial statements; and the possibility that stockholders or regulatory authorities may initiate proceedings against the company and/or our officers and directors as a result of any numerous statements or other actions. Risk factors with our business, including some of the facts as set forth herein, are detailed in the company's Form 10-K for the period ended February 29, 2008

At this time I would like to turn the call over to Pat Lavelle, President and CEO.

Patrick M. Lavelle

Thank you and good morning everyone. Welcome to our Fiscal 2008 Conference Call.

I trust by now you’ve all had a chance to review our results, which were released after market close yesterday. And I’m going to quickly recap the year and then focus most of my remarks on fiscal 2009. After my comments, Michael will cover our financials in more detail, and then we will open the call to questions.

At our shareholders’ meeting last year we indicated sales would grow by 30% year-over-year. In fact, sales grew by 29.5% and came in at $591 million with electronics representing approximately 74% of our revenue. Accessories grew by $131 million in sales and finished the year at 26% of revenue. Now, we believe the split this year will be more like 75% electronics and 25% accessories.

Electronics, that were positively impacted by increases in our mobile audio, satellite radio, and international groups, were offset by lower sales of shortage play LCD-based consumer products like LCD TV, portable DVD, and digital picture frames. Accessories sales grew due to the admission of Oehlbach and the Thomson acquisitions, now both fully integrated into Audiovox.

Overall, I believe we could have reported a stronger increase, based on our programs and our placement at retail. However, the macro economic conditions we faced at the end of the year impacted sales across the board. Both our consumer and accessory programs were negatively affected by weak holiday sales and our mobile products suffered from lower automotive sales throughout the year.

Despite the economic conditions, gross margins increased 140 basis points to 18.8%. This increase was the result of higher margins in our floor products, as well as the blend of higher margin accessories sales.

We reported net income of $8.5 million, or $0.37 per share, compared to $2.9 million, or $0.13 per share, in fiscal 2007. Our pre-tax income from continuing operations was $10.6 million, an increase of $8.4 million, or almost 400%, over last year. On a pro forma basis, excluding non-cash and non-reoccurring charges, which Mike will review, had net income of $10.5 million, or $0.46 per share. In spite of the economic realities we face today, I believe we are positioned well and expect improvement as the year progresses, especially into the second and third quarters.

We have long-known brands in Audiovox, RCA, Jensen, Acoustic Research, and Energizer for North and South America and Magnate, Mac Audio, Heco, and Oehlbach in Europe. We anticipate fiscal 2009 sales to grow approximately 20% over 2008 and to exceed $700 million.

After five acquisitions in 2007, our focus this year is to complete the consolidation of all the companies and fully realize the synergies that drove us to make those acquisitions. We are looking at each of the businesses to cut complicity, leverage our infrastructure, and pursue the new sales opportunities provided by each deal. I believe our strategy of leveraging our overhead with new business from acquisitions is working since we have been able to expand sales, raise our margins, and lower our OpEx as a percentage of sales.

In addition to the consolidation efforts, I have put in place aggressive cost reduction initiatives to reduce core overhead by an additional $8 million. This program is underway with significant cuts already made, which will yield approximately $6 million over this fiscal year with the balance to come this year as certain programs and contracts expire.

We have improved margins from 11.3% in fiscal 2005 to 18.8% this past year and we continue to press our manufacturing and seek productivity savings to increase margins growth. We believe that our margin performance in 2008 is a good barometer for 2009.

However, I must caution that margins related to the recent RCA audio video acquisition are more consistent with consumer electronics, which could have a softening effect on margin percentage. That being said, we believe we will generate higher gross profit dollars with our main focus being on improving overall bottom line performance. The combination of the improving economy, higher margined accessories sales, and the effects of our cost-containment measures could give margins some upside potential.

Now I would like to take a few moments to address some of our new product initiatives. I believe the diversity of our portfolio of brands provides us with significant advantages over our competition and has strengthened our position with all of our retail customers. We have a number of new products across those brands which makes me bullish about our prospects for 2009.

I expect consumer electronics sales to grow significantly due to the RCA AV acquisition. We expect this acquisition to drive higher sales to the national chains but we will also employ a strategy designed to expand RCA distribution beyond the network and the target markets that were part of Thomson’s marketing strategy. We have already placed our Small Wonder camcorders and mp3 players into major chains since our takeover and I am confident that we will be able to increase penetration in 2009, resulting in greater sales of RCA digital products.

We have begun shipment of Home Base, a unique digital picture frame, designed for the home’s hub, the kitchen. Home Base will anchor our digital picture frame business as we expand the model lineup with other life-style products.

During the second quarter we plan to leverage RCA’s number one market share in clock radios by entering an exciting and growing new radio category, Internet Radio. In 2007 there were 54 million Internet radio listeners tuning into thousands of Internet stations, all of them listening over the PC. The new RCA Internet radio provides that same Internet access, but without the PC. We will launch the category with an RCA-branded model and have future plans for the Acoustic Research brand.

Additionally, under the AR brand we have developed an exciting line of table-top radios for use in high-end homes and office environments. They combine beautiful design with impeccable sound quality and unique features that will separate them from the competition. Both of these new product groups represent higher retails, which should help move up average selling prices in this category.

The LCD panel shortage that plagued us this past year is basically over, which bodes well for our portable DVD, digital picture frames, and LCD TV.

On the mobile side, cross sales are projected to drop to approximately 15 million new cars and trucks, the worst year since 1999. However, we had a number of mobile electronic positives that should help offset some of the weakness in the automotive market. Our Jensen mobile multimedia products remain the number one selling brand at retail and we have a complete new lineup scheduled for the year. Our multimedia systems have been developed with a move toward content conversion and feature HD radio, Bluetooth, and mechless designs.

We have also launched a new line of Advent In Dash radios that carry an OE look and design. These are designated to be sold through our expedited channel.

Our new rear-seat entertainment solutions, which began shipping first quarter of this year, should begin to reverse the decline that we’ve seen over the past years in the mobile video category.

And on the OEM side, we have won a number of new programs that will impact sales for this year and next.

In Car, one of our more recent acquisitions, has won the contract to produce the rear-seat entertainment system for the new Porsche Panamera, scheduled to be introduced in 2009. In addition, In Car has been awarded two new 2008 Toyota models and will ship a rear-entertainment system designed for the BMW X5 this year.

In the U.S., Mopar has awarded us the contract for their rear-seat entertainment program for Chrysler and recently Toyota Motor Sales expanded their program with us to include our new, next-generation headrest system for the Toyota Sienna. This month we made our first shipment of the GM bi-directional transmitter for vehicles equipped with GM factory remote starters.

And in Venezuela we have begun shipment of our car audio system for the GM Aveo, a new contract won late last year.

All in all, I believe these new programs should go a long way in offsetting weaker car sales and the overall softness in the automotive market.

In accessories, we recently announced the extension of our Energizer license for Mexico and certain other Latin American countries. This will allow us to sell our Energizer-branded products to a wider base of retailers and distributors, which will help increase sales.

And our most recent announcement of an agreement with Universal Electronics has several benefits on the sales, distribution, and supply sides. This new relationship, combined with the strength of both companies, leveraging UEIs IP and strong R&D capabilities and Audiovox’s broad marketing and distribution, will put us in a position to be a significant player at the higher end of the remote control market.

The RCA brand currently holds the largest unit share of Universal Remote Controls. Our agreement with UEI will allow us to provide high technology and higher priced remotes in both the RCA and Acoustic Research brands, remote controls that are designed all media in the home, either tethered to the computer or operating wirelessly.

In addition, Audiovox will take over distribution of UEI’s One For All brand in North America, certain Latin American countries, and Asia, which will also help to increase remote control sales. And finally, Audiovox will become a supplier of UEI’s universal remote business.

Our international sales continue to grow and in fiscal 2008 they represented 18.4% of our total and our plan for fiscal 2009 is a 20% increase in international sales, which would bring them up to 20% of our total turnover. We plan to attain that growth with two new international groups added as a result of the Thomson acquisition.

Audiovox Mexico was established to take over the Thomson business in that country. It gives us, for the first time, a local presence and full distribution and service capability in Mexico. We believe it will also allow us to grow Audiovox’s mobile consumer and accessories businesses in this important market.

Also as part of our Thomson acquisition, we acquired a sales and distribution team in Hong Kong that will assist us in growing our presence in Asia.

In summary, we have had a very challenging three-year period following the sale of our cellular group and the economy continues to hold us back somewhat. But our business and our financials continue to improve. I fully expect to show better returns in fiscal 2009 and beyond. As I said, we are going to focus our efforts on leveraging our infrastructure to drive synergy throughout our global organization and we are going to spend a great deal of time further consolidating each of our acquisitions so that they are running efficiently and profitably. Our cash position is strong, as is our balance sheet.

Based on our plan, I do not anticipate that we will be making any major acquisitions this year, however, we remain in the market and will not look away at the right opportunity. My expectation is that we will be back in full acquisition mode during the latter part of this fiscal year and more so in fiscal 2010.

Despite the state of the economy and the uncertainty surrounding the American consumer, I remain optimistic about our potential this year.

I would like to thank you all for your continued support and now I will turn the call over to Michael who will go through the financials.

Charles M. Stoehr

Thank you, Pat. Good morning everyone.

I will begin by discussing our fourth quarter, followed by a brief review of the fiscal year results, and then provide you with some details on the balance sheet.

For the fourth quarter of 2008 sales were $131.3 million, an increase of 36.6%, compared to $96.1 million reported in the fourth quarter of last year. This increase was a result of higher sales in the electronics and accessories groups.

Electronic sales were $95.8 million compared to $83.2 million, an increase of 15.1%. This increase was a result of higher sales in our consumer group, partially as a result of sales of the RCA audio video acquisition, completed December 31, 2007, and higher sales in our regular consumer business.

We also experienced increased sales in the satellite radio and code products, offset by declines in security and video products.

Accessories sales were $35.5 million, up over 173%, compared to $13 million in the fourth quarter last year. The increased sales were a result of a full quarter sales of the RCA accessories acquisition and the recent acquisitions of Oehlbach in Europe and Technuity.

As a percentage of net sales fourth quarter fiscal 2008, electronics represented 73% versus 86% fourth quarter last year.

Accessories represented 27% of sales versus 14% last fourth quarter.

Gross margins were 18.8% for the fourth quarter 2008 and the same as fourth quarter 2007.

During our fourth quarter we experienced higher freight and warehousing costs compared to last year.

Also, the cost of our marketing and development programs were higher due to increased consumer and accessories sales.

Operating expenses were $28.2 million for the quarter, an increase of $7.5 million, versus $20.7 million fourth quarter last year. Included in this overhead was: one, cost of Oehlbach, which was $1 million; the Thomson RCA audio video acquisition had expenses of $824,000; and Technuity had expenses of $1.1 million, for approximately $2.9 million related to our recent acquisitions.

Technuity, as of the first quarter 2009, has been fully integrated into our existing Audiovox programs.

We also experienced several one-time charges in the fourth quarter. We had payment on intellectual property for prior year periods of $602,000, stock option costs of $276,000, catch up on charges for amortization of intangibles as a result of our recent acquisitions of $497,000, and acquisition costs related to the RCA audio video acquisition of $500,000. Offsetting these charges were some favorable option adjustments of $507,000. The net total of the net charges of this was $1,368,000.

We had an operating loss for the quarter of $3.5 million versus $2.6 million last year. Adjusting for the above pro forma charges, the operating loss would have been $2.2 million versus $2.5 million last year.

During the fourth quarter the company had tax audit related to our subsidiary, Audiovox Germany. The years under review included a prior period when our subsidiary that was owned by Recoton, who was in bankruptcy at the time. The audit has been completed and there was an additional tax charge of $936,000, which we paid in the fourth quarter. As a result of this and other normal tax matters, our fourth quarter tax provision showed a charge instead of a benefit.

For the fourth quarter we reported a net loss from continuing operations of $1.8 million, or $0.08 per diluted share, versus a loss of $305,000, or $0.01 per share, for last year.

On a pro forma basis, adjusting for legal settlements, catch up in amortization related to the acquisitions, net option costs, and tax audit, we would have shown a break-even for the fourth quarter.

For fiscal 2008 our sales increased 29.5% to $591.4 million. Electronic sales of $437 million were up approximately 1%. We also saw an increase in our international operations in Germany and Venezuela. This increase was partially offset by declines in security and mobile video sales. Accessories sales was $154.3 million, an increase of 549%. This represents a full year of sales of RCA accessories, the Oehlbach acquisition, and a partial year of Technuity.

Our gross margins for the fiscal year, as Pat mentioned, increased 140 basis points to 18.8% as a result of: one, our recently acquired companies; two, improvements in our existing business; and three, better buying and inventory management. This is compared to 17.4% last year.

We anticipate further improvements during next year through the introduction of new products and technologies and as our accessories become a higher overall percentage of our sales mix.

Additionally, as previously stated, the fiscal 2008 gross margins were impacted with higher warehouse and assembly and freight costs as a result of the incremental transition costs to support the acquired companies and also the impact of higher fuel and labor costs.

Operating expenses increased approximately $22.5 million, or 26.7%, to $106.9 million for fiscal 2008, compared to last year. As a percentage of net sales, operating expenses declined to 18.1% from 18.5%. The increase in total expenses is due to the incremental cost related to the five acquisitions we announced between January and November, which resulted in total operating expenses from these acquisitions of $25.1 million in fiscal 2008, compared to $1.2 million in fiscal 2007.

Overhead for our core business was down 1.7%. We had additional expenses related to legal settlements, increased depreciation of amortization, as we purchased additional systems to support our new operations, and the impact of the acquisitions on the operating expenses.

We also experienced a decline in our professional fees, which was basically legal and audit services.

We reported operating income of $4.4 million compared to an operating loss last year of $5.1 million. We had total net pro forma charges during this year of $1.7 million related to the same areas as outlined in the fourth quarter. And as such our operating income would have been $6.2 million.

Other income was approximately $6.2 million compared to $7.2 million last year. Interest and bank charges represented expenses for bank obligations of Audiovox Corporation and our German and Venezuelan subsidiaries, as well as interest payments on a capital lease.

Equity and income of our equity investee increased by approximately $655,000 due to higher income in our joint venture ASA.

Other income declined by roughly $1.5 million as a result of a decline in interest income related to our short-term investments, partially offset by realized gains and the sale of a portion of our marketable securities.

Our pre-tax income from continuing operations improved by approximately $8.4 million. Net income for the company in 2008, which includes discontinued ops, was $8.5 million, or $0.37 a share, compared to $2.9million, or $0.13 cents a share last year.

On a pro forma basis net income from continuing operations was $8.8 million, at $0.38 a share. For continuing and discontinued ops net income was $10.5 million, or $0.46 a share.

The effective tax rate for fiscal 2008 was a provision of $3.8 million, or 36.3%, compared to a benefit last year of $1.5 million, or 7.1%, a difference of $5.3 million. This increase is due to: one, lower tax-exempt interest income earned on our short-term investments; two, increased income from our operations; and three, the completion of foreign tax audits.

Our working capital was $276 million and cash and investments of $39 million. Last year our working capital was $306 million with cash and investments of $156 million. This change was a result of acquisitions made during the year and increased working capital needs.

Inventory balances as of the end of the fiscal year have increased principally as a result of the acquisition of Technuity and RCA audio video. But, as of today, our cash and investment balances are $68 million as we have begun to bring the inventories back into line.

I will be available for any questions later and I will turn the call back to Pat.

Patrick M. Lavelle

Michael, thank you very much, and the call is open for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Richard Greenberg with Donald Smith & Co.

Richard L. Greenberg - Donald Smith & Co.

On your operating expenses, could you give a little bit of guidance as to what we should be looking for this year? Clearly you still have some of the higher costs from the Thomson acquisition, I don’t think that’s been fully flowed through, and maybe some of your other acquisitions, so we’ve got to get that. And then, Pat, we’ve got your $6 million-$8 million operating expenses coming down. I mean, what are we looking at? $120 million? $130 million? Just ballpark range.

Patrick M. Lavelle

You know last year we were at 18.1% and we expect to see some improvement year-over-year. The percentage of our OpEx should be lower. It depends on how well the sales are toward the end of the year with some of the Christmas programs that we’ve already booked. But I would estimate that they would be lower than $130 million.

Richard L. Greenberg - Donald Smith & Co.

You guys say that the acquisitions added $25 million to the operating expenses. How much more has to be flowed through from just the acquisitions?

Charles M. Stoehr

As Pat outlined, we picked, the VOCA that will come from the audio video group, which we did not take, we took some people over in Asia, and we’ll have to see a couple of months with Technuity. But as Pat mentioned, we anticipate that the overhead of percentage of sales will drop.

The one thing I just want to caution everyone is, is that the seasonality of Audiovox still exists, which is the first quarter is our lowest quarter, second quarter gets higher, third quarter, which includes the months of September through November 30, that’s going to be the highest quarter, followed by a dip off in the fourth quarter.

Patrick M. Lavelle

If you just take a look and just lower the percentage somewhat against the sales, you will come with a number that probably makes sense.

Richard L. Greenberg - Donald Smith & Co.

And Mike, two quick questions. All these restructuring items. Some sense of how much more of that kind of stuff we’ll be facing over the next year, and then a ballpark tax rate estimate.

Charles M. Stoehr

We’ve finished three of the five acquisition valuations. What we have left open is Technuity and the RCA audio video. We tried to anticipate the amortization of intangibles with those. There will be some coming through.

The tax rate you want to use is 38%.

Richard L. Greenberg - Donald Smith & Co.

And, Pat, an update on the XM after market and the Sirius-XM merger, assuming that does go through. How do you feel your positioning is to get that business?

Patrick M. Lavelle

First off, we don’t expect to get too much impact in 2009 because we’re well into the year. We’re already placing orders for Christmas deliveries now. So I don’t think there will be any impact in 2009. We’re monitoring the situation very closely. At this point we do business with Sirius in a small way with some of our OEM programs. I think our prospects of working with them are very good, post merger.

Richard L. Greenberg - Donald Smith & Co.

And sales in that business were what? $50 million-$60 million last year?

Patrick M. Lavelle

We normally don’t break it down that far but last year we had respectable increases in our XM business.

Operator

Your next question comes from Jim Barrett with CL King & Associates.

Jim Barrett – CL King & Associates

Pat, the five acquisitions you made in 2007, approximately when would you expect those businesses to be fully integrated within Audiovox?

Patrick M. Lavelle

The five acquisitions, we started with the AV accessory acquisition, that is almost completely down. There are a few things that we are looking at that we anticipated when we acquired them that we still want to get done and that will be accomplished this year.

The AV group was somewhat easier in that it was very similar to our radio and CD business. So most of that transition is done already. We’ve move the people in, whether they’re in India or Hong Kong or in Mexico, these facilities are all set up. They are all Audiovox facilities now. So I don’t believe there’s going to be much more when we look at the AV group.

In Car is fully integrated at this particular point. Oehlbach is integrated although there are a number of things that we have planned for Oehlbach based on our agreement with them when we purchased with them. Those savings will flow in the latter part of this year, but most of it is next year.

So, the things that we are going to concentrate on is making sure that the systems are right, the acquired companies are trained on our systems and operate the way that we do. There’s a lot of work that we have to do there. There’s a lot of work in our websites, bringing all this information into our websites and modifying theirs and bringing some of theirs up to speed. So that’s the type of activity that you’re going to see. And then obviously coordinating the sales and marketing to where we can get it tighter, are other things we’re going to be doing throughout the year.

Really, from an operational shipping standpoint we’re done. But there’s improvements we can make in each area and again, as I mentioned, there are synergies that we looked at when we acquired these companies, many of the ones that were done previously are done, but there are a few things that we have to do to wring out more expenses and get them to where we think they should be.

Jim Barrett – CL King & Associates

And can you comment, in the press release you mention that you foresee the company achieving improved returns. What is the range of returns you would expect, given the current portfolio and I would say a more normalized economy?

Patrick M. Lavelle

Our target is still 5%. With an improving economy, obviously if we can grow sales toward the latter part of the year where we think we might see some improvement in the economy, we have a potential for that.

Jim Barrett – CL King & Associates

On a prior call I think you mentioned a proprietary remote state for an OEM customer. Has that come to fruition yet? I know you made some comments earlier in this call.

Patrick M. Lavelle

Yes. This is the GM bi-directional transmitter for the GM remote starts. We began shipment of that product this month.

Jim Barrett – CL King & Associates

And how significant would you expect that particular product to be?

Patrick M. Lavelle

In 2008 it’s a start. The significance comes, if the program is successful and GM wants to expand it into other models, it could become quite significant as far as a percentage of our OEM business. But it’s a little too early to tell.

Jim Barrett – CL King & Associates

And Michael, considering the sales forecast of $700 million, where are inventories likely to be at year end?

Charles M. Stoehr

We’re looking probably in the 90-95 day terms.

Jim Barrett – CL King & Associates

$90 million-$95 million?

Charles M. Stoehr

No. 90-95 days. About 100+. Very small.

I think if you take your model you can probably touch into it.

I just want to caution everybody that we do have seasonality in our quarters.

Operator

Your next question comes from Thomas Kahn of Kahn Brothers.

Thomas Kahn – Kahn Brothers & Co.

Could you give me a little color on this digital radio? I already have digital TV but I guess I don’t have, I can listen to digital radio on the computer. Is this going to be a big deal and who broadcast? How is this going to happen?

Patrick M. Lavelle

You’re referring to Internet radio, correct?

Thomas Kahn – Kahn Brothers & Co.

Yes. Exactly.

Patrick M. Lavelle

There are aggregators of content. There are thousands of Internet stations that already exist around the world. And you have many, many people who are listening to Internet radio through their PCs today.

Thomas Kahn – Kahn Brothers & Co.

Including me.

Patrick M. Lavelle

Good. You can be our first customer.

Thomas Kahn – Kahn Brothers & Co.

Are you going to have anything at the show to show me?

Patrick M. Lavelle

Yes, we will.

We believe there’s a significant market there, especially when you take it away from the PC. So you don’t have to have a PC to listen to it. So we can incorporate the Internet radio tuner into a number of products. Our first ones are going to be some table-tops and some clock radios where we will put in an Internet tuner.

And this can be done very simply. Obviously you need broadband into the house, but there’s a huge percentage of people that already have that, so their hook up for Internet radio into their existing network will be very simple and will just allow them, you know, there’s a lot of people who would like to listen to a soccer game in Spain or something.

Thomas Kahn – Kahn Brothers & Co.

If you have a LAN, let’s say, in your house, you would be able to listen to Internet radio on one of these devices?

Patrick M. Lavelle

Yes.

Thomas Kahn – Kahn Brothers & Co.

How about mobile? I guess you would have to be in an area where there is WiFi or something like that, right?

Patrick M. Lavelle

We’re looking at many different ways of accessing live content for mobile applications. There are a number of ways now with WiMax, WiFi, and some of the cellular services that are out there where we can bring in live content.

Live content Internet accessibility in the vehicle, there is a big desire for it and we are working on programs and hopefully we will be able to announce things in the future that will address those needs.

Thomas Kahn – Kahn Brothers & Co.

Would this be satellite based?

Patrick M. Lavelle

It could be satellite based, it could be a server forum, you know, slinging, a dish network programming through a vehicle. There’s multiple ways of doing it at this point.

Operator

At this time there are no further questions.

Patrick M. Lavelle

Once again, thank you for your support. Thank you for being on the call this morning and I wish you all a good day.

Operator

Thank you for participating in today’s conference call. You may now disconnect.

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