Gentex Corporation (GNTX) Q3 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Gentex Announces Third Quarter 2012 Financial Results Conference Call. Today’s call is being recorded. I’d now like to turn the meeting over to Ms. Connie Hamblin, Vice President of Investor Relations.

Thank you. Good morning, everyone. Thank you for participating in our third quarter conference call. On the call with me today are Steve Dykman, our Chief Financial Officer; and Mark Newton, our Senior Vice President. First, I will go through a few routine matters and then I’ll turn the call over to Steve for his comments and the company’s financial results for the quarter. This call is being broadcast live on the Internet via an icon on the homepage at www.gentex.com. The auto playback of the conference call is also available on the website. All contents of Gentex Corporation’s conference calls are the property of Gentex Corporation. It may not be copied, published, reproduced, rebroadcast, retransmitted or otherwise redistributed without the express written consent of Gentex Corporation. Gentex Corporation alone holds such rights. While we understand that there may be companies that transcribe and redistribute our conference calls notwithstanding this warning, Gentex Corporation provides no authorization to do so and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcript as Gentex Corporation will not be held liable for the content of any such transcript. Gentex Corporation will hold responsible or liable any party for any damages incurred by Gentex with respect to any such unauthorized use. Your participation implies consent to our taping and to the foregoing terms. Please drop off the line now if you do not agree with these terms. Before we begin, I’d like to remind you of our forward-looking statements. Gentex Corporation will make forward-looking statements in this presentation related to its financial results in the third quarter in calendar year 2012 and beyond that are based on preliminary data and are subject to risk and uncertainties. These forward-looking statements are based on management’s belief, assumptions, current expectation, estimates and projections about the global automotive industry, the economy and the company itself. Words like anticipates, believes, confident, estimates, expects, forecasts, hopes, likely, plans, projects, optimistic, and should, and variations of such words and similar expressions identify forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, expense, likelihood and degree of occurrence. Actual results and outcomes may materially differ from what is expressed or forecasted. The Company undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to the full Safe Harbor statement in our news release on our website. At this point, I will turn the call over to Steve Dykman.

Good morning and welcome to our third quarter 2012 conference call. We are pleased to report that our gross profit margins sequentially improved in the third quarter 2012, despite a sequential decline in net sales. We are also pleased to illustrate the positive efficiencies we’re experiencing within our operating expenses. While we continue to be concerned about the flattening net sales, particularly as we operate in a challenging and changing market conditions, our primary long-term goal is to improve our topline growth. The company reported third quarter 2012 net sales of $268.2 million which was slightly down compared with net sales of $269.5 million in the third quarter of 2011, net sales of $839.2 million for the first nine months of 2012, or the 10% increase compared with net sales of $763.4 million in the first nine months of 2011. We reported third quarter 2012 net income of $41.9 million which was a 4% decrease compared with net income of $43.4 million in the third quarter of 2011. Net income of $129 million for the first nine months of 2012 was a 4% increase compared with net income of $124.2 million in the first nine months of 2011. We reported third quarter 2012 earnings per diluted share of $0.29 compared with $0.30 per share in the third quarter of 2011. Earnings per diluted share was $0.89 for the first nine months of 2012 compared with earnings per diluted share of $0.86 for the first nine months of 2011. Next, we'll look at automotive net sales and automotive or auto-dimming mirror unit shipments for the third quarter ended September 30, 2012. Total auto-dimming mirror unit shipments increased by 5% in the third quarter of 2012, compared with the third quarter last year. Automotive net sales decreased by 1% from $264 million…

In an effort to provide more detail on our continuing investment in the business, all of the advanced automotive mirror technologies that Gentex markets today is shown in our website, resulting in future new rewarded business. Interior automatic-dimming mirrors are in launch with new chrome ring frameless designs, providing applications with new auto electronics, digital microphones replacing analog microphones, wireless control systems that send, receive signals from large doors, gates, lights, locks, security systems, many different displays and insides with faster processing and increased graphics capabilities. SmartBeam with advanced protection for tunnels, curves, and fog for use on halogen, xenon and LED headlamp technologies. Driver-assist systems with lane departure warning, traffic sign recognition and variety of object detection capabilities, and multiple combinations of these features. Exterior auto-dimming mirrors are in launch with new chrome ring frameless designs, curved glass capabilities and a variety of indicators. The company has previously disclosed that four customers for Rear Camera Display Mirrors had notified the company of their plans to have the primary display for rear camera video in a radio display in the vehicle’s center console instead of in the interior rearview mirror. Two of the four customers are expected to begin that transition in the 2013 calendar year, with the other two customers in the 2014 calendar year, and these transitions are expected to occur over multiple years. Each of these four customers continues to offer Gentex RCD Mirrors for other vehicle applications. In addition, they continue to offer Gentex’s auto-dimming mirrors, many with other advanced electronic features, on the majority of their vehicle models. To date, no additional RCD Mirror customers have indicated a move of the rear video display application from the mirror to the center console. During the third quarter of 2012, the company began shipping its RCD Mirror…

Okay, I am going to give you few production numbers, IHS productions numbers that this forecast was based on. So the fourth quarter of 2012, IHS is predicting that North American light vehicle production will be 3.6 million vehicles, which is a 5% increase compared with 3.4 million in the fourth quarter of 2011. European light vehicle production of 4.5 million which is down 10% compared with fourth quarter 2011 at 5.0 million. And then, Japan and Korea 3.4 million vehicles which his down 10% compared with 3.7 vehicles in the fourth quarter of 2011. And then for calendar year 2012, North American light vehicle production IHS has it at 15.2 million vehicles, which is a 16% increase compared with 13.1 million last year. For Europe 19.0 million vehicles which is down 6% compared with 20.1 million last year, and then Japan and Korea, is 14.0 million vehicles, up 12% compared with 12.5 million vehicles last year. And again these are based on IHSs mid-October forecast. As a reminder, all listeners should note that this call is being recorded by Gentex Corporation. All contents of Gentex Corporation’s conference call is the property of Gentex. No such content may be copied, published, reproduced, rebroadcast, retransmitted or otherwise redistributed without the expressed written consent of Gentex Corporation. Gentex Corporation alone holds such rights. While we understand that there may be companies that transcribe and redistribute our conference calls notwithstanding this warning, Gentex Corporation provides no authorization to do so and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcripts as Gentex Corporation will not be held liable for the content of any such transcript. Gentex Corporation will hold responsible or liable any party for any damages incurred by Gentex with respect to any such unauthorized use. Your participation implies consent to our taping and to the foregoing terms. Please drop off the line if you do not agree. At this time, we’ll open the call up for Q&A. And as usual, we respectfully request that you plan to ask one single part question to allow others to get in the queue. Thank you. Operator, we can open for Q&A.

(Operator Instructions) And we’ll go to our first question from David Leiker with R.W. Baird. David Leiker – Robert W. Baird: Good morning.

Good morning.

Good morning. David Leiker – Robert W. Baird: Just a housekeeping item here to start with. Steve, can you put any color, comment it at all on the impact Hyundai with the strike and also with their big September production cut, how big of an impact that was on your numbers?

Yeah. With respect to the strike, it did not have a significant impact on the quarter. When you think of the revenue versus our guidance, a lot of that have to do with weakness in Europe. David Leiker – Robert W. Baird: Okay, then you focused on Opel.

In part, yes. David Leiker – Robert W. Baird: Okay. And then my question is that if we look at margins and the gross margin given where the revenue number came in, you still hit your gross margin target. Is that reflective that you are getting traction in some of these gains in terms of efficiencies on the manufacturing floor or purchasing initiatives or there is something else going on there?

Well, it’s twofold. One, the primary driver is additional purchasing cost reduction benefits that we are experiencing and that is even on a sequential basis when you look at the 33.1% versus the 33.6%. And other factors that we talked about in the second quarter, we did have some production line moves, which were beyond that, so there were some products efficiencies that occurred in the quarter as well. David Leiker – Robert W. Baird: Does that mean the in a world of everything else equal, it’s not that if we weren’t looking for margin improvement until early 2013 that means that you might be ahead of track of that plan, understanding that volumes are going are going to weak…

Yes, a little bit to your point, yes. But when you look at our margin guidance going forward, we had indicated that it would be down slightly. And one of the primary drivers for that is the new agreement. And as Mark indicated in his comments that would at least in the near-term has a impact on the margins of just under four terms. David Leiker – Robert W. Baird: Okay. Great. Thank you very much.

Okay.

And we will take our next question from Ryan Brinkman with J.P. Morgan. Ryan Brinkman – J.P. Morgan: Hi, good morning. Thanks for taking my call.

Good morning.

Good morning Ryan Brinkman – J.P. Morgan: I think a key question investors may have is how long you can continue to exercise the type of expense control that you did in 3Q without impeding long-term sales growth. Can you comment on that? And if relevant maybe the degree to which the ER&D and SG&A disciple in the quarter related to determining of fat versus muscle et cetera?

Okay. I think specifically within ER&D because that’s really where the majority of cost reductions occurred. And we started to discuss that a little bit in our second quarter conference call, where we were starting to gain and see some efficiencies within that area and in part we were working of a higher base. We had talked about there were some resources devoted to the redesigning of some products, specifically due to supply chain constraints, which – and is subsided. And we also have as we talked about contract engineers for development services and some of those projects are nearing an end as well.

A couple of additional comments from the engineering side of the business. We’ve not been doing this with muscle; this is in the normal part of doing business. Contract engineers that were required to help in supportive meeting, near-term launch, deliverables, we meet those requirements and we’re always looking for opportunities to optimize our expenses in those areas. But we continue to invest strongly in the key areas of ER&D going forward that lead to product development and support new order business. Ryan Brinkman – J.P. Morgan: Okay. That’s great to hear. And then just lastly before I jump back in the queue, can you comment on the appropriate net leverage for the firm, I think there is an overwhelming sense that the company has a rather tremendous liquidity cushion currently, it might be helpful in sizing the amount of any capital that could be potentially deployed towards share repurchase or other core productivity. If you were to share whether there is a certain amount of cash or percentage of sales held in cash or net leverage that you are targeting or think is appropriate for the firm?

Well, I think if you look at our balance sheet historically, we have stated that, we’re very conservative from a financial standpoint and the actual cash needed to run the day-to-day operation would be significantly lower than current levels, probably in the $200 million to $250 million range, but we also know we are in a cyclical business and I think the economic downturn aid certainly as a demonstration of having the extra cash on the balance sheet, certainly has allowed the business to run itself for the long-term and develop products, so we can grow and return the highest rate of return to shareholders. So, I think when we look at deploying resources through cash dividends and share repurchases, we talked about the cash dividend program that was initiated back in 2003 then we’ve consistently have increased that dividend rate over that period of time and maintained actually during the downturn. And with repurchases, to-date, we’ve repurchased 28 million shares and one recently about 2 million shares and as we just mentioned, the board did authorize an additional 4 million shares as well. Ryan Brinkman – J.P. Morgan: Great. I appreciate all the color. I’ll jump back in. Thanks so much.

And we will take our next question from Rich Kwas with Wells Fargo. Richard Kwas – Wells Fargo Securities, LLC: Hey, good morning everyone.

Good morning.

Good morning. Richard Kwas – Wells Fargo Securities, LLC: On the SmartBeam guidance, I don’t recall the driver-assist piece being included in the previous SmartBeam guidance, is that correct? And then if it that is correct, does the SmartBeam revision is that worse, does that mean that SmartBeam growth is worse than the 10% to 15% because it includes driver-assist, if you can just clarify that.

The guidance we had provided throughout this year did include the driver-assist, so that has not been a change. Richard Kwas – Wells Fargo Securities, LLC: Okay, all right. Thanks. And then just on the RCD work here, are you still looking for flat volume on a year-over-year basis for the full year would be…?

For calendar year 2012, yes that’s correct. Richard Kwas – Wells Fargo Securities, LLC: Okay great. I will get back in the queue, thanks.

Now we will take our next question from Steve Dyer with Craig-Hallum. Steve L. Dyer – Craig-Hallum Capital Group LLC: Thanks, good morning.

Good morning. Steve L. Dyer – Craig-Hallum Capital Group LLC: I’m wondering if you could just give us an update maybe refresh us on the RCD legislation, sort of where – what are – maybe I guess my understanding is, maybe end of the year would be the next time, we would potentially hear something about that. Just what’s your understanding?

That too is our understanding, we haven’t been given any updates with publicly available, that is still pending for the end of this year. Steve L. Dyer – Craig-Hallum Capital Group LLC: Okay. And then just with respect to gross margin, kind of drilling down on a previous question. Assuming sort of similar revenue levels next year which again you’re not endorsing that but well its equal, eventually gross margin be sort of in the same area less the 35 basis point impact from the royalties?

All things being equally yes, and we will provide more detailed guidance in our fourth quarter conference call. And obviously the caveat there is that there is a lot of uncertainty in the economy that can impact the overall business as well. Steve L. Dyer – Craig-Hallum Capital Group LLC: Sure and then last question, operating expenses, would you expect them to remain sort of in this level going forward assuming the outlook space as it is?

Well, we’ll provide detailed guidance in the fourth quarter call, but I think as you look at the operating expenses and how they have trended, as we progress for 2012, I think our expectation is we’ll continue to see efficiencies and that growth rate will slow down as you look at it on a year-over-year basis. Steve L. Dyer – Craig-Hallum Capital Group LLC: Okay, thank you.

Now, let’s take our next question from John Murphy with Bank of America/Merrill Lynch. John Murphy – Bank of America/Merrill Lynch: Good morning guys. I just have a follow-up on the ER&D yield cuts or the more conservative outlook for the spend there versus these patents that you’re buying, putting on your balance sheet that are going to be sort of expensed over time. Just trying to understand where the proprietary technology that’s incremental to your future growth really is owned and resides. I mean, is that the kind of stuff that is actually being purchased in or just a kind of patents and technology that you view is owning. I mean you clearly have core strength with these upcoming mirrors patents. But I am just trying to understand sort of the value of the patents in the intellectual property for these future products?

I’ll try to answer some of these key questions. This is actually a normal part of our business and something that we’ve always done through our history where to continue to develop products and technologies with the smallest risk of interference, we will from time to time, look to obtain certain intellectual property rights like we have here, which give us the capability to not only do our current products, but potentially do future new products and that’s what we are referring to in this particular case. We consider this good for the company and a normal part of doing that. John Murphy – Bank of America/Merrill Lynch: So it is sort of like a seesaw and you pulled down the ER&D costs, you are buying these patents to allow you to produce these – to generate the technology to produce these products. Is that the way to think about it, there is a bit of an offset here?

No, actually, we are taking away from ER&D and our product development efforts and intention continue very, very strong and it’s at the – that’s the highest rate I think, we’ve experienced in many years. We continue to optimize and align those expenses with the business as our product development requires. In this particular case that we just reported here, we have been able to optimize outside contract engineering services, replace them with inside employees of our own in this case and that’s a normal practice for I think any company in these areas as they look to optimize and (inaudible). John Murphy – Bank of America/Merrill Lynch: Okay. And then just the follow-up on that, I mean all of this is not resulting in a net increase in the revenue per mirror or the average selling price depending on how you are measuring it. We are looking at a number that is really the lowest that we’ve seen since the second quarter of ’09. That mean, it seems like there is a lot of investment and more technology going into the mirror and the product you are delivering, yet, you are not really getting any big payments for that. I’m just curious when you think that inflection point will occur, so we actually see real ramp up in the average selling price or revenue from your – however it’s measured going forward?

Yeah, when you look at the ER&D efforts in developing products, as long as new program awards, that group is really working on things today that are not going to result in revenues for three to three years out. And so when you look at additional development work they tend to be on more advanced features like we talked that tend to have higher value add through the mirror and that is why we continue to believe over the long-term that the average selling price will continue to trend up. Now, when you look five to seven years ago, the average selling price was around $40 and today it’s in the mid-40s, now more recently when you look over the last 12 months or so, the average selling price has declined and that is in part due to the slowing growth with RCD, or which is really the result of some of the legislation delays as well as SmartBeam, which is the result of some of the European economic turmoil that is occurring that is effecting take rates. So those are more near-term headwinds that are effecting the ASPs, but in the long-term we still feel directionally that it will increase over time. John Murphy – Bank of America/Merrill Lynch: Okay, great, thank you very much.

And we’ll take our next question from Brett Hoselton with KeyBanc. Brett D. Hoselton – KeyBanc Capital Markets: Good morning.

Good morning Brett.

Good morning. Brett D. Hoselton – KeyBanc Capital Markets: I guess what I am grappling most right now is the RCD, last quarter you announced that four customers are – that are discontent due to some extent here. Now you’re providing maybe a little bit more detail on it, kind of two in 2013, two in 2014. I guess my question is, how would you suggest that we consider quantifying, it sounds like the four customers are very large customers or not all of them, but it sounds like they do represent at least 50% of your current RCD shipments is that a fair assessment?

We haven’t specifically disclosed that. And in part, it’s because 100% of that business with those four customers are not going away. So like we had said in the second quarter that two other customers start to impact our unit shipments in calendar year 2013 and will transition over a couple of years; the other two start in 2014 and transition over a couple of years. However, we’re still shipping mirrors to those customers and we continue to have development programs with those customers for RCD and we continue to start to ship for new programs for RCD with some of those customers. And so it’s difficult to project looking forward the timing of the unit shift and to a certainty of what degree and what percentage our business is actually going to transition away. Brett D. Hoselton – KeyBanc Capital Markets: As you think about now 2013, 2014 assuming a flat production environment, it appears as though your net RCD shipments are going to be declining over the next two years, first, am I correct in that? And then secondly, if that’s the case, at what point in time, do you thing that RCD shipments might actually turn positive again?

You are correct on that. As far as when RCD new unit shipments will turn positive that’s going to be contingent upon a number of factors including what happens with the legislation and what our customers decide to do because it is like we continue to design RCD products that have different features in them, graphical relays and other features beyond just the rear camera. So it’s really hard to predict when it’s really going to turn. I mean obviously there is significant volume there that will transition over the next four, five years. Brett D. Hoselton – KeyBanc Capital Markets: Okay.

And does it look like answered your question, but… Brett D. Hoselton – KeyBanc Capital Markets: It sounds like, how close are we going to get at this point.

Yes. Brett D. Hoselton – KeyBanc Capital Markets: The amortization, in my understanding that the fourth quarter did not necessarily reflect the amortization and so therefore the step function change is likely to take place as we move into 2013?

Yeah, it will start to affect in Q4. So the agreement was a Q3 event, so there was not much of an impact in Q3 of the new agreement, but there will be a full effect in Q4. Brett D. Hoselton – KeyBanc Capital Markets: Thank you, Steve, thank you, Connie.

Yeah.

Now we will take our next question from Peter Nesvold with Jefferies. Elaine S. Kwei – Jefferies & Company, Inc.: Hi, this is Elaine Kwei for Peter. Thanks for taking the question. Just a quick follow-up on the licensing, is that – it’s not what AVS is reconsidering that priority filing suits against you, is it – it’s with someone else we should assume?

This is not – really, no. Sorry, if we confused you in the proximity of the statement. No, this not related to AVS. Elaine S. Kwei – Jefferies & Company, Inc.: Okay, great. So is it related to the driver assist technology?

We cannot state specifically any details on the technologies because of legal agreements involved. This is across multiple different technologies that we do as we spoke earlier, as a normal part doing of business. It will help us potentially develop new products and technologies, but it’s across multiple different lines. Elaine S. Kwei – Jefferies & Company, Inc.: Okay, great. Thanks. And just one quick one on CapEx, it looks like you’re definitely doing or you tend to optimize OpEx there and it sounds like the CapEx plans haven’t changed. Do you think the backlog and current outlook can still support the kind of growth that you had originally planned for or is there any potential for adjusting CapEx to different market conditions, especially volumes continue to deteriorate?

Yeah, one thing to keep in mind to with respect to CapEx for the calendar year 2012 is there is a sizable amount of the CapEx that is related to facilities building expansions, which we’ve often discussed that facility related plant capacity is more of a step function process for the company and equipment capacity, it was added as needed and has a shorter lead time. So the building expansions two of the four are complete, the third one is pretty much done, with the fourth one being completed by the end of this calendar year. So because that’s a step function basis, if you think of backlog in the business, we had said that this would – capacity would last for about three year. And so depending on the backlog as things adjust, we may have plant capacity for a little bit longer than three years. But we truly do view facility related expansion with a step function basis. Elaine S. Kwei – Jefferies & Company, Inc.: Okay, understood. That’s helpful. And just one also on, I think, you had mentioned earlier there were some negative mix effects from take rates on the featured mirrors or we also have the lower growth – lower outlook for SmartBeam. What’s the growth rate looking like sort of relatively between these different product lines at this point? Are they starting to converge or are certain one still on a much faster trajectory?

We haven’t disclosed specifics by product lines. I mean, obviously, there is certain products that continue to do well. I mean, overall, we’re continuing to increase our overall core auto-dimming mirror unit shipments. Two of the products that we talked about is with respect to rear camera display, and that 2012, the unit shipments will be approximately flat. And so that has had a trend of slowing growth and that’s really been primarily driven due to the delays in the legislation. And I think specifically with SmartBeam that product continues to grow although the growth rate have slowed and that’s relay been driven by the European economic situation. Elaine S. Kwei – Jefferies & Company, Inc.: Okay. Thank you so much.

And we’ll take our next question from Jason Rogers with Great Lakes Review. Jason Rogers – Great Lakes Review: Hello. Can you remind us or just give us an update for the number of vehicle programs than OEMs that have RCD as well as SmartBeam?

We basically talked in this quarter we talked about the number of programs that we’ve added this quarter in the press release. We have seven additional RCD programs and then we have in terms of SmartBeam, we have an additional eight and then additional two driver assist programs. Jason Rogers – Great Lakes Review: Well, do you have the total there? As far as…

It’s not right up in top of my head, but basically you can take the total that you had from last time and add these on to them. Jason Rogers – Great Lakes Review: Okay. And then that the share repurchase, the 2 million shares re-bought, do you have the total spend for that or the average price per share that you paid?

Details of the average repurchase prices will be disclosed in our 10-Q filing, but as a matter of practice the company repurchases shares not during our blackout periods which start at the end of the calendar quarter and then spend 48 hours after we release our earnings. And it basically would be from the end of July up until the end of September and so if you just look at our share price history and roughly between 15 and 18. Jason Rogers – Great Lakes Review: Okay. And then finally, looking at the radio display competition for RCD that competing product, I wondered if you got any – more information about that as far as the response time of that product or how bright it is et cetera?

We haven’t yet seen a product unit in these areas. So we are still looking for that information as well. Jason Rogers – Great Lakes Review: Thank you.

And we’ll take our next question from Efraim Levy with Standard & Poor’s. Efraim Levy – Standard & Poor's: Hi, thanks for taking my question. I was wondering you’re in the middle of an expansion program and I was wondering where you stood in the capacity utilization right now, the actual capacity that you have for interior mirrors and exterior mirrors, you’re trying to get to 21 million to 23 million and 10 million respectively, so where do you stand out? Thank you.

Okay. Yeah, so as you mentioned, prior to the four expansion projects that the company announced some time ago, interior mirror capacity was in the 16 million to 18 million range and exterior mirrors at 6 million. After those four expansion projects were completed, interior mirror capacity would increase to 21 million to 23 million units and exterior mirrors 10 million units annually. The exterior mirror facility expansion is now complete. So that capacity is at the revised rate. We have one of the four expansion projects still under construction that’s expected to be completed near the end of calendar year 2012 and that is one of the larger expansion projects of the four of around 120,000 square feet. So you might say that we’re maybe half way there on the inside mirror side. Efraim Levy – Standard & Poor's: All right. Thank you.

And we’ll take our next question from Ryan Brinkman with J.P. Morgan. Ryan Brinkman – J.P. Morgan: Hi, thanks, again. In the past, I think, you have pointed to normalized gross margins in the neighborhood or the vicinity of around 35%. I was wondering if today’s announcement is related to the purchased intellectual property rights would cause you to reassess that target range? Thanks.

We’ve talked about, we feel that we can work towards over time and stabilize and maintain margins of around 35%. I think with the new agreement as we’ve indicated that at least in the near-term is estimated to have an impact of just under four-tenths on the margin. So it’s not significant in our view that we would permanently adjust our objective of around 35% margins. Ryan Brinkman – J.P. Morgan: Okay. That’s very helpful. And then, I guess just lastly, can you talk about any new product introductions coming up that could improve your topline growth? I mean, last quarter, I think, you were talking about the roll out of the driver-assist product, maybe on the Ford Explorer. Is there anything you can update in terms of take rates, penetration rates, how things are tracking in that respect?

I’ll answer a little bit of this. In the additional information under our update in products and technology by detailing an overview of all the technologies that I listed when I read that, that was an indication, tried to give you some indication there. We are in launch and growing with advances in all of our existing technology right now. So that’s probably I think are best indication right now of information we can provide today. And we did add this information and then therefore to try and provide you more detail on this. Ryan Brinkman – J.P. Morgan: Okay. Thanks so much.

And we’ll take our next question from Steve Bowen with Kalmar Investments. Steve Bowen – Kalmar Investments, Inc.: Thanks for taking my questions.

Good morning.

Good morning. Steve Bowen – Kalmar Investments, Inc.: Good morning. Steve perhaps you’ve already answered this, best you can, but I do have a follow up question as it relates to share repurchases and the formula the Board uses to make decisions, because I’m surprised that the authorization isn’t more aggressive. I mean, the last time it was taking what I am seeing is $4 a share in net cash, 3% dividend yields where the shares are currently charting, little return on this $570 million in cash on the balance sheet was left what the company might be able to borrow? That seems to me that there is just room to be more aggressive, and so it leaves me wondering what in this formula if you agree with what I’ve outlined here that is factored plus that the Board is as conservative as they are. Thank you.

That’s a good question, Steve. And I think when you look over the years and the company’s history with respect to the share repurchase program. The Board has authorized additional shares incrementally as the plan has progressed. And still as we have discussed to date, the anti-dilutive effect using normalized interest rates is one of the factors as a starting point for consideration for re-purchases. And the Board and the company also looks at other economic and market consideration, so I think the fact when you look back in 2006 I believe is the last time the Board authorized additional shares. They authorized 4 million additional shares. So in the event that the new 4 million shares that are authorized are exhausted, the Board certainly will evaluate the potential for additional authorizations and so our criteria really hasn’t changed to date, so we continue to progress under those criteria the board and the company has established.

This is – yeah, go ahead Connie.

And as you know, I mean, the – it’s intended to be an opportunistic plan and with the macroeconomic conditions the way that they are particularly in Europe, our board is watching out very carefully. Steve Bowen – Kalmar Investments, Inc.: Okay. Thank you very much.

Okay.

We have time for one more question.

And we will take our last question from Richard Kwas with Wells Fargo. Richard Kwas – Wells Fargo Securities, LLC: Hi, good morning, again.

Good morning. Richard Kwas – Wells Fargo Securities, LLC: CapEx, Steve for next year, you said, this year it was a big ramp, I mean would you envision next year should be down?

Well, if you go under the assumption that the majority of the CapEx this year – it’s like a significant portion of the CapEx this year was facility related cost and they will be completed near the end of this year. So that would not be an ongoing recurring event. So CapEx should come down. Richard Kwas – Wells Fargo Securities, LLC: Okay. All right, and then just a follow-up on this pricing, with the European manufacturers struggling and some of that slipping over under the premium side and at least Daimler has got a pretty net – now they are going to announce pretty aggressive cost reduction program. Are you seeing any incremental pricing pressure from the European manufacturers that you work with most closely?

Nothing beyond what we normally have had, no. Richard Kwas – Wells Fargo Securities, LLC: It’s okay. All right. Thanks so much.

Thank you. At this time, we are going to wrap the call up. We thank you for participating and if you have follow-up questions, we will be around this afternoon. Thank you.

That concludes today’s conference call. We appreciate your participation. Thank you.