Welcome to the Universal Electronics second quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks we’ll hold a Q&A session. (Operator instructions) As a reminder, this conference is being recorded August 7th, 2008. I would now like to turn the conference over to Ms. Kirsten Chapman. Please go ahead ma'am.

Thank you, Ashley. Good afternoon everyone. Thank you for joining us for the Universal Electronics 2008 second quarter's earnings conference call. By now, you should have received a copy of the press release. If you have not, please contact Lippert/Heilshorn and Associates at 415-433-3777 and we will forward a copy to you. This call is being broadcast live over the Internet. A webcast replay will be available at www.uei.com for one year. In addition, a telephone replay of this call will be made available for 48 hours, beginning approximately two hours after the conclusion of this call. To listen to the replay, in the US, please dial 1-800-642-1687 and internationally 1-706-645-9291. Enter access code 55656076. Also, any additional updated material nonpublic information that might be discussed during this call will be provided on the company's Web site at www.uei.com shortly after the call where it will be retained for at least one year. You may also access that information by listening to the webcast replay. After I read a short Safe Harbor statement, I will turn call over to management. During the course of this conference call, management may make projections or other forward-looking statements regarding future events and the future financial performance of the company, including the benefits the company expects as a result of the development and success of products and technologies, including new products and technologies and the company's home connectivity line of products and software such as Delta, the company's next-generation Nevo product and its XMP2 technologies, the recently announced new contracts with new and existing customers and new market penetration. The growth expected as a result of the digital-to-analog conversion, the expected continued growth in digital TVs, PVRs and overall growth in the company's industry. The company's ability to timely deliver its products to its customers as explained during the call. The company's continued sales, operating income, net income and EPS growth, the company's ability to attract and obtain new customers, particularly in Asia and the strength of the company's financial position. Management wishes to caution you that these statements are just projections and actual results may differ materially. For further detail on risk, management refers you to the press release mentioned at onset of this call and the documents the company files from time to time with the SEC including the Annual Report on Form 10-K for the year ended December 31, 2007 and the quarterly report on Form 10-Q filed since that time. These documents contain and identify various factors that could cause actual results to differ materially from those contained in management's projections or forward-looking statements. On the call today are Paul Arling, Chief Executive Officer and Chairman, who'll deliver an overview and Bryan Hackworth, Chief Financial Officer, who will summarize the financial results. Then Paul will return to discuss the vision. Now I'll turn the call over to Paul Arling. Please go ahead, sir.

Thank you, Kirsten, and welcome everyone. Our goal is to continue to drive growth by developing wireless control technology for the leading consumer electronic equipment makers, subscription broadcasters and retailers all over the world. This quarter, we succeeded again. We met our guidance and reported solid revenue of $70.7 million and earnings per diluted share of $0.24. We developed new technology, won new customers' and expanded relationships. Our second half of 2008 continues to look strong. As such, we remain on track to deliver record revenue and earnings in 2008. We continue to serve very dynamic and growing markets by supplying what consumers need in an ever more digital yet chaotic home environment, which in turn drives our customer base expansion. A recent example revolves around digital-to-analog or DTA converters. Most of you are aware that in February 2009, television transmission in the US will switch from analog to digital. What you may not be aware of is that the National Association of Broadcasters or the NAB has estimated that there are 69 million analog televisions sets that will potentially impacted by the digital transition, consisting of 19.6 million households or 17% of all households that rely exclusively on over-the-air analog television sets and an additional 14.7 million cable and satellite households receiving some over-the-air programming on analog sets. Households affected by this will either need to get a new TV or the easier, more cost-effective solution of a DTA converter. To meet this need, we developed the Delta, which is a universal two-device remote designed to be pre-programmed to a DTA converter and programmed by the user to operate his or her television. This is a great device that leverages our infrared library, which is the largest data base of codes for A/V devices and our XMP protocol, an…

Thanks, Paul. Net sales for the second quarter of 2008 were $70.7 million, in the middle of our guidance $69 million to $72million. Business category revenue was $56.8 million at the high end of our guidance of $54 million to $57 million. This is a bit lower to the $60.5 million in Business category revenue we achieved during last year's second quarter. But remember that was due to the exceptional ramp up in purchases in anticipation of a mid-year OCAP deadline. Our Consumer category revenue was $13.9 million, also within our guidance of $13.5 million to $16.5 million and growing for the second quarter 2007 revenue $11 million. Gross profit for the second quarter was $24.2 million or 34.3% of sales compared to guidance of 35% plus or minus one point and 34.5% sales a year ago. R&D expense was $2.2 million, consistent with R&D spend in the second quarter of 2007. Total operating expenses were $19.9 million for the second quarter of 2008, at the low end of our guidance of $19.8 million to $20.4 million and compared to $18.7 million in the second quarter of 2007. The 2008 second quarter operating expenses included $857,000 of employee stock-based compensation expense, compared to $671,000 in the second quarter of 2007. Interest income for this quarter was $893,000 compared to interest income of $732,000 in the second quarter of 2007, reflecting a higher cash balance. The effective tax rate was 33.4% within our guidance of 33% to 35%. Net income for the second quarter of 2008 was $3.5 million or $0.24 per diluted share within our guidance $0.23 to $0.27 per diluted share and compared to $4.5 million or $0.30 per diluted share in the prior year's quarter. Now, turning to our balance sheet and cash flow review. During the second…

Thanks, Bryan. As demonstrated our consistent strategy and execution delivers results. We continue to be the leader in wireless access and control solutions, enabling consumers to easily and affordably control the chaos in their ever more complex homes. We are excited about both the public information we've reviewed and our behind-the-scenes projects. We have over 20 years experience supplying our customers through every cycle in the economy. We employ industry experts who have developed innovative products and services – new relationships and support all of our customers' long term and new. The current economic environment is admittedly more difficult than it was two years ago. However, our people have been through this before and know how to get the job done. Yes, the economy can be tough but as I've said before, this is when strong companies get stronger. We are confident we will deliver a record year. Once again, regardless of the platform or technology cable, satellite, analog, digital, AV receivers, DVRs, set-top boxes or digital TVs, UEI provides the devices and customized entertainment solutions for our growing base of global customers. Stay tuned and open up the call to the Q&A, operator?

(Operator instructions) Our first question comes from Scot Ciccarelli with RBC Capital Markets. Scot Ciccarelli – RBC Capital Markets: Hi, guys, Scot Ciccarelli.

Hi, Scot.

Hi, Scot. Scot Ciccarelli – RBC Capital Markets: How are you? Couple of questions, what is the primary difference in your guidance between last quarter till now? Looks like revenues are roughly the same, the top end was shaved just a bit. Is it really on the gross margin side?

Yes, Scot, it's primarily on the gross margin side. As we've said several times before that the gross margin is always difficult for us to predict because there are so many factors that play a key role. This year we got some positives and in Q2 we've had low air freights. In Q2, we also had a Consumer versus Business mix is favorable. While we've also had some negatives in that mix within the line where we've had a number of say large orders from significant customers who because are large and high volume get favorable pricing. We've also had some cost pressures and higher oil prices affects freight cost as well as certain components of our finished goods and this is actually put a little bit of downward pressure on the gross margins. Scot Ciccarelli – RBC Capital Markets: Okay. This is primarily is always showing through in the third quarter so that the business mix from business towards consumers are enough to alter [ph] Bryan?

No. Actually for the full year based on our original guidance, Consumer actually was going to make up about 25% of our total sales and we now expect to be about 23%. Scot Ciccarelli – RBC Capital Markets: Okay. Sorry about that – I guess I was focusing on the quarter.

Okay. Scot Ciccarelli – RBC Capital Markets: And then the Consumer segment, what is your assessment of the risk to that, obviously you've shaved it a little bit but what is the risk just given the economy and how much of a boost is the Audiovox where you are fully baking in Audiovox, I'm assuming that's in the Consumer segment?

Yes. You are right. Audiovox is in the Consumer segment. Just to give you a little background on how we do the budgeting and forecasting. At the beginning of the year, we put together a number of potential wins and then what we do is acquire probability to it. So, we are naturally not going to buy every potential win because that's just not realistic. So, I would say that the Audiovox is included in the budget but in indirect manner, we do apply a probability to it. In terms of the risk of the Consumer segment for the rest of the year, but I think it all comes down to the (inaudible) and how well the products will be received in the market. I think the one thing that keep into consideration is just like the overall consumer market being down, I think if you look at the home entertainment market, there actually have been some positive recourse in terms of consumer spending. If you look at flat panel TV sales have done actually pretty well. And if you look at out numbers in Q2 of '08, we had $13.9 million in consumer versus $11 million last year for the same quarter. So, we've actually had some pretty good growth and we think with the new product launches that are coming out in the back half of the year that we are very positive and confident that we'll do well. Scot Ciccarelli – RBC Capital Markets: Okay. All right thanks a lot, guys.

Our next question is from John Bright with Avondale Partners. John Bright – Avondale Partners: Thank you. Paul, Bryan, good afternoon. Paul, on the new Delta products can you give us an idea of the margin profile or characterize the profile of those products?

We don't think we just talk about pricing or margins on specific products or specific customers but as you might expect it's a two-device product. So, it's one of our – it's a simpler product for a specific application. So, I suppose you can presume the margin will be slightly lower on it that the average. John Bright – Avondale Partners: But it is probably – so it's a strong high-volume product that you are fairly optimistic about. But the other side of the equation as you bring on Audiovox and the mid to high-range products. Are those going to be new for Audiovox?

They will, yes. John Bright – Avondale Partners: So, this will be first time they'll be in that market. And then secondly, how do I reconcile that with the new products you are introducing in Europe. So, you are introducing some new aftermarket products in Europe, will they only be first of all, will they only be for Europe, you are introducing them in Germany but they only be for Europe or they'll be for the States as well and how do they reconcile with the Audiovox contract?

As is typical in that market, John, they – the products will – they'll be derivates of each other. You do have to – the products that we sell in Europe will be modified for Europe, but they can often carry the same platform. So, products that you see us introduce in the US or Europe in the retail market can transfer over with some modification. Sometimes they are introduced first in Europe and later in the US. Sometimes first in the US and later in Europe but the products are often quite similar. John Bright – Avondale Partners: Right, right. So, the number one question, there's the number one topic that comes up as far as I'm concerned with your name on the Consumer side, you addressed it in your closing strategic comments, and in turn you was asked in last question, how do you characterize what you are hearing from the retailers on the consumer side, you had a good quarter on consumer and now I think you wisely shaved down your guidance slightly for the year associated with consumer. What's the feedback you are receiving Paul?

The feedback is good mainly because we are bringing out new products and what we believe and some of the customers we previewed these products with, very interesting products. So, the feedback we are getting is strong. But it's certainly is true that the environment is more difficult as I said in my comments, the environment today is more difficult than it was two years ago. But the true testament is you got – whether you are swimming with the current or against it, you still got to get to the destination and our people are working really hard to get out forte these new relationships get out these new products in a more difficult environment because we believe when you do those things during difficult times, you come out the other side even stronger than you were before. So, we are confident in the forecast we gave and pretty strong growth for what is a difficult year. Part of that's based on the introduction of new products. I think as you may have pointed out here, I mean our growth for the year in Consumer is going to be a wider range right now, 15% to 33% and I think Bryan said versus 9% to 14% in Business. So, a little wider array roughly because it's difficult to predict the exact outcome in that retail or consumer marketplace. John Bright – Avondale Partners: Sure. Thank you.

Thanks John.

Our next question is from Matt Kather with WR Hambrecht. Matt Kather – WR Hambrecht: Hi, Bryan and Paul. How are you?

Hi, Matt. Matt Kather – WR Hambrecht: It's the question back to the gross margin. If I look at least for the last couple of years as your Consumer mix has ticked up particularly in the fourth quarter but also in the third quarter, you typically have had higher margins on the Consumer side and that's ticked up your gross margin. And you talked about input cost, and freight and other things that aren't going away. So, I guess the question is eventually will you be able to pass some of this stuff along and do you think continue to get that better margin mix as your Consumer grows if we look at your business model going forward or do you think that this is a permanent 100 basis points to 200 basis points possible reductions to where you guys are depending on what the mix is on in a given quarter?

Yes. I would say in the short runs it's going to affect us, and that's why we've actually one of the primary reasons why we are taking down the EPS slightly. In the long run, we are going to do we've always done and that's if we fight keep the gross margin between the 34% and 38% range and we are going to achieve that this year. But pricing pressures and cost pressures are nothing new to us. And I think if you look over the last several years, we've done a pretty good job of maintaining our margins and we intend to do the same this year as well as in the future. Matt Kather – WR Hambrecht: It's just a fact that it's trending towards that below end of that profile even though you are having a bunch of new products coming out. Is it fair for us to be thinking that you are going to despite like (inaudible) and there'll be opportunity to negotiate the prices possibly back to where they've been historically as we look into next year?

Yes. I would say, yes. It's definitely a potential. And the other thing we've always done as well – we try and (inaudible) to the bottom line. So, this year we don't use – we are not using gross margin as an excuse. The first thing we did was when the gross margin went a little less than we expected we immediately went into a cost saving initiative mode to try and mitigate or offset the degradation of current year and gross margin, and we've done that. So, again we are not using that as an excuse. We are employing cost saving initiatives to offset that. Matt Kather – WR Hambrecht: So, in the Consumer side just looking at your guidance and all of us asking questions, nobody really knows what the holiday selling season is going look like, it can have a pretty wide margin. Is there any comfort that you give just maybe any color on the Audiovox products so far on the Nevo product without giving a number for Q3 of how sales are going, comp vis-a-vis, the year in the high end of the market, and the last thing in that just about the new products in the Consumer or do you expect to have them all on the market by October 1st or the start of the fourth quarter so that you will be able to experience that full quarter of sales?

Yes. The expectation is that the new products on the Retail side will ship this year, meaning Q4. As far as the relationships go is the highlight really Audiovox is right on track. The relationship there is very strong, very sound. We are working very well them. We've already began shipping. So, that's going as we planned. And as you mentioned Nevo products, I mentioned earlier they've done very well. We've gotten both of the products out. They've received a lot of positive review from the customers and the order volumes have been strong. And we expect them to be good in the back half based on that experience. So, the previews of the Retail product also have been done, certain accounts have been brought in to gain input on the product and they are extremely interested or extremely positive about our introduction of the product. So, a lot of good things are going on, and just to come back to the guidance, I mean $305 million and $316 million is a very strong year for us particularly in this type of an economy and the earnings were I think is equally strong $1.50 to $1.57 per share is a very strong guidance for us. We feel pretty positive about what we are doing here. Matt Kather – WR Hambrecht: Okay. Great, great. I guess the last question is any update that you can give us in Asia anecdotal or I know you can't announce specific wins, it haven't press released yet, but just maybe just give us an update of the battle during the quarter and anything that you can say about your progress in that region?

Yes. I mean we've had a lot of positive events there in terms of new customers', not many of which we've been able to announce but that's okay as long as the customers' are ordering product, we are okay with that. The region is at an early stage of development. A lot of the operators there have, some of them have 0.5 million subs may be just over 1 million subs but they are the type of companies that are projected to grow substantially over the next number of years, and that market is projected to grow substantially. So, we are really excited about pairing up or becoming a trusted supplier to the major subscription broadcasters there both today and we think tomorrow because as that region grows as more subs are added, we think it's very important to be aligned with them, just like we did here a decade ago we lined up with a lot of companies that have grown substantially, and it's been a mutual success. So, we see that doing the same thing there over a number of years and we had a lot of positive activity going on there over the last 12 months. Matt Kather – WR Hambrecht: Okay. Thanks for the update Paul, appreciate it.

Sure.

(Operator instructions) Our next question comes from Jonathan Goldberg with Deutsche Bank. Jonathan Goldberg – Deutsche Bank: Hi, guys.

Hi. Jonathan Goldberg – Deutsche Bank: Just a quick housekeeping question. What's your expected stock comp for the full year?

For the full year – give me a second I'll tell you. I would state the key is in the number I gave you in the (inaudible). It should be about $3 million approximately. Jonathan Goldberg – Deutsche Bank: And then I was wondering if you could just elaborate a little bit on last caller's question he asked about Asia, I wanted to know what's happening in Europe. And if you can talk about customers' specifically give us some color there how that market is moving along both for your products and for just subscription TV in general?

Sure. The market there is much like it is here. I think on both the Consumer and the Business side, little bit tougher, more competitive but there's still strength in the market. I mean we play in an area that is not typically – it's something a little less prone to cycle because people are looking to entertainment themselves. People are driving less. There's been a lot written recently about cocooning consumers' staying at home instead of spending other things, they spend on home entertainment. TVs are still been okay. TV sales they are projected to grow say over the next five years. So, we are seeing that similarities between the US and Europe right now, whereas Asia is in sort of a different mode where there it's all about right now subscriber growth, whereas here it's more about upgrades digital upgrades from analog, HD upgrades from non-HD, PVR from non-DVR, it's all about the upgrades like subscriber growth. So, the markets are very different but there's obviously we had a growth potential in both cycles in both markets. Jonathan Goldberg – Deutsche Bank: Okay. Thank you.

Sure.

(Operator instructions) Our next question is from Neil Goldman with Goldman Capital Management. Neil Goldman – Goldman Capital Management: Hi, Paul.

Hi, Neil. Neil Goldman – Goldman Capital Management: I missed part of the Q&A, so I don't know – it sounds like your stock based comp is equal to your increased income at this point?

That's true. Neil Goldman – Goldman Capital Management: Okay. So, in essence since stock based comp is a non-cash number, we are sitting with $6 a share in cash, which mean we are selling at 11 times missed guidance with a great long-term outlook. Why don't you get more aggressive on the buyback?

We actually have been pretty aggressive. For the year, we actually have purchased about $17.5 million worth of our shares in the open market. Neil Goldman – Goldman Capital Management: We are still building cash every quarter despite that?

Right. Part because it affects us, but we do plan on to continue to buyback shares in the next two quarters. Neil Goldman – Goldman Capital Management: Okay. Is there anything more on (inaudible) I saw they are exploring now all alternatives?

Right. We obviously we – was made public that we were involved with them. I can't make any comments specifically about that deal in particular but we are actively looking at a number of investment alternatives which may or may not include them. And we'll report on that as time goes on. Neil Goldman – Goldman Capital Management: In other companies in this space of the remote or RFID or whatever?

Yes. There's a few. There's a sub set of companies that are either in our market or involved in some area of our market either distribution, manufacture, in and around remote controls, make chips for remote controls. Anything that touches our business is a potential candidate. Neil Goldman – Goldman Capital Management: Have prices come down by the sellers as they get more realistic in these times or –?

Yes. I think it has. Generally over the last couple of years, I mean a couple of years ago prices got fairly inflated as everyone remembers. And I think things have settled down. The sellers' expectations have become more realistic. Neil Goldman – Goldman Capital Management: Okay. Thank you. Good luck guys.

(Operator instructions) And there are no further questions at this time. Please proceed with your presentation or any closing remarks.

Okay everybody. In summary, our customer wins, new products is strong in existing business translated into a strong second quarter. As we continue to execute on our strategy to drive growth by leading wireless home control technology over the world, we are on track to generate record results for the full year of 2008. We'll be presenting at the Canaccord Adams 28th Annual Global Growth Conference on August 13th at 11:00 a.m. Eastern Time, and hope to see some of you there. You can also catch the webcast on our Web site if you are not able to be there. We look forward to talking to you all soon. Thank you and good bye.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your line.