Good day ladies and gentlemen, and welcome to the Year-end and Fourth Quarter 2007 Drew Industries Incorporated Earnings Call. My name is Melanie and I will be your coordinator today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session at the end of this conference. (Operator Instructions). And as a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Ryan McGrath of Lambert-Edwards. Please proceed sir. Ryan McGrath – Investor Relations Firm: Thank you. Good morning everyone. Welcome to Drew Industries 2007 fourth quarter and year-end conference call. I'm Ryan McGrath of Lambert Edwards, Drew's Investors Relations Firm. And I have with me today members of Drew's management team including Leigh Abrams, President, CEO and the Director of Drew, David Webster, President, CEO of Kinro and Director of Drew, Jason Lippert, President, CEO of Lippert Components and the Director of Drew and Fred Zinn, Executive Vice President, and CFO of Drew. I want to take a few minutes to discus our quarterly and year-end results. But before we do so it is my responsibility to inform you that certain statements made in today's conference call regarding Drew Industries and its operations maybe considered forward looking statements under the securities laws. As a result I must caution you at the number of factors many of which are beyond the Company’s control which could cause actual results and events to differ materially than those described in the forward looking statements. These risk factors are identified in our press releases in our Form 10-K for the year ended December31st 2006 and our subsequent Form 10-Q is filed with the SEC. With that, I would like to turn the call over to Leigh Abrams. Leigh?

Thank you, Ryan. Good morning and welcome to all of you on the call and to all of those listening on the internet, I won't wish any of you a happy Valentines Day so that I'm not accused of anything, but I will remind you that today is Valentines Day. Looking at this 2007, I really reflected on it. And I truly believe that our financial results for 2007 and the fourth quarter of 2007 may represent one of the highlights of my business career. When you look at a macro and an industry perspective, 2007 was truly a difficult year. The country has been in and is continuing to experience serious crisis in both the real estate industry and the mortgage markets. Not to mention the threat of a recession. All of which can affect consumer confidence and obviously their willingness to purchase a big ticket item. The RV industry spent much of 2007 adjusting inventory levels downward to correct the excesses of 2006. That saw a most of the industry misjudge the impact of the 2005 hurricanes. Industry wholesale shipments of travel trailers and fifth-wheel RV's which represent more than 90% of Drew's RV's segment sales decreased 10% for 2007, while travel trailers and fifth-wheel RV retail sales were up just under 3% through November of 2007. In the late summer of 2007 just about the time the RV dealers had almost corrected their inventory levels the subprime mortgage crisis hit with a vengeance and talk of a national recession began in earnest. However, the recent RV dealer's surveys now indicate that dealers may once again be considering reducing their inventories even further. Shipments of manufactured homes declined 18% in 2007 to about 96,000 homes compared to about a 117,000 homes in 2006. The reduced shipments were partially…

Thank you, Fred. Maloney if you could open it for questions for now, please.

Yes Sir. (Operator Instruction). Your first question comes from the line of Scott Stember with Sidoti & Company. Go ahead.

Good Morning.

Hey Scott. How are you?

Pretty good. Could you talk about new products in the quarter? Any products such as ramp doors and axles and may be talk about the run rate this year on an annualized basis versus last year in the fourth quarter.

I will start with Jason on that one and then I will stay with

Yes Scott, on axles we’re, our run rates higher than last year, I can't tell you exactly what it is, but it's higher and we are really starting to break into a couple other specialty trailer markets outside of the RV industry, so the RV's industry is actually the smallest market for the axles that we build, so these are the couple of markets that we are looking at like Cargo trailer and (inaudible) trailer and other specialty trailers are about three time the size of the RV markets. So there is a huge potential therefore and we're just getting ramped up this year for those products. On the ramp door, we did not start that project till summer last year and it's a $10-12 million market and we are reading up a lot of that right now. Our run rate there is about 70-75% of that market and we are still gaining market. So we are still doing a lot of prototyping there and stuff like that, but our market share in the ramp doors within the first year of production has been a significant gain for us.

Thank you Jason.

David you want to add anything on your side.

No, I don't think I want to add anything right now.

Okay. Kinro, I can't say has picked up market share in last several months of the existing products that they have.

Okay. And as far as raw material cost Fred, could you may be talk about the timing of when these purchases go into inventory and when they will actually negatively impact margins.

Yes, hopefully they won't negatively impact margins too badly. But there were some significant increases. I think we start to get delivery for those higher costs products where the market price of those products went up some in January, February and March. So we'll see it start appearing in our inventory into the first quarter and start impacting our costs in the second quarter. But we've tried to do as much as we could in terms of buying ahead and sourcing from overseas and looking at alternative sources to minimize the impact.

Okay and Fred just going back to the interest expense comment you made at the end of the call.

Yeah.

If you exclude that 400,000 then I mean going forward you could be looking at a 200,000 first quarter and last as you continue to pay down debt?

Yeah. We have continued to pay, in fact that swap that I talked about eliminating we eliminated right at the end of the quarter. So that benefit will start showing up at the first quarter. So it should be even less than 200,000. Unless of course we buy back more stock.

And of course we're earning interest income on the cash that we have.

All right. And I think Fred last quarter or third quarter you made some comments about cost cutting. How much it actually contributed to the quarter. Do you have anything on that for the fourth quarter?

I think in the fourth quarter we hit just about where we said we would be. I think it’s in -- at least in the10-Q for the third quarter we said we'd hit about $6.2 million for the year or $6 million for the year. We were just about there maybe a little bit higher.

That’s only on a fixed costs right?

That’s just the fixed cost. As bigger piece comes from efficiencies and from global sourcing and from the acquisitions and various other factors.

Scott, can we take some other questions and then we will come back to you?

Yeah. No problem.

Okay, thank you.

Our next question comes from the line of Katherine Thompson with Avondale partners. Go ahead.

Hi thanks. On the acquisition front, last year you talked about focussing on a few different specialty trailer acquisition opportunities. What's the update on this and do you still see opportunities out there?

Well firstly you know we can't discuss specific acquisitions. But there are always opportunities out there…

But is it still focussed at least?

It's still a focus. We continue to regularly talk to people as our acquisition criteria is very stringent and we are very patient. So we continually talk whether an acquisition occurs or not we just never know. But we are always looking.

And of course we did make that acquisition in July of Extreme Engineering. That are a boat trailer company on the West Coast.

Yeah. And could you estimate the market potential for specialty trailers?

Well there's so many different types. Right now we are focussed only in specialty trailers primarily for boats and hauling equipment. But there is all kinds of specialty trailers so market could be huge. But so far we're only in specialty trailers for boats.

And in that market for the light weight specialty trailers, Jason correct me if I'm wrong but I think it’s about $200 million. And as you move up that weight scale, you could be talking about $400 to 500 million.

And we're doing, currently we're doing about 6, 7 million a year in specialty trailers that are not marine related they're heavy hauling, light hauling stuff like that. And that markets equally big as the marines. So the specialty market in whole is a pretty significant market and we're just trying to strategies and where to take the most effective bites out those markets as we can.

And, this could be an area; we should see some additional focus this year.

For sure.

Okay.

You should know Katherine it is a fairly fragmented market. So growth there will be in little chucks likely anyway.

Of course, of course. You mentioned in your release that you had eliminated certain lower margin products in your manufacture housing segment. Is there more to come and how much was it drag, was that in the fourth quarter. And what should we expect for the first couple of quarters this year?

I think we probably eliminated most of the lower margin items as you see the effect was not significant. It raised a margin in manufactured housing is primarily where it recovered from 7 to 8%. But I think we're pretty much done with those products maybe accounted for couple of million dollars in the fourth quarter.

Okay, alright thank you. Also you said -- I just want to touch on something you said on the call. You said you're expecting more benefit on the margins in 2008. Did I hear that correctly and maybe could you explain that because it’s my understanding that most of your cost cut may be 60% to 70% done.

Yeah. What I said was that we expect to go up from let’s say 6 million and change that we experienced in 2007 to add an additional several million dollars. I mean, if you just play with the numbers that we've reported in our 10-Q, those cuts have come throughout the year. So, next year we will have a full year impact, so we may add another $2 or $2.5 million. We'll have some lower severance costs and moving costs so that will be as as well.

Plus any of the new cut.

Right, plus the cuts that came right at the end of 2007 and probably there'll be a few more.

So -- find out you could have a flat to down top line, but still the improvement on the bottom line?

Well, right. You have the efficiency improvements to cost cuts. You got a couple of million or $3 million of interest expense. So yes it should be true. Of course, it depends on the product mix and all that as well and material cost and everything else.

Yes. And one thing is little (inaudible)by the blackout period seemed a little longer?

We always black out the first day of the quarter till after the quarter end.

Okay. Great. I'll hop back in the queue. Thank you.

Your next question comes from the line of John Diffendal with BB&T. Go ahead.

Yes, good morning.

Hi! John.

Just want to kind of move further down the line when on what Katherine was talking about on margin. I mean, you had most of the margin improvement came on the RV side at 12.8. I was wondering if there is a way you could help us think in terms of how much more that might improve in terms of basis points given the sort of an annualization of the improvements there. I guess on the MA side, you ended the year at 8.5% and certainly based on these margin improvement calling at the product line, just trying to get a little bit of help on where you think the margin improvement might come on the two different sectors?

Yes, I think that most of the cuts obviously were most of the cost savings were in the RV sector, although, some in the manufactured housing segment. But, really in terms of next year's margins there are just so many factors, material costs, and pressures from customer, and had new products at the ever higher margin. It's really impossible for me to project where it will be. I would say though as I said to Katherine, if you could just -- in terms of the cost cuts we've already experienced and as we see on the table, we are talking about another $2 to $3 million in 2008 plus some other savings from lower severance costs.

And most of that, I mean, I just try to look between the segments, would most of that be falling on the RV side or?

Yes, once again it will be mostly on the RV side.

Okay, great. And, one thing you've typically talked about in the past is like price changes in the quarter and how that affected things. I guess, it wasn't much in the third quarter, is that true? Is it well in the fourth quarter?

Yes, basically and overall that was just same as inflation.

Great. And, you did a re-class on the quarters which has other line in there that kind of moves around a little bit, what's in that and then explain to us why you did that?

Well, we did it because every quarter in our 10-Q and on these calls we were talking about the manufacturing housing industry having this margin, but it would've been a little bit different if we excluded the sale of the buildings or we excluded some what we would call quested not directly related to the operations of that segment. And, that's the way our internal reports read.

Right.

So, we try to segregate those. So, as you could see what the day to day operations of the manufactured housing segment and the day-to-day operations of RV generated. The kinds of costs we're talking about again are the gains and losses on sales and facilities. There are legal expenses for current litigation. We had some due diligence cost last year, and there probably are a few other things, but that's the majority of it.

Nothing to ongoing operations.

Right. And we’ll give probably a little more detail. We also had in the first quarter last year again collection of previously reserve note of about $700,000, that’s in there as well.

For this quarter?

For the first quarter of 2007.

That was likely a year ago? And, I guess you closed 18 factories now, is there still a sense potentially that there could be more coming there or is that pretty much due what you think you can do?

We were always looking at that and as of now we haven't announced any addition ones.

Great. Thanks so much.

Okay.

Our next question comes from the line of Paul Burton with RBC Capital Market. Go ahead.

Hi! Nice job in a tough environment guys.

Thank you.

Just a little bit more on the margin, I am wondering, you talked about sort of a 20% incremental margin and I guess I'm wondering if that sort of what I should think about going forward. And would that include or not include sort of the additional 2 to 2.5 million on the RV side that you guys talking about for 2008?

Yeah. The 20% really I always call it a sanity check. We have products where it's considerably higher and products where it's considerably lower. But if you're looking across all of our products it's in that range. And it hasn't changed that much. I can't tell you really whether its 18.8 or 21.4, but it’s right in that range of 20% that you should be looking at.

Okay. Great thanks. And then wondering if you can give me a little bit of color on sort of the mix of current RV business totals, motorized going up more than it was in Q3 or what you see right now?

Motorized recently has been down fairly, heavily, I think the last month we saw was down 25% for motor homes class A particularly. You got to remember though that your motor homes with an average selling price of that $100,000. That was an increase in the number of units is a 100 millin of sales. And again we only have about less than 5% of our sales in motor homes, although we are growing. As towables we just don't know, throughout 2007 retail sales were up expect for November when they were down about 4%. We're waiting for the December retail sales which we expect to see next week sometime. And that will give us a further indication of how things are going. So it would be a miracle if they weren't down. But I would think and hoping that they won't be down as much as motor home sales have been down.

On Motor home side, I mean, that still is a relatively new market for us and we have been having significant amount of sales each year and slide outs and leveling products and some of other products and sliding storage trays, and other steel fabricated parts for motor homes. So on the Lippert side, its still a wide open market for us that we're biting off chunk of market share every year so. Even though it's down, it doesn't really affect us a whole lot.

Alright, great. Just one last question, any color on price increases that you might anticipate to see in 2008?

We really don't talk about pricing. It's a customer-by-customer situation; it’s a product-by-product situation.

Alright. Great thanks very much guys.

And our next question comes from the line of Jim (Inaudible) Research. Go ahead.

Hi Jim how are you?

Excuse me good morning and congratulations on a strong quarter and tougher like the previous gentlemen said. A lot of my question has been asked, but I guess I will first like to ask 20,000 first question about how -- how Drew is gaining market share in terms of passively versus actively in this environment? I presume many purchasers prefer to deal with you especially in this uncertain environment?

We need David Webster (Inaudible), they were effectively seeking new business. And over the years have been very successful in getting it, and they get it because we truly believe that we have terrific customer service. On time deliveries are important, we have reasonable prices, we have high quality product and we have good relationships with our customers, we work as partners with them, and then we do everything we can to help satisfy them as well as make money so that we can continue to grow and continue to keep our factories as efficient as possible.

And on that note, I mean, we all know that in this regard its conditions are extremely difficult put together (M&A) side. But I was just looking here, if you compare the year over year sales in each segment whether sales or operating profit. You guys have done a tremendous job. So if you look at a seasonal basis, it seems like everything is kind of right sized right now. How comfortable are you guys with the technology of coil spring, particularly say we’re going through next years selling season. Because I think we all know that 2008's probably just going to be -- for the industry wise its lets get through this year. I guess, (Inaudible) are speaking right now (Inaudible) congress, and it just seems like that is a lot of measures are likely to be in place for more optimistic starting season 2009. Can you just give me more of a macro feeling? I know you guys are hesitant to give guidance but just what you feel about this general environment long-term.

We're not economists. Even economists are having a tough time judging where the economy is going.

I trust you border an economist, though.

All I can say is that we've taken every step we can to reduce costs as much as we can, to repair our factories for growth when it comes and to capitalize on that growth when it really does come. So we’re – I think in a very strong position, very strong balance sheet, and very strong management team, very efficient factories, so when growth does return we'll be in a great position to take advantage of it.

Okay. So, I guess, then only one follow-up I have is, could you give us a guesstimate of the capacity utilization, your potential right now?

I guess I answer that every quarter. Our capacity rate now is one shift of eight hours and.

Okay.

And maybe not even completely an eight hour shift all the time, and when the hurricanes came we were able to go to three shits a day, seven days a week if we had to. We cannot wait longer at that period but that would certainly give us enough capacity to operate in no matter what the environment was until the time that we could reopen plants or build new plants. So, we really are just not concerned about capacity.

Fair enough, thank you very much.

Our next question comes from the line of Jamie Wyland with Wyland Management. Go ahead.

Hi fellows.

Hi Jamie.

I have got a couple of little question in here. You mentioned in the release about the 10 facilities you have for sale of a book of $9 million. Any idea what those could be worth?

Well, we would have, the 9 million dollars is already written down to what's estimate of their market value.

Okay.

Though you could never write them up, but you can write it down.

Okay. But you would expect that to be a reasonable amount what you could receive?

Yeah, some of those facilities may have been below market costs so there could be some gains. And therefore we'll have to wait and see until we sell them and if we sell them.

Okay. And I missed the start of the call, did you mention about the buyback program, obviously you haven't bought anything back.

We haven't bought anything back yet. Our blackout period ends shortly and at that time we'll make a decision what to do depending on the prices.

Okay. And you mentioned in manufactured housing, you eliminated some lower margin products. Could you tell us what that area was that you…?

I would rather not mention the products that we eliminated.

It wasn't really that we got out of the whole product line. It was just geographic regions or particular areas where we were.

Okay, got you. And as you move forward, obviously you're constantly looking at the business and there will be other facilities if the time comes that you can consolidate as well. I guess you have your hit list depending on what the volumes will be?

Jason and David are constantly rationalizing each facility. We have a very effective incentive bonus plan and we do everything we can to make sure our cost is as low as possible.

You've done an incredible job of managing in a slower environment of reducing costs at a faster pace than any downturn could enable you. You said that, you have increased earnings in a tough environment. Wonderful job, thank fellows, thanks.

Thanks.

Thanks.

Our next question comes from the line of Don Curtis with Principal Global Investors. Go ahead.

Good morning. I have two questions. First what do you anticipate capital spending to be for the upcoming fiscal year?

It is about $10 million to $12 million. It depends really on one project that could swim into the upper end or move it to the lower end.

Okay and then secondly in your prepared remarks you talked about acquiring, I guess, about $80 million or raw materials and products from overseas. Could you kindly give us an indication of what type of things those are and what might that increase to in this upcoming year?

We bring in a number of axial component parts. We bring both from India and China and we're constantly looking at additional importing opportunities, both at Kinro and Lippert.

Usually it would be a product that has more fabrication in it. So we can take advantage of the lower labor costs. David or Jason do you want to add anything to it?

We are continuing to look at global sourcing as an opportunity. Our sourcing opportunities expand China and India presently with most of what we are buying globally but we may extend Taiwan and Vietnam and some other countries as they continue to get more competitive with the Chinese and the Indians. So as a company we're looking at that kind of stuff all the time and if the products are good and the pricing is right and it passes all of our evaluations and in-house testing then we look to move more to that.

The 80 million that you've purchased in this most recent year, what would be the percentage sourced from overseas?

It’s about 20% and maybe close to 25%.

Okay. Thank you very much.

Our next question is a followup from the line of John Diffendal with BB&T. Go ahead.

Yes, just a couple of other things. Any other, you mentioned the interest rate swap, any other sort of year-end, sort of items that maybe in the quarter that you didn't express in the release that you might want to think about?

You can really tell we did put most of those types of items in that other line in the segment reporting, and I think it was just a couple of hundred thousand dollars.

It is all pretty clean. And any – Fred, any thought you have in terms of either credit issues or whatever your client base, anything that you're doing or noting about payments or anything of that nature?

I think that really – our credit situation is pretty good. We've collected receivables in about 20 days. At the end of the year it was even less, it was 15 to 16 days. I think I have mentioned before that we have kind of built-in early warning signal. We give a very big discount for prompt payments. It is really a penalty for being late. And if your customer doesn't take a 3% to 5% discount, you know they are in trouble. And right now, generally people are paying on time. There are some accounts that we have to watch. But generally things are okay.

And again we work very closely with customers. I can only tell you in the past when the situation rose, we took out bad debt and we continue to work with the customer.

And I would have to say that the credit teams at Kinro and Lippert are really excellent. They keep on top of these customers, extremely closely. And they do an excellent job.

Okay. And then lastly I think you mentioned in the release, the difference between singles and multis on the each side how they've been tending less content. Could you refresh our memory in terms of what may be the difference in terms of content between singles and doubles? I mean, obviously, two different sections versus one, but any other thing you keep in mind there?

Firstly the multi sections are generally the homes that are purchased by retirees. And those are the ones that are down. And again if you look at the three retiree states of California, Florida, and Arizona, sales in those states are down to 40%. So, obviously that means less multi section homes that are sold. Single section homes have been relatively strong, up 20% to 30% in some states. So, that’s a good sign that manufactured housing is coming back and very likely.

For the past few days in the last month it was better than 20% growth.

Yes. There is some real life in the manufactured housing industry and very possibly the people that can no longer buy the site built home because of sub-primeness are now turning to manufactured housing and turning to the single section where they can afford it. But as far as content, Fred can answer that.

Yeah, we do -- obviously we have more content in the multi-section homes. I would say that maybe 1.5 or 1.6 times of what's in a single-section home.

That’s great. And just lastly, just add my congratulations on a very good year in a tough market. Thanks.

Thanks. Leigh Abrams Thank you.

Our next question is a follow-up from the line of Katherine Thompson with Avondale. Go ahead.

Yeah one on just the housekeeping, I missed the dollar impact or the percentage impact on your swap in the quarter, could you tell that again?

It is about $400,000 of expense in the fourth quarter and that's pre-tax, aftertax sort of 240,000 or something.

Okay.

It is still pending (inaudible).

All right and then also you could give a little color on January sales. How is February starting to trend?

We haven't announced it but I can tell you there is nothing unusual going on in February.

It is a little too early for us to look at the trends now. We don't know, what you say, build the sales evenly throughout the month. So we have got to wait for the month to develop.

But again we don't see anything dramatically one way or the other.

Okay, great. Thank you.

Our next question comes from the line of Adriano Almeida with DGHM. Go ahead.

Hey gentleman.

Hi Adriano.

How relevant is January really in terms of signaling what the rest of the year might look like?

Well you really can't tell on January for two reasons. January is the month that dealers maybe start to order to build up a little bit. Manufactures start rebuilding after the slowdown from middle of November to December. And it is probably one of the slower months of the year. So, you really can't tell; and particularly in this environment. We'll start to know late February, early March to see how sales are really going and that tell us what the dealers are selling through or just restocking, so.

Okay. And then at one point in the fourth quarter, there had been some chatter about Clayton putting through some orders for low end single-wise I guess. Can you discuss that, when that's going to happen?

We really don't discuss individual customers that you would have to get from Clayton.

Okay, alright, that's all I have. Thank you very much guys.

And gentlemen, I'm not showing any further questions at this time. I'd like to turn the call back over to management for any closing remarks.

Once again, I just want to thank everybody for listening in. It was a good '07 for us and we are hoping to be able to report the same kind of thing to you in '08. So, have a good New Year and we'll speak to you at the end of the first quarter.

Ladies and gentleman, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.