At this time, I would like to welcome everyone to the Miller Industries fourth quarter '07 earnings conference call. (Operator Instructions) Thank you. I would now like to turn the call over to Ms. Alex Tramont with FD. Ma'am, you may begin your conference.

Thank you and good morning, everyone. I'd like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2007 fourth quarter and full year results which were released after the close of market yesterday. With us from management today are Bill Miller, Chairman of the Board and Co-CEO; Jeff Badgley, President and Co-CEO; Vince Mish, CFO; Frank Madonia, General Counsel; Debbie Whitmire, Corporate Controller; and [Allison Hutton], Director of Finance. Today's call will begin with formal remarks from management followed by a question-and-answer period. Please note that in this morning's call, management may make forward-looking statements in accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. We would like to call your attention to the risks related to these statements which are more fully described in the company's annual report filed on Form 10-K and other filings with the Securities and Exchange Commission. With these formalities out of the way, I would like to turn the call over to Jeff Badgley. Jeff, please go ahead.

Good morning and thank you, Alex. The 2007 fourth quarter saw a weakening US economic environment that begin to weigh in on our customers, as well as continued price pressure across a wide range of products, including aluminum, steel and all petroleum based materials. Net sales for the 2007 fourth quarter were $84.5 million compared with $116.7 million in the fourth quarter of 2006, reflecting softer demand from our customers as a result of a number of factors, including the impact of higher fuel costs, a tightening credit market and a declining economic environment. During the quarter, we took the necessary steps to more closely align our operating structure with the current demand levels by reducing our costs base and our production levels. The decline also reflects the completion of several major municipal and military orders in the second quarter of 2007, which had been contributing to our performance during 2006 and the early part of 2007. While we completed the two small government orders in the fourth quarter, we did not receive any additional orders in the period. That said, we continue to diligently pursue the municipal and military markets for new and follow-on orders and are hopeful for long-term success in this area. But obviously, we can not predict the timing of any such success. Now, I will turn the call over to Vince who will review fourth quarter and full year 2007 financial in greater detail. After that, I will be back to add some comments, following which we will take your questions. Vince?

Thanks, Jeff, and good morning, everyone. As Jeff mentioned, net sales in the fourth quarter of 2007 were $84.5 million versus $116.7 million, which is a decrease of 27.6%. Operations also decreased by 26.6% to $73.4 million in 2007 fourth quarter compared to $100.1 million in the fourth quarter 2006. This resulted in gross profit of $11.1 million or 13.1% of net sales in the 2007 fourth quarter compared to $16.6 million, which was 14.3% of net sales in the fourth quarter of 2006. Although lower sales year-over-year did drive a decline in gross margins, the impact of this volume decline was somewhat offset by our cost reduction efforts and the steps we've taken to bring production rates more in line with demand levels. In the fourth quarter of 2007, SG&A expenses decreased 10.9% to $6.4 million compared to $7.2 million for the same period a year ago. However, as a percentage of sales, SG&A was 7.6% compared to 6.2% in the fourth quarter of 2006, reflecting the lower sales levels in 2007. Total interest expense in the 2007 fourth quarter was $780,000 compared to $865,000 in the fourth quarter of last year, reflecting both the reduction in bank debt levels and lower interest rates. Income from continuing operation before taxes was $3.9 million compared with $8.6 million in the fourth quarter of 2006. During the 2007 period, the company's effective tax rate was a more normalized 36.8%, resulting in income tax expense of $1.4 million as compared to a net tax benefit of $307,000 in the prior year period, which resulted from the reversal of the deferred tax asset valuation allowance. Before the fourth quarter of 2006, the company had reported a full valuation allowance against net deferred tax assets from continuing and discontinuing operations. As previously announced, during…

Thanks, Vince. Despite some challenges in our markets, we believe we are in a stronger position to weather economic difficulties and take advantage of the eventual rebound we will see in our industry. We generated strong cash flow in the fourth quarter, further improving our cash position and strengthening our balance sheet. We continue to utilize these resources to reinvest in our business. This included continuing work on the modernization of our heavy-duty wrecker facility in Ooltewah and completion of the modernization of our car carrier facility in Hermitage, Pennsylvania. We have made significant progress on the heavy-duty wrecker facility and we expect to complete this project shortly. While we do not expect all of our facilities to operate at 100% utilization until economic conditions improve, these initiatives are creating more efficient operations that are enhancing our customer service levels and product quality, as well as improving our competitive position in the global market. Overall, the US economy is clearly going through a difficult period and the softening conditions are impacting a number of industries, including ours. We expect that these tough economic conditions will continue in the near-term, and we remain extremely cautious regarding the effects of the economy on our customer base in the coming quarters. As a result, we are currently expecting a sequential decline in sales in the first quarter of 2008 in the range of 20% and the soft demand could continue as long as current economic conditions exist. We hope to see a gradual rebound in demand in the second half of 2008 should US economic conditions improve, but we, of course, don't claim to be able to predict where this economy is going. On the cost side, volatility in pricing of commodities are at historic levels. Working in conjunction with our suppliers, we…

(Operator Instructions) And your first question comes from the line of Rick D'Auteuil with Columbia Management.

Yeah. It's Rick D'Auteuil. A couple of questions. The raw material impact on gross margins can you quantify that?

This is Vince. In percentages, over the course of the year, it had some small impact but not a real major one. Maybe, just up a little bit.

Jeff, I think you are looking more at the future, aren't you?

This is Rick D'Auteuil. I'm looking more at what you are seeing as we're getting into Q1 and whatever price increases have been disclosed by the suppliers to-date.

We are giving notifications of intent to increase price from suppliers. We're currently fighting increases in terms of amounts. So to qualify the gross margin impact on a go-forward basis at this point in time might be a little premature.

Okay. Let's try to tackle it another way. What percentage of your cost of goods are involved in the commodities that are increasing, steel, aluminum, et cetera?

Rick, this is Vince again. We haven't really disclosed that, and it's kind of difficult.

Vince, when you say its petroleum, aluminum, steel.

That's pretty much it.

It is pretty much everything.

Yeah. That's pretty much it.

Almost every part we have either has some kind of petroleum product, some kind of petroleum by-product or it's got some kind of aluminum or some of kind of steel. Do you have labor in their too?

Labor is separate. I'm jut saying if you ask what percentage is being impacted by the commodities, Rick, I mean pretty much every one of our vendors is creating something out of one of those three items. They are trying to pass-through what they are beginning to feel. We obviously are saying, well, we are a high volume customer, go to somebody else or let's talk about what and when, and obviously, we're going to have to take a look at a price increase ourselves that we're going have to pass through to try to offset these rising costs.

Okay.

Does that help you understand?

I mean direction, yes, it doesn't help me get to impact. And so, maybe if we looked at it what is labor versus materials in cost of goods?

We never disclosed that, but when you have things like chassis, I mean it's not nearly as big a percentage as materials are.

Okay.

I think if you're looking at your question, I mean we're going to do everything in our power, Rick. This is Bill Miller, and I'm sure Jeff can respond in here how we feel. We're going to do everything we can, number one, to try to control the costs. And number two is, unfortunately, we're going try to protect our margins bypassing the costs on. But that doesn't mean our margin is not going to be impacted. I mean I'm not saying, hey, we're going increase our margin, we're going to protect that, but it's a battle.

Right. You talked about the current economic environment being pretty difficult, you guys are making cost and production adjustments. Can I get some sort of quantification to what you're planning on taking out on the cost side sequentially or since the end of the year?

This is Vince again. You can see this in the K with the numbers to some extent, but we've actually reduced our staffing by more than 130 people, which hasn't had an impact. We've cut expenses in a lot of other areas.

We reduced direct labor substantially to match up to what we think the production levels are. But there are certain parts of our business when you look at our manufacturing overhead that are fixed versus variable we can't reduce them. They are kind of step functions, but we've taken care of all the variable sides. Just to give you an idea, all of the senior staff including myself and Jeff, which includes 18 people, took a 10% salary cut for next year. We froze the salaries for the rest of the salaried people and our labor increase is 1%. That's how aggressive we've been at this point.

Okay. I mean that's helpful but the 130 people that you mentioned, Vince. If I recall, you were cutting people last year because of the lack of municipal and military orders. Now, we are seeing the everyday commercial business drop off. How much of that is incremental, and if we're kind of starting with an uglier demand picture as we start this year, is how many people have been reduced in the last two or three months?

In the last two or three months, we've had a series of layoffs at the various plant. The first pass was about was about $0.50 and the second quarter where we've had some $0.80 since that.

Most of that's been since Thanksgiving as of it.

Yeah.

And the salaried people have walked in.

Yeah.

Most of it happened in fourth quarter.

Okay.

And early first quarter.

Yeah. Are you down to muscle at this point or is there any more room if the demand picture doesn't pick up?

We're concerned about cutting in the muscle, particularly as Jeff had mentioned, with the resources we've engaged to try improve our business in military, governmental and the international staff. We got a great team and we don't want to lose that -- what we've spent to get the opportunities that we have had and hope to continue to have.

This is Bill. We can just direct labor it's a variable.

Right.

The manufacturing staff, the GS&A kind of stuff, the customer service, we have, as I said, went through and took about 10% of that out on -- was that January 3, Jeff?

Yeah, I believe so.

Yeah. So it was right there at the first week of January, it might have been the 4th and whatever. We've been about as aggressive. What would you say about that, Jeff, we had that discussion?

As far as other than direct labor, and I'd like to add some color to Bill's comment about senior staff and cutting in the muscle, from a strategy standpoint, the senior staff it was not a mandatory cut, it was a voluntary cut. And the cut was made by senior staff members because they didn't want to cut into their personnel and lay more people off, four or five more people because it would affect the long-term viability of our company.

Okay.

So, if you're asking can we cut into the muscle more, I mean can we cut more? Yes. We would be cutting in the muscle. Our goal is going to be to protect profitability, but we are not, at least in Bill and my estimation, going to affect long-term possibilities for the company by doing that.

Okay. And I have one more question. As you've obviously been around a long time and ridden this cycles before, when you get into a tough economic cycle, obviously, your customers can defer purchases but they are still running your equipment everyday. What typically do you see as far as duration before they have to come back to the well and buy new?

I have being around a long time, probably about 25 years in the industry. This is kind of a strange situation. But historically, the customer's mindset is closely tied to the cash in his pocket. And when cash comes back, purchases take place. It's not really a mindset of how long will the equipment last? It's more a mindset of when I feel comfortable, a little bit of consumer confidence, I would expect, when I feel comfortable I'll start buying again. And we are fearful when we look at diesel fuel prices. I think today they are approaching $4, and obviously they trend higher than gas prices. I will figure that out, but they do. So historically, in a downturn, the business comes back when the customer feels comfortable. I don't know if that answers your question or not.

I guess consumer confidence they are not seeing their business decline I wouldn't think?

I think what they are seeing is their business…

Rising costs.

Yeah, I think there were seeing rising costs. Well, I know they are seeing rising costs, I talked to towers everyday. If you take a tower in the state of Florida that has a contract with the state of Florida and that contract is a year old, the state of Florida will not allow a fuel surcharge to that contract. So that guy is trying to manage his business squeeze, look at other areas he is spending. Now that varies from state-to-state, but it does have an impact.

Okay. That's helpful I appreciate it thanks.

Yes.

And your next question comes from the line of Quinton Maynard with Morehead Capital.

Hi, guys. How you are doing today?

Fine, how are you?

Good. Luckily a few of my questions got answered there, but kind of touching on the last thing he just add, when you think about replacement rates, trucks that are on the road and kind of an expectation of a really grim cycle right now, not wanting to count on having gotten any municipal or international business, even though we're hopeful that shows up. But if you really want to kind of get down to the bare bones and say, what is going to actually have to get purchased for my customers continue doing business? Are we talking about aiming in our revenue line or could that be $50 million in the quarter, because people really do say, hey, we're going to defer our purchases until we feel more comfortable?

Well, we could answer that a couple of ways. This is Bill. One, we've indicated as we're well into the first quarter that we believe our revenues sequentially will be down about in the range of 20% this quarter.

You are right. That then puts you at 64ish million expectation, 66 million somewhere in there.

Pretty close

We try not to do any forecasting on what might happen with our company but that's a pretty close estimate of what we think.

Got you.

Well, the first quarter is almost over.

Right. We should be able to make a pretty good guess.

All right. But do you see that as something that if the customer wanted to be really pulling it in, they could keep that level of revenue for a while or is that something that all of a sudden that's going to backdate some demand and now you get into the third and fourth quarter this year and the customer doesn't have any choice but to be increasing his order level?

Well, I think Jeff read in his statement that we're looking at that level now. Although we cannot predict, we hope that we will see the gradual increase starting in the second half. Did you not say that, Jeff?

Yes, I did.

As far as the stimulus package, I know that it's got --

That's assuming the economic conditions don't worsen out there and everybody goes to the bunkers.

The stimulus package -- go ahead, yes.

I was just going to ask if you guys have heard from your customers about wanting to take advantage of any of the tax treatment around capital expenditures for small business.

Actually, we do a publication, magazine about our company. It's called 24/7. We are pushing that stimulus package quite heavily on that publication.

I mean we'd have a pretty material cash flow impact for your customer, right?

Yes, it would.

Absolutely.

And they appreciate the accelerated depreciation, I mean these guys are mostly almost all are private companies, there is one or two. I guess they're all private.

No, they're all private.

All private right now. So, yeah, that certainly helps them. Their cash flow drives them a lot harder than net income.

As far as the AR, first of all kudos on getting that down this quarter, when you look at kind of risk in that, I've read you have a relationship where people can pushback a certain portion of that on you if they want in product, is that correct?

No.

Not exactly. That's not correct.

Not correct? Okay. I read something else. So you don't feel like there was any risk other than just the small guys going out of business, but outside its something like that, you think most of that AR is pretty solid?

Yeah. As you look at our distributors, we really don't have any of the small guys. But what we do, we have to repurchase on floor planning with Sovereign Bank in that floor planner. And if they recover the product at some point, let's say, there is some problem with the distributor, and they get the product back and they delivered to us in -- I think its original condition, isn't it Vince, or like new condition?

Yeah, like new.

Then what we will do is we will credit them for that, and we will move it, basically another distributor will be looking for that product. So we have really never had that as an issue, and this is not our first rodeo. We've been through this kind of times before. What's important to us is we have great financially strong distributors and that's always been really helpful to us.

Sure yeah, absolutely. And even that dollar amount.

I think it was down.

That's what I was reading about is that on your floor plan financing. That's limit is like $20 million or something, correct?

Yes. And even that they have to recover product, we get the product back, another distributor that's in good standing and then take the product.

Go ahead, Vince. It's a contingent liability.

Potentially you have to disclose it, we haven't. I guess the main thing is we haven't and then there were no purchases. In '06, '07 we have a net repurchase, I can't remember one.

That's what I was saying.

We had one, it was small. So, it's something we have to disclose the inventories there.

I appreciate the clarification. Following up on floor planning, you'll have to excuse me for not having as much expertise in this as I'm sure some other folks on the call do, but I was hoping if you could just walk through interest expense as it relates to floor planning because obviously we can back out from the day you carry that the majority of your interest is being tied to that, and yet we've not gotten a real clear understanding of how we can calculate it, and so, therefore, projecting it becomes pretty tough. How should we think about the calculation on floor planning interest?

Just think about it very carefully.

Okay.

What we've got in our interest expense, which for the year was $3.4 million, we got about 800 of that is on the bank debt and the sub-debt that we had for the junior facility during the year. We've got floor planning that we had on what we were just discussing, which is somewhere in the $1.8 million range. And we've also had chassis that we, you know, after a certain time we have to pay interest on that and that's something in the $1.6 million range for the year.

And the chassis number will come down this year because of the engine, pre-buy right?

Yes, probably will. It depends on what we buy, what terms we get, there is a lot factors. But then, we also make interest income, so that was some $900,000. That's kind of the breakout of that.

That interest income comes from our distributors. In other words, we're basically paying interest to the chassis manufacturer and then they pay us some portion of that.

Okay. So you're making some interest.

Basically, we got four parts in our interest.

Yeah, it also includes the cash we got too.

You got an interesting amount of cash.

This is a new thing. We haven't had that before. That's a new thing.

But it's a good thing to have, right?

Yeah, especially right now, definitely a good thing to have now.

Absolutely. As far as being able to get an rate lag, if I wanted to tie that $1.6 million in chassis interest back to a number on the balance sheet, would that be the chassis portion of your inventory?

No, you really couldn't anything directly. You'd have to do chassis that are out there that we haven't been paid for.

Once we purchase the chassis and that goes on our balance sheet and there is no interest on it.

Got you. So, is there any way to get a feeling on the level of commitment for the floor planning and chassis that you guys have?

What we might have out there, I mean some of those are sold. Customers are holding them and we get terms and we give them terms. We had not disclosed for a number of reasons the amount of actual chassis sales.

And we try not to disclose here our terms with our various people because we believe we have the best turns in the industry and we believe that's a competitive advantage and proprietary information, and we really don't want to give that information out.

That's answers my question right there. I don't want to give it out either.

(inaudible). Any feel for that?

I am sorry. We didn't catch that.

2008 CapEx guidance got a feel for where you're looking?

Well, we still got a few things left as mentioned in the K that we haven't paid for yet, a couple of million dollars of commitments. But what we've generally done, we're kind of ramping up with that the modernizations we've done, but we're generally below depreciation expense in our CapEx.

You would be safe if you threw depreciation plus $2 million probably.

Great. That's very helpful. As far as the impact of a weak dollar, I know you got the two European operations and you're trying to get something going in Asia. Is that netting out to be a positive negative that really impact you at all?

As Jeff mentioned, this is Vince, again we are trying to expand our international sales. We've got some great folks in Europe that sells not only in Europe, but all around the world. We're trying to pick that business up, dedicating new sources to that as well.

But Vince, I think that the benefit, and Jeff might go to this, is with the weaker dollar we've had some real success. We getting a lot of activity on purchases because we have an international group here in the US that sells our product internationally. And Jeff, the dollar benefit is?

Yeah. I mean certainly our core activity internationally was up.

Got you. But that in the fourth quarter didn't actually turn into materialized contracts right?

Well, when we say core activity internationally that could mean our agent in Taiwan quoting five small wreckers. And we have distributors in a variety of places across the world. Their quote activity is up of our equipment based on the weak dollar.

Okay. Just a couple of other last things. You've always kind of said total fleet miles driven is the best way to think about a long-term driver for sales for you guys in your core business. Is there any direct impact of gas prices? I think you addressed this when you were talking about your Florida guys not being able to put a surcharge, but do you feel like with most of your customers, gas prices actually drive their willingness to reorder?

No. I think what we are talking about with fleet miles, so you will understand, and the long term driver is, if you take the total fleet in US, including your mom and dad's van and passenger cars.

Trucks.

Yes. That total mileage goes up.

It could be more tolling activity.

Right.

More tolling activity, and obviously, fuel prices historically would have an impact on the total miles driven in the US. When gas is $4 a gallon, my assumption -- and since I've have never been there, but I will make the assumption -- I know I'm going to tell my wife to drive less. So my assumption is that other people will be telling people to drive less. Teenagers won't be able to drive as much. I mean it will have an impact.

Well, let's hope for some $2 gas. Last question for you, I know you've talked about what happened in the fourth quarter last year with the valuation allowance as far as tax numbers, do I understand this right though that you guys still have net operating losses, so even though you are not having to take any kind of GAAP impact that you are reporting paying your normalized tax rate, and yet from a cash impact you are not having to pay that rate yet? Is that correct or you are actually now having to pay normalized cash taxes, as well as reporting them as GAAP?

Yes, that is correct. In the K, you will see we still have something over $24 million of federal NOLs.

Actually on a cash perspective, even though you're showing paying GAAP taxes, you're getting a benefit from a cash flow perspective for a good long while relative to the NOLs on your balance sheet?

Right.

Yeah, we hope it would not last too long.

I would like you to get rid of it next quarter. I just wanted to make sure I was thinking about that correctly

But we still do have alternative minimum. We do have state taxes and we do have foreign taxes that we actually do have to pay.

And from a cash rate, what kind of expectations you have there?

Quinton, if you look on the cash flow statement with the tax expense that we showed, it was actually $7.7 million on the cash flow statement of deferred tax that was non-cash.

Perfect. Thank you so much.

Thanks.

All right, guys. Well, good luck.

Thank you

(Operator Instructions) And your next question, you have a follow-up from the line of Rick D'Auteuil with Columbia Management.

Just to drill down a little bit, I know you continue to pursue some of these non everyday kind of business, the bigger municipal orders and military orders. So is there a pipeline out there, is there a business that you're tracking or is that business pretty dead right now too?

With that, we have several tenders out throughout the world. So the business on itself is not dead and that's on the military side. And we act like international, we don't mean to mislead you, the international business, towers in Taiwan are similar to towers in the US. They buy our product. We report it as international sales. We see an increase in quote activity internationally of our everyday products. Does that answer your question?

Sure. I mean, do you look at this to be experiencing headwinds in 2008 or could this be some of these non everyday markets be, to contribute in a positive way to '08 versus '07?

I think, obviously, we can't predict the timing of military orders nor the funding. We would hope that we would get some positive impact in 2008.

Okay.

How's that?

That's fine, thanks.

Good.

And you do have follow-up from the line of Quinton Maynard with Morehead Capital.

Yes, sir, Quinton.

I was looking over the press release again, and noticed the balance sheet numbers weren't on that. I was just hoping that I can get you to repeat a couple quickly, cash balance at the end of the year?

23. The K was filed last night too, so it's all there.

Well, the K is out, I haven't seen that. I will just pick it up, won't bother you on the call. Thanks so much.

Yes.

No problem.

There are no further questions at this time. I would now like to turn the call back over to our host for any closing remarks.

We would like to thank you for joining us on our conference call, and we will look forward to updating you in the very near future on our quarter one conference call shortly. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.