Robert Wachob – President & CEO Dennis Loughran – CFO Debra Granger – VP CCC Paul Middleton – Treasurer William Tryon – Manager IR

Avinash Kant – Broadpoint Capital Inc. James Chen – BB & T Capital Markets Jay Harris – Goldsmith & Harris Jiwon Lee - Sidoti & Company Tom Lewis - Century Management Dana Walker – Canmore Investments Bob Fetch – Lord Abbott

Good morning. At this time I would like to welcome everyone to the Rogers Corporation fourth quarter conference call. (Operator Instructions) Mr. Wachob you may begin your conference.

Good morning ladies and gentlemen. With me are Dennis Loughran our Chief Financial Officer, Deb Granger, Vice President Corporate Compliance & Controls, Paul Middleton, Treasurer and Bill Tryon, Manager Investor Relations. First Dennis will dispense with the formalities and then we will get right down to business.

Thank you Bob. I would like to point out to all our listeners that statements in the conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Rogers operations and environment. These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement. I’ll now turn it back over to Bob.

Thanks Dennis. The quarter turned out much better than we had expected in early November. The higher than expected sales were driven by growth in high performance foams, power distribution systems and Durel declining significantly less than expected. For the year total sales declined by $14.5 million but the decline at Durel and flex exceeded $43 million. Looking ahead as stated in the news release we expect Durel and flex material sales to decline by $50 million to $60 million in 2008. We’ve taken steps to restructure these businesses in order to help adjust for the lower revenues. We potentially completed a transfer of EL to our Suzhou facility and we’ve transferred many of the commodity flex circuit products to our joint venture in Taiwan. However, the remaining transfers may not continue as sales volumes have declined and the production machinery at our joint venture needs long runs to be profitable. At the current level we are able to fill all flex orders from the US at our minimum staffing level of two-12 hour shifts working three days. Our strategic businesses remain strong. The continued shift by consumers to high definition TV is causing our business with the low noise, block down converter manufacturers who use high frequency materials for satellite TV dishes to continue to grow. We’re also seeing initial production of automotive lane change sensors. We expect this new automotive sensing application to be a rapidly growing area adding several million dollars of sales for Rogers’s high frequency materials in 2008. The wireless infrastructure business is expected to remain sluggish, except for network builds occurring in Brazil and India. Any infrastructure growth will be in 3G and WiMAX systems as 2G sales will continue to decline. Finally high frequency material sales for back planes, in backbone internet switches are expected to continue growing. The addition of a new polyurethane foam machine in Suzhou was very successful with the new capacity coming on stream in Q4 allowing us to achieve record sales at high performance foams. As more products are qualified on the new equipment we should be able to reduce our finished goods inventory for polyurethane foam. The biggest advantage of the new equipment is it will allow us to better serve our Asian based customers. For all of 2007 we introduced 12 new products with potential 2012 sales of over $170 million. New products sales in 2007 totaled 35% of sales or about $150 million. It is our efforts in new business development; our new thermal management system business is an example and our new product development that will drive our growth over the next five years. We continue to believe that a long term 12% compounded annual growth in sales is attainable. I’ll now turn it over to Dennis for the detailed results.

Thank you Bob and good morning again to everybody. Rogers finished 2007 with strong results in fourth quarter for both sales and EPS. And exceptional results in balance sheet management and cash generation. These results were needed to ensure a solid base for an upcoming 2008 that has us facing the certainty of having to overcome significant loss of sales and profits from our Durel business as well as the uncertainty of a global economy that has everyone wondering where it will take us. In sales our fourth quarter achieved a level almost $8 million above the midpoint of our guidance range with strength across all reporting segments except for printed circuits which experienced a slight fall in demand during the fourth quarter. Earnings per share of $0.48 per share reflected the highest manufacturing margin of the year at 31%. Our businesses culminated an outstanding year of balance sheet improvement with inventory levels reduced by over $22 million from the peak early in the first quarter, a reduction of 31%. In addition accounts receivable was maintained at approximately 67 days despite continued pressure for extended terms in Asia. Free cash flow of over $34 million was generated representing a high point for the last 10 years and a fourth straight year of improvement. Overall the fourth quarter of 2007 Rogers reported earnings of $0.48 per diluted share from continuing operations for the fourth quarter of 2007. This compares to earnings from continued operations of $0.80 per diluted share for the fourth quarter of 2006. The year over year change is attributed primarily to lower sales and the resultant loss contribution related to the Durel business decline. In addition higher commercial expenses were experienced in the fourth quarter of 2007 resulting primarily from additional professional services fees and a number of charges isolated to the fourth quarter. Going forward in 2008 we expect our quarterly average SG&A costs to be approximately $17 million with the first quarter of 2008 approximately $1.5 million higher than that target due to higher equity compensation expense during that period. The fourth quarter of 2007 sales total of $108.7 million represents a $12.2 million or 10.1% decrease from the same period in 2006. With the decline being driven primarily by lower revenues in restructured businesses, Durel and flex totaling $20 million, which offset growth in our high performance foams and power distribution systems business units. Sequentially total quarterly sales for the company were down slightly at 0.8% with small improvements in high performance foams at 2% and custom electrical components at 4.8% offset by a quarterly decline in printed circuit materials at 7.5%. As reported in our earnings release the custom electrical components sales level for the fourth quarter was supported by higher volumes from mature cell phone programs totaling approximately $10 million to $15 million on an average quarterly basis which we do not expect to continue in 2008. Fourth quarter 2007 gross margin was 31% versus 28.4% for the fourth quarter of 2006. For the full year of 2007 and 2006 the gross margin percentages were 26.8% and 31.6% respectively. 2007 results include approximately $7.9 million in inventory charges and accelerated expense related to the restructuring activities undertaken in the second quarter. In addition operating margins for 2007 were achieved while reducing inventory over $22 million since the first quarter. Selling and administrative expenses for 2007 and 2006 were $73.2 million and $62.2 million respectively. The increase was driven primarily by restructuring charges of approximately $2.4 million, increased equity compensation charges and increased professional service fees as well as annual merit increases. In addition our planned spending levels for 2007 were based on expectations of sales increases that did not occur and the spend rate was not adjusted until the second half of the year when we implemented our restructuring and cost reduction programs. Research and development expenses were $7.4 million in the fourth quarter of 2007 as compared to $6.3 million in the fourth quarter of 2006 and increased slightly from $24.2 million for the full year of 2006 to $24.7 million in 2007. As a percentage of sales research and development expenses were 6.8% in the fourth quarter of 2007 as compared to 5.2% in the fourth quarter of 2006. On a year over year basis R&D expenses as a percentage of sales were up slightly from 5.4% in 2006 to 5.7% in 2007. We continue to target a long term reinvestment percentage of approximately 6% of sales into R&D although year to year expenses may be slightly above or below that target depending on the timing of cash flows from major initiatives. As commented by Bob in our press release we have a full portfolio of technology and new business development projects to support our long term growth targets. Other income and expense which includes income from our joint ventures and royalties less other expenses amounted to $3.1 million for the fourth quarter of 2007 compared to $5.8 million in last year’s fourth quarter. We experienced $0.6 million in higher JV income due to better performance from our foams joint ventures, higher commission income from our PLS joint venture of $0.4 million offset by lower royalty income and an increase in other net charges related primarily to the realignment of our legal structure in China as well as certain other one-time charges across our businesses. Rogers 50% owned joint ventures had fourth quarter sales totaling $35.3 million a record for any quarter up 20% from $29.4 million in the fourth quarter 2006 led by strength in our two polyurethane foam joint ventures. As a result overall equity income in unconsolidated joint ventures increased in the fourth quarter of 2007 as compared to the fourth quarter of 2006 from $2.6 million to $3.2 million. On a year over year basis equity income decreased slightly from $8.6 million in 2006 to $8.1 million in 2007. This year over year decrease is due primarily to a combination of lower flex circuit profitability through our RCCT joint venture somewhat offset by improvements in Rogers INOAC Suzhou Corporation, one of our high performance foams joint ventures during 2007. The company’s 2007 affective tax rate including restructuring costs was 13.2% and excluding restructuring charges was approximately 22%. The company believes the tax rate for 2008 will be in the 28% range as foreign tax holidays continue to expire. Turning to our financial position, Rogers ended the fourth quarter with a cash and short term investment position of $89.6 million compared to the third quarter total of $66.1 million. This increase in the quarter stemmed largely from collection of accounts receivable and substantial reduction in inventory levels, $8.2 million during the quarter, offset by stock repurchases of $2.9 million and capital expenditures of $10.9 million. Capital expenditures were approximately $31 million for the year and Rogers anticipates capital expenditures in 2008 of approximately $35 million. In accordance with the $50 million stock buy back authorization issued by the Board of Directors on February 15, 2007 the company purchased approximately 67,000 shares of stock for $2.9 million in the fourth quarter of 2007 bringing the total buy back under the program to approximately 810,000 shares at a cost of $35.5 million, average cost of $43.83 per share in 2007. On February 15 of 2008 Rogers Board of Directors approved a new $30 million buy back program. Our balance sheet continues to be a strength of Rogers especially entering a period of questionable economic vitality. We continue to have no outstanding debt although we are supported by available credit facilities totaling $100 million. Our current assets ratio maintained an excellent level of 3.6 times current liabilities. Inventory levels ended the quarter at $51.2 million compared to $59.4 million at the end of the third quarter 2007. With the further reduction during the fourth quarter we achieved a total reduction of over $22 million for 2007. accounts receivable ended with 67.3 days outstanding which is an increase of eight days or 13.4% compared to the 59.3 days at the end of the third quarter, with year collection timing being the only real major factor in that difference. We expect to average between 60 and 65 days in 2008. All totaled we are very proud of our performance in asset management, capital spending control and cost reduction efforts in 2007 which provided Rogers with cash generation totaling the best level in the past 10 years despite the operating performance issues encountered and overcome during the year. This concludes my remarks and I’ll now turn the call back over to Robert Wachob for closing remarks.

Thank you Dennis, now we’ll entertain any questions.

Your first question comes from Avinash Kant - Broadpoint Capital Inc. Avinash Kant – Broadpoint Capital Inc.: Good morning Bob and Dennis. I had a few questions. In your prepared remarks you did talk about roughly a $50 to $60 million drop in revenues versus last year due to certain product lines now and you said it may not be compensated. Does that mean we should expect a year over year revenue decline in calendar ’08 and if at all yes, by how much?

We do expect a year over year decline as we don’t believe the other businesses can grow by $50 million to $60 million in this current environment. We have not made a projection as to what the decline will actually be. We’re going to have to take this one quarter at a time as the economy I think is going to be changing quite a bit during the course of the year. Avinash Kant – Broadpoint Capital Inc.: Given what you see at this point though, would you expect and especially the traction from the new products would you expect the second half to be better than the first half in calendar year ’08?

I don’t know because I don’t know what the economy is going to look like. We will be driven by the US economy. Avinash Kant – Broadpoint Capital Inc.: But barring any broad economic slowdown seasonally, how have things tracked for you?

Seasonally the second quarter generally is the lowest quarter and the third sometimes is the highest and sometimes the fourth is the highest. It kind of depends upon how our customers are feeling; bullish or not so. The first is generally just mediocre as you can see based upon our forecast. Avinash Kant – Broadpoint Capital Inc.: And second typically the weakest right?

Yes. And this year I expect that Durel will have it’s most significant declines in the second half because the second quarter is generally when phones reach end-of-life and third quarter is when new ones begin to ramp and there’ll be more reaching end-of-life and there will be new ones ramping. Avinash Kant – Broadpoint Capital Inc.: In terms of margins, your gross margins improved significantly this quarter. Should we expect similar margins going forward in calendar year ’08 and how would you guide us there?

We expect even with a sales decline to be able to hold the gross margins in that same relative area plus or minus a point. Avinash Kant – Broadpoint Capital Inc.: Very good. Just looking at the quarter just one clarification, if we took out inventory charges for quarter I think the operating EPS would have been $0.49 for the first quarter right, not $0.48.

Yes, I think that’s about right because the accelerated depreciation charges were pretty much offset by the sales of inventory that we thought was obsolete but turned out they bought it anyway. Avinash Kant – Broadpoint Capital Inc.: The joint ventures, how should we expect their business, would it be tracking in line with your business?

Yes. Avinash Kant – Broadpoint Capital Inc.: Okay. Thank you so much.

Your next question comes from James Chen - BB & T Capital Markets James Chen – BB & T Capital Markets: On the new products can you give a little bit more details on your projects like some are management solutions or [battery separators] are they contributing, how much sales they start to contribute and what’s your expectation, your time line, if you can update on those couple of major new projects?

Sure, a couple of thoughts here. We expect the thermal management business in 2008 to be in the $2 million to $3 million range and then double or triple that in 2009. I do not expect any business in the membranes as that product is still just being evaluated so these things take time. Let me give you a couple of examples of some new products and what their sales history look like. This would be by year, $400,000, $400,000, $600,000, $1 million, $1.3 million, and $1.5 million. Another one which was much more successful was $200,000, $300,000, $1.5 million, $4.4 million, $7.6 million, and $13.3 million. One of the issues here if you noticed, both the one that became very large and one that didn’t they looked pretty similar during those first two years. So it’s hard for us to tell early on what the big winners are going to be. And as you can see by the string there once this starts, this continues for quite a long time. We don’t actually count something as a new product until it reaches $0.5 million worth of sales because if used a much lower number we’d never have anything that, our new product sales would always be very low. Because sometimes the gestation period is two or three years here. So other things to give you an example of things we expect to contribute, some in 2008 but significantly more in 2009 and 2010. There is a high frequency material that is 3 and 4 mil stick that is able to deal with very, very smooth copper which we’ll find a lot of applications in the digital marketplace. And we have an antenna material which has received some good evaluations. I talked about the thermal management systems there with the aluminum silicone carbide and the thermal interface material. On the foam side, you can look at Soft Seal. Soft Seal is a 5 lb. per cubic foot product. It actually has one of the quickest starts that we’ve ever had in that it exceeded $1 million in its first year. We’ll see how that continues. I expect it to continue. We have a new material for flexographic printing specifically aimed at the corrugated market. We have a 9 lb. per cubic foot pour on material that has already achieved a couple million dollars worth of sales and appears to be growing very quickly. On the silicone side, we have R-grips and I would expect that to break the $1 million mark in 2008 and achieve several million dollars in 2009 and 2010. And then of course a couple of silicone products aimed at the transportation marketplace specifically trains. One is an underlayment for floors and the other is the gangway material meeting all the new flame and toxicity requirements. So there’s a few of the products that we expect to contribute. The part I wish I knew which is which one’s the big winner. You never seem to know that early. Well we think we know and it generally turns out something else was the big winner. James Chen – BB & T Capital Markets: So I guess bottom line is most of those projects, still checking what’s your expectations so far but they are still a couple of years from now to really realize the major benefits from those new projects.

Right. James Chen – BB & T Capital Markets: On the CapEx guidance, I think you guys raised up a little bit on this CapEx guidance. Is there any specific reason for that?

The biggest single piece of capital in 2008 will be the construction of a building in China for our high frequency and the installation of multiple presses there and associated equipment. That will be almost half the total capital spending and the rest can view mostly as maintenance.

And we did accelerate that project a little bit to try to get a little more full benefit quicker so the construction and ordering of equipment, but I think we had talked maybe in the mid 20s from a preliminary estimate so that did more to 35 when we pulled some more of that money into ’08. James Chen – BB & T Capital Markets: That’s helpful. Overall on the business in China that [inaudible] the second line over there, can you give some color in terms of how fast the sales ramp up or how quick you can load up the plant in China. Is that something, if you listen for, if the demand is strong you can load up within a couple of months of startup or you have to wait for a year or so?

No we actually during the fourth quarter we ran a full shift and we have enough business in China to fill that machine, if we were to make everything that’s sold in China to fill that machine to 50% but we will make sure that we are balancing production between the US and China, taking into account intellectual property issues and optimizing the workforces in each location. We will endeavor to minimize overtime in the US. James Chen – BB & T Capital Markets: On China again, is there any impact for the weather in January, is anything ….

We found out our employees can shovel snow a lot.

Yes, our roofs were designed to hold a maximum of 20 cm of snow and we had 22 cm so I have some pictures of 40 of our salaried employees shoveling a roof. But we did close for two days. James Chen – BB & T Capital Markets: Only two days so you won’t have any financial impact there. And on the tax rate, you also increased guidance up to 28% for ’08, you talk about is the tax holiday, what kind of trend, is that the tax holiday keep expiring and are we expecting moving up more in 2009 and forward or do you have more tax holidays than that?

I believe the first time we projected for ’08 we did say in the 26% to 28% range and as we’ve been there multiple years and looking at the allocation of our income between taxable entities we’re looking at next year’s mix and we still have a good deal of profit of China that is taxed at US tax rates because the IP is owned. So going forward we have active projects looking at how to formally swing profitability to a lower tax entity between some of our IP related products but it takes a little bit of research to make sure that we’re not risking any long term impacts of putting IP and ownership in entities where we’d rather not have it long term. So we hope we can beat that rate long term but that’s where it sits right now. James Chen – BB & T Capital Markets: Okay great, thank you for help.

Your next question comes from Jay Harris - Goldsmith & Harris Jay Harris – Goldsmith & Harris: The sales decline that you’re projecting in Durel and flexible circuit materials how much of that do you think will be realized in the first quarter?

I expect about a $10 million decline in the first quarter. Jay Harris – Goldsmith & Harris: And you indicated to an earlier question that you thought the majority of the decline would occur in the last half of the year?

Durel will accelerate in the second half. Jay Harris – Goldsmith & Harris: Well if you consider all the materials declines, would the second quarter be, would it be spread evenly on a quarterly basis over the year or would we have less in the second quarter then the first and then the majority in the last half.

You know this is all predicated on when things reach end-of-life. As we’ve all experienced in the last two quarters our customers don’t seem to be able to get this even close. And so I’m kind of at a loss. I can tell you what they tell us. But so far it’s been so wrong that we have twice now exceeded sales by 8% in the quarter because it didn’t happen the way our customers said it would. Jay Harris – Goldsmith & Harris: Is that due to the fact that they’re phasing out certain product lines more slowly?

Their sales are turning out to be better than they thought. And one of the issues here is I’ve been through this before. This is typical, it declines more slowly than they say but one day it stops, it doesn’t go to a slow decline it stops. So the cliff is sharp and key is when do you think it’s going to be. We’re guessing second quarter. Jay Harris – Goldsmith & Harris: What is the, what percentage of your cost of goods sold comes out of China now?

I think we produced about 25% of our sales in China. Jay Harris – Goldsmith & Harris: And how will that ratio change over the next year?

I believe that should go up to about 30%. Jay Harris – Goldsmith & Harris: And where in your share buy back program, you spent all that money last year between $43 and $44 a share….

That’s what it averaged; we spent it at a wider range than that. Jay Harris – Goldsmith & Harris: I hear you, given the fact that the stock is so much cheaper at this point in time, are there factors and if so what are they that will limit the speed with which you resume your share buy back program. Are you concerned about trying to maintain your net worth above a certain level or seeing it grow on a consecutive quarterly basis or don’t you care?

We have historically only purchased shares during the open window which is three weeks after the announcement and we are at that point, we’re constrained by the rules associated with what percentage of the shares traded we can buy. But we are also looking at a corporate 10B5-1 plan. Jay Harris – Goldsmith & Harris: So there are no balance sheet constraints in your thinking at all?

Absolutely not, this is only a small portion of the cash on hand. Jay Harris – Goldsmith & Harris: And when do you think you’ll be filing your 10-K?

Next Thursday. Jay Harris – Goldsmith & Harris: Thank you very much.

Your next question comes from Jiwon Lee - Sidoti & Company Jiwon Lee - Sidoti & Company: Knowing what we know now how should we look at your high frequency circuit material especially in conjunction with several key markets that are important to you and some of the new smaller markets that you’re trying to target?

We expect to see growth in 2008 in the single-digit area. Jiwon Lee - Sidoti & Company: Okay. In terms of your sale or moving of the flex circuit materials to the joint venture, could you give us an update to where you are in terms of your negotiation there?

The high volume stuff has been moved. But some of the other things have declined to the point at which we’re probably not going to move it because it’s not economical to make it on the machinery that exists there. Those machines run 2.5 times faster than ours in the US so we need some pretty high volume stuff to make it worthwhile turning it on. Jiwon Lee - Sidoti & Company: That’s helpful. In terms of your PORON can you give us some sense as to your joint venture, where they are running in terms of their own capacity including their new line in China?

There was a point during the fourth quarter where our joint venture in China was completely full and our machine was being utilized to make some product for them. Jiwon Lee - Sidoti & Company: Your machine in China you mean?

Yes but now that there is a new machine in Japan that was started up in the fourth quarter but only had limited availability because there were only a couple of products approved. That capacity constraint in the joint venture will go away as that new machine comes up. But we will also be greatly limiting the amount of material we’re going to make on a machine built in 1983. It’s only half as wide and runs one third the speed. Jiwon Lee - Sidoti & Company: And the sales and distribution between you and the joint venture, how does that roughly work?

If it is an Asian headquartered company, that is our joint venture’s customer. If it is a US or European or Chinese headquartered company, it is our customer. Jiwon Lee - Sidoti & Company: And finally Dennis your options expense, should we look at host first quarter expenses sort of kind of similar to what you did last year? In other words the first quarter was a bit accelerated and should we expect that level to be cut more than half going forward? How should we look at that expense?

What happens in the first quarter is an accounting issue. Anyone who receives an option who is age 55, because they could retire and because our options fully vest upon retirement, we must account for the complete expense in that quarter as opposed to amortizing it over four years which is how the options vest. So one thing to keep in mind is that as we began 2006 we had very little in the way of option expense so one quarter of the expense in 2006 occurred, in 2007 it was one quarter of 2006 and one quarter of 2007. Then in 2008 it will be one quarter of 2006, 2007 and 2008. So in 2009 we will reach a plateau. So then it will continue to grow somewhat although as you know option tranches also drop off.

In my comments I had said that just to reiterate for everyone, we were looking at about $18.5 million to $19 million in the first quarter and then in the range of $17 million, total SG&A. That impact that I had mentioned there was the equity piece of that being heavier in the first quarter versus the remaining three quarters. Jiwon Lee - Sidoti & Company: That’s very helpful and clear, thank you very much.

Your next question comes from Tom Lewis - Century Management Tom Lewis - Century Management: First question, talking about your printed circuit board decline, I was hoping you could shed a little light on the extent to which that was, can you tell the extent to which that was seasonal in nature or were there other factors at work, end-of-life and such.

The decline, the majority of it is associated with the flex and the flex materials have become commodities. There is huge excess capacity with the Korean manufacturers having built a lot of new capacity and they seem to be able, willing, I shouldn’t say able, seem to be willing to just keep taking the price down regardless. So we’ve seen a 20-25% price erosion during the course of 2007. On the high frequency side, sequentially sales were down some and that was due to softness in the infrastructure for cell telephones. Which is pretty normal in the fourth quarter. It always seems to be inventory adjustment time. Tom Lewis - Century Management: Yes, there seemed to be a pattern this year that in September and October people were marveling at strength relative to seasonal expectations and by December it seemed to be ending early and that would, but it sounds like there’s other factors at work in there too which you’ve described. Also on the matter of your inventory coming down by $22 million, on the one hand I’m thinking, inferring something detrimental as you go into inventory levels, on the other hand I heard a potential positive in perhaps you sold some inventory that you’d marked down as obsolete. Can you tell us what the net benefit or whether that was a plus or minus for you?

Absolutely no negatives in that connotation. We did start the year with heavy inventories in both our Durel and our power distribution systems and I think our foams business is probably the leanest. But it was all good for the year. We basically brought every business down to levels that they can sustain the global supply chain. Some of the benefit has been being able to produce PORON in China for example; you have less in transits. And we hope in 2009 even our high frequency business will have less in transit when we start manufacturing there. So to us in the 8.5 to 9 week range is where we got to and we’re targeting to move that down in 2008 also as we lean out these places. And as they get used to operating with leaner inventories. It’s a learned process to get the forecasting people, supply chain people to be moving quicker and leaner and getting those dollars out of the system was a positive to us completely for ’07. Tom Lewis - Century Management: Okay so you spoke earlier, you mentioned the prospect of inventory coming out of high performance foam, but are you suggesting that there’s room ahead on this lean curve, a broader across the enterprise and on that same, in the same vein are there any other factors that are going to affect your working capital requirements other than obviously the pace of business?

As we produce more in China, our inventories will come down. The way to think about this is it is six weeks on the boat from the US to China. Our lead times are generally two weeks so you can eliminate, by making it in China, in other words, making it where the customer is buying it allows us to reduce our inventory significantly and over the last few years as our sales grew dramatically in China our inventories went up because we had to sell from stock and we had to guess as to what they were going to buy so the total transit time was eight weeks; six on the boat and two to get it off and through customs. So that’s why it’s going to keep coming down.

I just want to make sure I clarified, our high performance foam business is our leanest business totally in inventory so what we would look to avoid is actually building inventories from that level as they grow further in Asia so to me they stay as lean as they are and some of our other businesses that are moving bigger chunks of their manufacturing like high frequency and even our power distribution business which has operations in China as they grow, most of that manufacturing will be in China and keep their levels lower.

I expect also as, if indeed the economy slows, then once again any more of our suppliers will be willing to put in consignment inventories. It’s a cycle we go through. We always ask for consignment in good times they say no, in bad times they’re anxious to try and lock us in. Tom Lewis - Century Management: The last question, its just a little arcane, but the thermal management caught my attention for the first time in, that could mean a lot of different things, is that an electronic application or are we talking about people keeping their feet warm?

It’s an electronic application. The aluminum silicone carbide for example is used as lids for power amplifier chips used in cell phone infrastructure, for large server chips that generate a 100 watts of heat, those kinds of things. And the thermal interface material actually is injected underneath the chip inside the package so if gives you a continuous thermal transfer from the chip to the package to the board. Tom Lewis - Century Management: So by injected you’re saying that it sounds like it’s something that gets in there and goes in liquid and solidifies?

It’s a grease.

It’s a grease. The R&D guys hate it when I call it grease. Tom Lewis - Century Management: Sure but some grease we can all understand. Okay, thanks a lot.

Your next question comes from Dana Walker - Canmore Investments Dana Walker – Canmore Investments: Now Bob you didn’t want to mention that heating pad application you have with the national recall going on for Icy Hot?

No, he’s sitting on that pad right now. Dana Walker – Canmore Investments: With some very well noted dislocation in mobile handset market share that has been taking place before our eyes what affect did that have on your business both in terms of sales as well as logistics?

It actually affected Durel and the flex business. It had no measurable affect on the high performance foam business. Dana Walker – Canmore Investments: And the affect on Durel, on flex would have been negative?

Both Durel and flex are negative. Dana Walker – Canmore Investments: You’ve seen the benefit of the end-of-life not ending quite as quickly as you might once have thought, what type of expectations are you now building. You said that year over year you expected about a $10 million decrement in Q1, how does that look sequentially?

We plan on Q3 being substantially lower than Q2. We’ll have to wait and see if that happens but that’s what we’re planning on is major end-of-life in Q2. Dana Walker – Canmore Investments: But if we were to compare your ’08 first quarter to your ’07 fourth quarter, in Durel and flex, how might that look?

Oh those together are down about $10 million. Dana Walker – Canmore Investments: So the $10 million you said it before, is a sequential number, it’s not a year over year number?

Yes.

It would be a lot worse year over year. Dana Walker – Canmore Investments: Recognizing that these are fleeting dollars is there some chance that the tone of business there sustains somewhat longer, somewhat higher than you thought?

Yes. We’ll have to see what happens here as, we had some issues with a contract that we were unwilling to sign. We made an independent proposal which apparently was acceptable. So we are in the process of bidding on some things that we were not allowed to participate in. We’ll see what happens, who knows the end result. Dana Walker – Canmore Investments: The $40 to $60 million in potential decrement year over year, that’s a higher number than we’ve, I think we’ve heard before and I suspect that’s because you’ve had more benefit in the latter part of ’07 than you once thought. Robert Wachob Yes. Dana Walker – Canmore Investments: Can you remind us how you’ve restructured flex and Durel so that I believe you had a tough time making money, certainly in the early part of the year in both of those businesses in the US, can you talk about the total company affect though even on lower volume as you see it?

Durel has, except for the second quarter when we had the write-off; Durel was profitable in every quarter and actually generated $25 million worth of cash. Flex on the other hand lost money every single quarter. What we did in the restructuring is that we reduced the employment dramatically at flex to the point at which we were operating three days, 24 hours, because the machine once it’s turned on, must run continuously. How we get down to in effect 2 12-hour shifts and we have written off the majority of the assets of flex. Durel we reduced the employment in the US by several hundred. In total I believe we reduced employment across the company by more than 300 people during the second quarter and a little bit of the third. We have ceased manufacturing, ostensibly ceased manufacturing any Durel product in US. It is all manufactured in China except for a couple of part numbers which we significantly raised the price. So those are the main things we did, we took about $8 million, $10 million out of the corporate expense line also in the second quarter and we saw some benefit of that in the second half, not all of it, some of it. Those are the things we did anticipating that these two businesses would be substantially smaller and we had to resize the headcount and the assets to match much lower expectations. Dana Walker – Canmore Investments: If Durel made money in ’07 though now that you’re fully in China with a lower headcount how would you expect Durel’s bottom line comparisons to look?

I don’t believe it can make as much money as 2007 because sales are going to be very substantially lower but I would expect at least in the first half that it will be a money maker and then we’ll have to see about the second whether or not we have to take any action. Dana Walker – Canmore Investments: And I believe you’ve made the argument that your flex business as it is now constituted ought to be a positive swing for you.

Yes.

When Bob talks about these businesses we do fully allocate corporate overhead to both those business units. They’re obviously absorbing a smaller share because some of its based on sales actual usage of services, those kind of things but even in a constrained manner in ’08 Durel will be a positive cash contributor and contribution contributor with the overhead structure we’ve got set for ’08. And flex to a smaller extent would be the same case. Dana Walker – Canmore Investments: How does having to sustain some level of production to meet the that which can’t be run on a rapid line in Taiwan, how is that going to affect your, the way you expect flex to play out from a bottom line standpoint?

It really has no affect because we are able to make those products with the existing workforce. In other words we were down to the minimum workforce but they were not fully occupied. They are more fully occupied by making some of these products that we did initially plan to transfer so it’s a wash because there’s little difference here. We can think of it as no labor associated with the incremental sales. Dana Walker – Canmore Investments: The $8 to $10 million in corporate expense reduction, where would we see that on your income statement?

Some of that and I’ll use maybe half of that total is flowing through as business unit, profitability improvement and their plans for ’08 versus ’07 to a gross margin and operating margin also for those businesses, some of it being SG&A and the rest is in that, and when you look at our ’07 SG&A versus which we were sitting at I think at about $73 million and us being able to try to predict a number of $70 million. Unfortunately in that number of $70 million we’re going to have increased equity compensation, merit increase roll throughs, but that number as we look at next year versus this, we’ve probably got that $4 million or $5 million in corporate SG&A being offset by those other costs to allow us to come down $3 million even net of cost increases and equity comp. Dana Walker – Canmore Investments: Although Dennis in your explanation about the affect that bringing inventories down you talked about it not being a negative because of what it does to the company’s invested capital and liquidity as well as improving your overall operations, in the past and maybe this is not something that we should get used to looking at but you’ve made a point of comparing the affect that either higher inventories or lower inventories sequentially had on your P&L because of the affect that it had on the way you put costs into inventory. I presume we’re going to get away from that because you’re hoping to run on a leaner basis on a go forward.

Without running leaner in ’08, Bob indicated in his earlier comment that we expect to be able to stay at about the same manufacturing margin at 31% what we achieved in the fourth quarter and looking at ’08 we think we can get there also. So without reducing that inventory, part of that 31% is actually producing the material we sell in ’08 so that if we ended up building inventory in ’08 which we wouldn’t want to do from a working capital standpoint, you might even improve on the 31%. We think that part of the improvement in ’08 will be maintaining production at the sales levels as opposed to declining inventory and that does offset some of the loss contribution from Durel and flex in our overall ability to sustain that 31%. Dana Walker – Canmore Investments: If we were to net all this out, and as an addendum to an earlier question asked, reducing inventory has a negative affect on your gross margin.

Yes. Dana Walker – Canmore Investments: Even though there may have been some low cost inventory or some written off stuff that flowed through it might have partly offset that.

That’s right. Dana Walker – Canmore Investments: So you’re gross margin in Q4 if you were not bringing inventory lower by $8 million would have been higher than 31?

It absolutely would have been. Dana Walker – Canmore Investments: If you therefore maintain a static relationship between take away and inventory levels in ’08 if your operations properly reflected what was going on in the mix of your business, there might be a positive bias to your gross margin in ’08, understanding…

All things being equal that’s correct and I think that in our estimation of ’08 looking at the negatives that we will have to offset in terms of the gross margin lost a big chunk of positive contribution from Durel which on a contribution basis was higher than that 31% is something that we’re having to offset. Dana Walker – Canmore Investments: Understood. Thanks.

Your next question is a follow-up from Avinash Kant - Broadpoint Capital Inc. Avinash Kant – Broadpoint Capital Inc.: Just wanted to double check maybe I didn’t get it right so when you say most cell phones come to end-of-life in Q2, does that mean the impact on your revenue is in Q3 or Q2 itself?

Q3, there’s always impact in Q2 because it’s a low quarter but the biggest impact would be Q3. Avinash Kant – Broadpoint Capital Inc.: For the end-of-life at least, that will happen in Q3 right?

Well sometime during the second quarter multiple phones will reach end-of-life. It won’t be on April 1st, it’ll happen before June 30th. It’ll be somewhere in between so you’ll see some affect in second quarter, full affect in third quarter.

And that’s our current thinking based on limited information from our customer base. Avinash Kant – Broadpoint Capital Inc.: Now Dennis you talked about R&D expenditure being roughly 6% of revenues and you say it could vary, what would you expect R&D to be in calendar year ’08?

Six percent, absolutely. When we say variability its quarter to quarter but we’re absolutely trying to target 6% in total and we’ve underachieved that due to spending, I think we were 5, 7 I believe in ’07 so plus or minus a couple of percentage points we’ve been within that target. Avinash Kant – Broadpoint Capital Inc.: If I’m looking at it on a quarterly basis in the fourth quarter your R&D went up significantly, what was that for?

I believe we had some technology acquisition costs that got expensed all in the fourth quarter as opposed to be spread throughout the year so that was just a one-time quarterly blip as we would describe it. Avinash Kant – Broadpoint Capital Inc.: And what’s the share count assumption you have in your next quarter guidance, in the March quarter guidance?

Same as year end. Avinash Kant – Broadpoint Capital Inc.: Okay.

And that assumes a dilution based on the stock price where it’s currently at today.

One of the issues here is, we’re at a point at which I don’t think any more options actually come out if the stock drops but some could come back into the mix if the stock goes up into the 40s. It’s what the dilution calculation is all about. How many options do you count? Make it low enough we can lower the share count. That’s not my preference. Avinash Kant – Broadpoint Capital Inc.: I would agree. Final question, in terms of visibility though, how much of visibility do you get in overall business. What kind of…?

When we start the month, 40% to 50% of what we actually sell on the books for that month. So we don’t have a lot of visibility and we also have a significant amount of sales that come from consignment inventories in which we have zero visibility until after it occurs. They tell us once a week what they use. They forecast what they’re going to use but we don’t listen anymore because they can’t get within a factor of two or three on a weekly basis so the visibility is not real good. That’s why we don’t like to talk about anything more than a quarter because that’s kind of risky in itself. Avinash Kant – Broadpoint Capital Inc.: Perfect, thank you so much.

Your next question comes from Bob Fetch – Lord Abbott Bob Fetch – Lord Abbott: I don’t think you touched on most of these but can you elaborate on the high performance foams’ progress as well as the outlook in the medical wound care area and how that’s proceeding?

Yes in the medical wound care area we’ve concluded that we will need to be both bacterial and viral barrier and that will take some more development. The bacterial test we can pass but that doesn’t give us enough advantage to break in so we need to finish the development and see if we can’t also become a viral barrier. We are making some significant progress here in materials such as the Soft Seal which is the 5 lb. per cubic foot material. We are having a very rapid sales increase there. Bob Fetch – Lord Abbott: And the primary application there?

That’s as gaskets. A lot of it is actually in cell phones because it allows the cell phone maker to use much less expensive molders who can’t hold tolerances nearly as well and also use thinner cases which saves him money also. So we’re able to sell that at a premium. Bob Fetch – Lord Abbott: And it’s a lot cheaper than higher cost plastic?

Oh yes absolutely. We’re also making a lot of progress with the 9 lb. density material which came out a little earlier than the 5, that’s a little farther up the curve and is larger and therefore is growing in a absolute dollar terms, greater rate. On the silicone side our R Grips are gaining some traction. We’ll see. I’m hopeful that in 2008 it goes well past the $1 million mark. And we have some of our first orders for the under floor layment in the railroad cars, trains. Meet the new toxicity and smoke requirements. Bob Fetch – Lord Abbott: So in the case of the Soft Seal is it largely a mix upgrade where you’re just displacing existing product that is not as high value added?

There’s some of that but there’s also a gaining of market share. There were some inferior products out there that were extremely soft but they had issues with dust, therefore made them hard to fabricate and also taking compression set. But in some cases they were deemed good enough because they were soft enough and now that we have something that has all the proper properties including the softness we’re gaining all that business. Bob Fetch – Lord Abbott: Okay just continuing to focus on cell phones as we go to these higher performance phones and the need for access high speed internet applications and things of that sort, how or in what way is that impacting you folks?

The high speed, the internet, we’re seeing a reasonable amount of business in the switches that are switching 12 billion bytes of data per second. It’s at that level that they need to use our kind of material in the back plane and of course these are large boards with many layers. All of which means that’s a good thing for us because it’s a lot of material. Bob Fetch – Lord Abbott: Okay and on the infrastructure side you mentioned India and Brazil, and is that for both 2G and 3G?

Yes. Bob Fetch – Lord Abbott: Okay and as far as China what are you seeing if anything yet at this stage?

One of our directors actually lives in China and participates in the telecommunications industry. His explanation to us is that every five years the Chinese government reorganizes and they have a change of power and that is happening now. When that is complete they will then reorganize the telephone companies. There will be fewer and when they have done that then they will release licenses. So we have a few signposts there to watch for that will tell us when it’s going to happen but based upon the need for those two things to happen first I don’t think it’s real soon. Bob Fetch – Lord Abbott: So it’ll be before the next time they host the Olympics? In regards to the largest cell phone manufacturer, are you making any better headway in terms of penetrating them as an account?

We have a large amount of high performance foam being sold into that account and we also have a fair amount of high frequency materials being sold into the infrastructure applications for that account. Durel’s going away at that account. Bob Fetch – Lord Abbott: And what sort of development or marketing and spend do you still have in regards to Durel. I know you’ve mentioned in the past some potential other applications, billboards and potential in the IC area….

Yes we expect to go into production in March of a lamp that will backlight a license plate in Germany. That’s being introduced during the first quarter. So there’s a plus there. We’ll have to wait and see how big that becomes. Bob Fetch – Lord Abbott: That’s sold with the car?

No, it’s different in Germany. I believe the number is 10 million new license plates a year and it’s not by the government but private companies actually make them. And so they are now allowing backlit and so the people we’re working with have been introduced, they’re in the process of introducing a backlit license plate. Bob Fetch – Lord Abbott: So the country is not demanding say greater light to identify the plate itself or anything like that? It’s more cosmetic?

It’s a fashion thing. And then the other area is the large area lamps for out-of-home advertising. These could be as large as three feet by nine feet. Bob Fetch – Lord Abbott: And on the license plates, is it just around the exterior?

No, it’s the whole thing. Bob Fetch – Lord Abbott: So it would almost like you know the razor back lighting, you kind of see it behind the letters or numbers?

You’ll see it, the letters will be black and you will see it everywhere except the letters. Bob Fetch – Lord Abbott: So does it appear fairly bright then?

Yes. They use a cold forming process is what’s going on here including the lamp. Bob Fetch – Lord Abbott: Okay as far as SG&A what quarterly run rate should we be expecting this year? I know you talked previously, I think last quarter targeting $15 million but is it going to be ….?

For ’08 the quarterly run rate we think is about $17 million and $18.5 million in the first quarter with the comp expense, higher in the first quarter. Bob Fetch – Lord Abbott: Okay, 17 average or is that….

Seventeen for the final three quarters would be the average first quarter, 18.5 is our best estimate now. Bob Fetch – Lord Abbott: And in the automotive area, the collision avoidance lane change is that a single customer or is that broadening out fairly rapidly?

That’s broadening out to multiple customers now. The collision avoidance or the active cruise control is still dominated by one company but then the lane change has multiple companies involved. Bob Fetch – Lord Abbott: And are they tier two suppliers that you sell to or one?

They would be tier two. Bob Fetch – Lord Abbott: In both cases?

In both cases, in all cases. We don’t have any tier one sales in the automotive area. Bob Fetch – Lord Abbott: Okay, there has been a lot of discussion years past of the introduction and money spent on implementing Six Sigma and the number of black belts you have there, have the issues you’ve had to deal with the last years have been difficult to see much further progress along those lines?

No, we’ve had progress just not was much as we do in times when sales are growing real fast because you can use Six Sigma to increase your productivity and therefore gain a lot of additional profits. In time of sales going down it’s a little harder but we manage to improve profitability through the Six Sigma efforts by more than $3.5 million in 2007 above what it would have been without the effort. Bob Fetch – Lord Abbott: Okay so you’re still were able to measure the positive impact.

Yes.

And as the key aspects of our manufacturing improvement in China, bringing those operations up to US standards, Six Sigma was a big piece of that and even though the capacities are not being fully utilized it’ll allow us to ramp them up much more quickly than if we hadn’t installed Six Sigma there. Bob Fetch – Lord Abbott: You folks went out of your way to prepare for a presentation this past May in terms of what some of your objectives and targets would hopefully be in five years and I guess now its four years and you had sales targets up towards $900 million and $7.00 in earnings, how would you characterize those objectives today?

I think our sales objectives are a little lower than that but the earnings objectives are pretty much the same. In other words we expect with the mix of business that we see in four or five years from now, to be a richer mix than we previously did, most of it being that the lower margin business such as Durel will be a much smaller portion of the total. Bob Fetch – Lord Abbott: And relative to I guess what we’ve experienced the last few years the volatility of those sales ought to be somewhat less as well.

Absolutely. Bob Fetch – Lord Abbott: And with the expectation then that we could see I guess gross margins hopefully sustainably in the mid upper 30s and net margins in the double-digit range?

I would certainly hope to be there in four or five years, yes. Bob Fetch – Lord Abbott: Thank you.

Your next question is a follow-up from Dana Walker - Canmore Investments Dana Walker – Canmore Investments: Just brief, Bob you’ve talked in the past about how you thought that there was a Durel prospect that would be handset based in the out periods, are you less keen on that today?

I think it’s a long shot and it deals with dead front and whether or not we’re able to gain access to what is called polymer dispersed liquid crystal display technology. If we are then it is possible to back light that with a multi segment EL lamp, in fact it is the preferable way, and that could be huge. But the probability isn’t real high so I tended to talk about it less. There’s always a potential winner out there and that’s one. Dana Walker – Canmore Investments: As well maybe perhaps you’d opine on your views on the wireless infrastructure market and how it affects your high frequency business in that expectations for ’07 may have been more robust than where things played out.

In total I believe that we ended up about where we thought we would. It just it was better in the first half than it was in the second half. I believe there’s a few things going on now associated with WiMAX and LTEV, Long Term Evolution. Long term evolution appears to be the direction that most of the service providers are choosing for fourth generation and they are beginning evaluations of that now. Which means there could be business as early as 2009 but eventually 2010 and 2011, these things never seem to happen as fast as they say. And we’re in a very good position whether it is WiMAX or its LTEV with our high frequency materials. Dana Walker – Canmore Investments: And the same way that you saw more material per board, would that relationship continue?

Potentially in LTEV but maybe less in WiMAX. But then the antenna becomes more important in WiMAX and therefore a bigger opportunity for us. Dana Walker – Canmore Investments: Final question relates to acquisitions. It has not played an active role in your game plan and they haven’t all worked, what role would you expect acquisitions with asset prices coming down and your liquidity rising to play.

We are always looking but I would not call us what the investment bankers call a strategic buyer meaning you pay whatever it takes to get it. If asset prices continue to come down there could be opportunities for us out there. But I don’t want to pay for what’s going to happen in five years. I’m willing to pay for today. Dana Walker – Canmore Investments: Thank you for sharing your thoughts.

There are no questions at this time. Any closing remarks?

I’d like to leave everyone with one last thought and that is that over the last few years, I believe we have significantly improved our future prospects and as we’ve said we continue to invest heavily in new business development efforts, increase our R&D spending and we are expanding capacity in our growing segments. We are confident that over the long terms we’ll see benefits from those actions both in terms of sales and earnings growth and it does remain our goal to continue delivering increasing sales and earnings for our shareholders. Thank you and good day.