In reviewing this letter from last year’s report, I was struck by how many of the business factors and trends we see now remain consistent with what we have said a year ago and noted in communications since. MSA has been the global leader in sophisticated safety equipment and we enhanced our position during this decade. Looking at the big picture, MSA’s core industrial business worldwide, beyond the U.S. fire service and the U.S. military, has grown consistently during recent years and this continued in 2006, driven by our making long-term improvements in our business processes. During this period, our fire service sales grew very well. As has been frequently reported, our total business was turbo charged in the period 2002 to 2004 by exceptional business in protective products to the U.S. military and in commercial Homeland Security gas masks. We always knew that these two businesses would be volatile and we have had a plan for a transition to a more normal business mix which we communicated over the last year. Most of this transition happened in one year – 2006 – in which our U.S. military business fell by more than $60 million, over 50 percent, due to the completion of a number of contracts and the U.S. Government’s decision to split evenly the Advanced Combat Helmet (ACH) contract among multiple suppliers. In 2006, MSA Europe achieved its best year in company history. Pictured with MSA chairman and CEO John T. Ryan III are members of MSA Europe’s leadership team, including, from left to right, Alan DiGiovanni, Thomas Muschter, Mathieu Tijskens, Frank Mak, Stefan Zloczysti and James Baillie, president of MSA Europe. Our rather audacious objectives in this transition year of 2006 were, in spite of the above challenges, to reach a sales and operating profit level (less adjustment for accounting changes and restructuring costs) higher than that of 2005, even if just a small increase, by significantly growing our business in other areas. The disappointment of 2006 as a company was that, on a qualitative basis, “we almost made it.” Indeed many of the goals in this transition year were accomplished. We actually did grow our sales, but we fell short on earnings due primarily to the timing of the U.S. Federal Government funding of the U.S. fire service. We did gain significant sales growth in two-thirds of our global business – that is everything except the U.S. fire service, the U.S. Homeland Security gas mask market, and the U.S. military. In 2006 MSA achieved strong double digit percentage growth in sales, and for the most part met our goals, in these key areas: the industrial business of our U.S. National Sales Force; the balance of our commercial sales efforts in North America; MSA Europe; and MSA International (with the help of Select PPE, a strategic acquisition in South Africa that expanded considerably as part of MSA in 2006.) Instrument sales lead our North American business growth, and industrial head protection, with the industry leading V-Gard Helmet, was a strong contributor. In particular, MSA Europe stepped into the breach and provided excellent growth to gain our best year there since the fall of the Berlin Wall. Our domestic sales in Germany were solid and well above plan. Eastern Europe business showed strong expansion and our plan was exceeded in each of the other regions of the continent. Fire service sales in Europe were also quite good, with breathing apparatus and fire helmets being well over plan. MSA sales also grew particularly well in China, Southeast Asia and Mexico. The company brought out telemetry capabilities in our breathing apparatus; a new generation of Thermal Imaging Camera – the Evolution 5200 HD; successful new instruments such as the Altair Single Gas Portable Instrument; and the latest generation of the SAFESITE Multi-Threat Detection System. MSA also was a major participant in the first large production contract of the Mask 2000, the new standard gas mask for the German military. In the U.S., we are now beginning work on a distinctive new breathing apparatus for the United States Air Force. Operating costs of the company were mostly on plan with the exception of a few special one-off issues. We were challenged because the areas in which we gained much of our sales growth were areas in which we are developing the market and these require higher than the average amount of selling and other supportive costs. The areas where our sales fell were those in which our marginal selling expenses are lower. Safety is our middle name, and I was very pleased that our Murrysville factory received the prestigious VPP Star Award from the U.S. Occupational Safety and Health Administration for our safety program in this important factory. Our Global Manufacturing Council was our Process of the Year by its efforts to spread best practices throughout the manufacturing elements of the company. Project Outlook, which was the consolidation of our Instrument and Safety Products Divisions in the U.S., and a voluntary retirement program to reduce overall costs, went exceptionally well. We also welcomed to the company the people of Paraclete Armor and Equipment of St. Pauls, N.C. Paraclete enhances our capabilities in ballistic vest protection for the military and law enforcement market. Paraclete has a distinctive business with the U.S. Special Forces – an area of growing importance in the U.S. military strategy – and is located close to Fort Bragg, N.C., where I spent a year and a half in my past life as a U.S. Army officer. During the year, company management completed a five-year strategic plan, which was reviewed and approved by the Board of Directors. The establishment of a new sales operation in Egypt makes this the 40th country in which MSA has operating companies or sales representative offices. Egypt is one of the oldest civilizations on Earth so it was about time that we got there. Even with all of this progress, we unfortunately did not make our earnings goals. The major factor that made the difference was the substantial delay in the release of U.S. Assistance to Firefighter Grants (AFG) funding, both directly and because its delay causes many municipalities to hold their own spending in the hopes that they would get money from still-open AFG requests. The impact on our business in 2006 was significant as only about half of the appropriated funds were released by calendar year end. While our U.S. military business declined from 2005 to 2006, we had a plan to overcome this by sales growth elsewhere. But on a net basis, the shortfall of sales to the U.S. fire service and the resulting impact on factory burden coverage caused us to miss our goals. This, along with the cost of restructuring, particularly Project Outlook, which was necessary for our future well being, and the accounting charge that required the expensing of stockbased compensation, were the main factors in the actual pre-tax earnings decline from 2005. Our outlook for the year 2007 is that we want to complete the transition that we had hoped to finish in 2006. We will once again count on the strength of the broad cross section of our business – about two thirds of our sales that are in areas in which we have consistently done well in the decade – that is our North American industrial business and consumer business, MSA Europe and MSA International. We have taken more steps to reduce our cost of operations. Our initiatives over recent years have enabled us to produce more products with less floor space. Project Magellan, which was recently announced, will enable us to concentrate our manufacturing work in fewer sites and reduce our expenses, while we make the maximum effort to help the individual associates involved. In particular, the company expects to begin the consolidation of our two facilities in Mexico at a new plant in Querétaro. We are also beginning work on a new facility in China, primarily to serve that strongly growing market, and our expanding business in the rest of our International operations. Most of the benefits of these manufacturing projects will be realized in 2008 and beyond. As you can expect, during this time of transition we will continue to be very careful with our expenses worldwide, while continuing to appropriately fund the important programs in new product development. Our objective in 2007 is to get back on the positive track, to increase sales and make a strong rebound in earnings to get us to earnings levels above that of the previous record of 2005. Once we achieve this, we would look forward to returning to a stable growth record going forward. The major imponderable in the business in 2007 is the timing of the U.S. fire service business. There are six major factors here which, for the most part, reflect the timing of business and not their ultimate achievement. About half of the U.S. Federal Government AFG funding expected in calendar year 2006 has slipped until the first half of 2007. Should the AFG program return to its previous time parameters, we could have in the calendar year 2007 about a year and a half worth of normal funding, completing last years’ and fully doing the current one. This, however, is dependent on whether or not there will be a third year of delays in AFG funding. Additional factors are the proportion of AFG grants going to personal protective equipment, the amount U.S. municipalities will spend from their own budgets, MSA’s market share (of which I am confident), the impact of the new National Fire Protection Association (NFPA) standard for breathing apparatus, which must be met by all U.S. manufacturers by August 31, 2007, and the question of whether our customers would prefer to buy breathing apparatus in the U.S. according to current NFPA standards, for which we could sell product for the first eight months, or, whether they would like to buy equipment according to the new standard for shipment in the last third of the year. To solve this latter dilemma, MSA is offering its customers the best of all worlds – the MSA Promise Program. In this way, customers can buy new needed equipment now according to the current standard, and then we will upgrade them to the new standard once upgrade kits are approved and available. Thus, I have strong confidence that the funding and the desire of U.S. fire service customers for breathing apparatus product in an 18-month period from January 2007 until June of 2008 (when currently appropriated AFG funding for 2007 needs to be released) will be good. What we do not know is when, during this 18 month period, most of the business will be placed. Going forward, there is a historical pattern that revenue from the fire service goes up in the year or two following a new NFPA standard. Our goals in 2007 are to keep up our growth in the two-thirds of our business that has done well in recent years, including 2006, to handle the short term volatility in the U.S. fire service, to reach our sales objective in military protective products and to carefully watch our costs so as to generate sales and earnings that would be new records for the company. Newly elected President and Chief Operating Officer William M. Lambert, left, with John T. Ryan III. I am pleased to announce the recent election of Mr. William M. Lambert as President and Chief Operating Officer of the company. Bill has excelled in his 25 years with the company in product design (inventing the Quick-Fill System – a key patented product for MSA), product management, division management and for the last four years as President of MSA North America. I look forward to working with Bill in his new role. It is often said in sports that the way to handle a disappointing end to a winning streak is to go right out there in the next game and start a new winning streak all over again, and that is what we are about in the year 2007. We have confidence in our business and are investing in plants, new products and people to build it over the years to come.