Inside the museum of MSA's John T. Ryan Memorial Lab near Pittsburgh, MSA's early mine safety innovations provide a fitting backdrop for the FireHawk¨M7 Responder AirMask, shown to the right with President and CEO Bill Lambert. The M7 Responder, which Mr. Lambert named MSA's 2009 Product of the Year, is an ultra-versatile breathing apparatus designed for the U.S. Air Force and is representative of MSA's rich history of product leadership and innovation.

In this letter to you last year, I had the privilege to report a record year for MSA, with sales exceeding the $1 billion level for the first time in our history. However, as I noted then, by late in 2008 we saw the economic storm clouds gathering and, as we all know far too well, this storm-"The Great Recession"- hit us all with its full force in early 2009.

For us at MSA, we saw companies in many of the industries we serve, such as construction, the energy sector and manufacturing, where our products help to keep men and women safe on the job, lose business, lay off workers, and, of course, reduce their purchases of everything, including hard hats, gas detectors, fall protection equipment and other MSA products. In addition, we saw Congress inexplicably delay the Assistance to Firefighters Grants (AFG) funding earmarked for firehouses across America, in turn delaying first responders from upgrading their fire helmets, breathing apparatus and other protective gear.

Further, in our military segment, several significant contracts were successfully completed in late 2008, and several new ones were not gearing up to begin until 2010 and 2011.

As a result of these factors, 2009 for MSA was a year that fell noticeably short of the record high we attained in 2008, and one that took an obvious sidestep away from our previous trend of nine years of increasing revenues.

To be sure, 2009 was a year in which we took defensive measures, looking hard at our operations-from the way we manage our expenses, use our facilities and deploy our people, to the way we organize our operations and manage inventories. As this economic cycle makes its inevitable turn upward, as we are now just getting a hint of, we will be well positioned to move even faster down the road of continued success.

OUR MISSION NEVER ENDS

The challenges of 2009 not withstanding, MSA stayed true to its mission of protecting life and earned significant orders and contracts in 2009, as total revenue exceeded $900 million.

For example, we secured a two-year, $45 million contract to supply Advanced Combat Helmets to the U.S. military, as well as a $10 million order to supply our M7 Responder Air Masks to the U.S. Air Force. The Hong Kong Fire Department purchased 1,300 Self-Contained Breathing Apparatus (SCBA) and complementary products, placing more than $5.6 million in business with us in the year. In fact, MSA sales in the Greater China Region grew by more than 36% in 2009, well above our most optimistic estimates. And there were green shoots of activity elsewhere in the world. Sales in Japan were up more than 20%, and in latin America, our new MSA Colombia business exceeded their sales plan in their very first year of operation.

Similarly, there were a number of superstars in our product line-up in 2009, as there have been throughout our history. For example, our ALTAIR family of single and multigas detectors, which deliver a level of durability and features that no other competing product can match, such as an alarm which sounds when a wearer is motionless for 30 seconds, far exceeded all sales projections this year. And, our FireHawk M7 Responder Air Mask continued on its path of success. As noted earlier, the Air Force placed additional orders for this world-class product in 2009, and word also traveled to the U.S. Coast Guard. They did an independent evaluation and soon placed their own order for $4.5 million of the M7 Responder Mask in 2009. Appropriately, I named the M7 Responder Air Mask our Product of the Year for 2009.

We also launched a number of innovative products that met strong customer acceptance in the year. Our next generation air-purifying half-mask, the Advantage 400 Respirator, was released with global approvals, and will no doubt help us further increase market share in key market segments. We also implemented our European Hard Hat Strategy with the launch of our V-Gard family of hard hats in that region of the world, further expanding market share for what has become a recognizable and flagship brand of MSA.

You can see echoes of these successes in many other numbers as well. In 2009, MSA achieved new levels of customer satisfaction based on our Net Promoter Score (NPS)-a key internal metric we use to assess ongoing customer loyalty. Overall, our NPS metric increased to its highest level since we first began utilizing this tool in 2007. We also showed that "The Safety Company" practices what it preaches as we embarked on a process to establish a world-class global safety program in every MSA location around the world. And we are already seeing great results. For example, one MSA facility achieved an amazing 1.7 million hours without a lost time accident in 2009, while two other plants achieved more than one million hours each. In doing this, these facilities established benchmarks for all other MSA work sites to follow.

But there was one other metric in 2009 of which I was particularly proud: the level of engagement demonstrated by our MSA associates around the world. Without question 2009 was a year in which we asked much of our associates. Yet, despite the uncertainty of the economy during the year, the cost discipline measures we implemented, and the resulting personal sacrifices that our associates were asked to make, our Employee Engagement levels remained strong and, in some locations such as North America, increased. This re-affirmed what I have always known: that the spirit of commitment and the dedication of MSA associates around the world are second to none.

PREPARING TO MEET THE BEST YEARS TO COME

As I noted above, 2009 was a year in which we took a defensive posture, looked hard at the efficiency of our operations, and advanced changes that will serve us well in the years ahead. Some of our noteworthy accomplishments over the past year include:

• We reduced local currency Selling, General and Administrative expenses by $32 million through restructuring efforts and various cost-saving initiatives.

• We took several steps to improve our working capital, developing new processes and key procedures. This resulted in generation of $121 million in cash flow from operations, an all-time record for the company. We used this cash flow to pay down debt, fund improvement projects and pay dividends to shareholders. And, we plan to build upon these successes to better manage our working capital assets around the world going forward.
• We articulated and codified our long-held values structure, with Integrity at its core, and rolled out these values globally to all MSA associates. In short, these values form the basis for everything we do. You can read more about them in the pages that follow.
• We increased the efficiency of our R&D efforts, opening a state of-the-art facility in Suzhou, China, while fueling the product innovation that has been the lifeblood of our company for 96 years. In 2009, this included adding new capabilities to our best-selling line of ALTAIR handheld gas detectors; developing a new line of gas detection sensors that raise the bar for sensor life and performance; developing a blueprint for the next generation Enhanced Combat Helmet for the U.S. military; and continuing our quest to engineer a never-before seen system to quickly locate firefighters in need of rescue.
• We continued our Project Magellan operational excellence voyage in North America, by consolidating manufacturing activities to make optimal use of all our manufacturing space and eliminate excess capacity. Looking ahead, Project Magellan will continue to be an important part of the MSA story in 2010 as we will move forward with plans to consolidate our Corporate headquarters within our existing Cranberry Campus, terminate operations in Evans City, Pa., and exit our Englewood, Co. facility as we complete the transfer of fall protection production from Englewood to Jacksonville, N.C. and Querétaro, Mexico. Once completed, Project Magellan restructuring efforts will lower operating costs significantly and vastly improve our ability to communicate and work together as a team.
• We launched a new Distribution Development Program, increasing the effectiveness of our key channel partners and solidifying those relationships that are so important to our future. As evidence of the effectiveness of this effort, our largest worldwide distributor rated MSA's level of field support Number One among 27 safety category manufacturers, with our rating a full five percentage points higher than the second place provider.
• Our global product developers applied Voice of the Customer "Best Practices" to our new product R&D efforts, and made more than 200 customer visits to uncover unmet needs, and build innovation and first-to-market features into new products.
• Our new brand positioning, "MSA-The Safety Company," was adopted globally by all affiliates, thereby strengthening the MSA brand and recognition of it in every market where we do business.
• And lastly, despite the need to adjust our workforce to counter the recession's impact on customer demand, we strategically made key hires that add depth and talent to our organization and will serve MSA well in the future.

A FOUNDATIONAL YEAR

I salute the successes our team achieved in 2009, and of our performance in the face of extremely difficult economic conditions. The past year presented challenges not seen in decades over our company's long history. Yet, in this crucible, mettle was formed. We emerge leaner and stronger, and positioned to shift from defense to offense as better times return. With signs of a gradual recovery emerging around us, MSA is making solid progress to make the coming years some of our best ever.

In closing, I want to thank all of my 5,000 MSA colleagues, including our Board of Directors and our Executive Leadership Team, for their especially tireless efforts in a challenging year. It is only through their skills and dedication that we were able to achieve so much. And, I want to thank our shareholders, distributors and customers around the world for your continued trust in us. We work hard to earn it, every day, and will continue to do so in 2010, as we have for nearly 100 years.

Sincerely,


William M. Lambert
President and Chief Executive Officer