Good morning, ladies and gentlemen and welcome to the MSA fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note this conference is being recorded. I would now like to turn the call over to your host Mr. Mark Deasy. Mr. Deasy, you may begin.

Thank you, Gretchen, and good morning everyone, and welcome to the MSA fourth quarter and yearend conference call for 2007. As Gretchen said, I'm Mark Deasy, Communications Director, and with me today are John Ryan III, Chairman and Chief Executive Officer, Dennis Zeitler, Senior Vice President and Chief Financial Officer; Bill Lambert, President and Chief Operating Officer; Joe Bigler, President of MSA North America; and Rob Canizares, Executive Vice President and President of MSA International. Our fourth quarter earnings release was issued this morning at 8:30 am and we hope everyone has had an opportunity to review it. It is accessible on the homepage of MSA's website. We will begin today's call with John Ryan, who will provide commentary on our fourth quarter and yearend results. John will be followed by Dennis, who will review our financials. We will then open up the call for questions and plan to adjourn by approximately 10:45. At this point, I would like to remind everyone that the matters discussed on this call, with the exception of historical information, are forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933 as amended, and Section 21 E of the Securities Exchange Act of 1934 as amended. Forward-looking statements including, without limitation, all projections and anticipated levels of future performance, involve risks, uncertainties, and other factors that may cause our actual results to differ materially from those discussed here. These risks, uncertainties and other factors are detailed from time-to-time in our filings with the SEC, including our most recent Form 10Q, which was filed on November 2, 2007. We strongly urge you to review all such filings for a more detailed discussion of such risks and uncertainties. Our SEC filings can be easily obtained at no charge at www.sec.gov, MSA's own website and a number of other commercial websites. That concludes our forward-looking statement. So at this point, I would like to turn the call over to John Ryan III for his comments. John?

Thank you, Mark. Good morning. Before I get into details of financials performance I did want to comment on things that are going particularly well with the Company. I'm pleased with how are new global organization is working out. Many people are new with their responsibilities but they're getting a good grasp for them and our leaders are working together as an effective global team, which is crucial for this organization to work. I'm pleased with the fine increase in international sales of 2007, a 19% increase in sales on local currency plus another 4.5% from the fall of the dollar. Our North American hardhat line with the ubiquitous V-gard helmet continues to chug right along and fall protection made a nice jump. We've got more business in homeland security respirators, thermal imaging cameras, the advanced combat helmet, and made our sales goals in Mexico. In Europe, we made fine advances in hearing protection and permanent instruments and got a very large order for breathing apparatus from Bundeswehr, the Germany military. Project Magellan is providing positive impact on our product cost. And Bill Lambert and I were pleased in December to go Queretaro, Mexico and inaugurate our new facilities there. We passed a milestone last year in that our sales outside of the U.S. and Canada are now greater than that within the U.S. and Canada. And I hope they stay together for a while and give some good competition for two sides there. There were a lot of complicated matters in both the fourth quarter and the year, and we tried to fully inform you of this in our press release this morning. Was long because there is a lot of important unusual information to help you evaluate our business. I won't review them all here but there are…

Thank you, John. Good morning, everyone. I'd like to give you some further insight into our fourth quarter performance and comment on the balance sheet and cash flow statements. Additional information will be available later today when we file our Form 10-K with the Securities and Exchange Commission. As John mentioned sales in the quarter of 2007 were a record $268 million compared to the fourth quarter of 2006 sales increased 5% with all of that increase being growth in our international segments, which was up $15 million. For the full year, sales were a record $990 million, an increase of 8% with sales increases in each of our three geographic segments. Our global sales were also higher in each of our three market categories. The core industrial market, which is approximately 60% of our total sales, is up 5% this quarter with strength in gas detection instruments, head protection and fall protection products. The 28% of our sales to the Fire Service is up 6% with increase sales of fire helmets and thermal imaging cameras. And our military business is up 2% over last year due to our Paraclete Body Armor acquisition. As we have often discussed in the past, the two most volatile pieces of our total sales are the United States Fire Service and United States Military. Volatility in the U.S. Fire Service is due to the new NFPA standards and past federal funding issues. And then, there is inherent volatility as a supplier to the U.S. Military. Our U.S. Fire Service sales decreased 10% in calendar year 2007 and U.S. Military sales increased 12%. When we look at our globally diversified sales that comprise nearly 80% of our total sales in 2007, aside from these two specific U.S. markets, revenue grew 5% this quarter and 12%…

Thank you. (Operator Instructions). Our first question comes from Brian Ruttenbur. Brian your line is open, please go ahead.

Thank you very much. A couple of questions. Let me start up with the easy ones first. Stock-based comp in the quarter, D&A, and your diluted share count?

You're look to the specific numbers, Brian?

Yeah. If you can, if not, we can deal with that later?

I mean we can just see that most of that in the 10-K this afternoon or if you want to.

Then I'll just get it this afternoon. I didn't know if you had it handy. Okay, so those were the softball questions. Are you ready for the hard ones?

We are. I mean yeah.

Okay. First quarter '08 versus fourth quarter '07, I know you don't give a specific guidance, but can you talk in generality, do you expect the first quarter to be similar to the fourth quarter because we've got so much traction on the AFG side?

I don't think, Brian that we're going to give any particular guidance as to how we think the quarter is going to wind up. We are…

How about the first half versus the second half of the year?

Well, we are saying is that the U.S Fire Service has been particularly strong in the first two months of this year as regards incoming orders.

Okay. The rest of the business is seasonally weaker during the first quarter, is that right?

It's not. No, I don't think it's seasonally a whole lot different than any other quarter. And as I've said in my remarks here is that we have not seen movements in our non-fire service, non-military business that might be indicative of some sort of recession been out there.

Okay.

And we are reasonably happy.

Okay. And then the last question is the goal for '08 is to have up revenue and up earnings versus '07 or versus record?

Well, we figured that for a number of years we had record earnings without having said anything about before and we just went out and did it. In the last two years, we told -- we said our goal is record earnings, we didn't make it. So it's like a little bit of sports superstition. You do some things didn't work, well, you do something different this time. What we'll do different is not comment as to how much of an improvement our earnings might be this year. We'll just go out and work real hard to come up with real nice results.

Okay. And maybe we can just add on to that cash flow, are you looking for any kind of cash flow numbers that we can relate to our balance sheet issues by the end of '08 where you want to be?

I won't give you a little bit of color on that, Brian. I think we had a couple of accounts receivable issues at the end of 2007. And we're still working on extended terms with our fire service distributors and so our business really hasn't picked up yet. I think you'll see some improvement in our receivables as their business improves. We also had a little bit of a glitch with our U.S. military invoicing because the government switched over to a more -- to a new and improved invoicing system, which is electronic and we got delayed and about $8 million worth of U.S. military invoicing in December that got pushed into, as far as being received as cash, into 2008. I did mention on the capital expenditure side, we actually have maybe $5million to $10 million greater capital expenditures in 2008 than we had in 2007. So we've got a couple of positives and one negative on the cash flow.

Okay. Thank you very much. That helps.

You're welcome, Brian

Our next question comes from Jack Hain. Jack, your line is open Please go ahead.

Good morning, gentlemen. I am sitting in for Walt this morning. I had two questions for you. First related to sales in Europe, I know in the release and at the start of the call you discussed the fact that there was some lack of comparability in Q4 sales to Europe because of the slower backlog liquidation, aside from that do you see any sort of a slowdown in Europe and if so, where in and in what products?

This is Rob Canizares. Jack, just to put a perspective on one of the factors that affected our sales in Europe, we had a shortage of a key chemical component that we use for one of our products. And what happens is that the global orders of MSA, both North America and the rest of the world exceeded the capacity of our supplier. So we ended up with backlog that we couldn't ship and that was one of the factors that affected us in the quarter. In terms of global slowdown in Europe, we're sort of in a similar boat to what John referred to in North America. The beginning of the year looks for the moment not affected by any recession. Incoming orders are coming in at a healthy base and so far we don't see a slowdown.

Okay. Great. Second question was to regards the SCBA's. I was just wondering as far as price competition goes, how much about is the Firehawk M7 and is it competitive pricing? And also, is profitability better on the Firehawk than on than on previous SCBA products?

This is Joe Bigler. Let's see, your first question in terms of profitability, we do expect to see improved margins on the new NSPA 2007 M7 product. We've commented on that previously and we are seeing that. And your second question is it's a very competitive product in terms of average selling price, the products vary anywhere from about $4,800 to as high as $6,200 depending upon various accessories that departments will add on to it, but we remain, what we've seen in the market so far and with our quotation activity, which really has almost doubled in the first two months of this year versus the last six months of last year. We find our pricing to be very competitive and we're seeing quite a bit of very positive activity.

Okay. Thanks a lot.

I would that in discussing Europe, we did have a very large government order in 2006 that we're hoping to get maybe with a different product in 2007 and didn't get it in 2007. That was a factor. Europe had a wonderful job between '05 and 06. So then it was flat '06 and '07, but over two years, the increase is real nice.

Okay. Thanks for that. I have no questions.

Yeah.

Thank you. Our next question comes from Richard Eastman. Richard, your line is open. Please go ahead.

Yes. Good morning.

Hi. Greets.

Just a couple of things. John, you had mentioned in your commentary when you looked at the fourth quarter and I believe you, you made a similar suggestion about '07 that invoicing in the U.S. Fire Service and this Japan, German tax credit in the fourth quarter were really the two disappointments, yet I'm looking at the expense lines, SG&A and your R&D -- I'm going to just take you at your comments, was your SG&A and your R&D in the fourth quarter at plan or was it well above plan?

Well, in terms of the fourth quarter, we knew that there was a lot of backed up R&D relating to NFPA approvals and we knew a lot of those bills were coming in and that were some major factor in why the R&D in fourth quarter was up. In some parts of the world, I think we did real good job at adjusting our SG&A expenses to the way sales were tracking and some other parts of the world, we could have done little better job in that. Do we have details here Bill Lambert, perhaps?

Hi, Rich. It's Bill. If we take a look at the full year, John commented on the fourth quarter, but if we look at the full year for SG&A and we are up $25.4 million, $7.5 million of that is just due to the FX rate. So the foreign exchange rate accounts for $7.5 million of that. So that leaves us with about $17.5 million and when we take a look at the -- there were some one items in North America with related to insurance and that sort of thing and we take that out, we're really then looking at about 7% increase in SG&A for the full year and a lot of that is coming from international, where we grew business for the year, as you know, about 24%. And so as we put in the selling organization in other parts of the world and we put feet on the street, it is causing us to spend more money in that area. As a percent of sales total SG&A was about 24.5% versus 23.5%, the year earlier. We're making some fairly significant investments in international as we know and we're seeing some of the sales growth that we want to see.

And again, when I look at the combination whether it's just the SG&A line or whether it's R&D. As you roll into '08, are these absolute levels? Are you planning on growing off of kind of an annualized fourth quarter level?

I don't think we'd say -- I mean I'm not even thinking in my mind what the annualized fourth level, we're thinking of the full year. In international, there will continue to be selling expense growth as we put in new companies, expand existing companies and such, but we are very aware that in some cases in 2007, we could have done better in expense control and we'll be watching how our sales are going and watching how our expenses are going, and also, hopefully not have a couple of oddball items that hit us in [2007].

Well, in the R&D line, I mean some of the stuff you said there was some catch up there in terms of the expenses. Does R&D run at a $10 million quarterly rate or does that fall back -- does that drop back down now that we have some of these approvals?

Well, Rich, it's going to drop back down. That was running at about 3.7% of sales for the fourth quarter, which is higher than what our normal run rate is. So the fourth quarter was a fairly significant catch up quarter from an R&D expense perspective. So I think you're sense there is right that that was a high quarter.

Hi, Rich. It's Dennis. Let me give you a high level -- some higher level numbers. You're looking for improved operating margin as a percentage of sales right, I think our expectation is that SG&A including or excluding R&D will be a smaller percent of sales in 2008 than it was in 2007. But we actually expect to get more of an improvement in the gross profit line…

Right.

…than we do in the operating expense line. So we're looking for improvement in both as a percentage of sales. The larger improvement is in the factory as opposed to the operating expenses.

And one of the big reasons for that is the expectation on the SCBA sales, which are high gross profit sales.

Okay.

Yeah. I have had a chance to look at the numbers while the others were talking. And yes, clearly, R&D in the fourth quarter was extraordinarily high and doesn't reflect -- we are planning on increasing R&D sales but that quarterly rate is average and a lot of them or all of those bills for the approvals of the NFPA devices, which we knew we had to have and didn't get sent to us until the fourth quarter

And then can I -- and again, just to carry that expense question maybe into the geographies when I look at the net income both in Europe and international, Europe I guess would be impacted by the German tax charge?

Yes

And so would an international by the Japan tax charge.

Yes

Yes.

Okay. Because, again, I'm looking at the sales growth there and some of the excitement on the international sales growth, kind of, fades when I look at the profit contribution being so minimal on that sales growth.

Yeah. Basically, as I mentioned in my comments here, Europe profit growth would have been up equivalent in percent to their sales growth, if it wasn't for those tax charges and also one-time over plan over expectation restructuring charge in Europe. And international would have been over except for the Japanese tax. Now, we would hope overtime, that you get a nice increase in percentage of sales like you get international. We'd like to see our profit go up by a higher percentage. But one must realize as you're doing missionary work and as you're working in a less mature economy, sometimes you do have to roll up the sales equivalent to, I mean, the cost equivalent, selling costs equivalent as much as your sales go up. But as they mature that will change and we would hope in all of our parts of the world that our profitability would go up a greater percentage then our sales went up, but we did have a couple of these things happening this year. A few other things that we'll do a better job in 2008.

And then, just one last question. Within the AFG program and the process itself, what exactly is this new administrative procedure, was this something that it just occurred in the fourth quarter? Or why is that something different or a change once the grants have already been made?

Well, what they've done -- this is Joe Bigler. What they've done as they came out during the fourth quarter and where there was some confusion created is, they're going back that once the grants are actually awarded, the municipalities need to go out and really seek three bids from three different manufacturers. And then, the AFG will look at that and they will give them enough money to pay for the lowest bid. Then the municipality has to go back to their city council to try to find out, if there can be some additional money. So there was some real confusion about once the award was made going out and getting three bids, how do we choose, do we have to choose the least expensive bid. This isn't the product that we want? So as John said in his opening comments that really created some confusion. It was there but I don't think many of the municipalities really understood till the fourth quarter, as they really started to dig into it and some of them started to make decisions. It's even got more complicated. But in the last week or so, FEMA has put out a notice to all of the awardees saying now that they look at the pricing of 2007 compliance devices, that if the department will go out again and get three bids and submit the lowest bid, they could get an additional $400 to $500 above and beyond what has already been granted. So now we're seeing some of the department saying, gee, let me hold off here and I think I'm going to go back and I'm going to ask for three additions bids, submit the necessary paperwork, and we'll be able to get an addition $400 to $500. So there are certainly some changes that seem to be coming back or coming out of the agency that certainly created a lot of confusion and indecision in the fourth quarter. And although we're seeing that tide really break open and people really making decisions and users making decisions now, there still seems to be some confusion as to the pricing and how many dollars they can really get for SCBA.

And we could be here for another hour or so going through all of these complications. There was the concept that they had a ceiling price and if you kept within the ceiling price, all right, but let's take bottomline. They are not required to take the low bid and our percentage of orders gained of the major the part of the areas we've been tracking has been quite satisfactory. We see the impact of all of these administrative burden not so much in terms of our market share, but in terms of people just waiting and figuring it out and trying to see what the other guy did and not wanting to make a mistake and things like that. It's going through all process that has been somewhat of difficulty to us, particularly in the fourth quarter when this was all new and nobody knew what worked and what didn't worked. And so -- but we're still getting good share of our market.

Yeah. Thank you.

Thank you. Our next question comes from Brian Butler. Brian, your line is open. Please go ahead. Brian Butler - Friedman, Billings, Ramsey & Co.: Good morning, guys. Thanks for taking my questions.

Great. Thanks. Brian Butler - Friedman, Billings, Ramsey & Co.: First one just kind of on thought of just on the SCBA's again. I guess a simple way to ask it is what percentage of the SCBAs are typically purchased with AFG funds versus money is coming from the actual fire department budget. Because it seems like they might under a little bit of pressure in '08?

Well. That's a really a tough one to really come up with any type of quantifiable percentage. We certainly have tried to follow it over the last few years as to what spot was municipal dollars and what's purchased out of AFG. The bottomline is the fire departments are trying to provide the best level of protection to the firefighters. And they seem to able somehow, someway between AFG money and municipal help or those departments that are not getting AFG money, they seem to be finding the money through the municipalities and obviously because the pressure from the IAFF, the union, to get the money to update the devices and to provide the best protection with the newest SCBA. But as far as what the exact breakdown is, Brain, that's a tough one. Brian Butler - Friedman, Billings, Ramsey & Co.: Well, not so much necessarily the exact breakdown, but just kind of your sense is -- are the SCBA purchases relatively resistant to budgetary pressures in the fire departments?

Hard to say. In some departments, obviously, providing the highest level and the best protection to the firefighters, fire departments for the most part are pretty dug on successful in getting the dollars that they need to assure that the firefighters are getting the right protection. Of course you have liability, you have insurance, city councils looking at that. So I would say generally speaking, the whole PPE market be it helmets, instruments, SCBA, thermal imaging cameras is somewhat sensitive to municipal budgets, but for the most part, I would say, typically with the SCBA, the municipalities and the fire departments generally speaking get what they want. Brian Butler - Friedman, Billings, Ramsey & Co.: Okay. That’s helpful. And then on the military side, just any visibility on some of the body opportunities, I know you have the Paraclete out there and recently I think the Marines have said that the MTV, they're currently purchasing a little too heavy. I know there's a big XSAPI/ESAPI award coming up in August. Is that something you're looking to participate? So any kind of visibility on some of the contract awards that are pending that you guys are working on and kind of how you feel competitive it was?

You bet. We're excited about it. I mean first of all to comment on Paraclete, if you take a look at our fourth quarter sales of 2007 versus 2006, our Paraclete sales were up about 17%. And if you look at the full year 2006 and 2007, our Paraclete sales were up nearly 40%. And I'm looking at the full year of 2006. We had acquired them in September, but looking at their full year 2006 versus 2007 Paraclete sales were up 40%. So we're pleased with the progress that we're making there. We're even more exited about the opportunities. You mentioned ESAPI and XSAPI. They are tremendous multimillion dollar opportunities. Since you are aware, both of those quotations were due I believe on February 7th. We had to get in our samples. We had to get in our quotations. Now, we expect, we've heard varying dates but we would expect, perhaps, the XSAPI will be decided sometime in June, between June and August. It just depends on the government going through the testing. They have a new laboratory that they've set up down in Aberdeen and they're really trying to get that lab set up to actually do all of the testing on the plates. So we're exited about both the ESAPI and XSAPI opportunities. As I said, I think each of them were worth something about $1.2 million sets and each one of those sets have two plates in it and the numbers are just staggering. So what we have been working diligently throughout all of 2007, particularly in the fourth quarter in technology and we're exited about the opportunities there. Brian Butler - Friedman, Billings, Ramsey & Co.: Do you have any -- on the offering you guys have for, let's say, those the XSAPI, I mean is there anything that kind of puts you in a better competitive position? I mean this has just been a market has been very dominated by one or two key players. And I'm just trying to get your sense of how you feel you fit in competitively or if there is some other measures that the military is using that you might be doing better than your competitors?

Well, I think our whole core of product leadership is really where we feel have an advantage. If you take look at their requirements on XSAPI, that is a very difficult specification to me. It really takes some advanced technology and ever since our acquisition apparently combined when we acquired Gallet a number of years ago with the advanced combat helmet, we really think in terms of advance technology and our capability and know how from an R&D standpoint, we think we have come up with some innovative, creative ways of meeting that XSAPI requirement. So, I would say, from a product leadership and technology standpoint that that certainly is what we feel we have an edge on. And hopefully, it will work out for us.

Brian, this is Bill. I'll just comment on Joe's areas of commentary. And certainly we're going up against some very established, very big and somewhat technology-driven companies as well. But we feel like we've really look at this hard, we feel like we've done a lot of the right R&D, and we hope that we can get a piece of this business. Certainly, these established competitors aren't going to give anything up easy. But then, prior to 2003 MSA had zero share of the military helmet, ballistic helmet business and then became a very large and, in fact, major provider for the ACH Helmet. And we've done a lot of work in this area. We hope we've done all the right work, at the right cost point. We're gone up against some big players. But as Joe said, I think we've done the right things and we'll just have to see how this unfolds. Brian Butler - Friedman, Billings, Ramsey & Co.: All right. That's great. Thank you very much. I hope the best of luck on the contract awards for sure.

Thank you.

Thanks, Brain.

Thank you. Our next question comes from Jason Rogers. Jason, your line is open. Please go ahead.

Good morning.

Hi.

Hi, Jason.

Did you give out the CapEx number for 2007?

I'm sure we did. $33 million.

Okay. And what about cash flow from operations either for the quarter or the year?

Cash flow from operations for the year. It's $41.3 million.

This is all be in the 10-K. It's coming out this afternoon.

Okay. And then looking at SCBAs, how many of your competitors now have products on the market?

As far as those that actually have approval under 2007 version?

Right. That would compete right with the Firehawk?

I believe right now we are sitting with four.

Okay.

The only -- I'm sorry three. The only manufacturer we do have Scott Bacu, Interspiro has a version of the 2007 unit to the best of our understanding approved and ISI, I believe those are the three that have approval and then including ourselves.

Okay. So then, given the fact you are receiving good orders for the Firehawk it seems now, but with these new AFG procedures, I don't know, the possibility is fire departments waiting for these other competitors to come out with the new product and so forth. Is there a risk that these delays that you've experienced in the Firehawk could extend beyond the first half of '08?

Well, as John said, keep in the mind the money that is awarded under the grant program, these departments have one-year to spend the money. So the clock is really ticking. So I think with some of the major manufacturers having units out there and samples getting out there, in many situations that's really helping us because departments are making decisions we think we're very competitive with the M7 and it's really pushing the evaluations along. So I think what you'll see is, several years ago when you looked at AFG money I think the manufacturers benefited to some extent with some very high volume months of SCBA sales and we tend to think what will happen this year is it will be some very steady goods solid business that will come through over the next six/seven months. And if the AFG funding for 2008 goes smoothly, it should be some good steady month business monthly throughout the whole year as opposed to these peaks and surges, I think that we saw a number of years ago in some cases.

And what is the deadline for the fiscal '07 funding to be used by?

Well, the funding started to get released in June of 2007. So, again, this is where we said that we always thought that we would get our fair share of business by June 2008 from the 2007 grant money. So most of that money really needs to be spent coming up here by the end of June beginning of July. And then, hopefully, the new funding will start to roll out in June has it did in 2007.

Okay. Thank you.

Thank you. And our last question comes from [Jim Hollister]. Jim, your line is open. Please go ahead.

Good morning, gentlemen.

Hi Jim

Do you got into the area that I was interested in the body armor. I note that one of your competitors has announced the reward of about $100 million contract in the ESAPI. Would you care to comment on that?

Bill?

Well, on the ESAPI, the plate we were talking about earlier was the XSAPI plate. The ESAPI plate is a plate that's been around for a quite sometime and there are a number of established competitors and suppliers in that area. And we bid on that particular contract that you're referring to Jim and we were unsuccessful. The XSAPI is a higher protected plate against some advance ballistics and that's the plate that we were talking about earlier.

Thank you.

Thank you. We show no further questions at this time.

Okay, Gretchen. Thank you everybody for joining us. Again, we always appreciate your interest in MSA and until next time, we will talk to you again and hope everybody has a great day. Thanks again.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation and you may all disconnect.