John A. Viniello, President

April 25, 2002 – 3:30 p.m.

Thank you Aus and good morning to all of you. This is one of the largest turnouts we have ever had in a non-exhibit year, and I would like to welcome you all to Las Vegas. Before I begin today’s formal remarks I would like to extend my appreciation from the members of the NFSA staff and Board of Directors to the immediate Past Chairman of the Board, Tom Groos who stepped aside as Chairman at our February meeting. I have had the pleasure of working with Tom for the past two years and can tell you that he was a “leader among leaders.” He has the unique ability to bring consensus to the table of a number of divergent thinkers, and believe me on our Board we have some divergent thinkers, and that in itself is a credit to his leadership skills. I personally want to thank him for the support he has given to the staff, the encouragement he has given to me personally, and the countless hours he has spent on industry issues away from running the business of his own companies. Ladies and Gentlemen let’s give a nice round of applause to Mr. Tom Groos. Tom please take a bow.

I also would like to acknowledge and congratulate Mike Friedman and his family on receiving the most prestigious Golden Sprinkler Award. During the past two decades, I have had the privilege of serving with a number of outstanding Chairmen. The first being Dick Boulanger, who was with us last year in San Francisco. I know his daughter Margaret is here with us this afternoon. When Mike took over as chairman, his theme was “commitment to excellence.” His energy, enthusiasm, his “out of the box” thinking, his tough dynamic management style is exactly what the Association needed. He really was the drafter of providing us with the tools to mold the Association in what it has become today. He was truly a pioneer of the new Association and a number of the staff positions that are thriving today were the brainchild of Mike Friedman. And while there are a number of very deserving people for this award, only one is given each year and I must say that the committee made an excellent choice, and on behalf of the staff, the Board of Directors, the membership and indeed the larger fire sprinkler community, my congratulations to you and your family. Thanks Mike!

This year we will have a “real live Economist” take a look into the sprinkler industry’s economic crystal ball. But I simply can’t resist giving you my view of the present economic state of our industry. In April of last year I suggested that the 3^rd and 4^th quarters of 2001, and the 1^st and 2^nd quarters of 2002 should begin to see significant slowdown in our industry. It’s been happening, in fact, I believe that the slowdown will be protracted into the 3^rd quarter of 2002. Backlogs are being reduced and new bookings are not replacing this work at the same rate. Fortunately for our industry, we are coming down from a very high level but we are seeing in some parts of the country a significant turndown in business. Those sprinkler contractors who have developed residential sprinkler divisions are not being affected as much as others because of the continued strong residential market. This is particularly true on the west coast.

However, the continued volatility in the equity markets and the general uncertainty given the instability in the Middle East is contributing mightily to the protracted uncertainty in Wall Street. As an example, back in September of last year, if you bought $1,000 worth of Nortel stock, it is now worth about $59, a $1,000 worth of Broad Vision is now worth about $22. A $1,000 worth of JDS&U is now worth about $52. A $1,000 worth of Merrill’s B2B holders is now worth $50.

I would like you to consider this. If at the same time you bought $1,000 worth of Budweiser beer or Rolling Rock (if you are from Philadelphia) -THE BEER NOT THE STOCK - one year ago, you drank all the beer, and traded in the cans for a nickel deposit, you would have made $79.

It’s just a thought, but certainly a better return on investment and you get to feel happy to boot!

But seriously, we need to take a close look at the Market place…if we look and take a moment to review the work from a broad survey of the American Institute of Architects, you will see that billings for architectural firms continued to slow in the first part of the year. However, we might add that the pace of decline moderated substantially from the sharp downturn that was experienced in billing the 3^rd and 4th quarters of 2001.

In the early part of the year, one out of five firms reported an increase in billing, that’s the largest share since August of last year.

Firms in all regions reported declines in billings, although the steepest were among the firms in the Northeast.

It should be noted, however, that architectural firms concentrating on residential work were the only category reporting gains in January. Inquiries to architectural firms increased sharply in the first part of the year. But once again, some of the strongest gains were among firms specializing in residential activity.

On Saturday, please be sure to listen to the presentation by Charles Jacklin of The Mellon Company who can give you additional statistics as to what we can expect for the balance of this year into 2003. But the most common scenario we are seeing is planned projects being delayed, deferred or cancelled with more bidders on jobs with pricing levels barely meeting our overhead. It’s not a pretty picture.

And now let me move to another area of concern for our industry, and that is the unavailability of insurance for fire sprinkler contractors. As you know, for several months we have been attempting to obtain hard cover loss runs from the sprinkler contractors in order to present a picture of what is taking place in our industry with respect to losses. We have a carrier who has expressed interest in assisting us in forming an insurance captive for sprinkler contractors. Unfortunately, we have been unable to obtain the needed number of companies participating to provide a carrier any significant trending. Insurance problems facing sprinkler contractors and manufacturers are going to get worse before it gets better. When insurance markets were soft as they were several years ago, insurance companies were writing risks at unrealistically competitive prices simply to churn premium dollars for reinvestment purposes. With the drop in interest rates, and the volatility in equity markets, this incentive no longer exists.

Secondly, sub-contractors are having law suits filed against them simply for being on a job sight. No involvement with the loss … the result…. umbrella coverage is skyrocketing out of sight. It seems everyone in the food chain is being sued. Any one with “deep pockets” winds up paying. We are working with a very large insurance agency, in this case, Marshall & Stirling, in New York, to investigate the feasibility of developing an insurance captive. At this time it is our only choice as an industry. We are a perfect fit, we are homogeneous, we can spread the risk, we can develop our own underwriting guidelines, we can develop loss control procedures and we can, in a word, be the determiners of our own destiny and not leave it in the hands of others. In order to do this we need loss information. Hard cover loss runs for the last three to five years are necessary. Of the almost 80 contracting companies we have in attendance here today, less than 20 have completed the insurance information we need to go to a carrier. Most of those are on our Board of Directors. Forms are available from staff, and I urge you to obtain them and give it to your insurance agent and have them complete it and return it so we can determine trends by lines of coverage. It is my belief that our industry is no different than other industries and that our losses are occurring in the areas of automobile and workers comp. We have experienced people with access to markets who in a short time, may be able to help you with your insurance needs. In the long term we need to look at every option available to our industry otherwise there are number of sprinkler contracting companies who are in business today who will be going without insurance tomorrow. Don’t wait. But we can’t help you unless you help us.

And once again, I have heard concerns about the confidentiality of this information. What are we going to do with it? But merely turn it over to the insurance professionals and have them do their analysis. Again, these surveys are available from staff at the registration desk.

Now I would like to call your attention to a piece of legislation that was introduced this year by Senator Jerry Weller of Illinois. HR2970 would have allowed the purchasers of security systems to expense rather than capitalize the cost of that system in its first year. We attempted to include fire sprinklers as part of this legislation and ran into bureaucratic roadblocks. Let me tell you this is very high on our radar screen and will continue to be. One more attempt to resurrect the concept of this legislation to enable anyone who installs a fire sprinkler system to expense the cost of that system in the first year rather than to capitalize it over the life of the building will be made. This could be a huge incentive for retrofit initiatives and make adversaries advocates by supporting fire sprinkler systems. This program has been designated a SWAT initiative and Jim Dalton will be meeting with members of the Congressional Fire Services Institute, Fire Services and other stakeholders to resurrect either this bill or something similar during the next legislative session of Congress. This one will not die, trust me.

I would like to also report that Wayne Waggoner, Regional Manager for the Southeastern states, who started with the Association in July, 2001 has been named Executive Director of the Tennessee Fire Sprinkler Contractors Association. He will continue to be employed by NFSA but will assist the contractors’ state association in their efforts to promote fire sprinklers at the state level. It is our intention to continue to work with members and nonmembers in the state of Tennessee on this initiative and hopefully next year form a chapter similar to what we have in the State of Florida.

We will continue to provide a Regional Manager presence throughout the United States, and we have full-time people available to work with our members who have full-time jobs running their businesses with training and education and promoting the industry in each of our regions. Our talented Director of Regional Operations, Buddy Dewar, has a tremendous team of people with an ambitious agenda. I encourage you to attend chapter meetings to learn the latest about what is being accomplished.

I would also like to acknowledge the work of the Northern Illinois Fire Sprinkler Advisory Board and their Executive Director Tom Lia who is also working on the adoption of residential sprinkler ordinances in the suburbs of the Chicago metropolitan area.

Nine residential sprinkler ordinances have been obtained to date and a number of people need to be recognized who are in attendance this afternoon and I would like them to stand. Please hold your applause until they are all recognized. Gregg Huennekens of the US Fire Protection, Illinois and Wisconsin, Barry Waterman of Acme Sprinkler Service Company, Don Smith of Chicago Backflow as well as the Business manager for Sprinkler Fitter Local 281 Tom Collins… And last but by no means least, Tom Lia, Executive Director of the Northern Illinois Fire Sprinkler Advisory Board. This is a terrific example of people working on behalf of the industry and giving up their time from their businesses to promote the use of fire sprinklers to protect life and property. Guys take a bow.

On Saturday we have a program on Fire Safety in Student housing with an All Star Line up …Don’t miss this presentation it promises to be one to remember…learn about the current status of sprinkler protection in college dormitories and Greek housing (fraternities and sororities)… You will also have the opportunity to meet two special people - Rick and Donna Henson who arrive this evening. Their son Dominic was killed in a fire while a freshman at the University of Missouri …we’ll tell “Dominic’s Story” on Saturday…

Now I’d like to call your attention to the Fourth International conference being held in Prague on July 9^th and 10^th of this year. This conference, being sponsored by the International Fire Sprinkler Association, will boast an international group of speakers from all over the world to speak on fire sprinkler initiatives being conducted in different parts of the Globe. Prague, which is by all reports a jewel of Europe, is in the Czech Republic, and the conference is being held at the fully sprinklered Marriott.

See the IFSA web site www.sprinklerworld.org or NFSA.org for registration materials. They are also available at the registration desk here. I also encourage you as I do every year to avail yourself and you company of NFSA’s Training and Education programs. Details again can be obtained on our WEB site (ASK FOR SHOW OF HANDS)

That’s encouraging….(PAUSE)

On September 11^th of last year we all lived History. The events of that day will be forever etched in our memory banks.

I would like to take this opportunity to thank everyone for the expressions of support for those of us who live in New York and the outpouring of concern in the phone calls and letters we received world wide…I know we have a large turnout of New Yorkers here this morning and I ask that they stand and be recognized. THANK YOU …and now before I close this year’s State of the Industry, I would ask you to put on the Fire dept. hats you received when you registered. (PUT ON HAT) As some of you know I worked along with several members of the staff very closely with a number of fire officials lost that day…in addition to being business associates they were also our friends…This afternoon I would like to extend my own personal tribute to the 343 firefighters lost on 911…It’s in the form of a song I wrote back in December of last year. We’ve cut a CD which we will sing along with and I just need a moment to get set up…GO TO STANDING MIKE …This song, which is really a tribute, is dedicated today to Reverend Mychal Judge, Chaplain of the New York City Fire Department, and their highest ranking uniformed officer, Chief of Department Pete Ganci…who were lost that day. This is for you guys and the 341 who went with you to a better place…Ladies and gentlemen …911. Ok, Jimmy roll it!