e10vq

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION\n

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Washington, DC 20549\n

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FORM 10-Q\n

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þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES\nEXCHANGE ACT OF 1934

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For the Quarterly Period Ended October 31, 2007\n\n

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o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE\nSECURITIES EXCHANGE ACT OF 1934

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For the Transition Period from to \n\n

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Commission File Number 1-14959

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BRADY CORPORATION\n

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(Exact name of registrant as specified in its charter)

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Wisconsin\n		39-0178960
\n
(State or other jurisdiction of \nincorporation or organization)\n		(I.R.S. Employer \nIdentification No.)

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6555 West Good Hope Road, Milwaukee, Wisconsin 53223
\n(Address of principal executive offices)
\n(Zip Code)

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(414) 358-6600
\n(Registrant’s telephone number, including area code)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by\nSection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for\nsuch shorter period that the registrant was required to file such reports), and (2) has been\nsubject to such filing requirements for the past 90 days. Yes þ No o\n

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,\nor a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in\nRule 12b-2 of the Exchange Act.\n

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Large accelerated filer þ Accelerated filer o Non-accelerated filer o

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the\nExchange Act). Yes o No þ\n

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APPLICABLE ONLY TO CORPORATE ISSUERS\n

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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of\nthe latest practicable date.\n

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As of December 1, 2007, there were outstanding 50,867,054 shares of Class A Nonvoting Common Stock\nand 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which\nis held by affiliates of the Registrant, is the only voting stock.\n

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FORM 10-Q
\nBRADY CORPORATION
\nINDEX\n

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	Page
PART I. Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets		3

Condensed Consolidated Statements of Income		4

Condensed Consolidated Statements of Cash Flows		5

Notes to Condensed Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3. Quantitative and Qualitative Disclosures About Market Risk		20

Item 4. Controls and Procedures		20

PART II. Other Information

Item 4. Submission of Matters to a Vote of Security Holders		21

Item 6. Exhibits		21

Certification

Certification

Section 1350 Certification

Section 1350 Certification
Certification
Certification
Certification
Certification

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PART I. FINANCIAL INFORMATION\n

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ITEM 1. FINANCIAL STATEMENTS

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BRADY CORPORATION AND SUBSIDIARIES
\nCONDENSED CONSOLIDATED BALANCE SHEETS
\n(DOLLARS IN THOUSANDS)

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\n\n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n


	October 31, 2007		July 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	170,599		$	142,846
Short term investments		16,490			19,200
Accounts receivable, less allowance for losses ($9,583 and $9,109, respectively)		256,558			239,569
Inventories:
Finished products		78,793			80,486
Work-in-process		22,710			21,309
Raw materials and supplies		39,853			37,983

Total inventories		141,356			139,778
Prepaid expenses and other current assets		44,289			42,020


Total current assets		629,292			583,413

Other assets:
Goodwill		753,908			737,450
Other intangible assets		146,439			149,761
Deferred income taxes		30,379			32,508
Other		23,156			21,111

Property, plant and equipment:
Cost:
Land		6,388			6,332
Buildings and improvements		92,735			90,688
Machinery and equipment		254,703			248,356
Construction in progress		18,585			18,107

		372,411			363,483
Less accumulated depreciation		197,073			188,869


Net property, plant and equipment		175,338			174,614


Total	$	1,758,512		$	1,698,857


LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	97,171		$	91,596
Wages and amounts withheld from employees		55,073			73,622
Taxes, other than income taxes		9,592			8,461
Accrued income taxes		18,513			24,677
Other current liabilities		62,156			60,254
Short-term borrowings and current maturities on long-term obligations		21,440			21,444


Total current liabilities		263,945			280,054

Long-term obligations, less current maturities		478,573			478,575
Other liabilities		62,850			49,216


Total liabilities		805,368			807,845

Stockholders’ investment:
Class A nonvoting common stock — Issued and outstanding 50,847,654 and\n50,586,524 shares, respectively		508			506
Class B voting common stock — Issued and outstanding 3,538,628 shares		35			35
Additional paid-in capital		276,304			266,203
Earnings retained in the business		567,605			540,238
Accumulated other comprehensive income		108,050			83,376
Other		642			654


Total stockholders’ investment		953,144			891,012


Total	$	1,758,512		$	1,698,857

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See Notes to Condensed Consolidated Financial Statements\n\n

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3\n

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BRADY CORPORATION AND SUBSIDIARIES
\nCONDENSED CONSOLIDATED STATEMENTS OF INCOME
\n(Dollars in Thousands, Except Per Share Amounts)\n

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\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n\n\n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n


	Three Months Ended October 31,
	(Unaudited)
								Percentage
	2007			2006			Change
Net sales	$	380,134			$	332,259			14.4	%
Cost of products sold		192,467				168,131			14.5	%

Gross margin		187,667				164,128			14.3	%

Operating expenses:
Research and development		8,978				8,532			5.2	%
Selling, general and administrative		120,351				103,655			16.1	%

Total operating expenses		129,329				112,187			15.3	%

Operating income		58,338				51,941			12.3	%

Other income (expense):
Investment and other income — net		118				638			-81.5	%
Interest expense		(6,720	)			(4,735	)		41.9	%


Income before income taxes		51,736				47,844			8.1	%

Income taxes		15,366				13,396			14.7	%


Net income	$	36,370			$	34,448			5.6	%


Per Class A Nonvoting Common Share:
Basic net income	$	0.67			$	0.64			4.7	%
Diluted net income	$	0.66			$	0.63			4.8	%
Dividends	$	0.15			$	0.14			7.1	%

Per Class B Voting Common Share:
Basic net income	$	0.65			$	0.63			3.2	%
Diluted net income	$	0.64			$	0.62			3.2	%
Dividends	$	0.13			$	0.12			8.3	%

Weighted average common shares outstanding (in thousands):
Basic		54,350				53,734
Diluted		55,121				54,605

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See Notes to Condensed Consolidated Financial Statements.\n\n

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4\n

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BRADY CORPORATION AND SUBSIDIARIES
\nCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
\n(Dollars in Thousands)\n

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\n\n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n\n\n \n \n \n \n\n\n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n


	Three Months Ended
	October 31,
	(Unaudited)
	2007			2006
Operating activities:
Net income	$	36,370			$	34,448
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,168				12,927
Deferred income taxes		(666	)			(542	)
Loss on disposal of property, plant & equipment		712				204
Non-cash portion of stock-based compensation expense		3,257				1,559
Changes in operating assets and liabilities (net of effects of business acquisitions):
Accounts receivable		(10,880	)			(21,119	)
Inventories		1,337				(6,539	)
Prepaid expenses and other assets		(4,417	)			(4,818	)
Accounts payable and accrued liabilities		(13,278	)			(9,638	)
Income taxes		6,086				4,437
Other liabilities		1,201				1,443

Net cash provided by operating activities		33,890				12,362

Investing activities:
Acquisition of businesses, net of cash acquired		—				(45,173	)
Payments of contingent consideration		(1,200	)			(7,500	)
Purchases of short-term investments		(5,150	)			—
Sales of short-term investments		7,860				11,500
Purchases of property, plant and equipment		(7,395	)			(14,544	)
Other		(1,375	)			(539	)

Net cash used in investing activities		(7,260	)			(56,256	)

Financing activities:
Payment of dividends		(8,100	)			(7,463	)
Proceeds from issuance of common stock		4,134				531
Principal payments on debt		(5	)			(23,226	)
Proceeds from issuance of debt		—				48,220
Income tax benefit from the exercise of stock options and deferred compensation\ndistributions		2,712				162

Net cash (used in) provided by financing activities		(1,259	)			18,224

Effect of exchange rate changes on cash		2,382				171


Net increase (decrease) in cash and cash equivalents		27,753				(25,499	)
Cash and cash equivalents, beginning of period		142,846				113,008


Cash and cash equivalents, end of period	$	170,599			$	87,509


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest	$	9,298			$	5,368
Income taxes, net of refunds		1,782				9,393
Acquisitions:
Fair value of assets acquired, net of cash	$	—			$	27,589
Liabilities assumed		—				(6,610	)
Goodwill		—				24,194

Net cash paid for acquisitions	$	—			$	45,173

\n\n\n

See Notes to Condensed Consolidated Financial Statements.\n\n

\n\n\n

5\n

\n\n

BRADY CORPORATION AND SUBSIDIARIES
\nNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
\nThree Months Ended October 31, 2007
\n(Unaudited)
\n(In thousands, except share and per share amounts)\n

\n\n\n

NOTE A — Basis of Presentation\n

\n\n\n

The condensed consolidated financial statements included herein have been prepared by Brady\nCorporation and subsidiaries (the “Company” or “Brady”) without audit, pursuant to the rules and\nregulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing\nstatements contain all adjustments, consisting only of normal recurring adjustments and the impact\nof adopting Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for\nUncertainty in Income Taxes” (“FIN 48”) (see Note I for further information) as of August 1, 2007,\nnecessary to present fairly the financial position of the Company as of October 31, 2007 and July\n3l, 2007, and its results of operations and cash flows for the three months ended October 31, 2007\nand 2006. The condensed consolidated balance sheet as of July 31, 2007 has been derived from the\naudited consolidated financial statements of that date and condensed. The preparation of financial\nstatements in conformity with accounting principles generally accepted in the United States of\nAmerica (“GAAP”) requires management to make estimates and assumptions that affect the reported\namounts therein. Due to the inherent uncertainty involved in making estimates, actual results in\nfuture periods may differ from the estimates.\n

\n\n

Certain information and footnote disclosures normally included in financial statements\nprepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations\nof the Securities and Exchange Commission. Accordingly, the condensed consolidated financial\nstatements do not include all of the information and footnotes required by GAAP for complete\nfinancial statement presentation. It is suggested that these condensed consolidated financial\nstatements be read in conjunction with the consolidated financial statements and the notes thereto\nincluded in the Company’s latest annual report on Form 10-K for the year ended July 31, 2007.\n

\n\n

NOTE B — Goodwill and Intangible Assets\n

\n\n\n

Changes in the carrying amount of goodwill for the quarter ended October 31, 2007, are as\nfollows:\n


					Direct
					Marketing &
	Brady			People ID
	Americas			Americas			Europe		Asia-Pacific		Total
Balance as of July 31, 2007	$	143,775			$	260,299		$	163,699		$	169,677	$	737,450
Adjustments for prior year acquisitions		(731	)			422			(269	)		3,765		3,187
Translation adjustments		684				1,552			6,897			4,138		13,271

Balance as of October 31, 2007	$	143,728			$	262,273		$	170,327		$	177,580	$	753,908

\n\n\n

Goodwill increased $3,187 during the three months ended October 31, 2007 as a result of\nadjustments to the preliminary allocation of the purchase price for acquisitions completed in\nfiscal 2007. The largest component of the increase related to the acquisition of Comprehensive\nIdentification Products, Inc. (“CIPI”), which added $3,668 and was partially offset by a reduction\nto goodwill of $548 related to the adoption of FIN 48 (see Note I for further information). Of the\n$3,668 increase in goodwill attributed to the allocation of the purchase price for CIPI, $1,609\nrelated to the adoption of FIN 48, $1,250 was for employee termination costs, and the remaining\n$809 related to various exit costs associated with the closure of a facility. The remaining\n$13,271 increase to goodwill during the quarter was attributable to the effects of foreign currency\ntranslation.\n

\n\n

6\n

\n\n

Other intangible assets include patents, trademarks, customer relationships, non-compete\nagreements and other intangible assets with finite lives being amortized in accordance with\nStatement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible\nAssets.” The net book value of these assets was as follows:\n

\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n


	October 31, 2007		July 31, 2007
	Weighted												Weighted
	Average												Average
	Amortization		Gross									Amortization		Gross
	Period		Carrying			Accumulated		Net Book		Period			Carrying		Accumulated		Net Book
	(Years)		Amount			Amortization		Value		(Years)			Amount		Amortization		Value
Amortized other\nintangible assets:
Patents		15		$	8,407		$	(6,089	)	$	2,318			15		$	8,392	$	(5,913	)	$	2,479
Trademarks and\nother		5			4,747			(3,460	)		1,287			5			4,510		(3,250	)		1,260
Customer\nrelationships		7			136,758			(42,252	)		94,506			7			134,125		(36,674	)		97,451
Non-compete\nagreements		4			11,666			(6,897	)		4,769			4			11,364		(6,294	)		5,070
Other		5			3,297			(2,729	)		568			5			3,297		(2,554	)		743
Unamortized other\nintangible assets:
Trademarks		N/A			42,991			—			42,991			N/A			42,758		—			42,758

Total				$	207,866		$	(61,427	)	$	146,439					$	204,446	$	(54,685	)	$	149,761

\n\n\n

The value of goodwill and other intangible assets in the Condensed Consolidated Financial\nStatements at October 31, 2007 differs from the value assigned to them in the allocation of\npurchase price due to the effect of fluctuations in the exchange rates used to translate financial\nstatements into the United States Dollar between the date of acquisition and October 31, 2007.\n

\n\n

Amortization expense on intangible assets was $5,905 and $5,240 for the three-month periods\nended October 31, 2007 and 2006, respectively. The amortization over each of the next five fiscal\nyears is projected to be $24,131, $23,138, $22,265, $18,674 and $9,595 for the years ending July\n31, 2008, 2009, 2010, 2011 and 2012, respectively.\n

\n\n

NOTE C — Comprehensive Income\n

\n\n\n

Total comprehensive income, which was comprised of net income, foreign currency translation\nadjustments, net unrealized gains and losses from cash flow hedges and other investments, the\nunamortized gain on the post-retirement medical, dental and vision plan, and their related tax\neffects amounted to approximately $61,044 and $38,621 for the three months ended October 31, 2007\nand 2006, respectively.\n

\n\n

7\n

\n\n

NOTE D — Net Income Per Common Share\n

\n\n\n

Reconciliations of the numerator and denominator of the basic and diluted per share\ncomputations for the Company’s Class A and Class B common stock are summarized as follows:\n


	Three Months Ended October 31,
	2007			2006
Numerator:
Net income (numerator for basic and diluted Class A net income per share)	$	36,370			$	34,448
Less:
Preferential dividends		(846	)			(836	)
Preferential dividends on dilutive stock options		(13	)			(15	)

Numerator for basic and diluted Class B net income per share	$	35,511			$	33,597


Denominator:
Denominator for basic net income per share for both Class A and Class B		54,350				53,734
Plus: Effect of dilutive stock options		771				871

Denominator for diluted net income per share for both Class A and Class B		55,121				54,605


Class A Nonvoting Common Stock net income per share:
Basic	$	0.67			$	0.64
Diluted	$	0.66			$	0.63

Class B Voting Common Stock net income per share:
Basic	$	0.65			$	0.63
Diluted	$	0.64			$	0.62

\n\n\n

Options to purchase 1,280,500 and 629,500 shares of Class A Nonvoting Common Stock were not\nincluded in the computation of diluted net income per share for the quarters ended October 31, 2007\nand 2006, respectively, because the option exercise price was greater than the average market price\nof the common shares and, therefore, the effect would be anti-dilutive.\n

\n\n

8\n

\n\n

NOTE E — Segment Information\n

\n\n\n

The Company’s reportable segments are businesses that are each managed separately. As a\nresult of recent organizational changes within the executive leadership team in which management of\nthe manufacturing facilities was aligned with the geographic region of the facility, the Company\nhas revised its reportable segments and has restated the corresponding segment information from its\nprevious geographical based structure for the prior year. The Company has four reportable\nsegments: Brady Americas, Direct Marketing & People ID Americas, Europe and Asia-Pacific. The\nBrady Americas reportable segment includes businesses that focus on MRO market products and OEM\nmarket products sold to customers in North and South America through distributors or a direct sales\nforce. The Direct Marketing & People ID Americas reportable segment includes businesses that\nmarket their products through business-to-business direct mail, catalogs, and telemarketing,\ndistribution and a direct sales force in North and South Americas. The Europe and Asia-Pacific\nreportable segments have not changed from prior year disclosures. Following is a summary of\nsegment information for the three months ended October 31, 2007 and 2006:\n


				Direct
				Marketing &										Corporate
	Brady		People ID									and
	Americas		Americas	Europe		Asia-Pacific	Subtotals		Eliminations	Totals
Three months ended\nOctober 31, 2007:
Revenues from\nexternal customers	$	105,235		$	69,540		$	108,914		$	96,445	$	380,134		—		$	380,134
Intersegment revenues		14,405			621			2,985			6,140		24,151		(24,151	)		—
Segment profit		24,459			19,648			29,900			19,390		93,397		(2,237	)		91,160
Assets		358,028			414,809			358,222			398,990		1,530,049		228,463			1,758,512

Three months ended\nOctober 31, 2006:
Revenues from\nexternal customers	$	82,759		$	64,184		$	92,365		$	92,951	$	332,259		—		$	332,259
Intersegment revenues		12,218			712			786			5,991		19,707		($19,707	)		—
Segment profit		20,715			16,803			23,005			22,137		82,660		(2,810	)		79,850
Assets		270,585			392,697			258,039			370,067		1,291,388		127,871			1,419,259

\n\n

Following is a reconciliation of segment profit to income before income taxes for the three months\nended October 31, 2007 and 2006:\n

\n\n


	Three months ended:
	October 31,
	2007			2006
Total profit from reportable segments	$	93,397			$	82,660
Corporate and eliminations		(2,237	)			(2,810	)
Unallocated amounts:
Administrative costs		(32,822	)			(27,909	)
Investment and other income		118				638
Interest expense		(6,720	)			(4,735	)

Income before income taxes		51,736				47,844
Income taxes		(15,366	)			(13,396	)

Net income	$	36,370			$	34,448

\n\n\n

9\n

\n\n\n

NOTE F —Stock-Based Compensation\n

\n\n\n

The Company has an incentive stock plan under which the Board of Directors may grant\nnonqualified stock options to purchase shares of Class A Nonvoting Common Stock to employees.\nAdditionally, the Company has a nonqualified stock option plan for non-employee directors under\nwhich stock options to purchase shares of Class A Nonvoting Common Stock are available for grant.\nThe options have an exercise price equal to the fair market value of the underlying stock at the\ndate of grant and generally vest ratably over a three-year period, with one-third becoming\nexercisable one year after the grant date and one-third additional in each of the succeeding two\nyears. Options issued under these plans, referred to herein as “service-based” options, generally\nexpire 10 years from the date of grant. The Company also grants stock options to certain executives\nand key management employees that vest upon meeting certain financial performance conditions over\nthe vesting schedule described above. These options are referred to herein as “performance-based”\noptions. Performance-based options granted in fiscal 2007 and forward expire 10 years from the date\nof grant.\n

\n\n

As of October 31, 2007, the Company has reserved 4,182,608 shares of Class A Nonvoting Common\nStock for outstanding stock options and 1,721,000 shares of Class A Nonvoting Common Stock for\nfuture issuance of stock options under the various plans. The Company uses treasury stock or will\nissue new Class A Nonvoting Common Stock to deliver shares under these plans.\n

\n\n

The Company accounts for share-based compensation awards in accordance with SFAS No. 123(R),\n“Share Based Payment”. In accordance with this standard, the Company recognizes the compensation\ncost of all share-based awards on a straight-line basis over the vesting period of the award. Total\nstock compensation expense recognized by the Company during the three months ended October 31, 2007\nand 2006 was $3,257 ($1,987 net of taxes) and $1,559 ($951 net of taxes), respectively. As of\nOctober 31, 2007, total unrecognized compensation cost related to share-based compensation awards\nwas approximately $12,906 pre-tax, net of estimated forfeitures, which the Company expects to\nrecognize over a weighted-average period of approximately 1.9 years.\n

\n\n

The Company has estimated the fair value of its performance-based option awards granted during\nthe three months ended October 31, 2007 and 2006 using the Black-Scholes option valuation model.\nThe weighted-average assumptions used in the Black-Scholes valuation model are reflected in the\nfollowing table:\n


Black-Scholes Option Valuation Assumptions	October 31,2007		October 31,2006
Expected term (in years)		6.57			6.57
Expected volatility		33.68	%		34.66	%
Expected dividend yield		1.58	%		1.51	%
Risk-free interest rate		4.66	%		4.90	%
Weighted-average market value of underlying stock at grant date	$	35.35		$	33.32
Weighted-average exercise price	$	35.35		$	33.32
Weighted-average fair value of options granted during the period	$	12.83		$	12.57

\n\n\n

The Company uses historical data regarding stock option exercise behaviors to estimate the\nexpected term of options granted based on the period of time that options granted are expected to\nbe outstanding. Expected volatilities are based on the historical volatility of the Company’s\nstock. The expected dividend yield is based on the Company’s historical dividend payments and\nhistorical yield. The risk-free interest rate is based on the U.S. Treasury yield curve in effect\non the grant date for the length of time corresponding to the expected term of the option. The\nmarket value is obtained by taking the average of the high and the low stock price on the date of\nthe grant.\n

\n\n

The Company did not grant any service-based options during the three months ended October 31,\n2007 and 2006.\n

\n\n

10\n

\n\n

A summary of stock option activity under the Company’s share-based compensation plans for the\nthree months ended October 31, 2007 is presented below:\n


									Weighted
									Average
					Weighted			Remaining			Aggregate
					Average			Contractual			Intrinsic
Options	Shares			Exercise Price			Term			Value

Outstanding at July 31, 2007		4,182,739			$	26.36
New grants		268,000			$	35.35
Exercised		(261,130	)		$	15.83
Forfeited or expired		(7,001	)		$	35.34

Outstanding at October 31, 2007		4,182,608			$	27.43				6.9		$	40,873

Exercisable at October 31, 2007		2,225,776			$	22.37				5.7		$	32,498

\n\n\n

The total intrinsic value of options exercised during the three months ended October 31, 2007\nand 2006, based upon the average market price during the period, was approximately $6,393 and $634,\nrespectively. The total fair value of stock options vested during the three months ended October\n31, 2007 and 2006, was approximately $47 and $59, respectively.\n

\n\n

NOTE G: Stockholders’ Equity\n

\n\n\n

In September 2007, the Company announced that the Board of Directors of the Company authorized\na share repurchase plan for up to 1 million shares of the Company’s Class A Nonvoting Common Stock.\nThe share repurchase plan may be implemented by purchasing shares on the open market or in\nprivately negotiated transactions, with repurchased shares available for use in connection with the\nCompany’s stock-based plans and for other corporate purposes. During the three months ended\nOctober 31, 2007, the Company did not reacquire any shares under the repurchase plan.\n

\n\n

NOTE H: Employee Benefit Plans\n

\n\n\n

The Company provides postretirement medical, dental and vision benefits (the “Plan”) for all\nregular full and part-time domestic employees (including spouses) who retire on or after attainment\nof age 55 with 15 years of credited service. Credited service begins accruing at the later of age\n40 or date of hire. All active employees first eligible to retire after July 31,1992, are covered\nby an unfunded, contributory postretirement healthcare plan where employer contributions will not\nexceed a defined dollar benefit amount, regardless of the cost of the program. Employer\ncontributions to the plan are based on the employee’s age and service at retirement.\n

\n\n

The Company accounts for postretirement benefits other than pensions in accordance with SFAS\nNo. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” The\nCompany funds benefit costs on a pay-as-you-go basis. There have been no changes to the components\nof net periodic benefit cost or the amount that the Company expects to fund in fiscal 2008 from\nthose reported thereto in Note 3 to the consolidated financial statements included in the Company’s\nlatest annual report on Form 10-K for the year ended July 31, 2007.\n

\n\n\n\n

11\n

\n\n\n

NOTE I: Income Taxes\n

\n\n\n

On August 1, 2007, the Company adopted FIN 48. FIN 48 prescribes a recognition threshold that\na tax position is required to meet before being recognized in the financial statements and provides\nguidance on derecognition, measurement, classification, interest and penalties, accounting in\ninterim periods, and disclosure and transition issues.\n

\n\n

The adoption of FIN 48 resulted in a $900 charge to earnings retained in the business as of\nAugust 1, 2007 and a change in the classification of the liability on the balance sheet from\naccrued income taxes to other liabilities. As of August 1, 2007, the Company’s liability for\nuncertain tax positions was $15,900. Unrecognized tax benefits of $10,500 would affect the\nCompany’s effective tax rate if recognized.\n

\n\n

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax\nbenefits in income taxes on the accompanying condensed consolidated statement of income. At August\n1, 2007, the Company had accrued $2,200 for the potential payment of interest which is included in\nthe $15,900 liability for uncertain tax positions. The amounts recognized in income taxes for\ninterest and penalties during the quarter ended October 31, 2007 were not significant.\n

\n\n

The Company and its subsidiaries file income tax returns in the US federal jurisdiction, and\nvarious state and foreign jurisdictions. The following table summarized the open tax years for the\nCompany’s major jurisdictions:\n

\n\n\n\n \n \n \n \n \n\n\n \n \n \n\n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n


Jurisdiction	Open Tax Years
United States — Federal		F’04 — F’07
France		F’04 — F’07
Germany		F’03 — F’07
United Kingdom		F’05 — F’07

\n\n\n

Approximately $2,000 of unrecognized tax benefits relate to items that are affected by\nexpiring statute of limitations within the next 12 months.\n

\n\n

NOTE J: New Accounting Pronouncements\n\n

\n\n

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement\nprovides guidance on how to measure the fair value of assets and liabilities utilizing a fair value\nhierarchy to classify the sources of information used in the measurement calculation. SFAS No. 157\nalso provides new disclosure rules for assets and liabilities measured at fair value based on their\nlevel in the fair value hierarchy. This new statement will be effective for fiscal years beginning\nafter November 15, 2007. The Company is in the process of evaluating the impact that will result\nfrom adopting SFAS No. 157 and therefore is unable to disclose the impact SFAS No. 157 will have on\nits financial position and results of operations when such statement is adopted.\n

\n\n

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets\nand Financial Liabilities.” This statement permits entities to choose the fair value option to\nmeasure many financial instruments and certain other items at fair value that are not currently\nrequired to be measured at fair value. The objective is to improve financial reporting by\nproviding entities with the opportunity to mitigate volatility in earnings caused by measuring\nrelated assets and liabilities differently without having to apply complex hedge accounting. This\nnew statement will be effective for fiscal years beginning after November 15, 2007. The Company is\nin the process of evaluating the impact that will result from adopting SFAS No. 159 and therefore\nis unable to disclose the impact SFAS No. 159 will have on its financial position and results of\noperations when such statement is adopted.\n

\n\n

NOTE K: Subsequent Event\n\n

On December 3, 2007, the Company announced that David Mathieson resigned as chief financial officer\nof the company, effective December 31, 2007. The Company’s President and CEO, Frank M. Jaehnert,\nwill assume the additional duties of chief financial officer until a successor is named.\n

\n\n\n\n\n

12\n

\n\n\n\n

\n\n

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS\n

\n\n\n

Overview\n\n

\n\n

Brady is an international manufacturer and marketer of identification solutions and specialty\nmaterials that identify and protect premises, products, and people. Its products include\nhigh-performance labels and signs, printing systems and software, label-application and\ndata-collection systems, safety devices and precision die-cut materials. Founded in 1914, the\nCompany serves customers in electronics, telecommunications, manufacturing, electrical,\nconstruction, laboratory, education, governmental, public utility, computer, transportation and a\nvariety of other industries. The Company manufactures and sells products domestically and\ninternationally through multiple channels including direct sales, distributor sales, mail-order\ncatalogs, telemarketing, retail and electronic access through the Internet. The Company operates\nmanufacturing or distribution facilities in Australia, Belgium, Brazil, Canada, China, Denmark,\nFrance, Germany, India, Italy, Japan, Malaysia, Mexico, The Netherlands, Norway, Poland, Singapore,\nSlovakia, South Korea, Sweden, Thailand, the United Kingdom and the United States. Brady sells\nthrough subsidiaries or sales offices in these countries, with additional sales through a dedicated\nteam of international sales representatives in Hong Kong, the Philippines, Spain, Taiwan, Turkey\nand the United Arab Emirates. The Company further markets it products to parts of Eastern Europe,\nthe Middle East, Africa and Russia. The Company believes that its reputation for innovation,\ncommitment to quality and service, and dedicated employees have made it a world leader in the\nmarkets it serves.\n

\n\n

Sales for the quarter ended October 31, 2007, were up 14.4% to $380.1 million, compared to\n$332.3 million in the same period of fiscal 2007. Of the increase in sales, organic growth\naccounted for 1.7%, acquisitions added 7.5% and the effects of fluctuations in the exchange rates\nused to translate financial results into the United States Dollar added 5.2%. Net income for the\nquarter ended October 31, 2007, was $36.4 million or $0.66 per diluted Class A Nonvoting Common\nShare, up 5.6% from $34.4 million or $0.63 per diluted Class A Nonvoting Common Share reported in\nthe first quarter of last fiscal year.\n

\n\n

Results of Operations\n

\n\n\n

The comparability of the operating results for the three months ended October 31, 2007 to the\nprior year has been significantly impacted by the following acquisitions completed in fiscal 2007.\n

\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n


Acquisitions	Segment	Date Completed
CIPI\n	Direct Marketing &\nPeople ID Americas,\nEurope and\nAsia-Pacific\n	August 2006
Precision Converters, L.P. (“Precision Converters”)\n	Brady Americas\n	October 2006
Scafftag, Ltd., Safetrak, Ltd. and Scafftag Pty.,\nLtd. (collectively “Scafftag”)\n	Brady Americas,\nEurope and\nAsia-Pacific\n	December 2006
Asterisco Artes Graficas Ltda. (“Asterisco”)\n	Brady Americas\n	December 2006
Modernotecnica SpA (“Moderno”)\n	Europe\n	December 2006
Clement Communications, Inc. (“Clement”)\n	Direct Marketing & \nPeople ID Americas\n	February 2007
Sorbent Products Co., Inc. (“SPC”)\n	Brady Americas,\nEurope and\nAsia-Pacific\n	April 2007

\n\n\n\n\n\n

13\n

\n\n\n\n\n

Sales for the three months ended October 31, 2007 were up 14.4% compared to the same period in\nfiscal 2007. The increase was comprised of an increase of 1.7% attributed to organic growth, an\nincrease of 5.2% due to the effect of currencies on sales, and an increase of 7.5% due to the\nacquisitions listed in the above table. The organic growth for the quarter ended October 31, 2007,\nwas due primarily to an 8.2% increase in Brady Americas’ sales and a 2.4% increase in Direct\nMarketing & People ID Americas’ sales, partially offset by a 3.3% decline in Asia-Pacific sales.\nThe Europe segment’s organic sales were flat in the quarter.\n

\n\n

Gross margin as a percentage of sales remained constant at 49.4% for the quarter ended October\n31, 2007, compared to the same period of the previous year. Excluding the acquisitions completed\nin the last fiscal year, gross margin as a percentage of sales has improved slightly.\n

\n\n

Research and development (“R&D”) expenses increased 5.2% to $9.0 million for the three months\nended October 31, 2007, compared to $8.5 million for the same period in the prior year. As a\npercentage of sales, R&D expenses represented a lower percentage of sales, declining to 2.4% in the\nfirst quarter of fiscal 2008 from 2.6% in the first quarter of fiscal 2007. The majority of the\ndecline in R&D expense as a percentage of sales was due to acquisitions completed in the last year.\nThe acquisitions added $25.0 million in revenue and had minimal R&D expense.\n

\n\n

SG&A expenses increased 16.1% to $120.4 million for the three months ended October 31, 2007,\nas compared to $103.7 million for the same period in the prior year. This expected increase was\ndue to acquisitions completed in fiscal 2007, the continued implementation of SAP in many of our\nlocations around the world and investments made to generate new customers within our direct\nmarketing businesses. As a percentage of sales, SG&A expenses increased to 31.7% in the first\nquarter of fiscal 2008 from 31.2% in the same period of fiscal 2007, due to the reasons noted\nabove.\n

\n\n

Investment and other income decreased to $0.1 million for the quarter ended October 31, 2007\nfrom $0.6 million for the quarter ended October 31, 2006. Interest income earned in the first\nquarter of fiscal 2008 was $1.2 million, as compared to $0.4 million in the first quarter of fiscal\n2007, due to the higher cash and marketable securities investment balances maintained in fiscal\n2008. Also included in this income statement heading, the Company recorded losses from the net\neffect of changes in foreign currency exchange rates on specific transactions of $1.1 million in\nthe first quarter of fiscal 2008, as compared to a gain of $0.2 million in the first quarter of\nfiscal 2007.\n

\n\n

Interest expense increased to $6.7 million for the quarter ended October 31, 2007 from $4.7\nmillion for the quarter ended October 31, 2006. The increase in interest expense was due to\ninterest on the $150 million private placement of senior notes that the Company completed in the\nthird quarter of fiscal 2007, partially offset by the interest on the borrowings under our\nrevolving credit facility in the first quarter of fiscal 2007. During the first quarter of fiscal\n2008, the Company did not borrow under the revolving credit facility.\n

\n\n

The Company’s effective tax rate was 29.7% for the quarter ended October 31, 2007, and 28.0%\nfor the same period of the previous year. The increase in the effective rate was due to a shift of\na higher percentage of the Company’s pre-tax income to higher tax rate countries. The Company\nexpects the full year effective tax rate for fiscal 2008 to be approximately 29%.\n

\n\n

Net income for the three months ended October 31, 2007, increased 5.6% to $36.4 million,\ncompared to $34.4 million for the same quarter of the previous year. Net income as a percentage of\nsales decreased to 9.6% for the quarter ended October 31, 2007 from 10.4% for the same period in\nthe prior year. The decrease was primarily due to the increase in SG&A expenses, the increase in\ninterest expense and the increase in the Company’s effective tax rate.\n

\n\n\n\n\n

14\n

\n\n\n\n\n

Business Segment Operating Results\n

\n\n\n

Effective August 1, 2007, the Company revised its reportable segments as a result of\norganizational changes within the executive leadership team. Management of the Company now\nevaluates results based on the following businesses: Brady Americas, Direct Marketing & People ID\nAmericas, Europe, and Asia-Pacific.\n

\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n


				Direct
				Marketing &											Corporate
	Brady		People ID				Asia-					and
(Dollars in thousands)	Americas		Americas	Europe		Pacific	Subtotals		Eliminations	Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
October 31, 2007	$	105,235		$	69,540		$	108,914		$	96,445		$	380,134			—		$	380,134
October 31, 2006	$	82,759		$	64,184		$	92,365		$	92,951		$	332,259			—		$	332,259

SALES GROWTH INFORMATION
Three months ended October 31, 2007
Organic		8.2	%		2.4	%		0.3	%		-3.3	%		1.7	%		—			1.7	%
Currency		1.8	%		1.2	%		9.6	%		6.7	%		5.2	%		—			5.2	%
Acquisitions		17.2	%		4.7	%		8.0	%		0.3	%		7.5	%		—			7.5	%
Total		27.2	%		8.3	%		17.9	%		3.7	%		14.4	%		—			14.4	%

SEGMENT PROFIT
Three months ended:
October 31, 2007	$	24,459		$	19,648		$	29,900		$	19,390		$	93,397		$	(2,237	)	$	91,160
October 31, 2006	$	20,715		$	16,803		$	23,005		$	22,137		$	82,660		$	(2,810	)	$	79,850
Percentage increase\n(decrease)		18.1	%		16.9	%		30.0	%		(12.4	%)		13.0	%		(20.4	%)		14.2	%

\n\n\n

SEGMENT PROFIT RECONCILIATION (Dollars in thousands)\n

\n\n


	Three months ended:
	October 31,			October 31,
	2007			2006
Total profit from reportable segments	$	93,397			$	82,660
Corporate and eliminations		(2,237	)			(2,810	)
Unallocated amounts:
Administrative costs		(32,822	)			(27,909	)
Investment and other income		118				638
Interest expense		(6,720	)			(4,735	)

Income before income taxes		51,736				47,844
Income taxes		(15,366	)			(13,396	)

Net income	$	36,370			$	34,448

\n\n\n

The Company evaluates performance of the businesses using sales and segment profit. Segment\nprofit or loss does not include certain administrative costs, such as the cost of finance, stock\noptions, information technology and human resources, which are managed as global functions.\nInterest, investment and other income and income taxes are also excluded when evaluating\nperformance.\n

\n\n\n\n\n

15\n

\n\n\n\n\n

Brady Americas:\n

\n\n\n

Brady Americas sales increased 27.2% for the quarter ended October 31, 2007, compared to the\nsame period in the prior year. Organic growth accounted for 8.2% in the first quarter of fiscal\n2008 compared to the same period last year. Fluctuations in the exchange rates used to translate\nfinancial results into the U.S. dollar increased sales by 1.8% in the quarter. Sales in the region\nwere also aided by the fiscal 2007 acquisitions of Precision Converters, Scafftag, Asterisco and\nSPC, which increased sales by 17.2% for the quarter. The organic growth in the quarter was driven\nby strong growth across most of the major markets, including electrical and wire identification,\nsafety and industrial identification, laboratory and aerospace, and defense and mass transit. The\ngrowth was slightly offset by a continued softness in the electric utility market due to the weak\nhousing market.\n

\n\n

Segment profit increased 18.1% to $24.5 million for the quarter ended October 31, 2007,\ncompared to $20.7 million for the same period in the prior year. As a percentage of sales, segment\nprofit decreased to 23.2% for the quarter ended October 31,2007 from 25.0% for the same period in\nthe prior year. The decline in segment profit as a percentage of sales was mainly due to\nacquisitions made in the last 12 months, with a smaller decline due to reductions in the base\nbusiness profit percentage as gross margin declines were partially offset by selling expense\nreductions.\n

\n\n

Direct Marketing & People ID Americas:\n

\n\n\n

Direct Marketing & People ID Americas sales increased 8.3% for the quarter ended October 31,\n2007, compared to the same period in the prior year. Organic growth accounted for 2.4% in the first\nquarter of fiscal 2008 compared to the same period last year. Fluctuations in the exchange rates\nused to translate financial results into the U.S. dollar increased sales by 1.2% in the quarter.\nSales in the region were also aided by the fiscal 2007 acquisitions of CIPI and Clement, which\nincreased sales by 4.7% for the quarter. The organic growth in the quarter was driven by strong\nresults in our regulatory business and slightly positive growth in the non-residential construction\nmarkets, partially offset by softness experienced in the manufacturing sector and a proactively\nmanaged shift away from less profitable sales in one of our businesses.\n

\n\n

Segment profit increased 16.9% to $19.6 million for the quarter ended October 31, 2007,\ncompared to $16.8 million for the same period in the prior year. As a percentage of sales, segment\nprofit increased to 28.3% in the first quarter of fiscal 2008 from 26.2% in the first quarter of\nfiscal 2007. The improvement was due to the continued integration of acquisitions and cost control\nefforts, partially offset by the investments made to generate new customers.\n

\n\n

Europe:\n

\n\n\n

Europe sales increased 17.9% for the quarter ended October 31, 2007, compared to the same\nperiod in the prior year. Organic growth was essentially flat at a 0.3% increase in the quarter as\ncompared to the same period last year. Sales were positively affected by fluctuations in the\nexchange rates used to translate financial results into the U.S. dollar, which increased sales\nwithin the region by 9.6% in the quarter. The fiscal 2007 acquisitions of CIPI, Scafftag, Moderno\nand SPC increased sales by 8.0%. By market within the region, the direct marketing business\nexperienced strong organic growth as we continued the momentum built up last year in France, in the\nUnited Kingdom and in Germany. Modest organic growth was achieved by the Brady brand MRO business,\nthe high-performance labeling business and the wire identification business. In contrast, the OEM\nelectronics business continued to decline as business continues to migrate to Asia.\n

\n\n

Segment profit increased 30.0% to $29.9 million for the quarter ended October 31, 2007,\ncompared to $23.0 million for the same period of the prior year. As a percentage of sales, segment\nprofit increased to 27.5% in the first quarter of fiscal 2008 from 24.9% in the first quarter of\nfiscal 2007. The improvement in the segment profit rate was due to the continued focus on more\nprofitable product lines, the integration of acquisitions, as well as other cost reduction\nactivities. Acquisitions completed in the last 12 months were slightly dilutive to the segment\nprofit rate in the first quarter of fiscal 2008.\n

\n\n

Asia-Pacific:\n

\n\n\n

Asia-Pacific sales increased 3.7% for the quarter ended October 31, 2007, compared to the same\nperiod in the prior year. Organic sales decreased 3.3% in the quarter as compared to the same\nperiod last year. Sales were positively affected by fluctuations in the exchange rates used to\ntranslate financial results into the U.S. dollar, which increased sales within the region by 6.7%\nin the quarter. The fiscal 2007 acquisitions of CIPI, Scafftag and SPC had a minimal impact on\nsales in the quarter by increasing sales by 0.3%. The negative organic growth for the quarter was\ndue to a double-digit reduction within the mobile handset business, which began in the second\nquarter of fiscal 2007, and a smaller reduction in the high performance labeling business. The\nrelatively small hard disk drive business experienced a double-digit sales increase in the first\nquarter of fiscal 2008, as did the relatively new and small consumer electronics business. The\nsafety and facility identification business, wire identification business, direct marketing\nbusiness and people identification business also continued to grow during the quarter.\n

\n\n\n\n\n

16\n

\n\n\n\n\n

Segment profit decreased 12.4% to $19.4 million for the quarter ended October 31, 2007,\ncompared to $22.1 million for the same period in the prior year. As a percentage of sales, segment\nprofit decreased to 20.1% in the first quarter of fiscal 2008 from 23.8% in the first quarter of\nfiscal 2007. The decreases were due primarily to the decreased sales volume described above as\ncompared to the first quarter of fiscal 2007, as well as pricing pressure received from our\ncustomers, partially offset by cost control efforts and improving productivity.\n

\n\n

Financial Condition\n

\n\n\n

The Company’s current ratio as of October 31, 2007, was 2.4 compared to 2.1 at July 31, 2007.\nCash and cash equivalents were $170.6 million at October 31, 2007, compared to $142.8 million at\nJuly 31, 2007. Additionally, there were $16.5 million of short-term investments outstanding at\nOctober 31, 2007, compared to $19.2 million outstanding at July 31, 2007. Working capital increased\n$61.9 million during the quarter ended October 31, 2007, to $365.3 million from $303.4 million at\nJuly 31, 2007. Accounts receivable increased $17.0 million for the quarter due to increased sales\nvolume and foreign currency translation. Inventories increased $1.6 million for the quarter, due to\nforeign currency translation. The net decrease in current liabilities was $16.1 million for the\nquarter. The decrease was composed of a significant decrease in accrued wages due to the payment of\nincentives in the first quarter of fiscal 2008 related to the incentives earned in the year ended\nJuly 31, 2007, and a decrease in accrued income taxes as the adoption of FIN 48 required a\nreclassification of a portion of the current payable recorded at July 31, 2007 to long-term\nliabilities, partially offset by an increase in accounts payable due to foreign currency\ntranslation.\n

\n\n

Cash flow from operating activities totaled $33.9 million for the quarter ended October 31,\n2007, compared to $12.4 million for the same period last year. The increase was the result of a\n$1.9 million increase in net income, a $1.2 million increase in depreciation and amortization on\nthe intangible assets acquired in fiscal 2007, and significant decreases in the change in accounts\nreceivable and inventory balances as compared to the changes reported in the first quarter of\nfiscal 2007.\n

\n\n

Contingent consideration payments of $1.2 million were paid during the quarter ended October\n31, 2007 to satisfy the earnout liability and the holdback liability of the Stopware acquisition\ncompleted in fiscal 2006. Capital expenditures were $7.4 million for the quarter ended October 31,\n2007, compared to $14.5 million in the same period last year. Fiscal 2007 capital expenditures\nincluded approximately $9 million spent on the expansions in China, Canada, India, Slovakia, and\nother locations which were not repeated in fiscal 2008. Net cash used in financing activities was\n$1.3 million for the quarter ended October 31, 2007, due to the payment of dividends, partially\noffset by the proceeds from the issuance of common stock. Net cash provided by financing\nactivities for the same period last year was $18.2 million due to net borrowings on the revolving\nloan agreement, partially offset by the payment of dividends.\n

\n\n

On October 5, 2006, the Company entered into a $200 million multi-currency revolving loan\nagreement with a group of five banks that replaced the Company’s previous credit agreement. At the\nCompany’s option, and subject to certain standard conditions, the available amount under the new\ncredit facility may be increased from $200 million up to $300 million.\n

\n\n

Under the 5-year agreement, which has a final maturity date of October 5, 2011, the Company\nhas the option to select either a base interest rate (based upon the higher of the federal funds\nrate plus one-half of 1% or the prime rate of Bank of America) or a Eurocurrency interest rate (at\nthe LIBOR rate plus a margin based on the Company’s consolidated leverage ratio). A commitment fee\nis payable on the unused amount of the facility. The agreement requires the Company to maintain two\nfinancial covenants. As of October 31, 2007, the Company was in compliance with the covenants of\nthe agreement.\n

\n\n

The credit agreement restricts the amount of certain types of payments, including dividends,\nwhich can be made annually to $50 million plus an amount equal to 75% of consolidated net income\nfor the prior fiscal year. The Company believes that based on historic dividend practice, this\nrestriction would not impede the Company in following a similar dividend practice in the future.\nDuring the quarter ended October 31, 2007, the Company did not borrow or repay any amounts under\nthe credit agreement. As of October 31, 2007, there were no outstanding borrowings under the\ncredit agreement.\n

\n\n\n\n\n

17\n

\n\n\n\n\n

On March 23, 2007, the Company completed the private placement of $150 million in ten-year\nfixed notes at 5.3% interest to institutional investors. The notes will be amortized in equal\ninstallments over seven years, beginning in 2011 with interest payable on the notes semiannually on\nSeptember 23 and March 23, beginning in September 2007. The notes have been fully and\nunconditionally guaranteed on an unsecured basis by the Company’s domestic subsidiaries. The\nCompany used the net proceeds of the offering to reduce outstanding indebtedness under the\nCompany’s revolving loan agreement and fund its ongoing strategic growth plan. This private\nplacement was exempt from the registration requirements of the Securities Act of 1933. The notes\nwere not registered for resale and may not be resold absent such registration or an applicable\nexemption from the registration requirements of the Securities Act of 1933 and applicable state\nsecurities laws. The notes have certain prepayment penalties for repaying them prior to the\nmaturity date. The agreement also requires the Company to maintain a financial covenant. As of\nOctober 31, 2007, the Company was in compliance with this covenant.\n

\n\n

On February 14, 2006, the Company completed the private placement of $200 million in ten-year\nfixed notes at 5.3% interest to institutional investors. The notes will be amortized in equal\ninstallments over seven years, beginning in 2010 with interest payable on the notes semiannually on\nAugust 14 and February 14, beginning in August 2006. The notes have been fully and unconditionally\nguaranteed on an unsecured basis by the Company’s domestic subsidiaries. The Company used the net\nproceeds of the offering to finance acquisitions completed in fiscal 2006 and fiscal 2007. This\nprivate placement was exempt from the registration requirements of the Securities Act of 1933. The\nnotes were not registered for resale and may not be resold absent such registration or an\napplicable exemption from the registration requirements of the Securities Act of 1933 and\napplicable state securities laws. The notes have certain prepayment penalties for repaying them\nprior to the maturity date. The agreement also requires the Company to maintain a financial\ncovenant. As of October 31, 2007, the Company was in compliance with this covenant.\n

\n\n

On June 30, 2004, the Company finalized a debt offering of $150 million of 5.14% unsecured\nsenior notes due in 2014 in an offering exempt from the registration requirements of the Securities\nAct of 1933. The debt offering was in conjunction with the Company’s acquisition of EMED. The notes\nwill be amortized over seven years beginning in 2008, with interest payable on the notes\nsemiannually on June 28 and December 28, beginning in December 2004. The Company used the proceeds\nof the offering to reduce outstanding indebtedness under the Company’s revolving credit facilities\nused to initially fund the EMED acquisition. The debt has certain prepayment penalties for repaying\nthe debt prior to its maturity date. The agreement also requires the Company to maintain a\nfinancial covenant. As of October 31, 2007, the Company was in compliance with this covenant.\n

\n\n

On November 16, 2007, the Board of Directors declared a quarterly cash dividend to\nshareholders of the Company’s Class A Common Stock of $0.15 per share payable on January 31, 2008\nto shareholders of record at the close of business on January 10, 2008.\n

\n\n

The Company believes that its continued strong cash flows from operations and existing\nborrowing capacity will enable it to execute its long-term strategic plan. This strategic plan\nincludes investments, which expand its current market share, open new markets and geographies,\ndevelop new products and distribution channels and continue to improve our processes. This\nstrategic plan also includes executing key acquisitions.\n

\n\n

Subsequent Event\n

\n\n\n

\n\n\n\n\n

18\n

\n\n\n\n\n

Off-Balance Sheet Arrangements — The Company does not have material off-balance sheet\narrangements or related-party transactions. The Company is not aware of factors that are reasonably\nlikely to adversely affect liquidity trends, other than the risk factors described in this and\nother Company filings. However, the following additional information is provided to assist those\nreviewing the Company’s financial statements.\n

\n\n

Operating Leases — These leases generally are entered into for investments in facilities,\nsuch as manufacturing facilities, warehouses and office buildings, computer equipment and Company\nvehicles, for which the economic profile is favorable.\n

\n\n

Purchase Commitments — The Company has purchase commitments for materials, supplies,\nservices, and property, plant and equipment as part of the ordinary conduct of its business. In the\naggregate, such commitments are not in excess of current market prices and are not material to the\nfinancial position of the Company. Due to the proprietary nature of many of the Company’s materials\nand processes, certain supply contracts contain penalty provisions for early termination. The\nCompany does not believe a material amount of penalties will be incurred under these contracts\nbased upon historical experience and current expectations.\n

\n\n

Other Contractual Obligations — The Company does not have material financial guarantees or\nother contractual commitments that are reasonably likely to adversely affect liquidity. In\nconnection with the adoption of FIN 48 as of August 1, 2007, the Company is unable to determine the\nperiod in which the cash settlement of the liability associated with FIN 48 will occur with the\nrespective taxing authority. As such, the Company has excluded the liability associated with FIN\n48 from the contractual obligations table.\n

\n\n

Related-Party Transactions — The Company does not have any related-party transactions that\nmaterially affect the results of operations, cash flow or financial condition.\n

\n\n

Forward-Looking Statements\n

\n\n\n

Brady believes that certain statements in this Form 10-Q are “forward-looking statements”\nwithin the meaning of the Private Securities Litigation Reform Act of 1995. All statements related\nto future, not past, events included in this Form10-Q, including, without limitation, statements\nregarding Brady’s future financial position, business strategy, targets, projected sales, costs,\nearnings, capital expenditures, debt levels and cash flows, and plans and objectives of management\nfor future operations are forward-looking statements. When used in this Form 10-Q, words such as\n“may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or\n“plan” or similar terminology are generally intended to identify forward-looking statements. These\nforward-looking statements by their nature address matters that are, to different degrees,\nuncertain and are subject to risks, assumptions and other factors, some of which are beyond Brady’s\ncontrol, that could cause actual results to differ materially from those expressed or implied by\nsuch forward-looking statements. For Brady, uncertainties arise from future financial performance\nof major markets Brady serves, which include, without limitation, telecommunications,\nmanufacturing, electrical, construction, laboratory, education, governmental, public utility,\ncomputer, transportation; difficulties in making and integrating acquisitions; risks associated\nwith newly acquired businesses; Brady’s ability to retain significant contracts and customers;\nfuture competition; Brady’s ability to develop and successfully market new products; changes in the\nsupply of, or price for, parts and components; increased price pressure from suppliers and\ncustomers; interruptions to sources of supply; environmental, health and safety compliance costs\nand liabilities; Brady’s ability to realize cost savings from operating initiatives; Brady’s\nability to attract and retain key talent; difficulties associated with exports; risks associated\nwith international operations; fluctuations in currency rates versus the US dollar; technology\nchanges; potential write-offs of Brady’s substantial intangible assets; risks associated with\nobtaining governmental approvals and maintaining regulatory compliance for new and existing\nproducts; business interruptions due to implementing business systems; and numerous other matters\nof national, regional and global scale, including those of a political, economic, business,\ncompetitive and regulatory nature contained from time to time in Brady’s U.S. Securities and\nExchange Commission filings, including, but not limited to, those factors listed in the “Risk\nFactors” section located in Item 1A of Part I of Brady’s Form 10-K for the year ended July 31,\n2007. These uncertainties may cause Brady’s actual future results to be materially different than\nthose expressed in its forward-looking statements. Brady does not undertake to update its\nforward-looking statements.\n

\n\n\n\n\n

19\n

\n\n\n\n

\n\n

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK\n

\n\n\n

The Company’s business operations give rise to market risk exposure due to changes in foreign\nexchange rates. To manage that risk effectively, the Company enters into hedging transactions,\naccording to established guidelines and policies, that enable it to mitigate the adverse effects of\nthis financial market risk.\n

\n\n

The global nature of the Company’s business requires active participation in the foreign\nexchange markets. As a result of investments, production facilities and other operations on a\nglobal scale, the Company has assets, liabilities and cash flows in currencies other than the U.S.\nDollar. The primary objective of the Company’s foreign currency exchange risk management is to\nminimize the impact of currency movements on intercompany transactions and foreign raw-material\nimports. To achieve this objective, the Company hedges a portion of known exposures using forward\ncontracts. Main exposures are related to transactions denominated in the British Pound, the Euro,\nCanadian Dollar, Australian Dollar, Singapore Dollar, Swedish Krona, Korean Won and Chinese Yuan\ncurrency.\n

\n\n

The Company could be exposed to interest rate risk through its corporate borrowing activities.\nThe objective of the Company’s interest rate risk management activities is to manage the levels of\nthe Company’s fixed and floating interest rate exposure to be consistent with the Company’s\npreferred mix. The interest rate risk management program allows the Company to enter into approved\ninterest rate derivatives if there is a desire to modify the Company’s exposure to interest rates.\nAs of October 31, 2007, the Company had no interest rate derivatives.\n

\n\n

ITEM 4. CONTROLS AND PROCEDURES\n

\n\n\n

The Company maintains disclosure controls and procedures designed to ensure that the\ninformation the Company must disclose in its filings with the Securities and Exchange Commission is\nrecorded, processed, summarized and reported on a timely basis. The Company’s Chief Executive\nOfficer and Chief Financial Officer have reviewed and evaluated the Company’s disclosure controls\nand procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of\n1934, as amended (the “Exchange Act’’) as of the end of the period covered by this report (the\n“Evaluation Date’’). Based on such evaluation, such officers have concluded that, as of the\nEvaluation Date, the Company’s disclosure controls and procedures are effective in bringing to\ntheir attention on a timely basis material information relating to the Company required to be\nincluded in the Company’s periodic filings under the Exchange Act.\n

\n\n

The Company is in the process of implementing its enterprise resource planning system, SAP, to\nmany of its locations around the world. This implementation has resulted in certain changes to\nbusiness processes and internal controls impacting financial reporting. Management is taking the\nnecessary steps to monitor and maintain appropriate internal controls during this period of change.\n

\n\n

There were no other changes in the Company’s internal control over financial reporting (as\ndefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most\nrecently completed fiscal quarter that have materially affected, or are reasonably likely to\nmaterially affect, the Company’s internal control over financial reporting.\n

\n\n\n\n\n

20\n

\n\n\n\n

\n\n

PART II. OTHER INFORMATION\n

\n\n

ITEM 4. Submission of Matters to a Vote of Security Holders\n

\n\n\n

The annual meeting of shareholders was held on November 16, 2007. At the meeting, the\nfollowing persons were elected to serve as the Company’s directors by the affirmative vote of 100%\nof the 3,538,628 shares of Class B Voting Common Stock until the next annual meeting of\nshareholders and until their successors have been elected:\n

\n\n

Patrick W. Allender
\nRichard A. Bemis
\nRobert C. Buchanan
\nChan W. Galbato
\nConrad G. Goodkind
\nFrank W. Harris
\nFrank M. Jaehnert
\nFrank R. Jarc
\nGary E. Nei
\nElizabeth I. Pungello
\nBradley C. Richardson
\n

\n\n

ITEM 6.Exhibits\n

\n\n\n

(a) Exhibits\n

\n\n\n\n \n \n \n \n \n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n


	31.1			Rule 13a-14(a)/15d-14(a) Certification of Frank M. Jaehnert
	31.2			Rule 13a-14(a)/15d-14(a) Certification of David Mathieson
	32.1			Section 1350 Certification of Frank M. Jaehnert
	32.2			Section 1350 Certification of David Mathieson

\n\n\n\n\n\n

21\n

\n\n\n

EXHIBIT 31.1\n

\n\n\n

RULE 13a-14(a)/15d-14(a) CERTIFICATION\n

\n\n

I, Frank M. Jaehnert, certify that:\n

\n\n\n

(1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation;\n

\n\n

(2) Based on my knowledge, this report does not contain any untrue statement of a material\nfact or omit to state a material fact necessary to make the statements made, in light of the\ncircumstances under which such statements were made, not misleading with respect to the period\ncovered by this report;\n

\n\n

(3) Based on my knowledge, the financial statements, and other financial information included\nin this report, fairly present in all material respects the financial condition, results of\noperations and cash flows of the registrant as of, and for, the periods presented in this report;\n

\n\n

(4) The registrant’s other certifying officer and I are responsible for establishing and\nmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and\n15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules\n13a-15(f) and 15d-15(f)) for the registrant and have:\n

\n\n

a) Designed such disclosure controls and procedures, or caused such disclosure controls and\nprocedures to be designed under our supervision, to ensure that material information relating to\nthe registrant, including its consolidated subsidiaries, is made known to us by others within those\nentities, particularly during the period in which this report is being prepared;\n

\n\n

b) Designed such internal control over financial reporting, or caused such internal control\nover financial reporting to be designed under our supervision to provided reasonable assurance\nregarding the reliability of financial reporting and the preparation of financial statements for\nexternal purposes in accordance with generally accepted accounting principles;\n

\n\n

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and\npresented in this report our conclusions about the effectiveness of the disclosure controls and\nprocedures, as of the end of the period covered by this report based on such evaluation; and\n

\n\n

d) Disclosed in this report any change in the registrant’s internal control over financial\nreporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth\nfiscal quarter in the case of an annual report)that has materially affected, or is reasonably\nlikely to materially affect, the registrant’s internal control over financial reporting; and\n

\n\n

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent\nevaluation of internal control over financial reporting, to the registrant’s auditors and the audit\ncommittee of the registrant’s board of directors (or persons performing the equivalent functions):\n

\n\n

a) All significant deficiencies and material weaknesses in the design or operation of internal\ncontrol over financial reporting which are reasonably likely to adversely affect the registrant’s\nability to record, process, summarize and report financial information; and\n

\n\n

b) Any fraud, whether or not material, that involves management or other employees who have a\nsignificant role in the registrant’s internal control over financial reporting.\n

\n\n

Date:\nDecember 6, 2007\n

\n\n\n

/s/ FRANK M. JAEHNERT
\nFrank M. Jaehnert
\nPresident and Chief Executive Officer\n

\n\n\n\n

\n\n\n\n\n

EXHIBIT 31.2\n

\n\n\n

RULE 13a-14(a)/15d-14(a) CERTIFICATION\n

\n\n

I, David Mathieson, certify that:\n

\n\n\n

(1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation;\n

\n\n

(2) Based on my knowledge, this report does not contain any untrue statement of a material\nfact or omit to state a material act necessary to make the statements made, in light of the\ncircumstances under which such statements were made, not misleading with respect to the period\ncovered by this report;\n

\n\n

b) Any fraud, whether or not material, that involves management or other employees who have a\nsignificant role in the registrant’s internal control over financial reporting.\n

\n\n

Date:\nDecember 6, 2007\n

\n\n\n

/s/ DAVID MATHIESON
\nDavid Mathieson
\nSenior Vice President and Chief
Financial Officer\n

\n\n\n

\n\n\n\n\n

EXHIBIT 32.1\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley\nAct of 2002, the undersigned officer of Brady Corporation (the “Company”) certifies to his\nknowledge that:\n

\n\n

(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended October\n31, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange\nAct of 1934; and\n

\n\n

(2) The information contained in that Form 10-Q fairly presents, in all material respects, the\nfinancial conditions and results of operations of the Company.\n

\n\n

Date:\nDecember 6, 2007\n

\n\n\n

/s/ FRANK M. JAEHNERT
\nFrank M. Jaehnert
\nPresident and Chief Executive Officer\n

\n\n\n

A signed original of this written statement required by Section 906, or other document\nauthenticating, acknowledging, or otherwise adopting the signature that appears in typed form\nwithin the electronic version of this written statement required by Section 906, has been provided\nto the Company and will be retained by the Company and furnished to the Securities and Exchange\nCommission or its staff upon request. This certification accompanies this report pursuant to\nSection 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for\npurposes of Section 18 of the Securities Exchange Act of 1934, as amended.\n

\n\n

EXHIBIT 32.2\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

\n\n

(2) The information contained in that Form 10-Q fairly presents, in all material respects, the\nfinancial conditions and results of operations of the Company.\n

\n\n

Date:\nDecember 6, 2007\n

\n\n\n

/s/ DAVID MATHIESON
\nDavid Mathieson
\nSenior Vice President and Chief
Financial Officer\n

\n\n\n


	BRADY CORPORATION \n
Date: December 6, 2007	/s/ F. M. Jaehnert\n
	F. M. Jaehnert
	President & Chief Executive Officer


Date: December 6, 2007	/s/ David Mathieson\n
	David Mathieson
	Senior Vice President & Chief Financial Officer\n(Principal Accounting Officer) \n(Principal Financial Officer)

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