FORM 10-Q

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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 April 30, 2008\n

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OR\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\n		(I.R.S. Employer
incorporation or organization)\n		Identification No.)

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6555 West Good Hope Road, Milwaukee, Wisconsin 53223
\n(Address of principal executive offices)
\n(Zip Code)
\n(414) 358-6600

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(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\nfiler, a non-accelerated filer, or a smaller reporting company. See the definitions of “large\naccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the\nExchange Act. (Check one):\n

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Large accelerated filer\nþ	Accelerated filer\no	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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

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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 June 2, 2008, there were outstanding 50,312,341 shares of Class A Nonvoting Common Stock\nand 3,538,628 shares of Class B Voting Common Stock. The Class B Common Stock, all of which is\nheld 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		15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		22

Item 4. Controls and Procedures		22

PART II. Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23

Item 6. Exhibits		23

Certification

Certification

Section 1350 Certification

Section 1350 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

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CONDENSED CONSOLIDATED BALANCE SHEETS

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(DOLLARS IN THOUSANDS)

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	April 30, 2008			July 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	227,359			$	142,846
Short term investments		—				19,200
Accounts receivable, less allowance for losses ($9,863 and $9,109, respectively)		252,982				239,569
Inventories:
Finished products		75,492				80,486
Work-in-process		21,351				21,309
Raw materials and supplies		38,714				37,983

Total inventories		135,557				139,778
Prepaid expenses and other current assets		43,731				42,020

Total current assets		659,629				583,413
Other assets:
Goodwill		786,480				737,450
Other intangible assets		145,563				149,761
Deferred income taxes		32,194				32,508
Other		21,037				21,111
Property, plant and equipment:
Cost:
Land		6,482				6,332
Buildings and improvements		96,009				90,688
Machinery and equipment		272,461				248,356
Construction in progress		12,392				18,107

		387,344				363,483
Less accumulated depreciation		214,116				188,869

Net property, plant and equipment		173,228				174,614
Total	$	1,818,131			$	1,698,857

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	104,123			$	91,596
Wages and amounts withheld from employees		70,190				73,622
Taxes, other than income taxes		9,720				8,461
Accrued income taxes		13,914				24,677
Other current liabilities		51,897				60,254
Current maturities on long-term obligations		21,432				21,444

Total current liabilities		271,276				280,054
Long-term obligations, less current maturities		478,572				478,575
Other liabilities		60,517				49,216

Total liabilities		810,365				807,845
Stockholders’ investment:
Class A nonvoting common stock – Issued 51,051,487 and 50,586,524 shares,\nrespectively and outstanding 50,170,581 and 50,586,524 shares, respectively		511				506
Class B voting common stock – Issued and outstanding 3,538,628 shares		35				35
Additional paid-in capital		286,452				266,203
Earnings retained in the business		612,407				540,238
Treasury stock – 880,906 and 0 shares, of Class A nonvoting common stock, at cost		(26,743	)			—
Accumulated other comprehensive income		134,417				83,376
Other		687				654

Total stockholders’ investment		1,007,766				891,012

Total	$	1,818,131			$	1,698,857

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See Notes to Condensed Consolidated Financial Statements.\n

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3\n

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BRADY CORPORATION AND SUBSIDIARIES\n

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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(Dollars in Thousands, Except Per Share Amounts)

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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 \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \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 April 30,			Nine Months Ended April 30,
	(Unaudited)			(Unaudited)
								Percentage										Percentage
	2008			2007			Change		2008		2007			Change
Net sales	$	381,909			$	346,332			10.3	%	$	1,126,167			$	999,866			12.6	%
Cost of products sold		192,333				177,181			8.6	%		573,901				516,426			11.1	%

Gross margin		189,576				169,151			12.1	%		552,266				483,440			14.2	%

Operating expenses:
Research and development		10,274				8,739			17.6	%		29,323				26,353			11.3	%
Selling, general and administrative		126,720				114,109			11.1	%		369,579				326,119			13.3	%

Total operating expenses		136,994				122,848			11.5	%		398,902				352,472			13.2	%

Operating income		52,582				46,303			13.6	%		153,364				130,968			17.1	%

Other income (expense):
Investment and other income — net		920				385			139.0	%		3,307				917			260.6	%
Interest expense		(6,962	)			(6,428	)		8.3	%		(20,429	)			(16,407	)		24.5	%


Income before income taxes		46,540				40,260			15.6	%		136,242				115,478			18.0	%

Income taxes		12,187				11,273			8.1	%		38,829				32,334			20.1	%


Net income	$	34,353			$	28,987			18.5	%	$	97,413			$	83,144			17.2	%


Per Class A Nonvoting Common Share:
Basic net income	$	0.64			$	0.54			18.5	%	$	1.79			$	1.54			16.2	%
Diluted net income	$	0.63			$	0.53			18.9	%	$	1.77			$	1.52			16.4	%
Dividends	$	0.15			$	0.14			7.1	%	$	0.45			$	0.42			7.1	%

Per Class B Voting Common Share:
Basic net income	$	0.64			$	0.54			18.5	%	$	1.78			$	1.53			16.3	%
Diluted net income	$	0.63			$	0.53			18.9	%	$	1.76			$	1.50			17.3	%
Dividends	$	0.15			$	0.14			7.1	%	$	0.43			$	0.40			7.5	%

Weighted average common shares outstanding (in\nthousands):
Basic		54,021				53,953						54,294				53,860
Diluted		54,627				54,717						54,992				54,704

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See Notes to Condensed Consolidated Financial Statements.\n

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4\n

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BRADY CORPORATION AND SUBSIDIARIES\n

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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(Dollars in Thousands)

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	Nine Months Ended
	April 30,
	(Unaudited)
	2008			2007
Operating activities:
Net income	$	97,413			$	83,144
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,682				40,403
Deferred income taxes		(1,288	)			(2,129	)
Loss (gain) on disposal of property, plant & equipment		1,054				(182	)
Non-cash portion of stock-based compensation expense		7,797				5,022
Changes in operating assets and liabilities (net of effects of business acquisitions):
Accounts receivable		4,014				(20,146	)
Inventories		15,012				(17,544	)
Prepaid expenses and other assets		(6,193	)			(14,634	)
Accounts payable and accrued liabilities		(6,175	)			(2,454	)
Income taxes		(6,358	)			4,008
Other liabilities		1,157				4,169

Net cash provided by operating activities		152,115				79,657

Investing activities:
Acquisition of businesses, net of cash acquired		(28,871	)			(157,943	)
Payments of contingent consideration		(5,798	)			(10,906	)
Purchases of short-term investments		(10,350	)			(47,100	)
Sales of short-term investments		29,550				57,400
Purchases of property, plant and equipment		(19,678	)			(42,107	)
Proceeds from sale of property, plant and equipment		649				1,703
Other		1,808				(8,978	)

Net cash used in investing activities		(32,690	)			(207,931	)

Financing activities:
Payment of dividends		(24,341	)			(22,073	)
Proceeds from issuance of common stock		9,517				4,144
Principal payments on debt		(14	)			(110,674	)
Proceeds from issuance of debt		—				259,300
Purchase of treasury stock		(28,531	)			—
Income tax benefit from the exercise of stock options		4,620				902

Net cash (used in) provided by financing activities		(38,749	)			131,599
Effect of exchange rate changes on cash		3,837				3,005

Net increase in cash and cash equivalents		84,513				6,330
Cash and cash equivalents, beginning of period		142,846				113,008

Cash and cash equivalents, end of period	$	227,359			$	119,338


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest	$	22,450			$	16,003
Income taxes, net of refunds		39,505				33,268
Acquisitions:
Fair value of assets acquired, net of cash and goodwill	$	18,547			$	87,224
Liabilities assumed		(6,566	)			(33,037	)
Goodwill		16,890				103,756

Net cash paid for acquisitions	$	28,871			$	157,943

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See Notes to Condensed Consolidated Financial Statements.\n

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5\n

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BRADY CORPORATION AND SUBSIDIARIES\n

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Nine Months Ended April 30, 2008

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(Unaudited)

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(In thousands, except share and per share amounts)

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NOTE A — Basis of Presentation\n

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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 K for further information) as of August 1, 2007,\nnecessary to present fairly the financial position of the Company as of April 30, 2008 and July 3l,\n2007, its results of operations for the three and nine months ended April 30, 2008 and 2007, and\nits cash flows for the nine months ended April 30, 2008 and 2007. The condensed consolidated\nbalance sheet as of July 31, 2007, has been derived from the audited consolidated financial\nstatements of that date. The preparation of financial statements in conformity with accounting\nprinciples generally accepted in the United States of America (“GAAP”) requires management to make\nestimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty\ninvolved in making estimates, actual results in future 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 omitted pursuant to rules and regulations of the\nSecurities and Exchange Commission. Accordingly, the condensed consolidated financial statements\ndo not include all of the information and footnotes required by GAAP for complete financial\nstatement presentation. It is suggested that these condensed consolidated financial statements be\nread in conjunction with the consolidated financial statements and the notes thereto included in\nthe Company’s latest annual report on Form 10-K for the year ended July 31, 2007.\n

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NOTE B — Goodwill and Intangible Assets\n

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Changes in the carrying amount of goodwill for the nine months ended April 30, 2008, 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
Goodwill acquired during the period		—			3,156			13,734			—		16,890
Adjustments for prior year acquisitions		3,755			(1,192	)		(2,914	)		3,765		3,414
Translation adjustments		1,521			465			15,785			10,955		28,726


Balance as of April 30, 2008	$	149,051		$	262,728		$	190,304		$	184,397	$	786,480

\n\n\n

Goodwill increased $49,030 during the nine months ended April 30, 2008. A portion of the\nincrease related to the November 2007 acquisitions of Transposafe Systems B.V. and Holland\nMounting Systems B.V. (collectively “Transposafe”) and the March 2008 acquisition of DAWG, Inc.\n(“DAWG”), which added $13,734 and $3,156, respectively.\n

\n\n

Goodwill also increased as a result of adjustments to the preliminary allocation of purchase\nprice for the acquisitions completed in fiscal 2007, of which the largest adjustment related to\nthe final purchase price adjustments for Comprehensive Identification Products, Inc (“CIPI”) which\nadded $3,668. Of the $3,668 increase in goodwill attributed to the allocation of the purchase\nprice for CIPI, $1,609 related to the adoption of FIN 48 (see Note K), $1,250 related to the\naccrual for employee termination costs, and the remaining $809 related to various exit costs\nassociated with the closure of a facility. Goodwill increased $1,479 related to the fiscal 2007\nacquisition of Sorbent Products Co., Inc. (“SPC”), primarily due to an adjustment in taxes. The\nincrease in goodwill related to the acquisitions of CIPI and SPC was partially offset by a tax\nadjustment of $1,893 associated with the fiscal 2006 acquisition of Identicam Systems relating to\na deferred tax asset existing at the time of acquisition.\n

\n\n

Additionally, during the nine months ended April 30, 2008, goodwill increased by $28,726 due\nto the effects of foreign currency translation.\n

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6\n

\n\n

Other intangible assets include patents, trademarks, customer relationships, purchased\nsoftware, non-compete agreements and other intangible assets with finite lives being amortized in\naccordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other\nIntangible Assets.” The net book value of these assets was as follows:\n


	April 30, 2008		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		$	8,556		$	(6,407	)	$	2,149			15		$	8,392	$	(5,913	)	$	2,479
Trademarks and\nother		4			6,441			(4,503	)		1,938			5			4,510		(3,250	)		1,260
Customer\nrelationships		7			148,253			(53,854	)		94,399			7			134,125		(36,674	)		97,451
Non-compete\nagreements		4			12,242			(8,040	)		4,202			4			11,364		(6,294	)		5,070
Other		4			3,298			(3,294	)		4			5			3,297		(2,554	)		743
Unamortized other\nintangible assets:
Trademarks		N/A			42,871			—			42,871			N/A			42,758		—			42,758

Total				$	221,661		$	(76,098	)	$	145,563					$	204,446	$	(54,685	)	$	149,761

\n\n\n

The acquisitions completed during the nine months ended April 30, 2008, contributed to the\nincreases in the other amortized intangible assets listed in the table above. A portion of the\nincrease in customer relationships relates to the fiscal 2008 acquisitions of Transposafe and DAWG\nwhich added $8,236 and $432 respectively. A significant component of the increase in amortizable\ntrademarks relates to the acquisition of Transposafe, which added $1,287.\n

\n\n

The value of goodwill and other intangible assets in the Condensed Consolidated Balance Sheet\nat April 30, 2008, differs from the value assigned to them in the allocation of purchase price due\nto the effect of fluctuations in the exchange rates used to translate financial statements into the\nUnited States Dollar between the date of acquisition and April 30, 2008.\n

\n\n

Amortization expense on intangible assets was $7,260 and $5,673 for the three-month periods\nended April 30, 2008 and 2007, respectively and $20,003 and $16,634 for the nine-month periods\nended April 30, 2008 and 2007, respectively. Annual amortization is projected to be $27,682,\n$25,456, $24,515, $20,722 and $11,485 for the years ending July 31, 2008, 2009, 2010, 2011 and\n2012, respectively.\n

\n\n

7\n

\n\n

NOTE C — Comprehensive Income\n

\n\n\n

Total comprehensive income, which was comprised of net income, foreign currency adjustments,\nnet unrealized gains and losses from cash flow hedges and other investments, the unrealized gain\non the post-retirement medical, dental, and vision plans, and their related tax effects amounted\nto $61,735 and $49,365 for the three months ended April 30, 2008 and 2007, respectively and\n$148,454 and $116,868 for the nine months ended April 30, 2008 and 2007, respectively. The\ncomponents of accumulated other comprehensive income are summarized in the table below.\n


	Three Months Ended April 30,			Nine Months Ended April 30,
	2008			2007			2008		2007

Net Income	$	34,353			$	28,987		$	97,413		$	83,144
Cumulative translation adjustments		27,452				20,423			51,352			33,523
Unamortized gain on post-retirement medical,\ndental, and vision plans, net of tax		(82	)			—			(246	)		—
Unrealized gain on cash flow hedges and\nsecurities\nin deferred compensation plans, net of tax		12				(45	)		(65	)		201

Total comprehensive income	$	61,735			$	49,365		$	148,454		$	116,868

\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 April 30,		Nine Months Ended April 30,
	2008		2007			2008		2007
Numerator:
Net income (numerator for basic and\ndiluted Class A net income per share)	$	34,353		$	28,987		$	97,413		$	83,144
Less:
Preferential dividends		—			—			(847	)		(836	)
Preferential dividends on\ndilutive stock options		—			—			(13	)		(15	)

Numerator for basic and diluted Class\nB net income per share	$	34,353		$	28,987		$	96,553		$	82,293


Denominator:
Denominator for basic net income per\nshare for both Class A and Class B		54,021,000			53,953,000			54,294,000			53,860,000
Plus: Effect of dilutive stock options		606,000			764,000			698,000			844,000

Denominator for diluted net income\nper share for both Class A and Class\nB		54,627,000			54,717,000			54,992,000			54,704,000


Class A Nonvoting Common Stock net income\nper share:
Basic	$	0.64		$	0.54		$	1.79		$	1.54
Diluted	$	0.63		$	0.53		$	1.77		$	1.52

Class B Voting Common Stock net income per\nshare:
Basic	$	0.64		$	0.54		$	1.78		$	1.53
Diluted	$	0.63		$	0.53		$	1.76		$	1.50

\n\n\n

Options to purchase 2,171,000 and 1,874,200 shares of Class A Nonvoting Common Stock for the\nthree and nine months ended April 30, 2008, respectively, and 1,259,500 and 1,052,833 shares of\nClass A Nonvoting Common Stock for the three and nine months ended April 30, 2007, respectively,\nwere not included in the computations of diluted net income per share because the option exercise\nprice was greater than the average market price of the common shares and, therefore, the effect\nwould be anti-dilutive.\n

\n\n

8\n

\n\n

NOTE E – Acquisitions\n

\n\n\n

During the nine months ended April 30, 2008, the Company acquired two companies for a total\ncombined purchase, net of cash acquired, of $28,871. Transposafe is headquartered near Amsterdam\nwith operations in Belgium, Germany, and Poland. Transposafe specializes in security sealing and\nidentification solutions for protecting assets during transport. Transposafe was acquired in\nNovember 2007. DAWG is headquartered in Terryville, Connecticut. DAWG is a direct marketer of\nsorbents, spill-containment products, safety-storage cabinets, first aid kits, and other products\nthat help keep facilities safe and clean. DAWG was acquired in March 2008.\n

\n\n

The purchase agreement of Transposafe includes a provision for contingent payments based upon\nmeeting certain performance conditions over a two-year period of time subsequent to the\nacquisition. The total maximum contingent payment of approximately $3,000 has been placed in an\nescrow account for the acquisition of Transposafe. The Company has\nrecorded the contingent payment that has been placed in an escrow\naccount as an other asset on the condensed consolidated balance sheet.\n

\n\n

Payments of approximately $4,400, $1,200, and $200 were made during the nine months ended\nApril 30, 2008 to satisfy the earnout and holdback liabilities of the Daewon Industry Corporation,\nSTOPware, Inc., and Asterisco acquisitions, respectively.\n

\n\n

9\n

\n\n

NOTE F — Segment Information\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, and has restated the corresponding\nsegment information from its previous geographical based structure for the prior year. The\nCompany has four reportable segments: Brady Americas, Direct Marketing & People ID Americas,\nEurope and Asia-Pacific. The Brady Americas reportable segment includes businesses that focus on\nMRO and OEM market products sold to customers in North and South America through distributors or a\ndirect sales force. The Direct Marketing & People ID Americas reportable segment includes\nbusinesses that market their products through business-to-business direct mail, catalogs, and\ntelemarketing, distribution and a direct sales force in North and South America. The Europe and\nAsia-Pacific reportable segments have not changed from prior year disclosures. Following is a\nsummary of segment information for the three and nine months ended April 30, 2008 and 2007:\n


				Direct
				Marketing &										Corporate
	Brady		People ID									And
	Americas		Americas	Europe		Asia-Pacific	Sub-Totals		Eliminations	Totals
Three months ended\nApril 30, 2008:
Revenues from\nexternal customers	$	100,425		$	65,982		$	133,422		$	82,080	$	381,909		$	—		$	381,909
Intersegment revenues		14,166			669			1,732			6,194		22,761			(22,761	)		—
Segment profit		22,692			17,477			36,245			11,055		87,469			(1,816	)		85,653

Three months ended\nApril 30, 2007:
Revenues from\nexternal customers	$	88,077		$	65,784		$	111,266		$	81,205	$	346,332		$	—		$	346,332
Intersegment revenues		13,710			984			1,954			6,131		22,779			(22,779	)		—
Segment profit		20,245			17,768			29,370			11,861		79,244			(1,858	)		77,386

Nine months ended\nApril 30, 2008:
Revenues from\nexternal customers	$	300,963		$	196,840		$	364,951		$	263,413	$	1,126,167		$	—		$	1,126,167
Intersegment revenues		44,067			1,862			6,985			18,655		71,569			(71,569	)		—
Segment profit		66,667			49,645			97,212			43,105		256,629			(6,400	)		250,229

Nine months ended\nApril 30, 2007:
Revenues from\nexternal customers	$	251,346		$	189,446		$	302,477		$	256,597	$	999,866		$	—		$	999,866
Intersegment revenues		39,052			2,476			4,404			16,824		62,756			(62,756	)		—
Segment profit		55,433			49,491			74,979			46,392		226,295			(7,496	)		218,799

\n\n

Following is a reconciliation of segment profit to net income for the three months and nine months\nended April 30, 2008 and 2007.\n

\n\n


	Three months ended:			Nine months ended:
	April 30,			April 30,
	2008			2007			2008		2007
Total profit from reportable segments	$	87,469			$	79,244		$	256,629		$	226,295
Corporate and eliminations		(1,816	)			(1,858	)		(6,400	)		(7,496	)
Unallocated amounts:
Administrative costs		(33,071	)			(31,083	)		(96,865	)		(87,831	)
Investment and other income		920				385			3,307			917
Interest expense		(6,962	)			(6,428	)		(20,429	)		(16,407	)

Income before income taxes		46,540				40,260			136,242			115,478
Income taxes		(12,187	)			(11,273	)		(38,829	)		(32,334	)

Net income	$	34,353			$	28,987		$	97,413		$	83,144

\n\n\n

10\n

\n\n

NOTE G –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 or restricted\nshares of Class A Nonvoting Common Stock to employees. Additionally, the Company has a nonqualified\nstock option plan for non-employee directors under which stock options to purchase shares of Class\nA Nonvoting Common Stock are available for grant. The options have an exercise price equal to the\nfair market value of the underlying stock at the date of grant and generally vest ratably over a\nthree-year period, with one-third becoming exercisable one year after the grant date and one-third\nadditional in each of the succeeding two years. Options issued under these plans, referred to\nherein as “service-based” options, generally expire 10 years from the date of grant. The Company\nalso grants stock options to certain executives and key management employees that vest upon meeting\ncertain financial performance conditions over the vesting schedule described above. These options\nare referred to herein as “performance-based” options. Performance-based options granted in fiscal\n2007 and forward expire 10 years from the date of grant. Restricted shares have an issuance price\nequal to the fair market value of the underlying stock at the date of grant. They vest at the end\nof a five-year period and upon meeting certain financial performance conditions. These shares are\nreferred to herein as “performance-based restricted shares.”\n

\n\n

As of April 30, 2008, the Company has reserved 4,488,112 shares of Class A Nonvoting Common\nStock for outstanding stock options and restricted shares and 968,833 shares of Class A Nonvoting\nCommon Stock for future issuance of stock options and restricted shares under the various plans.\nThe Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares\nunder 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 April 30, 2008\nand 2007 was $1,415 ($863 net of taxes) and $1,353 ($825 net of taxes), respectively, and expense\nrecognized during the nine months ended April 30, 2008 and 2007 was $7,797 ($4,756 net of taxes)\nand $5,022 ($3,063 net of taxes), respectively. As of April 30, 2008, total unrecognized\ncompensation cost related to share-based compensation awards was approximately $20,331 pre-tax, net\nof estimated forfeitures, which the Company expects to recognize over a weighted-average period of\napproximately 2.7 years.\n

\n\n

The Company has estimated the fair value of its service-based and performance-based option\nawards granted during the nine months ended April 30, 2008 and 2007 using the Black-Scholes option\nvaluation model. The weighted-average assumptions used in the Black-Scholes valuation model are\nreflected in the following table:\n


	Nine Months Ended		Nine Months Ended
	April 30, 2008		April 30, 2007
				Performance-					Performance-
	Service-Based		Based Option	Service-Based		Based Option
Black-Scholes Option Valuation Assumptions	Option Awards		Awards	Option Awards		Awards
Expected term (in years)		6.04			6.57			6.07			6.57
Expected volatility		32.05	%		33.68	%		34.01	%		34.66	%
Expected dividend yield		1.62	%		1.58	%		1.46	%		1.51	%
Risk-free interest rate		3.44	%		4.66	%		4.52	%		4.90	%
Weighted-average market value of underlying stock at grant date	$	38.22		$	35.35		$	38.19		$	33.32
Weighted-average exercise price	$	38.22		$	35.35		$	38.19		$	33.32
Weighted-average fair value of options\ngranted during the period	$	11.94		$	12.83		$	13.57		$	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 granted 210,000 performance-based restricted shares during the nine months ended\nApril 30, 2008, with a grant price and fair value of $32.83. As of April 30, 2008, 210,000\nperformance-based restricted shares were outstanding.\n

\n\n

11\n

\n\n

A summary of stock option activity under the Company’s share-based compensation plans for the\nnine months ended April 30, 2008 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		954,500		$	37.44
Exercised		(527,853	)	$	18.22
Forfeited or expired		(331,274	)	$	36.44


Outstanding at April 30, 2008		4,278,112		$	29.06			6.7	$	27,994

Exercisable at April 30, 2008		2,466,275		$	25.15			5.4	$	23,730

\n\n\n

The total intrinsic value of options exercised during the nine months ended April 30, 2008 and\n2007, based upon the average market price during the period, was $10,725 and $5,016, respectively.\nThe total fair value of stock options vested during the nine months ended April 30, 2008 and 2007,\nwas $6,484 and $4,592, respectively.\n

\n\n

NOTE H – Debt\n

\n\n\n

On March 18, 2008, the Company entered into an amendment to the Company’s revolving loan\nagreement with the various lenders under the loan agreement. The amendment extended the maturity\ndate of the revolving loan from October 5, 2011 to March 18, 2013. All other terms of the\nrevolving loan agreement remained the same.\n

\n\n

NOTE I – Shareholders’ 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 one million shares of the Company’s Class A Nonvoting Common\nStock. The 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 nine months ended April\n30, 2008, the Company reacquired approximately 944,000 shares of its Class A Nonvoting Common Stock\nfor approximately $28,500.\n

\n\n

In March 2008, the Company announced that the Board of Directors of the Company authorized a\nshare repurchase plan for up to an additional one million shares of the Company’s Class A Nonvoting\nCommon Stock. The share repurchase plan may be implemented by purchasing shares on the open market\nor in privately negotiated transactions, with repurchased shares available for use in connection\nwith the Company’s stock-based plans and for other corporate purposes. During the nine months\nended April 30, 2008, the Company did not reacquire any shares under this repurchase plan.\n

\n\n

12\n

\n\n

NOTE J – Employee Benefit Plans\n

\n\n\n

The Company provides postretirement medical, dental and vision benefits for eligible regular\nfull and part-time domestic employees (including spouses) outlined by the plan. Postretirement\nbenefits are provided only if the employee was hired prior to April 1, 2008, and retires on or\nafter attainment of age 55 with 15 years of credited service. Credited service begins accruing at\nthe later of age 40 or date of hire. All active employees first eligible to retire after July 31,\n1992, are covered by an unfunded, contributory postretirement healthcare plan where employer\ncontributions will not exceed a defined dollar benefit amount, regardless of the cost of the\nprogram. Employer contributions to the plan are based on the employee’s age and service at\nretirement.\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 in Note 3 to the consolidated financial statements included in the Company’s latest\nannual report on Form 10-K for the year ended July 31, 2007.\n

\n\n

NOTE K – 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. As of April 30, 2008, the Company’s liability for\nuncertain tax positions was $15,600.\n

\n\n

The Company recognizes accrued interest related to unrecognized tax benefits in income taxes\non the accompanying condensed consolidated statements of income. At August 1, 2007, the Company\nhad accrued $2,200 for the potential payment of interest which was included in the $15,900\nliability for uncertain tax positions. During the nine months ended April 30, 2008, the Company\nrecognized $200 in potential interest associated with uncertain tax positions. The total accrual\nfor potential payment of interest was $2,400 as of April 30, 2008. During the third quarter of\nfiscal 2008, approximately $2,000 of tax benefits were recognized due to expiring statutes of\nlimitation.\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 summarizes 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 \n\n\n


Jurisdiction	Open Tax Years

United States – Federal		F’05 – F’07
France		F’05 – F’07
Germany		F’03 – F’07
United Kingdom		F’05 – F’07

\n\n\n

13\n

\n\n

NOTE L – 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

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R)\nrequires acquiring entities to recognize all the assets and liabilities assumed in a transaction at\nfair values as of the acquisition date, but changes the accounting treatment for certain items,\nincluding:\n

\n\n

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

	a)		Acquisition costs will generally be expensed as incurred;

	b)		Noncontrolling interests will be valued at fair value at the acquisition date;

	c)		Liabilities related to contingent consideration will be re-measured at fair value in each\nsubsequent reporting period;

	d)		Restructuring costs associated with a business combination will generally be expensed\nafter the acquisition date; and

	e)		In-process research and development will be recorded at fair value as an indefinite-lived\nintangible asset at the acquisition date.

SFAS No. 141(R) applies to business combinations for which the acquisition date is on or after the\nbeginning of the first annual reporting period beginning on or after December 15, 2008. The Company\nis in the process of evaluating the impact that will result from adopting SFAS No.141(R), and\ntherefore, the Company is unable to disclose the impact SFAS No. 141(R) will have on its financial\nposition and results of operations when such statement is adopted.\n

\n\n\n

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated\nFinancial Statements.” SFAS No. 160 establishes new accounting and reporting standards for the\nnoncontrolling interest in a subsidiary. This statement requires the recognition of a\nnoncontrolling interest (minority interest) as equity in the consolidated financial statements and\nseparate from the parent’s equity. The amount of net income attributable to the noncontrolling\ninterest will be included in consolidated net income on the face of the income statement. This new\nstatement will be effective for fiscal years beginning after December 15, 2008. The Company\nexpects that the adoption of SFAS No. 160 will not have a material effect on its consolidated\nfinancial statements.\n

\n\n

In March 2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and\nHedging Activities.” SFAS No. 161 requires expanded quantitative, qualitative, and credit-risk\ndisclosures about an entity’s derivative instruments and hedging activities. This new statement\nwill be effective for fiscal years and interim periods beginning after November 15, 2008. The\nCompany expects that the adoption of SFAS No. 161 will not have a material impact on its financial\nposition and results of operations. The Company is in the process of evaluating the impact that\nwill result from adopting SFAS No. 161 on the Company’s financial disclosures when such statement\nis adopted.\n

\n\n

14\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, safety devices, precision die-cut\nmaterials, and label-application and data-collection systems. Founded in 1914, the Company serves\ncustomers in manufacturing, electrical, telecommunications, electronics, construction, laboratory,\neducation, governmental, public utility, computer, transportation and a variety of other\nindustries. The Company manufactures and sells products domestically and internationally through\nmultiple channels including distributor sales, direct sales, mail-order catalogs, telemarketing,\nretail and electronic access through the Internet. The Company believes that its reputation for\ninnovation, commitment to quality and service, and dedicated employees have made it a world leader\nin the markets it serves. The Company operates manufacturing or distribution facilities in\nAustralia, Belgium, Brazil, Canada, China, Denmark, France, Germany, Hong Kong, India, Italy,\nJapan, Korea, Malaysia, Mexico, the Netherlands, Norway, Poland, Singapore, Slovakia, Sweden,\nThailand, the United Kingdom and the United States. Brady sells through subsidiaries or sales\noffices in these countries, with additional sales through a dedicated team of international sales\nrepresentatives in the Philippines, Spain, Taiwan, Turkey, and the United Arab Emirates and further\nmarkets its products to parts of Eastern Europe, the Middle East, Africa and Russia.\n

\n\n

Sales for the quarter ended April 30, 2008, increased 10.3% to $381.9 million, compared to\n$346.3 million in the same period of fiscal 2007. Of the increase in sales, organic sales declined\n1.2%, acquisitions added 5.0% and the effects of fluctuations in the exchange rates used to\ntranslate financial results into the United States dollar added 6.5%. Net income for the quarter\nended April 30, 2008, was $34.4 million or $0.63 per diluted Class A Nonvoting Common Share, up\n18.5% and 18.9%, respectively, from $29.0 million or $0.53 per diluted Class A Nonvoting Common\nShare reported in the third quarter of last fiscal year.\n

\n\n

Sales for the nine months ended April 30, 2008, increased 12.6% to $1,126.2 million, compared\nto $999.9 million in the same period of fiscal 2007. Of the increase in sales, organic sales\ndeclined 0.2%, acquisitions added 6.8% and the effects of fluctuations in the exchange rates used\nto translate financial results into the United States dollar added 6.0%. Net income for the nine\nmonths ended April 30, 2008, was $97.4 million or $1.77 per diluted Class A Nonvoting Common\nShare, up 17.2% and 16.4%, respectively, from $83.1 million or $1.52 per diluted Class A Nonvoting\nCommon Share reported in the same period of the prior fiscal year.\n

\n\n

Results of Operations\n

\n\n\n

The comparability of the operating results for the three and nine months ended April 30,\n2008, to the same periods of the prior year has been significantly impacted by the following\nacquisitions completed in fiscal 2008 and fiscal 2007.\n


Acquisitions	Segment	Date Completed
Comprehensive Identification Products, Inc. (“CIPI”)\n	Direct Marketing &\nPeople ID Americas,\nEurope, &\nAsia-Pacific\n	August 2006
Precision Converters, L.P. (“Precision Converters”)\n	Brady Americas\n	October 2006
Scafftag, Ltd., Safetrak, Ltd. and Scafftag Pty., Ltd. (collectively “Scafftag”)\n	Brady Americas,\nEurope, &\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 &\nAsia-Pacific\n	April 2007
Transposafe Systems B.V. and Holland Mounting Systems B.V.\n(collectively “Transposafe”)\n	Europe\n	November 2007
DAWG, Inc. (“DAWG”)\n	Direct Marketing &\nPeople ID Americas\n	March 2008

\n\n\n

15\n

\n\n

Sales for the three months ended April 30, 2008, increased 10.3% compared to the same period\nin fiscal 2007. The increase was comprised of a decline in organic sales of 1.2%, an increase of\n5.0% due to the acquisitions listed in the above table, and an increase of 6.5% due to the effect\nof currencies on sales. Declining organic sales for the quarter were the result of a 2.4% and\n7.4% decline in the organic sales in the Direct Marketing Americas and Asia-Pacific segments,\nrespectively, partially offset by 3.6% growth in the Brady Americas segment and 0.1% growth in\nEurope. Organic sales in the Brady Americas segment were driven by solid results in the education\nand industrial OEM markets. The declines in the Direct Marketing Americas segment were the result\nof slowing in the construction and manufacturing markets. The Asia-Pacific segment experienced\ndecreases in organic sales resulting from weakness in certain segments of the mobile handset\nmarket, the Company’s decision to deemphasize low-margin business in the mobile handset space, and\ncontinued pricing pressures in the mobile handset market.\n

\n\n

Sales for the nine months ended April 30, 2008, increased 12.6% compared to the same period\nin fiscal 2007. The increase was comprised of a slight decline in organic sales of 0.2%, an\nincrease of 6.8% due to the acquisitions listed above, and an increase of 6.0% due to the effect\nof currencies on sales. The solid organic growth in the Brady Americas segment of 4.6%, in\naddition to the slight increase in organic sales in Europe of 0.6%, was offset by a decrease in\nthe Direct Marketing Americas segment of 1.3% and a decline of 5.0% in the Asia-Pacific segment.\nOn a year-to-date basis, solid organic growth in the Brady Americas segment was driven by positive\nresults across multiple markets, including safety and industrial identification, laboratory, and\neducation. The decline in organic sales in the Asia-Pacific segment on a year-to-date basis was\ndue to factors mentioned above.\n

\n\n

Gross margin as a percentage of sales increased to 49.6% from 48.8% for the quarter and to\n49.0% from 48.4% for the nine months ended April 30, 2008, compared to the same periods of the\nprevious year. The increase in gross margin as a percentage of sales was primarily the result of\ncost reduction actions taken during fiscal 2007 and fiscal 2008.\n

\n\n

Research and development (“R&D”) expenses increased 17.6% to $10.3 million for the quarter\nand 11.3% to $29.3 million for the nine months ended April 30, 2008, compared to $8.7 million and\n$26.4 million for the same periods in the prior year, respectively. As a percentage of sales, R&D\nexpenses represented a slightly higher percentage of sales, increasing to 2.7% in the third\nquarter of fiscal 2008 from 2.5% in the third quarter of fiscal 2007, and remained at 2.6% in the\nfirst nine months of fiscal 2008 compared to 2.6% in the first nine months of fiscal 2007,\nreflecting the Company’s continuing commitment to investing in new product development.\n

\n\n

Selling, general and administrative (“SG&A”) expenses increased 11.1% to $126.7 million for\nthe three months ended April 30, 2008, compared to $114.1 million for the same period in the prior\nyear and 13.3% to $369.6 million for the nine months ended April 30, 2008, compared to $326.1\nmillion for the same period in the prior year. The increase in SG&A expenses was primarily the\nresult of the effect of currencies and acquisitions made during fiscal 2007 and 2008. As a\npercentage of sales, SG&A expenses increased to 33.2% from 32.9% for the quarter and to 32.8% from\n32.6% for the nine months ended April 30, 2008, compared to the same periods in the prior year.\n

\n\n

Interest expense increased to $7.0 million from $6.4 million for the quarter and to $20.4\nmillion from $16.4 million for the three and nine months ended April 30, 2008, compared to the same periods\nin the prior year. The increase in interest expense for the three and nine months ended April 30, 2008 was\ndue to interest on the $150 million private placement of senior notes that the Company completed\nin the third quarter of fiscal 2007.\n

\n\n

Other income and expense increased to $0.9 million of income for the quarter and to $3.3\nmillion of income for the nine months ended April 30, 2008, compared to $0.4 million of\nincome and $0.9 million of income for the same periods in the prior year, respectively. Of the\n$0.9 million in other income for the three months ended April 30, 2008, $1.4 million was the result\nof interest income generated from investments of excess cash, partially offset by $0.7 million of\nforeign exchange losses. Other income and expense for the three months ended April 30, 2007\nconsisted primarily of $0.6 million of interest income, partially offset by $0.4 million of foreign\nexchange losses. For the nine months ended April 30, 2008, of the $3.3 million of other income,\n$4.3 million was related to interest income generated from investments, partially offset by $1.3\nmillion in foreign exchange losses. Other income for the nine months ended April 30, 2007,\nconsisted primarily of $1.4 million was related to interest income, partially offset by $0.8\nmillion of foreign exchange losses.\n

\n\n

The Company’s effective tax rate was 26.2% for the quarter, and 28.5% for the nine months\nended April 30, 2008, compared to 28.0% for the three and nine months ended April 30, 2007. The\nCompany recognized approximately $2 million in income tax benefits due to the expiration of various\nstatutes of limitations, resulting in an effective tax rate of 26.2% during the third quarter of\nfiscal 2008. On a year-to-date basis, the increased tax rate in fiscal 2008 is primarily due to\nincreased profits in higher tax countries. The Company expects the full year effective tax rate\nfor fiscal 2008 to be approximately 29%.\n

\n\n

Net income for the three months ended April 30, 2008, increased 18.5% to $34.4 million,\ncompared to $29.0 million for the same quarter of the previous year. Net income as a percentage\nof sales increased to 9.0% from 8.4% for the quarter ended April 30, 2008, compared to the same\nperiod in the prior year, due to the factors noted above. For the nine months ended April 30,\n2008, net income increased 17.2% to $97.4 million, compared to $83.1 million for the same period\nin the previous year. As a percentage of sales, net income increased to 8.6% from 8.3% for the\nnine months ended April 30, 2008, compared to the same period in the previous year.\n

\n\n

16\n

\n\n

Business Segment Operating Results\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\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \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\n
Three months ended:
April 30, 2008	$	100,425		$	65,982		$	133,422		$	82,080		$	381,909		$	—		$	381,909
April 30, 2007		88,077			65,784			111,266			81,205			346,332			—			346,332

Nine months ended:
April 30, 2008	$	300,963		$	196,840		$	364,951		$	263,413		$	1,126,167		$	—		$	1,126,167
April 30, 2007		251,346			189,446			302,477			256,597			999,866			—			999,866

SALES GROWTH INFORMATION
Three months ended April 30, 2008
Base		3.6	%		-2.4	%		0.1	%		-7.4	%		-1.2	%		—			-1.2	%
Currency		2.8	%		1.7	%		11.3	%		7.9	%		6.5	%		—			6.5	%
Acquisitions		7.6	%		1.0	%		8.5	%		0.6	%		5.0	%		—			5.0	%
Total		14.0	%		0.3	%		19.9	%		1.1	%		10.3	%		—			10.3	%

Nine months ended April 30, 2008
Base		4.6	%		-1.3	%		0.6	%		-5.0	%		-0.2	%		—			-0.2	%
Currency		2.4	%		1.6	%		10.5	%		7.3	%		6.0	%		—			6.0	%
Acquisitions		12.7	%		3.6	%		9.5	%		0.4	%		6.8	%		—			6.8	%
Total		19.7	%		3.9	%		20.6	%		2.7	%		12.6	%		—			12.6	%
SEGMENT PROFIT
Three months ended:
April 30, 2008	$	22,692		$	17,477		$	36,245		$	11,055		$	87,469		$	(1,816	)	$	85,653
April 30, 2007		20,245			17,768			29,370			11,861			79,244			(1,858	)		77,386
Percentage increase		12.1	%		-1.6	%		23.4	%		-6.8	%		10.4	%		-2.3	%		10.7	%

Nine months ended:
April 30, 2008	$	66,667		$	49,645		$	97,212		$	43,105		$	256,629		$	(6,400	)	$	250,229
April 30, 2007		55,433			49,491			74,979			46,392			226,295			(7,496	)		218,799
Percentage increase		20.3	%		0.3	%		29.7	%		-7.1	%		13.4	%		-14.6	%		14.4	%

\n\n\n

NET INCOME RECONCILIATION (Dollars in thousands)\n

\n\n


	Three months ended:			Nine months ended:
	April 30,			April 30,			April 30,		April 30,
	2008			2007			2008		2007
Total profit from reportable segments	$	87,469			$	79,244		$	256,629		$	226,295
Corporate and eliminations		(1,816	)			(1,858	)		(6,400	)		(7,496	)
Unallocated amounts:
Administrative costs		(33,071	)			(31,083	)		(96,865	)		(87,831	)
Investment and other income		920				385			3,307			917
Interest expense		(6,962	)			(6,428	)		(20,429	)		(16,407	)

Income before income taxes		46,540				40,260			136,242			115,478
Income taxes		(12,187	)			(11,273	)		(38,829	)		(32,334	)

Net income	$	34,353			$	28,987		$	97,413		$	83,144

\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.\nCorporate research and development, interest, investment and other income and income taxes are\nalso excluded when evaluating performance.\n

\n\n

17\n

\n\n

Brady Americas:\n

\n\n\n

Brady Americas sales increased 14.0% for the quarter and 19.7% for the nine months ended\nApril 30, 2008, compared to the same periods in the prior year. Organic growth accounted for 3.6%\nand 4.6% in the quarter and year-to-date, respectively, as compared to the same periods in the\nprevious year. For the quarter, the organic growth was driven by strong performance in the\neducation market resulting from the fiscal 2007 launch of the VariQuest suite of products as well\nas solid results in the industrial OEM markets, partially offset by a softening in the\nmanufacturing and utility markets. Fluctuations in the exchange rates used to translate financial\nresults into the United States dollar increased sales by 2.8% in the quarter and 2.4% for the\nnine-month period. Sales in the segment were increased by the fiscal year 2007 acquisitions of\nPrecision Converters, Scafftag, Asterisco, and SPC, which increased sales by 7.6% for the quarter\nand 12.7% for the nine-month period.\n

\n\n

Segment profit for the region increased 12.1% to $22.7 million from $20.2 million for the\nquarter and 20.3% to $66.7 million from $55.4 million for the nine months ended April 30, 2008,\ncompared to the same periods in the prior year. As a percentage of sales, segment profit\ndecreased to 22.6% from 23.0% in the third quarter of fiscal 2008 and increased slightly to 22.2%\nfrom 22.1% in the nine months ended April 30, 2008, compared to the same periods in the prior\nyear. The slight decline for the third quarter in segment profit as a percentage of sales was due\nprimarily to the one-time cost of consolidating two medical die cut businesses. The consolidation\nof these businesses will allow the Company to leverage resources and drive future profit\nimprovements.\n

\n\n

Direct Marketing and People ID Americas:\n

\n\n\n

Direct Marketing and People ID Americas sales increased 0.3% for the quarter and 3.9% for the\nnine months ended April 30, 2008, compared to the same periods in the prior year. Organic sales\nfor the segment declined 2.4% and 1.3% in the quarter and year-to-date, respectively, as compared\nto the same periods in the previous year. The decline in the organic sales for the third quarter\nand nine-month period was due primarily to softness in the manufacturing and construction sectors.\nFluctuations in the exchange rates used to translate financial results into the United States\ndollar increased sales by 1.7% in the quarter and 1.6% for the nine-month period. Sales in the\nsegment were increased by the fiscal year 2008 acquisition of DAWG and the fiscal year 2007\nacquisitions of CIPI and Clement, which increased sales by 1.0% for the quarter and 3.6% for the\nnine-month period.\n

\n\n

Segment profit for the region decreased 1.6% to $17.5 million from $17.8 million for the\nquarter and increased 0.3% to $49.6 million from $49.5 million for the nine months ended April 30,\n2008, compared to the same periods in the prior year. As a percentage of sales, segment profit\ndecreased to 26.5% from 27.0% in the third quarter of fiscal 2008 and to 25.2% from 26.1% in the\nnine months ended April 30, 2008, compared to the same periods in the prior year. The decline in\nsegment profit as a percentage of sales compared to the prior year was due to the decline in\norganic sales during the quarter and on a year-to-date basis.\n

\n\n

Europe:\n

\n\n\n

Europe sales increased 19.9% for the quarter and 20.6% for the nine months ended April 30,\n2008, compared to the same periods in the prior year. Organic growth accounted for 0.1% and 0.6%\nin the quarter and year-to-date, respectively, compared to the same periods in the previous year.\nPrior year sales relating to the implementation of “No Smoking” legislation in the U.K. and\nFrance, created tough comparables for organic sales in the segment, as these sales did not recur\nin fiscal 2008. Sales were positively affected by fluctuations in the exchange rates used to\ntranslate financial results into the United States dollar, which increased sales within the region\nby 11.3% in the quarter and 10.5% for the nine-month period. The fiscal 2008 acquisition of\nTransposafe and the fiscal 2007 acquisitions of CIPI, Scafftag, Moderno, and SPC increased sales\nby 8.5% for the quarter and 9.5% for the nine-month period.\n

\n\n

Segment profit for the region increased 23.4% to $36.2 million from $29.4 million for the\nquarter and 29.7% to $97.2 million from $75.0 million for the nine months ended April 30, 2008,\ncompared to the same periods in the prior year. As a percentage of sales, segment profit\nincreased to 27.2% from 26.4% in the third quarter of fiscal 2008 and to 26.6% from 24.8% in the\nnine months ended April 30, 2008, compared to the same periods in the prior year. The increase in\nsegment profit was driven by the sales results noted above, as well as the realization of benefits\nfrom cost reduction activities taken at the end of fiscal 2007.\n

\n\n

18\n

\n\n

Asia-Pacific:\n

\n\n\n

Asia-Pacific sales increased 1.1% for the quarter and 2.7% for the nine months ended April 30,\n2008, compared to the same periods in the prior year. Organic sales in local currency decreased\n7.4% in the quarter and 5.0% year-to-date, compared to the same periods in the previous year.\nAlthough the segment saw gains with certain OEM customers, these were offset by a drop in sales to\nOEM customers who lost significant market share, as well as competitive, commodity business the\nCompany chose to deemphasize. Pricing pressures remained steady during the quarter. Sales were\npositively affected by fluctuations in the exchange rates used to translate financial results into\nthe United States dollar, which increased sales within the region by 7.9% in the quarter and 7.3%\nfor the nine-month period. The fiscal 2007 acquisitions of CIPI, Scafftag, and SPC increased sales\nby 0.6% for the quarter and 0.4% for the nine-month period.\n

\n\n

Segment profit for the region decreased 6.8% to $11.1 million from $11.9 million for the\nquarter and declined 7.1% to $43.1 million from $46.4 million for the nine months ended April 30,\n2008, compared to the same periods in the prior year. As a percentage of sales, segment profit\ndecreased to 13.5% from 14.6% in the third quarter of fiscal 2008 and to 16.4% from 18.1% in the\nnine months ended April 30, 2008, compared to the same periods in the prior year. The decline in\nsegment profit as a percentage of sales was due to the industry mix shift from high-end, feature\nrich mobile phones to low-end basic mobile phones and continued pricing pressures within the mobile\nhandset supply chain, partially offset by cost reduction activities initiated in fiscal 2007.\n

\n\n

Financial Condition\n

\n\n\n

The Company’s current ratio as of April 30, 2008, was 2.4 compared to 2.1 at July 31, 2007.\nCash and cash equivalents were $227.4 million at April 30, 2008, compared to $142.8 million at July\n31, 2007. There were no short-term investments outstanding at April 30, 2008, compared to $19.2\nmillion outstanding at July 31, 2007. Accounts receivable increased $13.4 million for the nine\nmonths ended April 30, 2008, due to the acquisitions of Transposafe and DAWG and foreign currency\ntranslation, partially offset by a lower receivable balance at April 30, 2008. Inventories\ndecreased $4.2 million for the nine months ended April 30, 2008, to $135.6 from $139.8 million.\nThe decline in inventory due to working capital initiatives was partially offset by the\nacquisitions of Transposafe and DAWG, as well as foreign currency translation. The net decrease in\ncurrent liabilities was $8.8 million for the current fiscal year. The decrease was composed of a\ndecline in accrued income taxes as the adoption of FIN 48 required a reclassification of a portion\nof the current payable recorded at July 31, 2007 to long-term liabilities, and a decline in other\ncurrent liabilities partially offset by an increase in accounts payable due to foreign currency\ntranslation.\n

\n\n

Cash flow from operating activities totaled $152.1 million for the nine months ended April 30,\n2008, compared to $79.7 million for the same period last year. The increase was the result of the\nimpact of working capital initiatives on accounts receivable and inventory balances as compared to\nthe changes reported for the nine months ended April 30, 2007, an increase in net income of $14.3\nmillion, and a $5.3 million increase in depreciation and amortization on the intangible assets\nacquired in fiscal 2007.\n

\n\n

The acquisitions of businesses used $28.9 million of cash for the nine months ended April 30,\n2008, compared to $157.9 million for the same period in the prior year. Payments of $4.4 million,\n$1.2 million, and $0.2 million were made during the nine months ended April 30, 2008 to satisfy the\nearnout and holdback liabilities of the Daewon Industry Corporation, STOPware, Inc., and Asterisco\nacquisitions, respectively. Capital expenditures were $19.7 million for the nine months ended\nApril 30, 2008, compared to $42.1 million in the same period last year. Fiscal 2007 capital\nexpenditures included the implementation of SAP and expansions in China, Canada, India, Slovakia,\nand other locations which were not repeated in fiscal 2008. Net cash used in financing activities\nwas $38.7 million for the nine months ended April 30, 2008, due to the payment of dividends and the\nrepurchase of outstanding stock, partially offset by the proceeds from the exercise of stock\noptions. Net cash provided by financing activities for the same period last year was $131.6\nmillion due to proceeds from the private placement of $150 million of senior notes in the third\nquarter, 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. On March 18, 2008, the\nCompany entered into an amendment to the revolving loan agreement which extended the maturity date\nfrom October 5, 2011 to March 18, 2013. All other terms of the revolving loan agreement remained\nthe same.\n

\n\n

Under the credit agreement, the Company has the option to select either a base interest rate\n(based upon the higher of the federal funds rate plus one-half of 1% or the prime rate of Bank of\nAmerica) or a Eurocurrency interest rate (at the LIBOR rate plus a margin based on the Company’s\nconsolidated leverage ratio). A commitment fee is payable on the unused amount of the facility. The\nagreement requires the Company to maintain two financial covenants. As of April 30, 2008, the\nCompany was in compliance with the covenants of the 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 nine months ended April 30, 2008, the Company did not borrow or repay any amounts under\nthe credit agreement. As of April 30, 2008, there were no outstanding borrowings under the credit\nagreement.\n

\n\n

19\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\nApril 30, 2008, 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 April 30, 2008, 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\namortize over seven years beginning in 2008, with interest payable on the notes semiannually on\nJune 28 and December 28, beginning in December 2004. The Company used the proceeds of the offering\nto reduce outstanding indebtedness under the Company’s revolving credit facilities used to\ninitially fund the EMED acquisition. The debt has certain prepayment penalties for repaying the\ndebt prior to its maturity date. The agreement also requires the Company to maintain a financial\ncovenant. As of April 30, 2008, the Company was in compliance with this covenant.\n

\n\n

On May 20, 2008, the Board of Directors declared a quarterly cash dividend to shareholders of\nthe Company’s Class A Common Stock of $0.15 per share payable on July 31, 2008 to shareholders of\nrecord at the close of business on July 10, 2008.\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, such\nas 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, services,\nand 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.\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

20\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 Form 10-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\nBrady’s control, that could cause actual results to differ materially from those expressed or\nimplied by such forward-looking statements. For Brady, uncertainties arise from future financial\nperformance of major markets Brady serves, which include, without limitation, telecommunications,\nconsumer electronics, mobile handset, manufacturing, electrical, construction, laboratory,\neducation, governmental, public utility, computer, transportation; difficulties in making and\nintegrating acquisitions; risks associated with newly acquired businesses; Brady’s ability to\nretain significant contracts and customers; future competition; Brady’s ability to develop and\nsuccessfully market new products; changes in the supply of, or price for, parts and components;\nincreased price pressure from suppliers and customers; interruptions to sources of supply;\nenvironmental, health and safety compliance costs and liabilities; Brady’s ability to realize cost\nsavings from operating initiatives; Brady’s ability to attract and retain key talent; difficulties\nassociated with exports; risks associated with international operations; fluctuations in currency\nrates versus the US dollar; technology changes; potential write-offs of Brady’s substantial\nintangible assets; risks associated with obtaining governmental approvals and maintaining\nregulatory compliance for new and existing products; business interruptions due to implementing\nbusiness systems; and numerous other matters of national, regional and global scale, including\nthose of a political, economic, business, competitive and regulatory nature contained from time to\ntime in Brady’s U.S. Securities and Exchange Commission filings, including, but not limited to,\nthose factors listed in the “Risk Factors” in Item 1A of Part I of Brady’s Form 10-K for the year\nended July 31, 2007. These uncertainties may cause Brady’s actual future results to be materially\ndifferent than those expressed in its forward-looking statements. Brady does not undertake to\nupdate its forward-looking statements.\n

\n\n

21\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\nactivities. The objective of the Company’s interest rate risk management activities is to manage\nthe levels of the Company’s fixed and floating interest rate exposure to be consistent with the\nCompany’s preferred mix. The interest rate risk management program allows the Company to enter\ninto approved interest rate derivatives, with the approval of the Board of Directors, if there is\na desire to modify the Company’s exposure to interest rates. As of April 30, 2008, the Company had\nno 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\nis recorded, 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,\nto many 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\nchange.\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

22\n

\n\n

PART II. OTHER INFORMATION\n

\n\n

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds\n\n

\n\n

In September 2007, the Company announced that the Board of Directors of the Company had\nauthorized a share repurchase plan for up to one million shares of the Company’s Class A Nonvoting\nCommon Stock. The share repurchase plan may be implemented by purchasing shares on the open market\nor in privately negotiated transactions, with repurchased shares available for use in connection\nwith the Company’s stock-based plans and for other corporate purposes.\n

\n\n

The following table provides information with respect to the purchases of Class A Nonvoting\nCommon Stock during the nine months ended April 30, 2008.\n

\n\n

ISSUER PURCHASES OF SECURITIES\n

\n\n


								Total Number of			Maximum Number
				Average			Shares Purchased			of Shares that May
	Total Number of		Price Paid			as Part of Publicly			Yet Be Purchased
Period	Shares Purchased		per Share			Announced Plans			Under the Plans
February 1, 2008 – February 29, 2008		267,306		$	29.34				267,306			732,694
March 1, 2008 – March 31, 2008		676,490		$	30.58				676,490			1,056,204
April 1, 2008 – April 30, 2008		—		$	—				—			1,056,204

Total		943,796		$	30.23				943,796			1,056,204

\n\n

ITEM 6. Exhibits\n

\n\n\n

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

	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 Thomas J. Felmer

	32.1		Section 1350 Certification of Frank M. Jaehnert

	32.2		Section 1350 Certification of Thomas J. Felmer

\n\n

23\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\nthose entities, 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\nfourth fiscal quarter in the case of an annual report) that has materially affected, or is\nreasonably likely to materially affect, the registrant’s internal control over financial\nreporting; 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\naudit committee of the registrant’s board of directors (or persons performing the equivalent\nfunctions):\n

\n\n

a) All significant deficiencies and material weaknesses in the design or operation of\ninternal control over financial reporting which are reasonably likely to adversely affect the\nregistrant’s ability 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: June 6, 2008\n

\n\n\n

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

\n\n

EXHIBIT 31.2\n

\n\n\n

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

\n\n

I, Thomas Felmer, certify that:\n

\n\n\n

(1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation;\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: June 6, 2008\n

\n\n\n

/s/ THOMAS J. FELMER
\nThomas J. Felmer\n\n

\n\n

Senior Vice President and Chief
\nFinancial Officer\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 April 30,\n2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act\nof 1934; and\n

\n\n

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

\n\n

Date: June 6, 2008\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,\nthe financial conditions and results of operations of the Company.\n

\n\n

Date: June 6, 2008\n

\n\n\n

/s/ THOMAS J. FELMER
\nThomas J. Felmer
\nSenior Vice President and Chief Financial Officer\n\n

\n\n

\n\n\n


	BRADY CORPORATION \n
Date: June 6, 2008	/s/ F. M. Jaehnert\n
	F. M. Jaehnert
	President & Chief Executive Officer



Date: June 6, 2008	/s/ Thomas J. Felmer\n
	Thomas J. Felmer
	Senior Vice President & Chief Financial Officer \n(Principal Accounting Officer) \n(Principal Financial Officer)