e10vq

\n\n\n

\n\n\n\n\n

UNITED STATES SECURITIES AND EXCHANGE COMMISSION\n

\n\n

Washington, DC 20549\n

\n\n

FORM 10-Q\n

\n\n

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


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

\n\n

For the Quarterly Period Ended October 31, 2008\n\n

\n\n

OR\n

\n\n

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


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

\n\n

For\nthe Transition Period from\n \nto \n\n

\n\n

Commission File Number 1-14959

\n\n

BRADY CORPORATION\n

\n\n

(Exact name of registrant as specified in its charter)

\n\n\n

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


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

\n\n

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

\n\n

(Registrant’s telephone number, including area code)

\n\n

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

Indicate by check\nmark whether the\nregistrant is a\nlarge accelerated filer, an accelerated filer, a non-accelerated\nfiler, or a\n\nsmaller reporting company.\nSee the definitions of “large accelerated\nfiler,” “accelerated\nfiler”\nand “smaller reporting company” in\nRule 12b-2 of the Exchange Act. (Check one):\n

\n\n

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


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

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

\n\n

APPLICABLE ONLY TO CORPORATE ISSUERS

\n\n

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

As of December 5, 2008, there were outstanding 48,758,566 shares of Class A Nonvoting Common Stock\nand 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which\nis held by affiliates of the Registrant, is the only voting stock.\n

\n\n\n

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

\n\n

FORM 10-Q
\nBRADY CORPORATION
\nINDEX\n

\n\n


	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		14

Item 3. Quantitative and Qualitative Disclosures About Market Risk		21

Item 4. Controls and Procedures		21

PART II. Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22

Item 4. Submission of Matters to a Vote of Security Holders		22

Item 6. Exhibits		23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

\n\n

PART I. FINANCIAL INFORMATION\n

\n\n

ITEM 1. FINANCIAL STATEMENTS

\n\n\n\n

BRADY CORPORATION AND SUBSIDIARIES

\n\n\n

\n\n

CONDENSED CONSOLIDATED BALANCE SHEETS

\n\n\n\n

(DOLLARS IN THOUSANDS)

\n\n\n

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


	October 31, 2008			July 31, 2008
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	178,792			$	258,355
Accounts receivable, less allowance for losses ($9,066 and $10,059, respectively)		243,219				262,461
Inventories:
Finished products		68,267				75,665
Work-in-process		21,586				21,187
Raw materials and supplies		40,852				37,767

Total inventories		130,705				134,619
Prepaid expenses and other current assets		46,669				43,650

Total current assets		599,385				699,085
Other assets:
Goodwill		724,072				789,107
Other intangible assets		124,593				144,791
Deferred income taxes		25,576				25,943
Other		17,820				21,381
Property, plant and equipment:
Cost:
Land		6,169				6,490
Buildings and improvements		92,509				98,646
Machinery and equipment		265,097				282,232
Construction in progress		9,453				6,040

		373,228				393,408
Less accumulated depreciation		216,891				223,202

Net property, plant and equipment		156,337				170,206
Total	$	1,647,783			$	1,850,513

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	109,083			$	118,209
Wages and amounts withheld from employees		52,396				82,354
Taxes, other than income taxes		8,033				10,234
Accrued income taxes		13,764				21,523
Other current liabilities		49,365				54,810
Short-term borrowings and current maturities on long-term obligations		21,430				21,431

Total current liabilities		254,071				308,561
Long-term obligations, less current maturities		457,143				457,143
Other liabilities		56,298				63,001

Total liabilities		767,512				828,705
Stockholders’ investment:
Class A nonvoting common stock — Issued 51,261,487 and 51,261,487 shares,\nrespectively and outstanding 48,926,466 and 50,005,296 shares, respectively		513				513
Class B voting common stock — Issued and outstanding 3,538,628 shares		35				35
Additional paid-in capital		294,181				292,769
Earnings retained in the business		667,108				639,059
Treasury stock — 2,125,021 and 1,046,191 shares, respectively of Class A\nnonvoting common stock, at cost		(67,539	)			(33,234	)
Accumulated other comprehensive (loss) income		(8,839	)			128,161
Other		(5,188	)			(5,495	)

Total stockholders’ investment		880,271				1,021,808

Total	$	1,647,783			$	1,850,513

\n\n\n

See Notes to Condensed Consolidated Financial Statements\n

\n\n\n

3\n

\n\n

BRADY CORPORATION AND SUBSIDIARIES\n

\n\n

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

\n\n\n\n

(Dollars in Thousands, Except Per Share Amounts)

\n\n\n

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


	Three Months Ended October 31,
	(Unaudited)
								Percentage
	2008			2007			Change
Net sales	$	378,317			$	380,134			(0.5	)%
Cost of products sold		197,171				192,467			2.4	%

Gross margin		181,146				187,667			(3.5	)%

Operating expenses:
Research and development		9,056				8,978			0.9	%
Selling, general and administrative		115,896				120,351			(3.7	)%

Total operating expenses		124,952				129,329			(3.4	)%

Operating income		56,194				58,338			(3.7	)%

Other income (expense):
Investment and other income — net		1,852				118			1,469.5	%
Interest expense		(6,361	)			(6,720	)		(5.3	)%


Income before income taxes		51,685				51,736			(0.1	)%

Income taxes		14,575				15,366			(5.1	)%


Net income	$	37,110			$	36,370			2.0	%


Per Class A Nonvoting Common Share:
Basic net income	$	0.70			$	0.67			4.5	%
Diluted net income	$	0.69			$	0.66			4.5	%
Dividends	$	0.17			$	0.15			13.3	%

Per Class B Voting Common Share:
Basic net income	$	0.68			$	0.65			4.6	%
Diluted net income	$	0.67			$	0.64			4.7	%
Dividends	$	0.15			$	0.13			15.4	%

Weighted average common shares outstanding (in thousands):
Basic		53,291				54,350
Diluted		53,938				55,121

\n\n\n

See Notes to Condensed Consolidated Financial Statements.\n

\n\n\n

4\n

\n\n

BRADY CORPORATION AND SUBSIDIARIES\n

\n\n

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

\n\n\n\n

(Dollars in Thousands)

\n\n\n

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


	Three Months Ended
	October 31,
	(Unaudited)
	2008			2007
Operating activities:
Net income	$	37,110			$	36,370
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		13,712				14,168
Non-cash portion of stock-based compensation expense		2,092				3,257
Other		(198	)			46
Changes in operating assets and liabilities (net of effects of business acquisitions):
Accounts receivable		(12,571	)			(10,880	)
Inventories		(10,360	)			1,337
Prepaid expenses and other assets		(8,147	)			(4,417	)
Accounts payable and accrued liabilities		(21,679	)			(13,278	)
Income taxes		(3,513	)			6,086
Other liabilities		(1,167	)			1,201

Net cash (used in) provided by operating activities		(4,721	)			33,890

Investing activities:
Payments of contingent consideration		—				(1,200	)
Purchases of short-term investments		—				(5,150	)
Sales of short-term investments		—				7,860
Purchases of property, plant and equipment		(6,429	)			(7,395	)
Other		1,300				(1,375	)

Net cash used in investing activities		(5,129	)			(7,260	)

Financing activities:
Payment of dividends		(9,061	)			(8,100	)
Proceeds from issuance of common stock		1,162				4,134
Principal payments on debt		(1	)			(5	)
Purchase of treasury stock		(36,508	)			—
Excess\nincome tax benefit from the exercise of stock options and deferred\ncompensation distributions\n		667				2,712

Net cash used in financing activities		(43,741	)			(1,259	)

Effect of exchange rate changes on cash		(25,972	)			2,382

Net (decrease) increase in cash and cash equivalents		(79,563	)			27,753
Cash and cash equivalents, beginning of period		258,355				142,846
Cash and cash equivalents, end of period	$	178,792			$	170,599

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest	$	9,298			$	9,298
Income taxes, net of refunds		15,605				1,782

\n\n\n

See Notes to Condensed Consolidated Financial Statements.\n

\n\n\n

5\n

\n\n

BRADY CORPORATION AND SUBSIDIARIES\n

\n\n

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

\n\n\n

Three Months Ended October 31, 2008

\n\n\n

(Unaudited)

\n\n\n

(In thousands, except share and per share amounts)

\n\n\n\n

NOTE A — Basis of Presentation\n

\n\n\n

The condensed consolidated financial statements included herein have been prepared by Brady\nCorporation and subsidiaries (the “Company” or “Brady”) without audit, pursuant to the rules and\nregulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing\nstatements contain all adjustments, consisting only of normal recurring adjustments necessary to\npresent fairly the financial position of the Company as of October 31, 2008 and July 3l, 2008, and\nits results of operations and cash flows for the three months ended October 31, 2008 and 2007. The\ncondensed consolidated balance sheet as of July 31, 2008 has been derived from the audited\nconsolidated financial statements of that date. The preparation of financial statements in\nconformity with accounting principles generally accepted in the United States of America (“GAAP”)\nrequires management to make estimates and assumptions that affect the reported amounts therein. Due\nto the inherent uncertainty involved in making estimates, actual results in future periods may\ndiffer from the estimates.\n

\n\n

Certain information and footnote disclosures normally included in financial statements\nprepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations\nof the Securities and Exchange Commission. Accordingly, the condensed consolidated financial\nstatements do not include all of the information and footnotes required by GAAP for complete\nfinancial statement presentation. It is suggested that these condensed consolidated financial\nstatements be read in conjunction with the consolidated financial statements and the notes thereto\nincluded in the Company’s latest annual report on Form 10-K for the year ended July 31, 2008.\n

\n\n

NOTE B — Goodwill and Intangible Assets\n

\n\n\n

Changes in the carrying amount of goodwill for the quarter ended October 31, 2008, are as\nfollows:\n


	Americas			Europe			Asia-Pacific		Total
Balance as of July 31, 2008	$	412,977			$	189,650		$	186,480		$	789,107
Adjustments for prior\nyear acquisitions		275				46			—			321
Translation adjustments		(6,948	)			(39,414	)		(18,994	)		(65,356	)

Balance as of October 31, 2008	$	406,304			$	150,282		$	167,486		$	724,072

\n\n\n

Goodwill increased $321 during the three months ended October 31, 2008 as a result of\nadjustments to the preliminary allocation of the purchase price for the acquisitions of Sorbent\nProducts Company (“SPC”) and Transposafe Systems B.V. and Holland Mounting Systems B.V.\n(collectively, “Transposafe”). Of the $321 increase during the quarter, $275 related to the final\ntax adjustment for the SPC acquisition. Goodwill decreased $65,356 during the three months ended\nOctober 31, 2008 due to the effects of foreign currency translation.\n

\n\n

6\n

\n\n

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

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


	October 31, 2008		July 31, 2008
	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		$	8,594		$	(6,608	)	$	1,986			15		$	8,603	$	(6,592	)	$	2,011
Trademarks and\nother		7			7,096			(4,308	)		2,788			7			8,079		(4,688	)		3,391
Customer\nrelationships		7			135,140			(59,151	)		75,989			7			151,704		(59,101	)		92,603
Non-compete\nagreements		4			10,519			(7,911	)		2,608			4			12,222		(8,446	)		3,776
Other		4			3,296			(3,293	)		3			4			3,299		(3,294	)		5
Unamortized other\nintangible assets:
Trademarks		N/A			41,219			—			41,219			N/A			43,005		—			43,005

Total				$	205,864		$	(81,271	)	$	124,593					$	226,912	$	(82,121	)	$	144,791

\n\n\n

The value of goodwill and other intangible assets in the Condensed Consolidated Financial\nStatements at October 31, 2008 differs from the value assigned to them in the allocation of\npurchase price due to the effect of fluctuations in the exchange rates used to translate financial\nstatements into the United States Dollar between the date of acquisition and October 31, 2008.\n

\n\n

Amortization expense on intangible assets was $5,928 and $5,905 for the three-month periods\nended October 31, 2008 and 2007, respectively. The amortization over each of the next five fiscal\nyears is projected to be $22,965, $21,319, $17,893, $10,854 and $7,685 for the years ending July\n31, 2009, 2010, 2011, 2012 and 2013, respectively.\n

\n\n

NOTE C — Comprehensive Income (Loss)\n

\n\n\n

Total comprehensive income (loss), which was comprised of net income, foreign currency\ntranslation adjustments, net unrealized gains and losses from cash flow hedges and other\ninvestments, the unrealized gain on the post-retirement medical, dental and vision plan, and their\nrelated tax effects amounted to ($99,890) and $61,044 for the three months ended October 31, 2008\nand 2007, respectively. The decrease in total comprehensive income for the quarter ended October\n31, 2008 as compared to the same period the previous year was due to the appreciation of the U.S.\ndollar against other currencies.\n

\n\n

7\n

\n\n

NOTE D — Net Income Per Common Share\n

\n\n\n

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


	Three Months Ended October 31,
	2008			2007
Numerator:
Net income (numerator for basic and diluted Class A net income per share)	$	37,110			$	36,370
Less:
Preferential dividends		(823	)			(846	)
Preferential dividends on dilutive stock options		(11	)			(13	)

Numerator for basic and diluted Class B net income per share	$	36,276			$	35,511


Denominator:
Denominator for basic net income per share for both Class A and Class B		53,291				54,350
Plus: Effect of dilutive stock options		647				771

Denominator for diluted net income per share for both Class A and Class B		53,938				55,121


Class A Nonvoting Common Stock net income per share:
Basic	$	0.70			$	0.67
Diluted	$	0.69			$	0.66

Class B Voting Common Stock net income per share:
Basic	$	0.68			$	0.65
Diluted	$	0.67			$	0.64

\n\n\n

Options to purchase approximately 1,613,500 and 1,280,500 shares of Class A Nonvoting Common\nStock were not included in the computation of diluted net income per share for the quarters ended\nOctober 31, 2008 and 2007, respectively, because the option exercise price was greater than the\naverage market price of the common shares and, therefore, the effect would be anti-dilutive.\n

\n\n

8\n

\n\n

NOTE E — Segment Information\n

\n\n\n

The Company evaluates segment performance based on segment profit or loss and customer sales.\nSegment profit or loss does not include certain administrative costs, interest, foreign exchange\ngain or loss, other expenses not allocated to a segment, and income taxes.\n

\n\n

The Company is organized and managed on a geographic basis by region. Each of these regions,\nBrady Americas, Brady Europe and Brady Asia-Pacific, has a President that reports directly to the\nCompany’s chief operating decision maker, its Chief Executive Officer. Each region has its own\ndistinct operations, is managed locally by its own management team, maintains its own financial\nreports and is evaluated based on regional results. In applying the criteria set forth in SFAS No.\n131 “Disclosures about Segments of an Enterprise and Related Information”, the Company has\ndetermined that these regions comprise its reportable segments based on the information used by the\nChief Executive Officer to allocate resources and assess performance.\n

\n\n

Subsequent to the first quarter of fiscal 2008, the Company made several reporting and\norganizational changes in which the leadership, operations, and administrative functions of the two\nbusinesses in the Americas region were consolidated. As a result of the changes, the Company\nchanged the number of reporting segments from four to three during the fourth quarter of fiscal\n2008. Following is a summary of segment information for the three months ended October 31, 2008\nand 2007:\n


												Corporate
												and
	Americas		Europe	Asia-Pacific		Subtotals	Eliminations		Totals
Three months ended\nOctober 31, 2008:
Revenues from\nexternal customers	$	160,916		$	108,215		$	109,186		$	378,317		—		$	378,317
Intersegment revenues		14,381			1,511			7,988			23,880		(23,880	)		—
Segment profit		35,524			31,138			22,401			89,063		(2,307	)		86,756

Three months ended\nOctober 31, 2007:
Revenues from\nexternal customers	$	174,775		$	108,914		$	96,445		$	380,134		—		$	380,134
Intersegment revenues		15,026			2,985			6,140			24,151		(24,151	)		—
Segment profit		44,107			29,900			19,390			93,397		(2,237	)		91,160

\n\n

Following is a reconciliation of segment profit to net income for the three months ended October\n31, 2008 and 2007:\n

\n\n


	Three months ended:
	October 31,
	2008			2007
Total profit from reportable segments	$	89,063			$	93,397
Corporate and eliminations		(2,307	)			(2,237	)
Unallocated amounts:
Administrative costs		(30,562	)			(32,822	)
Investment and other income		1,852				118
Interest expense		(6,361	)			(6,720	)

Income before income taxes		51,685				51,736
Income taxes		(14,575	)			(15,366	)
Net income	$	37,110			$	36,370

\n\n\n

9\n

\n\n

NOTE F —Stock-Based Compensation\n

\n\n\n

The Company has an incentive stock plan under which the Board of Directors may grant\nnonqualified stock options to purchase shares of Class A Nonvoting Common Stock 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. All performance-based options that were\ngranted in fiscal 2006 and in prior years expire five years from the date of grant.\nPerformance-based options granted in fiscal 2007 and forward expire 10 years from the date of\ngrant. Restricted shares have an issuance price equal to the fair market value of the underlying\nstock at the date of grant. They vest at the end of a five-year period and upon meeting certain\nfinancial performance conditions; these shares are referred to herein as “performance-based\nrestricted shares”.\n

\n\n

As of October 31, 2008, the Company has reserved 3,917,672 shares of Class A Nonvoting Common\nStock for outstanding stock options and restricted shares and 966,833 shares of Class A Nonvoting\nCommon Stock remain for future issuance of stock options and restricted shares under the various\nplans. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver\nshares under these plans.\n

\n\n

The Company accounts for share-based compensation awards in accordance with SFAS No. 123(R),\n“Share Based Payment”. In accordance with this standard, the Company recognizes the compensation\ncost of all share-based awards on a straight-line basis over the vesting period of the award. Total\nstock compensation expense recognized by the Company during the three months ended October 31, 2008\nand 2007 was $2,092 ($1,276 net of taxes) and $3,257 ($1,987 net of taxes), respectively. As of\nOctober 31, 2008, total unrecognized compensation cost related to share-based compensation awards\nwas $14,201 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a\nweighted-average period of 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 three months ended October 31, 2008 and 2007 using the Black-Scholes\noption valuation model. The weighted-average assumptions used in the Black-Scholes valuation model\nare reflected in the following table:\n


	Three Months Ended		Three Months Ended
	October 31, 2008		October 31, 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)		6.57			N/A			6.57			6.57
Expected volatility		31.80	%		N/A			33.68	%		33.68	%
Expected dividend yield		1.78	%		N/A			1.58	%		1.58	%
Risk-free interest rate		3.29	%		N/A			4.30	%		4.66	%
Weighted-average market value of\nunderlying stock at grant date	$	35.42			N/A		$	35.10		$	35.35
Weighted-average exercise price	$	35.42			N/A		$	35.10		$	35.35
Weighted-average fair value of options\ngranted during the period	$	11.04			N/A		$	12.55		$	12.83

\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 fiscal 2008, with a\ngrant price and fair value of $32.83. The Company did not grant any performance-based restricted\nshares during the three months ended October 31, 2008. As of October 31, 2008, 210,000\nperformance-based restricted shares were outstanding.\n

\n\n

10\n

\n\n

A summary of stock option activity under the Company’s share-based compensation plans for the\nthree months ended October 31, 2008 is presented below:\n


									Weighted
									Average
					Weighted			Remaining			Aggregate
					Average			Contractual			Intrinsic
Options	Shares			Exercise Price			Term			Value
Outstanding at July 31, 2008		3,985,205			$	29.43
New grants		15,000			$	35.42
Exercised		(72,034	)		$	16.14
Forfeited or expired		(10,499	)		$	38.02

Outstanding at October 31, 2008		3,917,672			$	29.67				6.6		$	17,063

Exercisable at October 31, 2008		2,424,376			$	25.05				5.4		$	17,063

\n\n\n

There were 2,424,376 and 2,225,776 options exercisable with a weighted average exercise price\nof $25.05 and $22.37 at October 31, 2008 and 2007, respectively. The cash received from the\nexercise of options during the quarters ended October 31, 2008 and 2007 was $1,163 and $4,134,\nrespectively. The cash received from the tax benefit on options exercised during the quarters\nended October 31, 2008 and 2007 was $446 and $2,493, respectively.\n

\n\n

The total intrinsic value of options exercised during the three months ended October 31, 2008\nand 2007, based upon the average market price at the time of exercise during the period, was $1,479\nand $6,393, respectively. The total fair value of stock options vested during the three months\nended October 31, 2008 and 2007, was $84 and $47, respectively.\n

\n\n

NOTE G: Stockholders’ Equity\n

\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 1 million shares of the Company’s Class A Nonvoting Common Stock.\nThe share repurchase plan may be implemented by purchasing shares on the open market or in\nprivately negotiated transactions, with repurchased shares available for use in connection with the\nCompany’s stock-based plans and for other corporate purposes. As of July 31, 2008, there remained\n650,864 shares to purchase in connection with this share repurchase plan. During the three months\nended October 31, 2008, the Company acquired the remaining 650,864 shares of its Class A Nonvoting\nCommon Stock authorized for repurchase under this plan for $21,539.\n

\n\n

In September 2008, the Company announced that the Board of Directors of the Company authorized\na share repurchase plan for up to 1 million additional 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. Under this plan, the\nCompany acquired 500,000 shares of its Class A Nonvoting Common Stock for $14,969 during the three\nmonths ended October 31, 2008.\n

\n\n

NOTE H: 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 2009 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, 2008.\n

\n\n

11\n

\n\n

NOTE I: Fair Value Measurements\n

\n\n\n

The Company adopted SFAS No. 157, “Fair Value Measurements”, on August 1, 2008 as it relates\nto financial assets and liabilities. The impact of this adoption was not material to the Company’s\nfinancial statements. SFAS No. 157 will be effective for the Company’s nonfinancial assets and\nliabilities on August 1, 2009, the first day of the Company’s next fiscal year. SFAS No. 157\napplies to other accounting pronouncements that require or permit fair value measurements, defines\nfair value based upon an exit price model, establishes a framework for measuring fair value, and\nexpands the applicable disclosure requirements. SFAS No. 157 indicates, among other things, that a\nfair value measurement assumes that a transaction to sell an asset or transfer a liability occurs\nin the principal market for the asset or liability or, in the absence of a principal market, the\nmost advantageous market for the asset or liability.\n

\n\n

SFAS No. 157 establishes a fair market value hierarchy for the pricing inputs used to measure\nfair market value. The Company’s assets and liabilities measured at fair market value are\nclassified in one of the following categories:\n

\n\n\n

Level 1 — Assets or liabilities for which fair value is based on quoted market\nprices in active markets for identical instruments as of the reporting date. At October 31,\n2008, $7,328 of the mutual funds held for the Company’s deferred compensation plans were\nvalued using Level 1 pricing inputs. The Company’s deferred compensation investments are\nincluded in “Other assets” on the accompanying Condensed Consolidated Balance Sheets.\n

\n\n\n

Level 2 — Assets or liabilities for which fair value is based on valuation models\nfor which pricing inputs were either directly or indirectly observable. At October 31, 2008,\n$2,801 of the Company’s forward exchange contracts were valued using Level 2 pricing inputs.\nThe Company’s forward exchange contracts are included in “Prepaid expenses and other current\nassets” on the accompanying Condensed Consolidated Balance Sheets.\n

\n\n\n

Level 3 — Assets or liabilities for which fair value is based on valuation models\nwith significant unobservable pricing inputs and which result in the use of management\nestimates. As of October 31, 2008, none of the Company’s assets or liabilities were valued\nusing Level 3 pricing inputs.\n

\n\n

12\n

\n\n

NOTE J: New Accounting Pronouncements\n

\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 in subsidiaries will be valued at fair value at the acquisition\ndate and classified as a separate component of equity;

	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\nAugust 1, 2009. The Company is in the process of evaluating the impact that will result from\nadopting SFAS No.141(R), and therefore, the Company is unable to disclose the impact that SFAS No.\n141(R) will have on its financial position and results of operations when such statement is\nadopted.\n

\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 statement will\nbe effective for fiscal years and interim periods beginning after November 15, 2008. The Company\nexpects that the adoption of SFAS No. 161 will not have a material impact on its financial position\nand results of operations. The Company is in the process of evaluating the impact that will result\nfrom adopting SFAS No. 161 on the Company’s financial disclosures when such statement is adopted.\n

\n\n

In June 2008, the FASB issued Staff Position on EITF Issue 03-6 (“FSP 03-6”), “Determining\nWhether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP\n03-6 requires that all outstanding unvested share-based payment awards that contain rights to\nnonforfeitable dividends be considered participating securities in undistributed earnings with\ncommon shareholders. This staff position will be effective for fiscal years and interim periods\nbeginning after December 15, 2008. The Company is in the process of evaluating the impact that\nwill result from adopting FSP 03-6 on the Company’s results of operations and financial disclosures\nwhen such statement is adopted.\n

\n\n

13\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, India, Italy, Japan, Malaysia,\nMexico, the Netherlands, Norway, Poland, Singapore, Slovakia, South Korea, Sweden, Thailand, the\nUnited Kingdom and the United States. Brady sells through subsidiaries or sales offices in these\ncountries, with additional sales through a dedicated team of international sales representatives in\nHong Kong, the Philippines, Spain, Taiwan, Turkey, and the United Arab Emirates and further markets\nits products to parts of Eastern Europe, the Middle East, Africa and Russia.\n

\n\n

Sales for the quarter ended October 31, 2008, declined 0.5% to $378.3 million, compared to\n$380.1 million in the same period of fiscal 2008. Of the decrease in sales, organic sales declined\n2.5%, acquisitions added 2.1%, and the effects of fluctuations in the exchange rates used to\ntranslate financial results into the United States Dollar resulted in a 0.1% decline. Net income\nfor the quarter ended October 31, 2008, was $37.1 million or $0.69 per diluted Class A Nonvoting\nCommon Share, up 2.0% from $36.4 million or $0.66 per diluted Class A Nonvoting Common Share\nreported in the first quarter of last fiscal year.\n

\n\n

Results of Operations\n

\n\n\n

The comparability of the operating results for the three months ended October 31, 2008 to the\nprior year has been impacted by the following acquisitions completed in fiscal 2008.\n

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


Acquisitions	Segment	Date Completed
Transposafe Systems B.V. and Holland Mounting\nSystems B.V. (collectively\n“Transposafe”)\n	Europe\n	November 2007
DAWG, Inc. (“DAWG”)\n	Americas\n	March 2008

\n\n\n

14\n

\n\n

Sales for the three months ended October 31, 2008 were down 0.5% compared to the same period\nin fiscal 2008. The decrease was comprised of a decline of 2.5% in organic sales, and a decrease of\n0.1% due to the effect of currencies on sales, which were partially offset by an increase of 2.1%\ndue to the acquisitions listed in the above table. The decline in organic sales for the quarter\nended October 31, 2008, was due primarily to an 8.2% and 5.3% decrease in sales in the Americas and\nEurope, respectively, partially offset by an increase of 11.0% in organic sales in the Asia-Pacific\nsegment.\n

\n\n

Gross margin as a percentage of sales declined to 47.9% for the quarter ended October 31,\n2008, compared to 49.4% in the same period of the previous year. The decline in gross margin as a\npercentage of sales was the result of increased sales in the Asia-Pacific segment and decreased\nsales in the Americas and Europe segments as compared to the prior year. The sales generated in\nthe Americas and Europe segments generate higher margins than sales in the Asia-Pacific segment.\n

\n\n

Research and development (“R&D”) expenses increased 0.9% to $9.1 million for the three months\nended October 31, 2008, compared to $9.0 million for the same period in the prior year. As a\npercentage of sales, R&D expenses remained constant at 2.4% in the first quarter of fiscal 2009 as\ncompared to the first quarter of fiscal 2008, evidencing the Company’s continued commitment to\ninnovation and new product development.\n

\n\n

Selling, general, and administrative (“SG&A”) expenses decreased 3.7% to $115.9 million for\nthe three months ended October 31, 2008, as compared to $120.4 million for the same period in the\nprior year. The decrease in SG&A was due to the realization of savings from prior year cost\nreduction activities and foreign currency translation. As a percentage of sales, SG&A expenses\ndecreased to 30.6% in the first quarter of fiscal 2009 from 31.7% in the same period of fiscal\n2008.\n

\n\n

Investment and other income increased to $1.9 million for the quarter ended October 31, 2008\nfrom $0.1 million for the quarter ended October 31, 2007. Interest income earned in the first\nquarter of fiscal 2009 was $1.1 million, as compared to $1.2 million in the first quarter of fiscal\n2008. Also included in this income statement heading, the Company recorded gains from the net\neffect of changes in foreign currency exchange rates on specific transactions of $0.8 million in\nthe first quarter of fiscal 2009, as compared to a loss of $1.1 million in the first quarter of\nfiscal 2008.\n

\n\n

Interest expense decreased slightly to $6.4 million for the quarter ended October 31, 2008\nfrom $6.7 million for the quarter ended October 31, 2007. In June 2008, the Company paid the first\ninstallment of $21.4 million related to the debt securities issued in June 2004. As a result of a\nlower principal balance under the related debt agreement, the Company’s interest expense decreased\nin the first quarter of fiscal 2009 as compared to the same period in the prior year.\n

\n\n

The Company’s effective tax rate was 28.2% for the quarter ended October 31, 2008, and 29.7%\nfor the same period of the previous year. The decrease in the effective tax rate was due primarily\nto a shift of profits away from higher taxed jurisdictions to lower taxed jurisdictions. The\nCompany expects the full year effective tax rate for fiscal 2009 to be approximately 28%.\n

\n\n

Net income for the three months ended October 31, 2008, increased 2.0% to $37.1 million,\ncompared to $36.4 million for the same quarter of the previous year. Net income as a percentage of\nsales increased slightly to 9.8% for the quarter ended October 31, 2008 from 9.6% for the same\nperiod in the prior year.\n

\n\n

During the quarter ended October 31, 2008, the Company experienced a deceleration in its\nbusinesses. Management believes that in light of the current global economic slowdown, business\nwill remain uncertain for the remainder of fiscal 2009. As a result of this outlook, the Company\nhas taken actions to reduce costs throughout the business, including a reduction in the global\nworkforce of 10 percent, a wage freeze for all employees, reductions in discretionary spending and\nthe deferral of previously approved increases in Director fees.\n

\n\n

15\n

\n\n

Business Segment Operating Results\n

\n\n\n

The Company is organized and managed on a geographic basis by region. Each of these regions,\nBrady Americas, Brady Europe and Brady Asia-Pacific, has a President that reports directly to the\nCompany’s chief operating decision maker, its Chief Executive Officer. Each region has its own\ndistinct operations, is managed locally by its own management team, maintains its own financial\nreports and is evaluated based on regional segment results. In applying the criteria set forth in\nSFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information”, the Company has\ndetermined that these regions comprise its reportable segments based on the information used by the\nChief Executive Officer to allocate resources and assess performance.\n

\n\n

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


													Corporate
							Asia-					and
(Dollars in thousands)	Americas		Europe	Pacific		Subtotals	Eliminations		Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
October 31, 2008	$	160,916		$	108,215		$	109,186		$	378,317			—		$	378,317
October 31, 2007	$	174,775		$	108,914		$	96,445		$	380,134			—		$	380,134

SALES GROWTH INFORMATION
Three months ended October 31, 2008
Organic		(8.2	)%		(5.3	)%		11.0	%		(2.5	)%		—			(2.5	)%
Currency		(0.3	)%		(1.6	)%		2.2	%		(0.1	)%		—			(0.1	)%
Acquisitions		0.6	%		6.3	%		0.0	%		2.1	%		—			2.1	%
Total		(7.9	)%		(0.6	)%		13.2	%		(0.5	)%		—			(0.5	)%

SEGMENT PROFIT
Three months ended:
October 31, 2008	$	35,524		$	31,138		$	22,401		$	89,063		$	(2,307	)	$	86,756
October 31, 2007	$	44,107		$	29,900		$	19,390		$	93,397		$	(2,237	)	$	91,160
Percentage increase\n(decrease)		(19.5	)%		4.1	%		15.5	%		(4.6	)%		3.1	%		(4.8	)%

\n\n\n

SEGMENT PROFIT RECONCILIATION (Dollars in thousands)\n

\n\n


	Three months ended:
	October 31,			October 31,
	2008			2007
Total profit from reportable segments	$	89,063			$	93,397
Corporate and eliminations		(2,307	)			(2,237	)
Unallocated amounts:
Administrative costs		(30,562	)			(32,822	)
Investment and other income		1,852				118
Interest expense		(6,361	)			(6,720	)

Income before income taxes		51,685				51,736
Income taxes		(14,575	)			(15,366	)

Net income	$	37,110			$	36,370

\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,\ninformation technology and human resources, which are managed as global functions. Interest, stock\noptions, investment and other income and income taxes are also excluded when evaluating\nperformance.\n

\n\n

16\n

\n\n

Americas:\n

\n\n\n

Sales in the Americas decreased 7.9% for the quarter ended October 31, 2008, compared to the\nsame period in the prior year. Organic sales declined 8.2% in the first quarter of fiscal 2009\ncompared to the same period last year. Fluctuations in the exchange rates used to translate\nfinancial results into the U.S. dollar decreased sales by 0.3% in the quarter. Sales in the region\nwere aided by the fiscal 2008 acquisition of DAWG, which increased sales by 0.6% for the quarter.\nThe decline in organic sales was driven by weakness in the MRO markets in the U.S., partially\noffset by growth in Brazil, Mexico and Canada as well as moderate growth in the OEM markets in the\nU.S. The segment experienced a significant softening across most markets during the quarter ended\nOctober 31, 2008. Management expects that challenging business conditions will continue for the\nremainder of fiscal 2009.\n

\n\n

Segment profit decreased 19.5% to $35.5 million for the quarter ended October 31, 2008,\ncompared to $44.1 million for the same period in the prior year. As a percentage of sales, segment\nprofit decreased to 22.1% for the quarter ended October 31, 2008 from 25.2% for the same period in\nthe prior year. The decline in segment profit as a percentage of sales was primarily due to weak\nsales, which impacted the Company’s ability to absorb fixed costs and overhead. The decline in\nsegment profit as a percentage of sales was partially offset by the reduction of costs resulting\nfrom the implementation of the Brady Business Performance System (“BBPS”).\n

\n\n

Europe:\n

\n\n\n

Europe sales declined 0.6% for the quarter ended October 31, 2008, compared to the same period\nin the prior year. Organic sales were down 5.3% in the quarter as compared to the same period last\nyear. Sales were negatively affected by fluctuations in the exchange rates used to translate\nfinancial results into the U.S. dollar, primarily the Euro and the British pound, which decreased\nsales within the region by 1.6% in the quarter. The fiscal 2008 acquisition of Transposafe\nincreased sales by 6.3%. The decline in organic sales was primarily the result of a weakening\nEuropean economy. Geographically, the segment experienced declines in Germany, Slovakia, Italy,\nand the U.K., which were partially offset by gains in Belgium, Scandinavia, and France. The\nEuropean economies are experiencing an economic downturn, and management anticipates that this\ndownturn will negatively impact the segment during the remainder of fiscal 2009.\n

\n\n

Segment profit increased 4.1% to $31.1 million for the quarter ended October 31, 2008,\ncompared to $29.9 million for the same period of the prior year. As a percentage of sales, segment\nprofit increased to 28.8% in the first quarter of fiscal 2009 from 27.5% in the first quarter of\nfiscal 2008. Despite lower than expected sales, the segment was able to improve profitability over\nthe prior year through the reduction of costs resulting from streamlined manufacturing operations\nand the implementation of the BBPS.\n

\n\n

Asia-Pacific:\n

\n\n\n

Asia-Pacific sales increased 13.2% for the quarter ended October 31, 2008, compared to the\nsame period in the prior year. Organic growth accounted for 11.0% in the quarter as compared to\nthe same period last year. Sales were positively affected by fluctuations in the exchange rates\nused to translate financial results into the U.S. dollar, which increased sales within the region\nby 2.2% in the quarter. The segment’s strong organic growth for the quarter exceeded reported\ngrowth in the OEM electronic industry due to the successful conversion of designs to orders,\nincreased allocations within the OEM supply chain, and the leveraging of the Company’s unique\nproduction capabilities. Towards the end of the first quarter of fiscal 2009, the segment\nexperienced declining demand resulting from reaction to the slowing global economy by its key\naccounts in the consumer electronics industry. Additionally, management expects the challenging\nbusiness conditions to continue during the remainder of calendar 2008 and into calendar 2009 due to\nthe global economic downturn.\n

\n\n

Segment profit increased 15.5% to $22.4 million for the quarter ended October 31, 2008,\ncompared to $19.4 million for the same period in the prior year. As a percentage of sales, segment\nprofit increased to 20.5% in the first quarter of fiscal 2009 from 20.1% in the first quarter of\nfiscal 2008. The increase in segment profit was primarily the result of capacity utilization\nwithin the segment, in addition to prior year consolidation of facilities and benefits achieved\nfrom BBPS initiatives.\n

\n\n

17\n

\n\n

Financial Condition\n

\n\n\n

The Company’s current ratio as of October 31, 2008, was 2.4 compared to 2.3 at July 31, 2008.\nCash and cash equivalents were $178.8 million at October 31, 2008, compared to $258.4 million at\nJuly 31, 2008. The decrease in cash of $79.6 million was the result of cash used in operations of\n$4.7 million, cash used in investing activities of $5.1 million, cash used in financing activities\nof $43.7 million, and the effects of the appreciation of the U.S. dollar against other currencies,\nwhich negatively impacted cash in the amount of $26.0 million during the quarter ended October 31,\n2008.\n

\n\n

Accounts receivable decreased $19.2 million for the quarter primarily as a result of foreign\ncurrency translation, partially offset by increases in the Asia-Pacific segment due to increased\nsales volume. Inventories decreased $3.9 million for the quarter, primarily due to foreign\ncurrency translation, partially offset by lower than expected demand due to the economic slowdown\nin the Americas and Europe. The net decrease in current liabilities was $54.5 million for the\nquarter. The decrease was composed of a significant decrease in accrued wages due to the payment of\nincentives in the first quarter of fiscal 2009 related to the incentives earned in the year ended\nJuly 31, 2008, in addition to decreases in accounts payable and accrued income taxes.\n

\n\n

Cash used in operating activities totaled $4.7 million for the quarter ended October 31, 2008,\ncompared to cash provided by operating activities of $33.9 million for the same period last year.\nThe decrease was the result of significant increases in inventory balances, as well as decreases in\naccounts payable and income tax balances as compared to the decrease reported in the first quarter\nof fiscal 2008.\n

\n\n

Capital expenditures were $6.4 million for the quarter ended October 31, 2008, compared to\n$7.4 million in the same period last year. Net cash used in financing activities was $43.7 million\nfor the quarter ended October 31, 2008, related primarily to the repurchase of the Company’s Class\nA Non-Voting Common Stock and the payment of dividends.\n

\n\n

On March 23, 2007, the Company completed the private placement of $150 million in ten-year\nfixed notes at 5.33% 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\non September 23 and March 23, which began 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. The 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.\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. Under the credit agreement,\nthe Company has the option to select either a base interest rate (based upon the higher of the\nfederal funds rate plus one-half of 1% or the prime rate of Bank of America) or a Eurocurrency\ninterest rate (at the LIBOR rate plus a margin based on the Company’s consolidated leverage ratio).\nA commitment fee is payable on the unused amount of the facility. The agreement restricts the\namount of certain types of payments, including dividends, which can be made annually to $50 million\nplus an amount equal to 75% of consolidated net income for the prior fiscal year of the Company.\nThe Company believes that based on historic dividend practice, this restriction would not impede\nthe Company in following a similar dividend practice in the future. On March 18, 2008, the Company\nentered into an amendment to the revolving loan agreement which extended the maturity date from\nOctober 5, 2011 to March 18, 2013. All other terms of the revolving loan agreement remained the\nsame. As of October 31, 2008, there were no outstanding borrowings under the credit facility.\n

\n\n

18\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, which began in August 2006. 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 finance acquisitions completed in fiscal 2006 and\n2007. This private placement was exempt from the registration requirements of the Securities Act of\n1933. The notes 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.\n

\n\n

On June 30, 2004, the Company finalized a debt offering of $150 million of 5.14% fixed rate\nunsecured senior notes due in 2014 in an offering exempt from the registration requirements of the\nSecurities Act of 1933. The debt offering was in conjunction with the Company’s acquisition of\nEMED. The notes will be repaid over seven years, which began in 2008, with interest payable on the\nnotes semiannually on June 28 and December 28, which began in December 2004. The Company used the\nproceeds of the offering to reduce outstanding indebtedness under the Company’s revolving credit\nfacilities. The debt has certain prepayment penalties for repaying the debt prior to its maturity\ndate. The Company paid its first installment under the debt agreement in June 2008 for $21.4\nmillion.\n

\n\n

The Company’s debt and revolving loan agreements require it to maintain certain financial\ncovenants. The Company’s June 2004, February 2006, and March 2007 debt agreements require the\nCompany to maintain a ratio of debt to the trailing twelve months earnings before interest, taxes,\ndepreciation and amortization (“EBITDA”), as defined in the debt agreements, of not more than a 3.5\nto 1.0 ratio (leverage ratio). The Company’s October 2006 revolving loan agreement requires the\nCompany to maintain a ratio of debt to trailing twelve months EBITDA, as defined by the debt\nagreement, of not more than a 3.0 to 1.0 ratio. Additionally, the revolving loan agreement\nrequires the Company’s trailing twelve months earnings before interest and taxes (“EBIT”) to\ninterest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of October\n31, 2008, the Company was in compliance and, as of the date of this Report, believes it will remain\nin compliance with the financial covenants of its debt and revolving loan agreements.\n

\n\n

The Company believes its cash position is solid. While the Company strives to maximize\ninvestment income on its excess cash, preservation of principal is the first priority of the\nCompany’s investment policy. In volatile markets, as the Company has recently experienced, the\nCompany’s investment policy is intended to preserve principal as its primary goal, possibly at the\nexpense of the yields historically achieved.\n

\n\n

The Company’s growth has historically been funded by a combination of cash provided by\noperating activities and debt financing. The Company believes that its cash from operations, in\naddition to its sources of borrowing, are sufficient to fund its anticipated requirements for\nworking capital, capital expenditures, restructuring activities, acquisitions, common stock\nrepurchases, and dividend payments. Further, external funds have been available at a reasonable\ncost. As of the date of this Form 10-Q, the credit and financial markets are in a period of\nsubstantial instability and uncertainty that is affecting the availability of credit to borrowers.\nThe Company believes that its current credit arrangements are sound and that the strength of its\nbalance sheet will allow the Company the financial flexibility to respond to both internal growth\nopportunities and those available through acquisition.\n

\n\n

Subsequent Events Affecting Financial Condition\n

\n\n\n

On November 20, 2008, the Board of Directors declared a quarterly cash dividend to\nshareholders of the Company’s Class A Common Stock of $0.17 per share payable on January 30, 2009\nto shareholders of record at the close of business on January 9, 2009.\n

\n\n

On November 24, 2008, the Company filed a shelf registration statement on Form S-3 with the\nSecurities and Exchange Commission (“SEC”), which will allow the Company to issue and sell, from\ntime to time in one or more offerings, an indeterminate amount of Class A Non-Voting Common Stock\nand debt securities as it deems prudent or necessary to raise capital at a later date. The shelf\nregistration statement became effective upon filing with the SEC. The Company plans to use the\nproceeds from any future offerings under the shelf registration for general corporate purposes,\nincluding, but not limited to, acquisitions, capital expenditures, and refinancing of debt.\n

\n\n\n

19\n

\n\n\n\n\n

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

\n\n

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

\n\n

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

\n\n

Other Contractual Obligations — The Company does not have material financial guarantees or\nother contractual commitments that are reasonably likely to adversely affect liquidity. Under the\nguidelines established by FIN 48, which the Company adopted as of August 1, 2007, the Company is\nunable to determine the period in which the cash settlement of the liability associated with FIN 48\nwill occur with the respective 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

Forward-Looking Statements\n

\n\n\n

Brady believes that certain statements in this Form 10-Q are “forward-looking statements”\nwithin the meaning of the Private Securities Litigation Reform Act of 1995. All statements related\nto future, not past, events included in this Form10-Q, including, without limitation, statements\nregarding Brady’s future financial position, business strategy, targets, projected sales, costs,\nearnings, capital expenditures, debt levels and cash flows, and plans and objectives of management\nfor future operations are forward-looking statements. When used in this Form 10-Q, words such as\n“may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or\n“plan” or similar terminology are generally intended to identify forward-looking statements. These\nforward-looking statements by their nature address matters that are, to different degrees,\nuncertain and are subject to risks, assumptions and other factors, some of which are beyond Brady’s\ncontrol, that could cause actual results to differ materially from those expressed or implied by\nsuch forward-looking statements. For Brady, uncertainties arise from future financial performance\nof major markets Brady serves, which include, without limitation, telecommunications,\nmanufacturing, electrical, construction, laboratory, education, governmental, public utility,\ncomputer, transportation; difficulties in making and integrating acquisitions; risks associated\nwith newly acquired businesses; Brady’s ability to develop and successfully market new products;\nchanges in the supply of, or price for, parts and components; increased price pressure from\nsuppliers and customers; fluctuations in currency rates versus the US dollar; potential write-offs\nof Brady’s substantial intangible assets; Brady’s ability to retain significant contracts and\ncustomers; risks associated with international operations; Brady’s ability to attract and retain\nkey talent; technology changes; business interruptions due to implementing business systems;\nenvironmental, health and safety compliance costs and liabilities; future competition;\ninterruptions to sources of supply; Brady’s ability to realize cost savings from operating\ninitiatives; difficulties associated with exports; risks associated with obtaining governmental\napprovals and maintaining regulatory compliance for new and existing products; and numerous other\nmatters of national, regional and global scale, including those of a political, economic, business,\ncompetitive and regulatory nature contained from time to time in Brady’s U.S. Securities and\nExchange Commission filings, including, but not limited to, those factors listed in the “Risk\nFactors” section located in Item 1A of Part I of Brady’s Form 10-K for the year ended July 31,\n2008. These uncertainties may cause Brady’s actual future results to be materially different than\nthose expressed in its forward-looking statements. Brady does not undertake to update its\nforward-looking statements.\n

\n\n

20\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. As of October 31, 2008, the amount of outstanding foreign exchange contracts was $15.6\nmillion.\n

\n\n

The Company could be exposed to interest rate risk through its corporate borrowing activities.\nThe objective of the Company’s interest rate risk management activities is to manage the levels of\nthe Company’s fixed and floating interest rate exposure to be consistent with the Company’s\npreferred mix. The interest rate risk management program allows the Company to enter into approved\ninterest rate derivatives if there is a desire to modify the Company’s exposure to interest rates.\nAs of October 31, 2008, the Company had no interest rate derivatives.\n

\n\n

The Company is subject to the risk of changes in foreign currency exchange rates due to its\noperations in foreign countries. The Company has manufacturing facilities in Australia, Brazil,\nCanada, China, Mexico, South Korea, Thailand, India and throughout Europe. It sells and\ndistributes its products throughout the world. As a result, the Company’s financial results could\nbe significantly affected by factors such as changes in foreign currency exchange rates or weak\neconomic conditions in the foreign markets in which the Company manufactures, distributes and sells\nits products. The Company’s operating results are principally exposed to changes in exchange rates\nbetween the dollar and the European currencies, primarily the euro, changes between the dollar and\nthe Australian dollar, changes between the dollar and the Canadian dollar, and changes between the\ndollar and the Chinese yuan. Changes in foreign currency exchange rates for the Company’s foreign\nsubsidiaries reporting in local currencies are generally reported as a component of shareholders’\nequity. The Company’s currency translation adjustments recorded for the three months ending\nOctober 31, 2008 and 2007 were $11.9 million unfavorable and $103.3 million favorable,\nrespectively. As of October 31, 2008 and 2007, the Company’s foreign subsidiaries had net current\nassets (defined as current assets less current liabilities) subject to foreign currency translation\nrisk of $230.3 million and $243.1 million, respectively. The potential decrease in the net current\nassets as of October 31, 2008 from a hypothetical 10 percent adverse change in quoted foreign\ncurrency exchange rates would be $23.0 million. This sensitivity analysis assumes a parallel shift\nin foreign currency exchange rates. Exchange rates rarely move in the same direction relative to\nthe dollar. This assumption may overstate the impact of changing exchange rates on individual\nassets and liabilities denominated in a foreign currency.\n

\n\n

ITEM 4. CONTROLS AND PROCEDURES\n

\n\n\n

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

\n\n

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

\n\n

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

\n\n

21\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\n

In March 2008, the Company announced that the Board of Directors of the Company authorized a\nshare repurchase plan for up to one million shares of the Company’s Class A Nonvoting Common Stock.\nThe share repurchase plan may be implemented by purchasing shares on the open market or in\nprivately negotiated transactions, with repurchased shares available for use in connection with the\nCompany’s stock-based plans and for other corporate purposes. As of July 31, 2008, the Company was\nauthorized to purchase 650,864 shares in connection with this share repurchase plan, all of which\nshares were repurchased during the quarter ended October 31, 2008.\n

\n\n

In September 2008, the Company announced that the Board of Directors of the Company authorized\na share repurchase plan for up to an additional one million shares of the Company’s Class A\nNonvoting Common Stock. The share repurchase plan may be implemented by purchasing shares on the\nopen market or in privately negotiated transactions, with repurchased shares available for use in\nconnection with 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 three months ended October 31, 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
August 1, 2008 — August 31, 2008		—		$	—				—			650,864
September 1, 2008 — September 30, 2008		255,610		$	33.81				255,610			1,395,254
October 1, 2008 — October 31, 2008		895,254		$	31.13				895,254			500,000

Total		1,150,864		$	31.72				1,150,864			500,000

\n\n

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

\n\n\n

The annual meeting of shareholders was held on November 20, 2008. At the meeting, the\nfollowing persons were elected to serve as the Company’s directors by the affirmative vote of 100%\nof the 3,538,628 shares of Class B Voting Common Stock until the next annual meeting of\nshareholders and until their successors have been elected:\n

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

\n\n\n

22\n

\n\n

EXHIBIT 31.1\n

\n\n\n

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

\n\n

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

\n\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

Date: December 8, 2008\n

\n\n\n

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

\n\n

24\n

\n\n

EXHIBIT 31.2\n

\n\n\n

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

\n\n

I, Thomas J. Felmer, certify that:\n

\n\n\n

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

\n\n\n

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

\n\n

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

\n\n

Date: December 8, 2008\n

\n\n\n

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

\n\n

25\n

\n\n

EXHIBIT 32.1\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

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

\n\n

(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended October\n31, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange\nAct of 1934; and\n

\n\n

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

\n\n

Date: December 8, 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

26\n

\n\n

EXHIBIT 32.2\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

\n\n

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

\n\n

Date: December 8, 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

27\n


	BRADY CORPORATION \n
Date: December 8, 2008	/s/ F. M. Jaehnert\n
	F. M. Jaehnert
	President & Chief Executive Officer


Date: December 8, 2008	/s/ Thomas J. Felmer\n
	Thomas J. Felmer
	Senior Vice President & Chief Financial Officer\n(Principal Financial Officer)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

	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