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 EXCHANGE ACT OF 1934

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For the Quarterly Period Ended January 31, 2011

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

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For the Transition Period from to

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\nCommission File Number 1-14959\n

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BRADY CORPORATION\n

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\n(Exact name of registrant as specified in its charter)

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

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

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

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by\nSection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for\nsuch shorter period that the registrant was required to file such reports), and (2) has been\nsubject to such filing requirements for the past 90 days. Yes þ\nNo o\n

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Indicate by check mark whether the registrant has submitted electronically and posted on its\ncorporate Web site, if any, every Interactive Data File required to be submitted and posted\npursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period\nthat the registrant was required to submit and post such files). Yes þ No o\n

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a\nnon-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,”\n“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.\n

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Large accelerated filer þ\n		Accelerated filer o\n		Non-accelerated filer o\n		Smaller reporting company o

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

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APPLICABLE ONLY TO CORPORATE ISSUERS\n

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

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As of March 3, 2011 there were outstanding 49,146,902 shares of Class A Nonvoting Common Stock and\n3,538,628 shares of Class B Voting Common Stock. The Class B Common Stock, all of which is held by\naffiliates of the Registrant, is the only voting stock.\n

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PART I. FINANCIAL INFORMATION\n

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ITEM 1. FINANCIAL STATEMENTS\n

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BRADY CORPORATION AND SUBSIDIARIES\n

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CONDENSED CONSOLIDATED BALANCE SHEETS\n

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(DOLLARS IN THOUSANDS)\n

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	January 31, 2011			July 31, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	362,302			$	314,840
Accounts receivable — net		240,173				221,621
Inventories:
Finished products		56,085				52,906
Work-in-process		14,614				13,146
Raw materials and supplies		28,129				28,620

Total inventories		98,828				94,672
Prepaid expenses and other current assets		36,233				37,839

Total current assets		737,536				668,972
Other assets:
Goodwill		781,776				768,600
Other intangible assets		98,560				103,546
Deferred income taxes		45,087				39,103
Other		19,673				20,808
Property, plant and equipment:
Cost:
Land		6,331				6,265
Buildings and improvements		103,305				101,138
Machinery and equipment		294,414				289,727
Construction in progress		15,208				9,873

		419,258				407,003
Less accumulated depreciation		278,710				261,501

Property, plant and equipment — net		140,548				145,502

Total	$	1,823,180			$	1,746,531

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	92,696			$	96,702
Wages and amounts withheld from employees		52,161				67,285
Taxes, other than income taxes		8,898				7,537
Accrued income taxes		16,603				10,138
Other current liabilities		60,105				50,862
Current maturities on long-term obligations		61,265				61,264

Total current liabilities		291,728				293,788
Long-term obligations, less current maturities		387,875				382,940
Other liabilities		66,120				64,776

Total liabilities		745,723				741,504

Stockholders’ investment:
Class A nonvoting common stock — Issued 51,261,487 and 51,261,487\nshares, respectively and outstanding 49,105,601 and 48,875,716\nshares, respectively		513				513
Class B voting common stock — Issued and outstanding 3,538,628 shares		35				35
Additional paid-in capital		308,002				304,205
Earnings retained in the business		750,038				718,512
Treasury stock —1,845,866 and 2,175,771 shares, respectively of\nClass A nonvoting common stock, at cost		(56,069	)			(66,314	)
Accumulated other comprehensive income		79,674				50,905
Other		(4,736	)			(2,829	)

Total stockholders’ investment		1,077,457				1,005,027

Total	$	1,823,180			$	1,746,531

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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\n

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME\n\n

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(Dollars in Thousands, Except Per Share Amounts)\n

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\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \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 January 31,			Six Months Ended January 31,
	(Unaudited)			(Unaudited)
								Percentage										Percentage
	2011			2010			Change		2011		2010			Change
Net sales	$	329,009			$	295,829			11.2	%	$	658,597			$	614,315			7.2	%
Cost of products sold		169,999				148,911			14.2	%		335,075				309,955			8.1	%


Gross margin		159,010				146,918			8.2	%		323,522				304,360			6.3	%

Operating expenses:
Research and development		11,732				10,632			10.3	%		21,676				20,241			7.1	%
Selling, general and administrative		108,064				108,735			(0.6	%)		217,388				217,411			0.0	%
Restructuring charge — (See Note J)		2,134				3,649			(41.5	%)		5,775				7,250			(20.3	%)

Total operating expenses		121,930				123,016			(0.9	%)		244,839				244,902			0.0	%

Operating income		37,080				23,902			55.1	%		78,683				59,458			32.3	%

Other income (expense):

Investment and other income — net		1,174				1,104			6.3	%		1,464				1,153			27.0	%
Interest expense		(5,850	)			(5,163	)		13.3	%		(11,537	)			(10,325	)		11.7	%


Income before income taxes		32,404				19,843			63.3	%		68,610				50,286			36.4	%

Income taxes		8,205				4,842			69.5	%		18,130				13,617			33.1	%


Net income	$	24,199			$	15,001			61.3	%	$	50,480			$	36,669			37.7	%


Per Class A Nonvoting Common Share:
Basic net income	$	0.46			$	0.29			58.6	%	$	0.96			$	0.70			37.1	%
Diluted net income	$	0.46			$	0.28			64.3	%	$	0.95			$	0.69			37.7	%
Dividends	$	0.18			$	0.175			2.9	%	$	0.36			$	0.35			2.9	%

Per Class B Voting Common Share:
Basic net income	$	0.46			$	0.29			58.6	%	$	0.94			$	0.68			38.2	%
Diluted net income	$	0.46			$	0.28			64.3	%	$	0.94			$	0.67			40.3	%
Dividends	$	0.18			$	0.175			2.9	%	$	0.34			$	0.33			3.1	%

Weighted average common shares\noutstanding (in thousands):
Basic		52,593				52,370						52,521				52,354
Diluted		53,053				53,096						52,932				53,020

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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\n

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS\n

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(Dollars in Thousands)\n

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	Six Months Ended
	January 31,
	(Unaudited)
	2011			2010
Operating activities:
Net income	$	50,480			$	36,669
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,502				27,366
Non-cash portion of restructuring charges		1,714				1,420
Non-cash portion of stock-based compensation expense		6,869				5,156
Gain on the divestiture of business		(4,394	)			—
Deferred income taxes		(4,926	)			(4,398	)
Changes in operating assets and liabilities (net of effects of business\nacquisitions/divestitures):
Accounts receivable		(11,938	)			(10,300	)
Inventories		(879	)			(1,891	)
Prepaid expenses and other assets		2,384				(1,585	)
Accounts payable and accrued liabilities		(13,792	)			12,926
Income taxes		6,589				2,670

Net cash provided by operating activities		57,609				68,033

Investing activities:
Acquisition of businesses, net of cash acquired		(7,970	)			(20,299	)
Divestiture of business, net of cash retained in business		12,979				—
Payments of contingent consideration		(979	)			—
Purchases of property, plant and equipment		(9,045	)			(14,974	)
Other		(494	)			(570	)

Net cash used in investing activities		(5,509	)			(35,843	)

Financing activities:
Payment of dividends		(18,954	)			(18,344	)
Proceeds from issuance of common stock		4,909				1,672
Excess income tax benefit from the exercise of stock options and deferred compensation\n		359				380

Net cash used in financing activities		(13,686	)			(16,292	)

Effect of exchange rate changes on cash		9,048				1,530

Net increase in cash and cash equivalents		47,462				17,428
Cash and cash equivalents, beginning of period		314,840				188,156
Cash and cash equivalents, end of period	$	362,302			$	205,584


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest	$	9,138			$	10,313
Income taxes, net of refunds		17,398				10,817
Acquisitions:
Fair value of assets acquired, net of cash and goodwill	$	4,624			$	8,829
Liabilities assumed		(1,446	)			(2,678	)
Goodwill		4,792				14,148

Net cash paid for acquisitions	$	7,970			$	20,299

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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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Six Months Ended January 31, 2011
\n(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 necessary to\npresent fairly the financial position of the Company as of January 31, 2011 and July 3l, 2010, its\nresults of operations for the three and six months ended January 31, 2011 and 2010, and its cash\nflows for the six months ended January 31, 2011 and 2010. The condensed consolidated balance sheet\nas of July 31, 2010 has been derived from the audited consolidated financial statements of that\ndate. The preparation of financial statements in conformity with accounting principles generally\naccepted in the United States of America (“GAAP”) requires management to make estimates and\nassumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in\nmaking estimates, actual results in future periods may differ from the estimates.\n

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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 do\nnot include all of the information and footnotes required by GAAP for complete financial statement\npresentation. It is suggested that these condensed consolidated financial statements be read in\nconjunction with the consolidated financial statements and the notes thereto included in the\nCompany’s latest annual report on Form 10-K for the year ended July 31, 2010.\n

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The Company has reclassified certain prior year financial statement amounts to conform to\ntheir current year presentation. The operating activities including “Other,” “Other liabilities,”\nand “Accounts payable and accrued liabilities”, which were previously disclosed as single line\nitems, have been combined and reported as “Accounts payable and accrued liabilities” on the\nCondensed Consolidated Statement of Cash Flows for the six months ended January 31, 2011 and 2010.\nThese reclassifications had no effect on total assets, net income, or earnings per share.\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 six months ended January 31, 2011, are as\nfollows:\n


	Americas			Europe			Asia-Pacific		Total
Balance as of July 31, 2010	$	425,018			$	163,189		$	180,393	$	768,600
Current year acquisitions		—				—			4,792		4,792
Current year divestitures		(3,696	)			(8,380	)		—		(12,076	)
Translation adjustments		1,699				9,868			8,893		20,460

Balance as of January 31, 2011	$	423,021			$	164,677		$	194,078	$	781,776

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Goodwill increased $13,176 during the six months ended January 31, 2011. Of the $13,176\nincrease, $20,460 was due to the positive effects of foreign currency translation and $4,792\nresulted from the acquisition of ID Warehouse during the second quarter of fiscal 2011. The\nincrease was offset by a $12,076 decrease in goodwill as a result of the divestiture of the\nCompany’s Teklynx business during the three months ended January 31, 2011. See Note L,\n“Acquisitions and Divestitures” for further discussion.\n

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6\n

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Other intangible assets include patents, trademarks, customer relationships, non-compete\nagreements and other intangible assets with finite lives being amortized in accordance with\naccounting guidance for goodwill and other intangible assets. The net book value of these assets\nwas as follows:\n


	January 31, 2011		July 31, 2010
	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		5		$	9,555		$	(8,244	)	$	1,311			5		$	9,314	$	(7,855	)	$	1,459
Trademarks and other		7			9,090			(6,196	)		2,894			7			8,823		(5,685	)		3,138
Customer relationships		7			159,773			(107,917	)		51,856			7			152,720		(95,996	)		56,724
Non-compete agreements		4			12,996			(12,031	)		965			4			11,930		(11,059	)		871
Other		4			2,730			(2,721	)		9			4			3,309		(3,297	)		12
Unamortized other\nintangible assets:
Trademarks		N/A			41,525			—			41,525			N/A			41,342		—			41,342

Total				$	235,669		$	(137,109	)	$	98,560					$	227,438	$	(123,892	)	$	103,546

\n\n\n

The value of goodwill and other intangible assets in the Condensed Consolidated Balance Sheet\nat January 31, 2011 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 January 31, 2011. The acquisition\ncompleted during the three and six months ended January 31, 2011 increased the customer\nrelationships by $1,846 and increased the amortizable trademarks by $487. See Note L, “Acquisitions\nand Divestitures” for further discussion.\n

\n\n

Amortization expense on intangible assets was $5,123 and $5,628 for the three-month periods\nended January 31, 2011 and 2010, respectively and $10,270 and $11,235 for the six-month periods\nended January 31, 2011 and 2010, respectively. Annual amortization is projected to be $21,125,\n$13,861, $10,570, $5,604 and $5,212 for the years ending July 31, 2011, 2012, 2013, 2014 and 2015,\nrespectively.\n

\n\n\n

NOTE C — Comprehensive Income (Loss)\n

\n\n\n

Total comprehensive income for the periods presented was a follows:\n


	Three Months Ended January 31,			Six Months Ended January 31,
	2011			2010			2011		2010
Net Income	$	24,199			$	15,001		$	50,480		$	36,669
Unrealized (loss) gain on cash flow hedges		(165	)			317			(890	)		(47	)
Amortization of gain on post-retirement\nmedical, dental and vision plan		(32	)			(63	)		(95	)		(145	)
Foreign currency translation adjustments		(341	)			(18,768	)		29,754			5,850

Total comprehensive income (loss)	$	23,661			$	(3,513	)	$	79,249		$	42,327

\n\n\n

The increase in total comprehensive income for the quarter ended January 31, 2011 as compared\nto January 31, 2010 was primarily due to the depreciation of the U.S. dollar against other\ncurrencies and net income.\n

\n\n

7\n

\n\n\n

NOTE D — Net Income Per Common Share\n

\n\n\n

In June 2008, the Financial Accounting Standards Board (“FASB”) issued accounting guidance\naddressing whether instruments granted in share-based payment transactions are participating\nsecurities prior to vesting, and therefore need to be included in the earnings allocation in\ncomputing earnings per share. This guidance requires that all outstanding unvested share-based\npayment awards that contain rights to non-forfeitable dividends be considered participating\nsecurities in undistributed earnings with common shareholders. The Company adopted the guidance\nduring the first quarter of fiscal 2010. As a result, the dividends on the Company’s\nperformance-based restricted shares are included in the basic and diluted earnings per share\ncalculations for the respective periods presented.\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 January 31,			Six Months Ended January 31,
	2011			2010			2011		2010
Numerator:
Net income (numerator for basic and diluted Class A\nnet income per share)	$	24,199			$	15,001		$	50,480		$	36,669

Less:
Restricted stock dividends		(56	)			(37	)		(112	)		(74	)

Numerator for basic and diluted Class A net income\nper share	$	24,143			$	14,964		$	50,368		$	36,595


Less:
Preferential dividends		—				—			(820	)		(816	)
Preferential dividends on dilutive stock options		—				—			(6	)		(11	)

Numerator for basic and diluted Class B net income\nper share	$	24,143			$	14,964		$	49,542		$	35,768


Denominator:
Denominator for basic net income per share for both\nClass A and Class B		52,593				52,370			52,521			52,354
Plus: Effect of dilutive stock options		460				726			411			666

Denominator for diluted net income per share for both\nClass A and Class B		53,053				53,096			52,932			53,020


Class A Nonvoting Common Stock net income per share:
Basic	$	0.46			$	0.29		$	0.96		$	0.70
Diluted	$	0.46			$	0.28		$	0.95		$	0.69

Class B Voting Common Stock net income per share:
Basic	$	0.46			$	0.29		$	0.94		$	0.68
Diluted	$	0.46			$	0.28		$	0.94		$	0.67

\n\n\n

Options to purchase approximately 4,281,000 and 3,959,000 shares of Class A Nonvoting Common\nStock for the three and six months ended January 31, 2011, respectively, and 3,019,000 and\n2,690,000 shares of Class A Nonvoting Common Stock for the three and six months ended January 31,\n2010, respectively, were not included in the computations of diluted net income per share because\nthe impact of the inclusion of the options would have been anti-dilutive.\n

\n\n

8\n

\n\n\n

NOTE E — Segment Information\n

\n\n\n

The Company evaluates short-term segment performance based on segment profit or loss and\ncustomer sales. Corporate long-term performance is evaluated based on shareholder value enhancement\n(“SVE”), which incorporates the cost of capital as a hurdle rate for capital expenditures, new\nproduct development, and acquisitions. Segment profit or loss does not include certain\nadministrative costs, such as the cost of finance, information technology and human resources,\nwhich are managed as global functions. Restructuring charges, stock options, interest, investment\nand other income and income taxes are also excluded when evaluating performance.\n

\n\n

The Company is organized and managed on a geographic basis by region. Each of these regions,\nAmericas, Europe and Asia-Pacific, has a President that reports directly to the Company’s chief\noperating decision maker, its Chief Executive Officer. Each region has its own distinct operations,\nis managed by its own management team, maintains its own financial reports and is evaluated based\non regional segment profit. The Company has determined that these regions comprise its operating\nand reportable segments based on the information used by the Chief Executive Officer to allocate\nresources and assess performance.\n

\n\n

Intersegment sales and transfers are recorded at cost plus a standard percentage markup.\nIntercompany profit is eliminated in consolidation. It is not practicable to disclose\nenterprise-wide revenue from external customers on the basis of product or service.\n

\n\n

Following is a summary of segment information for the three and six months ended January 31,\n2011 and 2010:\n


												Corporate
									Total		And
	Americas		Europe			Asia-Pacific		Region	Eliminations		Totals
Three months ended January 31, 2011:
Revenues from external customers	$	136,011		$	104,041		$	88,957	$	329,009		$	—		$	329,009
Intersegment revenues		11,043			620			6,400		18,063			(18,063	)		—
Segment profit		31,015			29,165			11,524		71,704			(5,088	)		66,616

Three months ended January 31, 2010:
Revenues from external customers	$	121,603		$	96,614		$	77,612	$	295,829		$	—		$	295,829
Intersegment revenues		14,129			822			4,932		19,883			(19,883	)		—
Segment profit		23,546			25,947			10,687		60,180			(3,683	)		56,497

Six months ended January 31, 2011:
Revenues from external customers	$	281,999		$	196,091		$	180,507	$	658,597		$	—		$	658,597
Intersegment revenues		20,791			1,513			12,346		34,650			(34,650	)		—
Segment profit		70,374			53,226			28,353		151,953			(8,525	)		143,428

Six months ended January 31, 2010:
Revenues from external customers	$	257,842		$	190,949		$	165,524	$	614,315		$	—		$	614,315
Intersegment revenues		27,564			2,577			8,901		39,042			(39,042	)		—
Segment profit		56,347			50,809			25,814		132,970			(6,603	)		126,367

\n\n\n

Following is a reconciliation of segment profit to net income for the three months and six months\nended January 31, 2011 and 2010:\n

\n\n


	Three months ended:			Six months ended:
	January 31,			January 31,
	2011			2010			2011		2010
Total profit from reportable segments	$	71,704			$	60,180		$	151,953		$	132,970
Corporate and eliminations		(5,088	)			(3,683	)		(8,525	)		(6,603	)
Unallocated amounts:
Administrative costs		(27,402	)			(28,946	)		(58,970	)		(59,659	)
Restructuring charges		(2,134	)			(3,649	)		(5,775	)		(7,250	)
Investment and other income		1,174				1,104			1,464			1,153
Interest expense		(5,850	)			(5,163	)		(11,537	)		(10,325	)

Income before income taxes		32,404				19,843			68,610			50,286
Income taxes		(8,205	)			(4,842	)		(18,130	)		(13,617	)

Net income	$	24,199			$	15,001		$	50,480		$	36,669

\n\n

9\n

\n\n\n\n

NOTE F —Stock-Based Compensation\n

\n\n\n

The Company has an incentive stock plan under which the Board of Directors may grant\nnonqualified stock options to purchase shares of Class A Nonvoting Common Stock 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 stock options have an exercise price equal to\nthe fair market value of the underlying stock at the date of grant and generally vest ratably over\na three-year period, with one-third becoming exercisable one year after the grant date and\none-third additional in each of the succeeding two years. Stock options issued under these plans,\nreferred to herein as “service-based” stock options, generally expire 10 years from the date of\ngrant. The Company also grants stock options to certain executives and key management employees\nthat vest upon meeting certain financial performance conditions over the vesting schedule described\nabove; these options are referred to herein as “performance-based” stock options. Performance-based\nstock options 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. The Company granted\nrestricted shares in fiscal 2008 and fiscal 2011 that have an issuance price equal to the fair\nmarket value of the underlying stock at the date of grant. The restricted shares vest at the end of\na five-year period, with respect to the restricted shares issued in fiscal 2008, and ratably at the\nend of years 3, 4 and 5 with respect to the restricted shares issued in fiscal 2011, and upon\nmeeting certain financial performance conditions; these shares are referred to herein as\n“performance-based restricted shares.”\n

\n\n

As of January 31, 2011, the Company has reserved 6,051,999 shares of Class A Nonvoting Common\nStock for outstanding stock options and restricted shares and 742,000 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 recognizes the compensation cost of all share-based awards on a straight-line\nbasis over the vesting period of the award. Total stock compensation expense recognized by the\nCompany during the three months ended January 31, 2011 and 2010 was $2,800 ($1,708 net of taxes)\nand $2,205 ($1,345 net of taxes, respectively, and expense recognized during the six months ended\nJanuary 31, 2011 and 2010 was $6,869 ($4,190 net of taxes), and $5,156 ($3,145 net of taxes),\nrespectively. As of January 31, 2011, total unrecognized compensation cost related to share-based\ncompensation awards was $20,970 pre-tax, net of estimated forfeitures, which the Company expects to\nrecognize over a weighted-average period of 2.4 years.\n

\n\n

The Company has estimated the fair value of its service-based and performance-based option\nawards granted during the six months ended January 31, 2011 and 2010 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


	Six Months Ended			Six Months Ended
	January 31, 2011			January 31, 2010
					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)		5.92				6.57			5.95			6.57
Expected volatility		40.22	%			39.39	%		39.85	%		38.72	%
Expected dividend yield		1.94	%			1.96	%		3.02	%		3.02	%
Risk-free interest rate		1.65	%			2.35	%		2.65	%		3.03	%
Weighted-average market value of\nunderlying stock at grant date	$	29.09				28.43		$	28.73			28.73
Weighted-average exercise price	$	29.09				28.35		$	28.73			29.78
Weighted-average fair value of options\ngranted during the period	$	9.58				9.87		$	8.78			8.70

\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 100,000 shares of performance-based restricted stock to Frank M. Jaehnert,\nthe Company’s President and Chief Executive Officer, in August of 2010, with a grant price and fair\nvalue of $28.35. The Company also granted 210,000 shares of performance-based restricted stock\nduring fiscal 2008, with a grant price and fair value of $32.83. As of January 31, 2011, 310,000\nperformance-based restricted shares were outstanding.\n

\n\n

The Company granted 465,000 performance-based stock options during the six months ended\nJanuary 31, 2011, with a weighted average exercise price of $28.35 and a weighted average fair\nvalue of $9.87. The Company also granted 895,500 service-based stock options during the six months\nended January 31, 2011, with a weighted average exercise price of $29.09 and a weighted average\nfair value of $9.58.\n

\n\n

10\n

\n\n

A summary of stock option activity under the Company’s share-based compensation plans for the\nsix months ended January 31, 2011 is presented below:\n


									Weighted
					Weighted			Average
					Average			Remaining			Aggregate
					Exercise			Contractual			Intrinsic
Options	Shares			Price			Term			Value
Outstanding at July 31, 2010		5,108,736			$	28.69
New grants		1,360,500			$	28.83
Exercised		(239,237	)		$	20.54
Forfeited or expired		(251,000	)		$	31.75

Outstanding at January 31, 2011		5,978,999			$	28.92				6.75		$	29,952

Exercisable at January 31, 2011		3,499,632			$	29.28				5.11		$	19,373

\n\n\n

There were 3,499,632 and 3,340,857 options exercisable with a weighted average exercise price\nof $29.28 and $28.52 at January 31, 2011 and 2010, respectively. The cash received from the\nexercise of options during the three months ended January 31, 2011 and 2010 was $2,804 and $956,\nrespectively. The cash received from the exercise of options during the six months ended January\n31, 2011 and 2010 was $4,909 and $1,672, respectively. The cash received from the tax benefit on\noptions exercised during the three months ended January 31, 2011 and 2010 was $263 and $181,\nrespectively. The cash received from the tax benefit on options exercised during the six months\nended January 31, 2011 and 2010 was $703 and $383, respectively.\n

\n\n

The total intrinsic value of options exercised during the six months ended January 31, 2011\nand 2010, based upon the average market price at the time of exercise during the period, was $2,505\nand $1,266, respectively. The total fair value of stock options vested during the six months ended\nJanuary 31, 2011 and 2010, was $6,744 and $12,054, respectively.\n

\n\n\n

NOTE G — Stockholders’ Investment\n

\n\n\n

In fiscal 2009, the Company’s Board of Directors authorized share repurchase plans for the\nCompany’s Class A Nonvoting Common Stock. The share repurchase plans were implemented by purchasing\nshares in the open market or privately negotiated transactions, with repurchased shares available\nfor use in connection with the Company’s stock-based plans and for other corporate purposes. The\nCompany reacquired approximately 102,067 shares of its Class A Common Stock for $2.5 million in\nfiscal 2010 in connection with its stock repurchase plans. No shares were reacquired during the\nsix months ended January 31, 2011. As of January 31, 2011, there remained 204,133 shares to\npurchase in connection with this share repurchase plan.\n

\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 funds benefit costs on a pay-as-you-go basis. There have been no changes to the\ncomponents of net periodic benefit cost or the amount that the Company expects to fund in fiscal\n2011 from those reported in Note 3 to the consolidated financial statements included in the\nCompany’s latest annual report on Form 10-K for the year ended July 31, 2010.\n

\n\n

11\n

\n\n\n

NOTE I — Fair Value Measurements\n

\n\n\n

The Company adopted new accounting guidance on fair value measurements on August 1, 2008 as it\nrelates to financial assets and liabilities. The Company adopted the new accounting guidance on\nfair value measurements for its nonfinancial assets and liabilities on August 1, 2009. The\naccounting guidance applies to other accounting pronouncements that require or permit fair value\nmeasurements, defines fair value based upon an exit price model, establishes a framework for\nmeasuring fair value, and expands the applicable disclosure requirements. The accounting guidance\nindicates, among other things, that a fair value measurement assumes that a transaction to sell an\nasset or transfer a liability occurs in the principal market for the asset or liability or, in the\nabsence of a principal market, the most advantageous market for the asset or liability.\n

\n\n

The accounting guidance on fair value measurements establishes a fair market value hierarchy\nfor the pricing inputs used to measure fair market value. The Company’s assets and liabilities\nmeasured at fair market value are classified in one of the following categories:\n

\n\n

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

Level 1 — Assets or liabilities for which fair value is based on quoted market prices in\nactive markets for identical instruments as of the reporting date.

\n\n

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

Level 2 — Assets or liabilities for which fair value is based on valuation models for\nwhich pricing inputs were either directly or indirectly observable.

\n\n

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

Level 3 — Assets or liabilities for which fair value is based on valuation models with\nsignificant unobservable pricing inputs and which result in the use of management estimates.

\n\n

The following tables set forth by level within the fair value hierarchy, the Company’s\nfinancial assets and liabilities that were accounted for at fair value on a recurring basis at\nJanuary 31, 2011, and July 31, 2010, according to the valuation techniques the Company used to\ndetermine their fair values.\n


	Fair Value Measurements Using Inputs
	Considered as
	Quoted Prices
	in Active
	Markets		Significant
	for		Other			Significant
	Identical		Observable			Unobservable
	Assets		Inputs			Inputs		Fair	Balance Sheet
	(Level 1)		(Level 2)			(Level 3)		Value	Classification
January 31, 2011:
Trading Securities	$	10,210		$	—		$	—	$	10,210	Other assets
Foreign exchange contracts — cash flow hedges		—			95			—		95	Prepaid expenses and other current assets

Total Assets	$	10,210		$	95		$	—	$	10,305


Foreign exchange contracts — cash flow hedges	$	—		$	1,390			—	$	1,390	Other current liabilities
Foreign exchange contracts — net investment hedge		—			5,082			—		5,082	Other current liabilities
Foreign exchange contracts		—			717			—		717	Other current liabilities
Foreign currency denominated debt — net investment hedge		—			102,683			—		102,683	Long term obligations, less current maturities

Total Liabilities	$	—		$	109,872		$	—	$	109,872

July 31, 2010:
Trading Securities	$	8,757		$	—		$	—	$	8,757	Other assets
Foreign exchange contracts — cash flow hedges		—			156			—		156	Prepaid expenses and other current assets
Foreign exchange contracts		—			24			—		24	Prepaid expenses and other current assets

Total Assets	$	8,757		$	180		$	—	$	8,937


Foreign exchange contracts — cash flow hedges	$	—		$	829		$	—	$	829	Other current liabilities
Foreign exchange contracts					64					64	Other current liabilities
Foreign currency denominated debt — net investment hedge		—			97,747			—		97,747	Long term obligations, less current maturities

Total Liabilities	$	—		$	98,640		$	—	$	98,640

\n\n

12\n

\n\n\n

The following methods and assumptions were used to estimate the fair value of each class of\nfinancial instrument:\n

\n\n\n

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

Trading Securities: The Company’s deferred compensation investments consist of investments in\nmutual funds. These investments were classified as Level 1 as the shares of these investments\ntrade with sufficient frequency and volume to enable us to obtain pricing information on an\nongoing basis.

\n\n

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

Foreign currency exchange contacts: The Company’s foreign currency exchange contracts were\nclassified as Level 2, as the fair value was based on the present value of the future cash flows\nusing external models that use observable inputs, such as interest rates, yield curves and\nforeign currency exchange rates. See Note K, “Derivatives and Hedging Activities” for additional\ninformation.

\n\n

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

Foreign currency denominated debt — net investment hedge: The Company’s foreign currency\ndenominated debt designated as a net investment hedge was classified as Level 2, as the fair\nvalue was based on the present value of the future cash flows using external models that use\nobservable inputs, such as interest rates, yield curves and foreign currency exchange rates. See\nNote K, “Derivatives and Hedging Activities” for additional information.

\n\n

There have been no transfers of assets or liabilities between the fair value hierarchy levels,\noutlined above, during the six months ended January 31, 2011.\n

\n\n

The Company’s financial instruments, other than those presented in the disclosures above,\ninclude cash, notes receivable, accounts receivable, accounts payable, accrued liabilities and\nshort-term and long-term debt. The fair values of cash, accounts receivable, accounts payable,\naccrued liabilities and short-term debt approximated carrying values because of the short-term\nnature of these instruments.\n

\n\n

The estimated fair value of the Company’s long-term obligations, based on the quoted market\nprices for similar issues and on the current rates offered for debt of similar maturities, was\n$468,140 and $467,479 at January 31, 2011 and July 31, 2010, respectively, as compared to the\ncarrying value of $449,140 and $444,204 at January 31, 2011 and July 31, 2010, respectively.\n

\n\n

Disclosures for nonfinancial assets and liabilities that are measured at fair value, but are\nrecognized and disclosed at fair value on a nonrecurring basis, were required prospectively\nbeginning August 1, 2009. During the six months ended January 31, 2011, the Company had no\nsignificant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent\nto their initial recognition other than for the acquisition of ID Warehouse and divestiture of the\nTeklynx. See Note L, “Acquisitions and Divestitures” for further information.\n

\n\n\n

NOTE J — Restructuring\n

\n\n\n

In fiscal 2010, the Company continued the execution of its restructuring actions announced in\nfiscal 2009. As a result of these actions, the Company recorded restructuring charges of $15,314\nin fiscal 2010. The restructuring charges included $10,850 of employee separation costs, $2,260 of\nnon-cash fixed asset write-offs, $1,493 of other facility closure related costs, and $711 of\ncontract termination costs. The Company continued executing its restructuring actions during the\nfirst and second quarters of fiscal 2011.\n

\n\n

During the three and six months ended January 31, 2011, the Company recorded restructuring\ncharges of $2,134 and $5,775, respectively. The year-to-date charges of $5,775 consisted of $3,878\nof employee separation costs, $1,714 of fixed asset write-offs, and $183 of other facility closure\nrelated costs and contract termination costs. Of the $5,775 of restructuring charges recorded\nduring the six months ended January 31, 2011, $3,575 was incurred in the Americas, $2,128 was\nincurred in Europe, and $72 was incurred in Asia-Pacific. The charges for employee separation costs\nconsisted of severance pay, outplacement services, medical and other related benefits. The costs\nrelated to these restructuring activities have been recorded on the condensed consolidated\nstatements of income as restructuring charges. The Company expects the majority of the remaining\ncash payments to be made during the next twelve months.\n

\n\n

A reconciliation of the Company’s fiscal 2011 restructuring activity is as follows:\n


	Employee			Asset Write-
	Related			offs			Other		Total
Beginning balance, July 31, 2010	$	6,055			$	—		$	106		$	6,161

Restructuring charge		2,665				951			25			3,641
Non-cash write-offs		—				(951	)		—			(951	)
Cash payments		(3,413	)			—			(112	)		(3,525	)

Ending balance, October 31, 2010	$	5,307			$	—		$	19		$	5,326

Restructuring charge		1,213				763			158			2,134
Non-cash write-offs		—				(763	)		—			(763	)
Cash payments		(2,679	)			—			(169	)		(2,848	)

Ending balance, January 31, 2011	$	3,841			$	—		$	8		$	3,849

\n\n

13\n

\n\n\n\n

NOTE K — Derivatives and Hedging Activities\n

\n\n\n

The Company utilizes forward foreign exchange currency contracts to reduce the exchange rate\nrisk of specific foreign currency denominated transactions and net investments. These contracts\ntypically require the exchange of a foreign currency for U.S. dollars at a fixed rate at a future\ndate, with maturities of 12 months or less, which qualify as either cash flow hedges or net\ninvestment hedges under the accounting guidance for derivative instruments and hedging activities.\nThe primary objectives of the Company’s foreign currency exchange risk management are to minimize\nthe impact of currency movements due to products purchased in other than the respective\nsubsidiaries’ functional currency and to minimize the impact of currency movements on the Company’s\nnet investment denominated in a currency other than the U.S. dollar. To achieve this objective, the\nCompany hedges a portion of known exposures using forward foreign exchange currency contracts. As\nof January 31, 2011 and July 31, 2010, the notional amount of outstanding forward exchange\ncontracts was $144,509 and $45,328, respectively.\n

\n\n

Hedge effectiveness is determined by how closely the changes in the fair value of the hedging\ninstrument offset the changes in the fair value or cash flows of the hedged item. Hedge accounting\nis permitted only if the hedging relationship is expected to be highly effective at the inception\nof the hedge and on an on-going basis. Gains or losses on the derivative related to hedge\nineffectiveness are recognized in current earnings. The amount of hedge ineffectiveness was not\nsignificant for the three-month or six-month periods ended January 31, 2011 and 2010.\n

\n\n

The Company hedges a portion of known exposure using forward exchange contracts. Main\nexposures are related to transactions denominated in the British Pound, the Euro, Canadian Dollar,\nAustralian Dollar, Singapore Dollar, Swedish Krona, Japanese Yen, Swiss Franc, and the Korean Won.\nGenerally, these risk management transactions will involve the use of foreign currency derivatives\nto protect against exposure resulting from sales and identified inventory or other asset purchases.\n

\n\n

The Company has designated a portion of its foreign exchange contracts as cash flow hedges and\nrecorded these contracts at fair value on the Condensed Consolidated Balance Sheets. For these\ninstruments, the effective portion of the gain or loss on the derivative is reported as a component\nof other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods\nduring which the hedged transaction affects earnings. At January 31, 2011 and July 31, 2010,\nunrealized losses of $1,296 and $493 have been included in OCI, respectively. All balances are\nexpected to be reclassified from OCI to earnings during the next twelve months when the hedged\ntransactions impact earnings.\n

\n\n

At January 31, 2011 and July 31, 2010, the Company had $95 and $156 of forward exchange\ncontracts designated as cash flow hedges included in “Prepaid expenses and other current assets” on\nthe accompanying Condensed Consolidated Balance Sheets. At January 31, 2011 and July 31, 2010, the\nCompany had $1,390 and $829, respectively, of forward exchange contracts designated as cash flow\nhedges included in “Other current liabilities” on the accompanying Condensed Consolidated Balance\nSheets. At January 31, 2011 and July 31, 2010, the U.S. dollar equivalent of these outstanding\nforward foreign exchange contracts totaled $17,657 and $32,020, respectively, including contracts\nto sell Euros, Canadian Dollars, Australian Dollars, British Pounds, U.S. Dollars, and Swiss Franc.\n

\n\n

On May 13, 2010, the Company completed the private placement of €75.0 million aggregate\nprincipal amount of senior unsecured notes to accredited institutional investors. This\nEuro-denominated debt obligation was designated as a net investment hedge to hedge portions of the\nCompany’s net investment in Euro-denominated foreign operations. As net investment hedges, the\ncurrency effects of the debt obligations are reflected in the foreign currency translation\nadjustments component of accumulated other comprehensive income where they offset gains and losses\nrecorded on the Company’s net investment in Euro-denominated operations. The Company’s foreign\ndenominated debt obligations are valued under a market approach using publicized spot prices.\n

\n\n

During the three and six month period ended January 31, 2011, the Company used forward foreign\nexchange currency contracts designated as net investment hedges to hedge portions of the Company’s\nnet investments in Euro-denominated foreign operations. For hedges that meet the effectiveness\nrequirements, the net gains or losses attributable to changes in spot exchange rates are recorded\nin the foreign exchange translation adjustment component of accumulated other comprehensive income\nwhere it offsets gains and losses recorded on the Company’s net investment in Euro-denominated\nforeign operations. Any ineffective portions are recognized in earnings. Recognition in earnings of\namounts previously recorded in cumulative translation is limited to circumstances such as complete\nor substantially complete liquidation of the net investment in the hedged foreign operation. At\nJanuary 31, 2011, the Company had $5,082 of forward foreign exchange currency contracts designated\nas net investment hedges included in “Other current liabilities” on the Condensed Consolidated\nBalance Sheet. At January 31, 2011, the U.S dollar equivalent of these outstanding forward foreign\nexchange contracts totaled $100,000. There were no forward foreign exchange contracts designated\nas net investment hedges outstanding as of July 31, 2010.\n

\n\n

14\n

\n\n

Fair values of derivative instruments in the Condensed Consolidated Balance Sheets were as\nfollows:\n


	Asset Derivatives		Liability Derivatives
	January 31, 2011		July 31, 2010		January 31, 2011			July 31, 2010
	Balance Sheet				Balance Sheet					Balance Sheet				Balance Sheet
	Location	Fair Value		Location		Fair Value			Location	Fair Value		Location	Fair Value
Derivatives designated as hedging instruments
Cash flow hedges
Foreign exchange contracts	Prepaid expenses and other current assets	$	95		Prepaid expenses and other current assets		$	156		Other current liabilities	$	1,390		Other current liabilities	$	829

Net investment hedges

Foreign currency denominated debt	Prepaid expenses and other current assets	$	—		Prepaid expenses and other current assets		$	—		Long term obligations, less current maturities	$	102,683		Long term obligations, less current maturities	$	97,747


Foreign exchange contracts	Prepaid expenses and other current assets	$	—		Prepaid expenses and other current assets		$	—		Other current liabilities	$	5,082		Other current liabilities	$	—


Total derivatives designated as hedging instruments		$	95				$	156			$	109,155			$	98,576


Derivatives not designated as hedging instruments
Foreign exchange contracts	Prepaid expenses and other current assets	$	—		Prepaid expenses and other current assets		$	24		Other current liabilities	$	717		Other current liabilities	$	64

Total derivatives not designated as hedging instruments		$	—				$	24			$	717			$	64

\n\n\n

The pre-tax effects of derivative instruments designated as cash flow hedges on the\nCondensed Consolidated Statements of Income consisted of the following:\n

Location of

Amount of Gain

Gain or (Loss)

Location of Gain or

or (Loss)

Recognized in

Amount of Gain

Amount of Gain or (Loss)

(Loss) Reclassified

Reclassified From

Income on

or (Loss)

Recognized in OCI on

From Accumulated

Accumulated OCI

Derivative

Recognized in

Derivative

OCI into Income

Into Income

(Ineffective

Income on Derivative

(Effective Portion)

Effective Portion)

(Effective Portion)

Portion)

(Ineffective Portion)

Derivatives in

Six months ended

Cash Flow Hedging

January 31,

Relationships

2011

2010

2011

2010

2011

2010

Foreign exchange\ncontracts

(1,296

)

(69

)

Cost of goods sold

(282

)

144

Cost of goods sold

—

Total

(1,296

)

(69

)

(282

)

144

—

\n\n\n

The pre-tax effects of derivative instruments designated as net investment hedges on the\nCondensed Consolidated Balance Sheet consisted of the following:\n


							Location of Gain	Amount of Gain
							or (Loss)	or (Loss)		Location of		Amount of Gain
	Amount of Gain or (Loss)			Reclassified From		Reclassified From	Gain or (Loss)	or (Loss)
	Recognized in OCI on			Accumulated		Accumulated OCI	Recognized in	Recognized in
	Derivative			OCI into Income		Into Income	Income on Derivative	Income on Derivative
Derivatives in	(Effective Portion)			(Effective Portion)		(Effective Portion)	(Ineffective Portion)	(Ineffective Portion)
Net Investment	Six months ended					Six months ended		Six months ended
Hedging	January 31,					January 31,		January 31,
Relationships	2011			2010			2011		2010				2011		2010
Foreign currency denominated debt	$	(4,935	)		$	—	Investment and other income — net	$	—		$	—		Investment and other income — net		$	—	$	—
Foreign exchange contracts	$	(5,082	)		$	—	Investment and other income — net	$	—		$	—		Investment and other income — net		$	—	$	—

Total	$	(10,017	)		$	—		$	—		$	—				$	—	$	—

\n\n

15\n

\n\n\n

The pre-tax effects of derivative instruments not designated as hedge instruments\non the Condensed Consolidated Statements of Income consisted of the following:\n


		Amount of Gain or (Loss) Recognized in
		Income on Derivative
	Location of Gain or (Loss)	Six months		Six months
	Recognized in Income	ended January 31,		ended January 31,
Derivatives Not Designated as Hedging Instruments	on Derivative	2011		2010
Foreign exchange contracts	Other income (expense)	$	717		$	—

Total		$	717		$	—

\n\n\n\n

NOTE L — Acquisitions and Divestitures\n

\n\n\n

On November 1, 2010, the Company acquired ID Warehouse, based in New South Wales, Australia\nfor $7,970. ID Warehouse offers security identification and visitor management products including\nidentification card printers, access control cards, wristbands, tamper-evident security seals and\nidentification accessories. The business is included in the Company’s Asia Pacific segment. The\npurchase price allocation resulted in $4,792 assigned to goodwill, $1,846 assigned to customer\nrelationships, and $487 assigned to non-compete agreements. The amounts assigned to the customer\nrelationships and non-compete agreements are being amortized over 10 and 5 years, respectively.\nThe Company expects the acquisition to further strengthen its position in the people identification\nbusiness in Australia and the segment.\n

\n\n

The results of the operations of the acquired business have been included since the respective\ndate of acquisition in the accompanying condensed consolidated financial statements. The Company is\ncontinuing to evaluate the initial purchase price allocations for the acquisition included above\nand will adjust the allocations as additional information relative to the fair value of assets and\nliabilities of the acquired business becomes known. Pro forma information related to the\nacquisition of ID Warehouse was not included because the impact on the Company’s consolidated\nresults of operations is considered to be immaterial.\n

\n\n

On December 16, 2010, the Company sold its Teklynx business, a barcode software company. The\nTeklynx business had\noperations primarily in the Company’s Americas and Europe segments. The Company received\nproceeds of $12,979, net of cash retained in the business. The transaction resulted in a pre-tax\ngain of $4,394, which was accounted for in “Selling, general, and administrative expenses” (“SG&A”)\non the Condensed Consolidated Statement of Income for the three and six month periods ended January\n31, 2011. The divestiture of Teklynx was part of the Company’s continued long-term growth\nstrategy to focus the Company’s energies and resources on growth of the Company’s core business.\nDiscontinued operations presentation was considered related to the divestiture but not included in\nthe financial statements for the six months ended January 31, 2011 because the impact on the\nCompany’s consolidated results of operations was considered to be immaterial.\n

\n\n\n

NOTE M — Significant Accounting Policies\n

\n\n\n

In July 2010, the FASB issued Accounting Standards Update No. 2010-20, Disclosures about the\nCredit Quality of Financing Receivables and the Allowance for Credit Losses, requiring more robust\nand disaggregated disclosures about the credit quality of an entity’s financing receivables and its\nallowance for credit losses. The Company adopted the new guidance which provides for additional\ndisclosure during the quarter ended January 31, 2011.\n

\n\n

Accounts receivables are stated net of allowances for doubtful accounts of $6,204 and $7,137\nas of January 31, 2011 and July 31, 2010, respectively. No single customer comprised more than 10%\nof the Company’s consolidated net sales as of January 31, 2011 or July 31, 2010, or 10% of the\nCompany’s consolidated accounts receivable as of January 31, 2011 and July 31, 2010. Specific\ncustomer provisions are made when a review of significant outstanding amounts, utilizing\ninformation about customer creditworthiness and current economic trends, indicates that collection\nis doubtful. In addition, provisions are made at different rates, based upon the age of the\nreceivable and the Company’s historical collection experience.\n

\n\n

In addition, the Company provides for an allowance for estimated product returns and credit\nmemos which is recognized as a deduction from sales at the time of the sale. As of January 31, 2011\nand July 31, 2010, the Company had a reserve of $3,838 and $3,963, respectively.\n

\n\n\n

NOTE N — Subsequent Events\n

\n\n\n

On February 17, 2011, the Board of Directors declared a quarterly cash dividend to\nshareholders of the Company’s Class A and Class B Common Stock of $0.18 per share payable on April\n29, 2011 to shareholders of record at the close of business on April 8, 2011.\n

\n\n\n\n

\n\n

16\n

\n\n

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


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

\n\n

Overview\n

\n\n\n

Brady, a Wisconsin corporation founded in 1914, is an international manufacturer and marketer\nof identification solutions and specialty materials that identify and protect premises, products,\nand people. Its products include facility identification products; safety and complementary\nproducts; wire and cable identification products; sorbent materials; people identification\nproducts; regulatory publishing products; high-performance identification products for product\nidentification and work-in-process identification; and bar-code labels and precision die-cut\ncomponents for mobile telecommunications devices, hard disk drives, medical devices and supplies,\nand automotive and other electronics. The Company serves customers in general manufacturing,\nmaintenance and safety, process industries, construction, electrical, telecommunications,\nelectronics, laboratory/healthcare, airline/transportation, brand protection, education,\ngovernmental, public utility, and a variety of other industries. The Company manufactures and sells\nproducts domestically and internationally through multiple channels including distributors,\nresellers, business-to-business direct marketing and a direct sales force. The Company believes\nthat its reputation for innovation, commitment to quality and service, and dedicated employees have\nmade it a world leader in the markets it serves. The Company operates in Australia, Belgium,\nBrazil, Canada, the Cayman Islands, China, Denmark, France, Germany, Hong Kong, India, Italy,\nJapan, Luxembourg, Malaysia, Mexico, the Netherlands, Norway, the Philippines, Poland, Singapore,\nSouth Korea, Spain, Sweden, Thailand, Turkey, the United Arab Emirates, the United Kingdom and the\nUnited States. Brady sells through subsidiaries or sales offices in these countries, with\nadditional sales through a dedicated team of international sales representatives in New Zealand,\nRussia, Taiwan, Turkey, Vietnam, and the United Arab Emirates. The Company further markets its\nproducts to parts of Eastern Europe, the Middle East, Africa and Russia.\n

\n\n

Sales for the quarter ended January 31, 2011, were up 11.2% to $329.0 million, compared to\n$295.8 million in the same period of fiscal 2010. Organic sales increased 9.8% and sales from\nacquisitions net of divestiture added 1.8%. The increase in sales was partially offset by a 0.4%\ndecrease due to the effects of fluctuations in the exchange rates used to translate financial\nresults into the United States dollar. Net income for the quarter ended January 31, 2011, was $24.2\nmillion or $0.46 per diluted Class A Nonvoting Common Share, up 61.3% from the $15.0 million or\n$0.28 per diluted Class A Nonvoting Common Share reported in the second quarter of last fiscal\nyear. Net income before restructuring-related expenses, net of tax for the quarter ended January\n31, 2011 was $25.7 million, or $0.48 per diluted Class A Nonvoting Common Share, up 46.0% from\n$17.6 million or $0.33 per diluted Class A Nonvoting Common Share reported in the second quarter of\nlast fiscal year.\n

\n\n

Sales for the six months ended January 31, 2011, increased 7.2% to $658.6 million, compared to\n$614.3 million in the same period of fiscal 2010. Organic sales increased 5.7% and sales from\nacquisitions net of divestiture added 2.0%. The increase was partially offset by a 0.5% decrease\ndue to the effects of fluctuations in the exchange rates used to translate financial results into\nthe United States dollar. Net income for the six months ended January 31, 2011 was $50.5 million\nor $0.95 per diluted Class A Nonvoting Common Share, up 37.7% from $36.7 million, or $0.69 per\ndiluted Class A Nonvoting Common Share reported in the same period of the prior fiscal year. Net\nincome before restructuring-related expenses, net of tax for the six months ended January 31, 2011\nwas $54.6 million or $1.03 per diluted Class A Nonvoting Common Share, up 30.3% from $41.9 million,\nor $0.79 per diluted Class A Nonvoting Common Share reported in the same period of the prior fiscal\nyear.\n

\n\n

Results of Operations\n

\n\n\n

The comparability of the operating results for the three and six months ended January 31,\n2011, to the prior year has been impacted by the following acquisitions and divestiture completed\nin fiscal 2011 and fiscal 2010.\n

\n\n

Fiscal 2011\n

\n\n

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


	Segment	Date Completed
Acquisitions
ID Warehouse	Asia Pacific	November 2010

Divestiture
Teklynx	Americas \nEurope	December 2010

\n\n\n

Fiscal 2010\n

\n\n

\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n\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
Welconstruct Group Limited (“Welco”)	Europe	October 2009
Stickolor Industria e Comerciao de Auto Adesivos Ltda. (“Stickolor”)	Americas	December 2009
Securimed SAS (“Securimed”)	Europe	March 2010

\n\n\n

Sales for the three months ended January 31, 2011, were up 11.2% compared to the same period\nin fiscal 2010. The increase was mainly driven by strong organic growth of 9.8%, which included\npositive organic growth in all three segments. In addition, acquisition-related sales net of\ndivestiture improved sales by 1.8% as a result of the acquisition of ID Warehouse during the\nquarter, offset by a slight reduction in sales due to the divestiture of Teklynx. The effects of\nfluctuations in the exchange rates used to translate financial results into the United States\ndollar negatively impacted sales by 0.4%. Organic sales increased 9.7%, 12.4% and 6.9% in the\nAmericas, Europe and Asia-Pacific segments, respectively.\n

\n\n

17\n

\n\n\n\n\n

Sales for the six months ended January 31, 2011, increased 7.2% compared to the same period in\nfiscal 2010. The increase was comprised of a 5.7% increase in organic sales, an increase of 2.0%\nresulting from sales related to the acquisitions of ID Warehouse in fiscal 2011 and the\nacquisitions of Welco, Stickolor and Securimed in fiscal 2010, net of divestiture, partially offset\nby the 0.5% decrease resulting from the negative impact of the fluctuations in the exchange rates.\nThe increase in organic sales was due to increases of 6.8% in the Americas segment, 6.6% in the\nEurope segment, and 3.1% in the Asia-Pacific segment.\n

\n\n

Gross margin as a percentage of sales decreased to 48.3% from 49.7% for the quarter and\ndecreased to 49.1% from 49.5% for the six months ended January 31, 2011, compared to the same\nperiods of the previous year. This decrease in gross margin as a percentage of sales for the three\nand six months ended January 31, 2011 was primarily due to a strong comparable in the prior year in\naddition to the impact of the product mix within the Company’s businesses.\n

\n\n

Research and development (“R&D”) expenses increased 10.3% to $11.7 million for the three\nmonths ended January 31, 2011 compared to $10.6 million for the same period in the prior year, and\nincreased 7.1% to $21.7 million for the six months ended January 31, 2011, compared to $20.2\nmillion for the same period in the prior year. R&D expenses as a percentage of sales remained\nconstant at 3.6% and 3.3% for the three and six months ended January 31, 2011 as compared to the\nsame periods of the previous year, respectively. The Company continues its commitment to\ninnovation and new product development and expects R&D expense to increase in the second half of\nfiscal 2011.\n

\n\n

Selling, general and administrative (“SG&A”) expenses decreased 0.6% to $108.1 million for the\nthree months ended January 31, 2011, compared to $108.7 million for the same period in the prior\nyear, and remained flat at $217.4 million for the six months ended January 31, 2011 and 2010,\nrespectively. During the three months ended January 31, 2011, the Company divested of its Teklynx\nbusiness resulting in a pre-tax gain of $4.4 million, which is included in SG&A. This gain was\noffset by an increase in the Company’s transaction-related costs in addition to the merit increase\nduring the three months ended January 31, 2011. SG&A has remained relatively flat during the six\nmonth ended January 31, 2011 as a result of cost increases offset by the Teklynx gain and cost\nreduction activities as compared to the same period in the prior year. As a percentage of sales,\nSG&A expenses decreased to 32.8% from 36.8% for the second quarter, and decreased to 33.0% from\n35.4% for the six months ended January 31, 2011, compared to the same periods in the prior year.\n

\n\n

Restructuring charges were $2.1 million and $5.8 million for the three and six months ended\nJanuary 31, 2011, respectively. Restructuring charges were $3.6 million and $7.3 million for the\nthree and six months ended January 31, 2010, respectively. In fiscal 2009, in response to the\nglobal recession, the Company took several measures to address its cost structure. The Company\ncontinued to incur costs related to the reduction of its workforce and facilities consolidations\nduring the six months ended January 31, 2011. The Company expects to incur $7 to $10 million of\nrestructuring charges in fiscal 2011.\n

\n\n

Other income and expense increased slightly to $1.2 million from $1.1 million for the three\nmonths ended January 31, 2011, as compared to the same period in the prior year, and increased to\n$1.5 million from $1.2 million for the six months ended January 31, 2011 as compared to the same\nperiod in the prior year. The increase was primarily due to the gains on securities held in\nexecutive deferred compensation plans and interest income, offset by foreign exchange losses.\n

\n\n

Interest expense increased to $5.9 million from $5.2 million for the quarter and to $11.5\nmillion from $10.3 million for the six months ended January 31, 2011, compared to the same periods\nin the prior year. The increase was due to the incremental interest on the Company’s May 2010\nprivate placement entered into in the fourth quarter of fiscal 2010.\n

\n\n

The Company’s effective tax rate was 25.3% for the quarter ended January 31, 2011, as compared\nto 24.4% in the same period in the prior year. The increase in the Company’s effective tax rate in\nthe quarter resulted from the tax on the gain associated with the divestiture of Teklynx, partially\noffset by benefits from change in U.S. tax legislation, including the extension of the R&D tax\ncredit. The Company’s effective tax rate for the six months ended January 31, 2011 was 26.4%\ncompared to 27.1% for the same period in the prior year. The slight reduction in the Company’s\neffective tax rate in the current year was primarily due to the mix of profits in low and high tax\ncountries as well as positive impacts from the extension of certain U.S. tax legislation. The\nCompany expects the full year effective tax rate for fiscal 2011 to be approximately 26%.\n

\n\n

Net income for the three months ended January 31, 2011, increased 61.3% to $24.2 million,\ncompared to $15.0 million for the same quarter of the previous year. Net income as a percentage of\nsales increased to 7.4% from 5.1% for the quarter ended January 31, 2011, compared to the same\nperiod in the prior year, due to the factors noted above. Net income before restructuring-related\nexpenses for the quarter ended January 31, 2011 was $25.7 million, up 46.0% from $17.6 million\nreported in the second quarter of last fiscal year. For the six months ended January 31, 2011, net\nincome increased 37.7% to $50.5 million, compared to $36.7 million for the same period in the\nprevious year. As a percentage of sales, net income increased to 7.7% from 6.0% for the six months\nended January 31, 2011, compared to the same period in the previous year. Net income before\nrestructuring-related expenses for the six months ended January 31, 2011 was $54.6 million, up\n30.3% from $41.9 million reported in the same period of the prior fiscal year. The improved\nearnings was primarily driven by the strong organic growth, which included positive organic growth\nin all three segments along with the positive impacts of the Company’s on-going process improvement\nactivities.\n

\n\n

18\n

\n\n\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,\nAmericas, Europe and Asia-Pacific, has a President that reports directly to the Company’s chief\noperating decision maker, its Chief Executive Officer. Each region has its own distinct operations,\nis managed locally by its own management team, maintains its own financial reports and is evaluated\nbased on regional segment profit. The Company has determined that these regions comprise its\noperating and reportable segments based on the information used by the Chief Executive Officer to\nallocate resources and assess performance.\n

\n\n

Following is a summary of segment information for the three and six months ended January 31,\n2011 and 2010:\n

\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \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-			Region			and
(Dollars in thousands)	Americas			Europe			Pacific		Total			Eliminations			Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
January 31, 2011	$	136,011			$	104,041		$	88,957			$	329,009			$	—		$	329,009
January 31, 2010	$	121,603			$	96,614		$	77,612			$	295,829			$	—		$	295,829

Six months ended:
January 31, 2011	$	281,999			$	196,091		$	180,507			$	658,597			$	—		$	658,597
January 31, 2010	$	257,842			$	190,949		$	165,524			$	614,315			$	—		$	614,315

SALES GROWTH INFORMATION
Three months ended January 31, 2011
Base		9.7	%			12.4	%		6.9	%			9.8	%			—			9.8	%
Currency		0.8	%			(6.9	%)		5.6	%			(0.4	%)			—			(0.4	%)
Acquisitions/Divestitures		1.4	%			2.2	%		2.1	%			1.8	%			—			1.8	%

Total		11.9	%			7.7	%		14.6	%			11.2	%			—			11.2	%

Six months ended January 31, 2011
Base		6.8	%			6.6	%		3.1	%			5.7	%			—			5.7	%
Currency		0.8	%			(6.9	%)		5.0	%			(0.5	%)			—			(0.5	%)
Acquisitions/Divestitures		1.8	%			3.0	%		1.0	%			2.0	%			—			2.0	%

Total		9.4	%			2.7	%		9.1	%			7.2	%			—			7.2	%

SEGMENT PROFIT
Three months ended:
January 31, 2011	$	31,015			$	29,165		$	11,524			$	71,704			$	(5,088	)	$	66,616
January 31, 2010	$	23,546			$	25,947		$	10,687			$	60,180			$	(3,683	)	$	56,497
Percentage change		31.7	%			12.4	%		7.8	%			19.1	%						17.9	%

Six months ended:
January 31, 2011	$	70,374			$	53,226		$	28,353			$	151,953			$	(8,525	)	$	143,428
January 31, 2010	$	56,347			$	50,809		$	25,814			$	132,970			$	(6,603	)	$	126,367
Percentage change		24.9	%			4.8	%		9.8	%			14.3	%						13.5	%

\n\n\n

NET INCOME RECONCILIATION\n

\n\n


	Three months ended:			Six months ended:
	January 31,			January 31,			January 31,		January 31,
(Dollars in thousands)	2011			2010			2011		2010
Total profit from reportable segments	$	71,704			$	60,180		$	151,953		$	132,970
Corporate and eliminations		(5,088	)			(3,683	)		(8,525	)		(6,603	)
Unallocated amounts:
Administrative costs		(27,402	)			(28,946	)		(58,970	)		(59,659	)
Restructuring charges		(2,134	)			(3,649	)		(5,775	)		(7,250
Investment and other income		1,174				1,104			1,464			1,153
Interest expense		(5,850	)			(5,163	)		(11,537	)		(10,325	)

Income before income taxes		32,404				19,843			68,610			50,286
Income taxes		(8,205	)			(4,842	)		(18,130	)		(13,617	)

Net income	$	24,199			$	15,001		$	50,480		$	36,669

\n\n

19\n

\n\n\n

The Company evaluates short-tem segment performance based on segment profit or loss and\ncustomer sales. Corporate long-term performance is evaluated based on shareholder value\nenhancement (“SVE”), which incorporates the cost of capital as a hurdle rate for capital\nexpenditures, new product development, and acquisitions. Segment profit or loss does not include\ncertain administrative costs, such as the cost of finance, information technology and human\nresources, which are managed as global functions. Restructuring charges, stock options, interest,\ninvestment and other income and income taxes are also excluded when evaluating performance.\n

\n\n

Americas:\n

\n\n\n

Americas sales increased 11.9% to $136.0 million for the quarter and 9.4% to $282.0 million\nfor the six months ended January 31, 2011, compared to $121.6 million and $257.8 million for the\nsame three and six-month periods, respectively, in the prior year. Organic sales increased 9.7% and\n6.8% during the quarter and year-to-date, respectively, as compared to the same periods in the\nprevious year. Fluctuations in the exchange rates used to translate financial results into the\nUnited States dollar resulted in a positive impact on sales of 0.8% in both the quarter and in the\nsix-month period. Sales resulting from acquisitions net of divestiture increased 1.4% for the\nquarter and 1.8% for the six-month period. This increase in sales resulted from the second quarter\nof fiscal 2010 acquisition of Stickolor, offset by the reduction in sales due to the divestiture of\nTeklynx. The increases in organic sales of 9.7% for the three-month period and 6.8% for the\nsix-month period was driven by the broad-based improvement in the Company’s core markets in\naddition to the positive results from the Company’s targeted strategies to grow sales. The segment\ncontinues to focus on the sale of new, differentiated products, while continuing growth in new\nmarkets.\n

\n\n

Segment profit increased 31.7% to $31.0 million from $23.5 million for the quarter and\nincreased 24.9% to $70.4 million from $56.3 million for the six months ended January 31, 2011,\ncompared to the same periods in the prior year. Segment profit was positively impacted by\nincreased sales volume. The segment continued to drive productivity improvements through\nconsolidating facilities, and implementing other operational improvement initiatives to further\nreduce costs and improve productivity. As a percentage of sales, segment profit in the three\nmonths ended January 31, 2011 increased to 22.8% from 19.4% and for the six months ended January 31,\n2011 increased to 25.0% from 21.9%, compared to the same periods in the prior year. The increase\nin segment profit as a percentage of sales was due to the cost reduction efforts and productivity\nimprovements described above.\n

\n\n

Europe:\n

\n\n\n

Europe sales increased 7.7% to $104.0 million for the quarter and increased 2.7% to $196.1\nmillion for the six months ended January 31, 2011, compared to $96.6 million and $190.9 million for\nthe same periods in the prior year. Organic sales increased 12.4% and 6.6% for the quarter and\nyear-to-date, respectively, compared to the same periods in the previous year. Sales were\nnegatively affected by fluctuations in the exchange rates used to translate financial results into\nthe United States dollar, which reduced sales in the segment by 6.9% in both the quarter and in the\nsix-month period. Segment sales increased 2.2% during the quarter and 3.0% during the six-month\nperiod as result of the fiscal 2010 acquisitions of Welco and Securimed, net of the fiscal 2011\ndivestiture of Teklynx. The winter campaigns in Europe generated incremental sales for the segment\nduring the quarter ended January 31, 2011. The segment’s organic sales were positively impacted\nduring the three and six months ended January 31, 2011 as a result of improvements in the core\ngrowth in all business streams due to the combination of product breadth and new product launches.\n

\n\n

Segment profit increased 12.4% to $29.2 million from $25.9 million for the quarter and\nincreased 4.8% to $53.2 million from $50.8 million for the six months ended January 31, 2011,\ncompared to the same periods in the prior year. The increase in segment profit for the quarter and\nthe first half of the year was attributable to the increased sales as discussed above. As a\npercentage of sales, segment profit increased to 28.0% from 26.9% in the second quarter of fiscal\n2011 and increased to 27.1% from 26.6% in the six months ended January 31, 2011, compared to the\nsame periods in the prior year. The increase in segment profit as a percentage of sales in the\nquarter was partially due to the increased sales volumes during the quarter, the continued efforts\nto streamline selling expenses through strategic initiatives, offset by the impact of foreign\ncurrency translation on the reported results.\n

\n\n

Asia-Pacific:\n

\n\n\n

Asia-Pacific sales increased 14.6% to $89.0 million from $77.6 million for the quarter and\n9.1% to $180.5 million from $165.5 million for the six months ended January 31, 2011, as compared\nto the same periods in the prior year. Organic sales increased 6.9% in the quarter and 3.1% for\nthe six-month period, compared to the same periods in the previous year. Sales were positively\naffected by fluctuations in the exchange rates used to translate financial results into the United\nStates dollar, increasing segments sales by 5.6% for the quarter and 5.0% for the six-month period\nended January 31, 2011. The increase in organic sales for the three and six months ended January\n31, 2011 was driven by increased sales in the consumer electronic market in addition to the\nexpanded focus on MRO applications throughout the segment.\n

\n\n

Segment profit increased 7.8% to $11.5 million from $10.7 million for the quarter and\nincreased 9.8% to $28.4 million from $25.8 million for the six months ended January 31, 2011,\ncompared to the same periods in the prior year. As a percentage of sales, segment profit declined\nto 13.0% from 13.8% in the second quarter of fiscal 2011 and increased to 15.7% from 15.6% in the\nsix months ended January 31, 2011, compared to the same periods in the prior year. The increase in\nsegment profit during the three and six months ended January 31, 2011 was primarily due to the\nsegment’s increased focus on higher-end, value-added solutions, newly launched products and the\ncost savings generated from lean initiatives including the Brady Business Performance System.\nSegment profit as a percentage of sales declined during the quarter, primarily due to the segment’s\nincreased investment in new product development.\n

\n\n

20\n

\n\n

Financial Condition\n

\n\n\n

Cash and cash equivalents were $362.3 million at January 31, 2011, compared to $314.8 million\nat July 31, 2010. The increase in cash of $47.5 million was the result of cash provided by\noperations of $57.6 million, cash received from the sale of business, and the positive effects of\nthe depreciation of the U.S. dollar against other currencies, partially offset by cash used for\nacquisitions and dividends during the six months ended January 31, 2011.\n

\n\n

The Company’s working capital, excluding cash and cash equivalents, increased to $83.5 million\nat January 31, 2011 from $60.3 million at July 31, 2010. Accounts receivable increased $18.6\nmillion for the six months ended January 31, 2011 mainly due to higher sales volumes. Inventories\nincreased $4.2 million for the six months ending January 31, 2011 due to increased production\nvolumes and the impact of foreign currency translation on the Company’s foreign inventory balances.\nThe net decrease in current liabilities was $2.1 million from July 31, 2010 to January 31, 2011.\nThe decrease in the current liabilities was primarily due to the decrease in accrued wages due to\nthe payment of the Company’s fiscal 2010 incentive compensation during the six months ended January\n31, 2011, partially offset by the fiscal 2011 incentive compensation accrual to be paid in fiscal\n2012.\n

\n\n

Cash flow from operating activities totaled $57.6 million for the six months ended January 31,\n2011, compared to $68.0 million for the same period last year. The decrease was primarily due to\nthe payment of the Company’s fiscal 2010 annual incentive compensation during the six months ended\nJanuary 31, 2011, whereas no incentive compensation was paid in same period in the prior year due\nto the elimination of the annual incentive compensation in fiscal 2009.\n

\n\n

Cash used for acquisitions totaled $8.0 million for the six months ended January 31, 2011 due\nto the acquisition of ID Warehouse. The Company used $20.3 million for acquisitions of Welco and\nStickolor during the six months ended January 31, 2010; the net cash paid for Welco and Stickolor\nwas $1.8 million and $18.5 million, respectively. Cash received from divestiture was $13.0 million\nduring the six months ended January 31, 2011 as a result of the sale of the Teklynx.\n

\n\n

Capital expenditures were $9.0 million for the six months ended January 31, 2011, compared to\n$15.0 million in the same period last year. Capital expenditures were $26.3 million during the\ntwelve months ended July 31, 2010. The Company expects the capital expenditures to be\napproximately $25.0 million for the twelve months ending July 31, 2011. Net cash used in financing\nactivities was $13.7 million for the six months ended January 31, 2011, due primarily to the\npayment of dividends, partially offset by the proceeds from the issuance of the common stock\nrelated to stock option exercises.\n

\n\n

21\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

On May 13, 2010, the Company completed a private placement of €75.0 million aggregate\nprincipal amount of senior unsecured notes to accredited institutional investors. The €75.0 million\nof senior notes consists of €30.0 million aggregate principal amount of 3.71% Series 2010-A Senior\nNotes, due May 13, 2017 and €45.0 million aggregate principal amount of 4.24% Series 2010-A Senior\nNotes, due May 13, 2020, with interest payable on the notes semiannually. This private placement\nwas exempt from the registration requirements of the Securities Act of 1933. The notes were not\nregistered for resale and may not be resold absent such registration or an applicable exemption\nfrom the registration requirements of the Securities Act of 1933 and applicable state securities\nlaws. The notes have certain prepayment penalties for prepaying them prior to maturity. The notes\nhave been fully and unconditionally guaranteed on an unsecured basis by the Company’s domestic\nsubsidiaries. These unsecured notes were issued pursuant to a note purchase agreement, dated May\n13, 2010.\n

\n\n

During fiscal 2004 through fiscal 2007, the Company completed three private placement note\nissuances totaling $500 million in ten-year fixed rate notes with varying maturity dates to\ninstitutional investors at interest rates varying from 5.14% to 5.33%. The notes must be repaid\nequally over seven years, with initial payment due dates ranging from 2008 to 2011, with interest\npayable on the notes due semiannually on various dates throughout the year, which began in December\n2004. The private placements were exempt from the registration requirements of the Securities Act\nof 1933. The notes were not registered for resale and may not be resold absent such registration or\nan applicable 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 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 conditions, the available amount under the credit facility\nmay be increased from $200 million up to $300 million. Under the credit agreement, the Company has\nthe option to select either a base interest rate (based upon the higher of the federal funds rate\nplus one-half of 1% or the prime rate of Bank of America) or a Eurocurrency interest rate (at the\nLIBOR rate plus a margin based on the Company’s consolidated leverage ratio). A commitment fee is\npayable on the unused amount of the facility. The agreement restricts the amount of certain types\nof payments, including dividends, which can be made annually to $50 million plus an amount equal to\n75% of consolidated net income for the prior fiscal year of the Company. The Company believes that\nbased on historic dividend practice, this restriction would not impede the Company in following a\nsimilar dividend practice in the future. On March 18, 2008, the Company entered into an amendment\nto the revolving loan agreement which extended the maturity date from October 5, 2011 to March 18,\n2013. All other terms of the revolving loan agreement remained the same. As of January 31, 2011,\nthere were no outstanding borrowings under the credit facility.\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, March 2007, and May 2010 private placement debt\nagreements require the Company to maintain a ratio of debt to the trailing twelve months EBITDA, as\ndefined in the debt agreements, of not more than a 3.5 to 1.0 ratio (leverage ratio). As of January\n31, 2011, the Company was in compliance with the financial covenant of these debt agreements, with\nthe ratio of debt to EBITDA, as defined by the agreements, equal to 2.1 to 1.0. Additionally, the\nCompany’s October 2006 revolving loan agreement requires the Company to maintain a ratio of debt to\ntrailing twelve months EBITDA, as defined by the debt agreement, of not more than a 3.0 to 1.0\nratio. The revolving loan agreement requires the Company’s trailing twelve months earnings before\ninterest and taxes (“EBIT”) to interest expense of not less than a 3.0 to 1.0 ratio (interest\nexpense coverage). As of January 31, 2011 the Company was in compliance with the financial\ncovenants of the revolving loan agreement, with the ratio of debt to EBITDA, as defined by the\nagreement, equal to 2.2 to 1.0 and the interest expense coverage ratio equal to 7.1 to 1.0.\n

\n\n

Long-term obligations, less current obligations, as a percentage of long-term obligations,\nless current obligations, plus stockholders’ investment were 26.5% at January 31, 2011 and 27.6% at\nJuly 31, 2010. Long-term obligations increased by $4.9 million from July 31, 2010 to January 31,\n2011 due to the negative impact of foreign currency translation on the Company’s Euro-denominated\ndebt.\n

\n\n

Stockholders’ investment increased $72.4 million during the six months ended January 31, 2011\nas a result of the Company’s net income of $50.5 million as well as the increase in the accumulated\nother comprehensive income of $29.8 million due to the impact of foreign currency translation. The\nincrease was offset by the dividends paid on Class A and Class B Common Stock of $17.8 million and\n$1.2 million, respectively.\n

\n\n

22\n

\n\n

Off-Balance Sheet Arrangements — The Company does not have material off-balance sheet arrangements\nor related-party transactions. The Company is not aware of factors that are reasonably likely to\nadversely affect liquidity trends, other than the risk factors described in this and other Company\nfilings. However, the following additional information is provided to assist those reviewing the\nCompany’s financial statements.\n

\n\n\n

Operating Leases — These leases generally are entered into for investments in facilities such\nas manufacturing facilities, warehouses and office space, computer equipment and Company vehicles.\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.\n

\n\n

Related-Party Transactions — The Company evaluated its affiliated party transactions for the\nperiod ended January 31, 2011. Based on the evaluation the Company does not have material related\nparty transactions that 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 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 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 the length or severity of the\ncurrent worldwide economic downturn or timing or strength of a subsequent recovery; future\nfinancial performance of major markets Brady serves, which include, without limitation,\ntelecommunications, manufacturing, electrical, construction, laboratory, education, governmental,\npublic utility, computer, transportation; difficulties in making and integrating acquisitions;\nrisks associated with newly acquired businesses; Brady’s ability to develop and successfully market\nnew products; changes in the supply of, or price for, parts and components; increased price\npressure from suppliers and customers; fluctuations in currency rates versus the US dollar;\nunforeseen tax consequences; potential write-offs of Brady’s substantial intangible assets; Brady’s\nability to retain significant contracts and customers; risks associated with international\noperations; Brady’s ability to maintain compliance with its debt covenants; technology changes;\nbusiness interruptions due to implementing business systems; environmental, health and safety\ncompliance costs and liabilities; future competition; interruptions to sources of supply; Brady’s\nability to realize cost savings from operating initiatives; difficulties associated with exports;\nrisks associated with restructuring plans; risks associated with obtaining governmental approvals\nand maintaining regulatory compliance; and numerous other matters of national, regional and global\nscale, including those of a political, economic, business, competitive and regulatory nature\ncontained from time to time in Brady’s U.S. Securities and Exchange Commission filings, including,\nbut not limited to, those factors listed in the “Risk Factors” section located in Item 1A of Part I\nof the Company’s most recently filed Form 10-K for the year ended July 31, 2010. These\nuncertainties may cause Brady’s actual future results to be materially different than those\nexpressed in its forward-looking statements. Brady does not undertake to update its forward-looking\nstatements.\n

\n\n

24\n

\n\n

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


ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

\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, Japanese Yen, and the Korean\nWon. As of January 31, 2011, the amount of outstanding foreign exchange contracts was $144.5\nmillion. In fiscal 2010 and continuing in fiscal 2011, the Company also hedged portions of its net\ninvestments in its European foreign operations using forward foreign exchange currency contracts\nand Euro-denominated debt of €75.0 million designated as a hedge instrument.\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, with the approval of the Board of Directors, if there is a desire to\nmodify the Company’s exposure to interest rates. As of January 31, 2011, the Company had no\ninterest 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 and sells and distributes\nits products throughout the world. As a result, the Company’s financial results could be\nsignificantly 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 U.S. Dollar and the European currencies, primarily the Euro, changes between the U.S.\nDollar and the Australian Dollar, changes between the U.S. Dollar and the Canadian Dollar, and\nchanges between the U.S. Dollar and the Chinese Yuan. Changes in foreign currency exchange rates\nfor the Company’s foreign subsidiaries reporting in local currencies are generally reported as a\ncomponent of shareholders’ equity. The Company’s currency translation adjustments recorded for the\nthree and six months ended January 31, 2011 were $0.3 million unfavorable and $29.8 million\nfavorable, respectively. The Company’s currency translation adjustments recorded for the three and\nsix months ended January 31, 2010 were $18.8 million unfavorable and $5.8 million favorable,\nrespectively. As of January 31, 2011 and 2010, the Company’s foreign subsidiaries had net current\nassets (defined as current assets less current liabilities) subject to foreign currency translation\nrisk of $367.1 million and $229.9 million, respectively. The potential increase in the net current\nassets as of January 31, 2011 from a hypothetical 10 percent adverse change in quoted foreign\ncurrency exchange rates would be $36.7 million. This sensitivity analysis assumes a parallel shift\nin foreign currency exchange rates. Exchange rates rarely move in the same direction relative to\nthe U.S. Dollar. This assumption may overstate the impact of changing exchange rates on individual\nassets and liabilities denominated in a foreign currency.\n

\n\n

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


ITEM 4.		CONTROLS AND PROCEDURES

\n\n

Brady Corporation maintains a set of disclosure controls and procedures that are designed to\nensure that information required to be disclosed by the Company in the reports filed by the Company\nunder the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed,\nsummarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure\ncontrols and procedures include, without limitation, controls and procedures designed to ensure\nthat information required to be disclosed by the Company in the reports the Company files under the\nExchange Act is accumulated and communicated to the Company’s management, including the Company’s\nprincipal executive and principal financial officers, or persons performing similar functions, as\nappropriate to allow timely decisions regarding required disclosure. The Company carried out an\nevaluation, under the supervision and with the participation of its management, including its\nPresident and Chief Executive Officer and its Senior Executive Vice President and Chief Financial\nOfficer, of the effectiveness of the design and operation of the Company’s disclosure controls and\nprocedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, the Company’s\nPresident and Chief Executive Officer and Senior Executive Vice President and Chief Financial\nOfficer concluded that the Company’s disclosure controls and procedures are effective as of the end\nof the period covered by this report.\n

\n\n

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

\n\n

25\n

\n\n

EXHIBIT 31.1\n

\n\n\n

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

\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: March 8, 2011\n

\n\n

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


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

\n\n

\n\n\n

EXHIBIT 31.2\n

\n\n\n

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

\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

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: March 8, 2011\n

\n\n

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


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

\n\n

\n\n\n

EXHIBIT 32.1\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

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

\n\n

(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended January\n31, 2011 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: March 8, 2011\n

\n\n

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


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

\n\n\n

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

\n\n

EXHIBIT 32.2\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

\n\n

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

\n\n

Date: March 8, 2011\n

\n\n

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


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

\n\n\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		17

Item 3. Quantitative and Qualitative Disclosures About Market Risk		25

Item 4. Controls and Procedures		25

PART II. Other Information

Item 6. Exhibits		26

CERTIFICATION
CERTIFICATION
Section 1350 Certification
Section 1350 Certification
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


	BRADY CORPORATION \n
Date: March 8, 2011	/s/ Frank M. Jaehnert\n
	Frank M. Jaehnert
	President & Chief Executive Officer

Date: March 8, 2011	/s/ Thomas J. Felmer\n
	Thomas J. Felmer
	Senior Vice President & Chief Financial Officer\n(Principal Financial Officer)

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	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
	101			Interactive Data File