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 October 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 No 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 the definitions of “large accelerated\nfiler”, “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 December 2, 2011, there were\n48,892,686 outstanding shares of Class A Nonvoting Common Stock\nand 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which\nis held by affiliates of the Registrant, is the only voting stock.\n

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PART I. FINANCIAL INFORMATION\n

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ITEM 1.		FINANCIAL STATEMENTS

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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\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


	October 31, 2011			July 31, 2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	371,594			$	389,971
Accounts receivable — net		232,837				228,483
Inventories:
Finished products		64,652				62,152
Work-in-process		16,259				14,550
Raw materials and supplies		28,752				27,484

Total inventories		109,663				104,186
Prepaid expenses and other current assets		42,120				35,647

Total current assets		756,214				758,287
Other assets:
Goodwill		792,303				800,343
Other intangible assets		84,461				89,961
Deferred income taxes		50,676				53,755
Other		19,444				19,244
Property, plant and equipment:
Cost:
Land		6,360				6,406
Buildings and improvements		103,683				104,644
Machinery and equipment		303,493				305,557
Construction in progress		13,431				11,226

		426,967				427,833
Less accumulated depreciation		290,704				287,918

Property, plant and equipment — net		136,263				139,915

Total	$	1,839,361			$	1,861,505

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	96,237			$	98,847
Wages and amounts withheld from employees		46,221				69,798
Taxes, other than income taxes		8,963				7,612
Accrued income taxes		16,170				9,954
Other current liabilities		57,717				54,406
Current maturities on long-term debt		61,264				61,264

Total current liabilities		286,572				301,881
Long-term obligations, less current maturities		330,054				331,914
Other liabilities		68,200				71,518

Total liabilities		684,826				705,313
Stockholders’ investment:
Class A nonvoting common stock — Issued 51,261,487 and 51,261,487 shares,\nrespectively\nand outstanding 48,862,485 and 49,284,252 shares, respectively		513				513
Class B voting common stock — Issued and outstanding, 3,538,628 shares		35				35
Additional paid-in capital		310,602				307,527
Income retained in the business		812,142				789,100
Treasury stock — 2,082,801 and 1,667,235 shares, respectively of Class A nonvoting\ncommon stock, at cost		(61,015	)			(50,017	)
Accumulated other comprehensive income		96,778				113,898
Other		(4,520	)			(4,864	)

Total stockholders’ investment		1,154,535				1,156,192

Total	$	1,839,361			$	1,861,505

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See Notes to Condensed Consolidated Financial Statements.\n

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3\n

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BRADY CORPORATION AND SUBSIDIARIES\n

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME\n

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

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	Three Months Ended October 31,
	(Unaudited)
								Percentage
	2011			2010			Change
Net sales	$	349,508			$	329,588			6.0	%
Cost of products sold		181,677				165,076			10.1	%

Gross margin		167,831				164,512			2.0	%
Operating expenses:
Research and development		9,809				9,944			(1.4	)%
Selling, general and administrative		108,932				109,324			(0.4	)%
Restructuring charges		—				3,641			(100.0	)%

Total operating expenses		118,741				122,909			(3.4	)%
Operating income		49,090				41,603			18.0	%
Other income and (expense):
Investment and other income (expense)		(202	)			290			(169.7	)%
Interest expense		(5,047	)			(5,687	)		(11.3	)%

Income before income taxes		43,841				36,206			21.1	%
Income taxes		11,109				9,925			11.9	%

Net income	$	32,732			$	26,281			24.5	%

Per Class A Nonvoting Common Share:
Basic net income	$	0.62			$	0.50			24.0	%
Diluted net income	$	0.62			$	0.50			24.0	%
Dividends	$	0.185			$	0.18			2.8	%
Per Class B Voting Common Share:
Basic net income	$	0.60			$	0.48			25.0	%
Diluted net income	$	0.60			$	0.48			25.0	%
Dividends	$	0.168			$	0.163			3.1	%
Weighted average common shares\noutstanding (in thousands):
Basic		52,657				52,448
Diluted		52,954				52,810

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See Notes to Condensed Consolidated Financial Statements.\n

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4\n

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BRADY CORPORATION AND SUBSIDIARIES\n

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS\n

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(Dollars in Thousands)\n\n

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	Three Months Ended
	October 31,
	(Unaudited)
	2011			2010
Operating activities:
Net income	$	32,732			$	26,281
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,241				12,594
Deferred income taxes		4,399				(4,849	)
Non-cash portion of stock-based compensation expense		3,591				4,069
Non-cash portion of restructuring charges		—				951
Changes in operating assets and liabilities (net of effects of business\nacquisitions/divestitures):
Accounts receivable		(7,798	)			(13,614	)
Inventories		(7,156	)			(3,689	)
Prepaid expenses and other assets		(7,384	)			1,078
Accounts payable and accrued liabilities		(21,814	)			(16,909	)
Income taxes		7,470				10,245

Net cash provided by operating activities		15,281				16,157
Investing activities:
Purchases of property, plant and equipment		(5,817	)			(2,810	)
Settlement of net investment hedges		(958	)			—
Other		(233	)			(908	)

Net cash used in investing activities		(7,008	)			(3,718	)
Financing activities:
Payment of dividends		(9,690	)			(9,424	)
Proceeds from issuance of common stock		683				2,105
Purchase of treasury stock		(12,309	)			—
Income tax benefit from the exercise of stock options and deferred compensation\ndistributions, and other		456				(146	)

Net cash used in financing activities		(20,860	)			(7,465	)
Effect of exchange rate changes on cash		(5,790	)			6,286

Net (decrease) increase in cash and cash equivalents		(18,377	)			11,260
Cash and cash equivalents, beginning of period		389,971				314,840

Cash and cash equivalents, end of period	$	371,594			$	326,100

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest	$	6,082			$	7,211
Income taxes, net of refunds		5,825				5,907

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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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Three Months Ended October 31, 2011

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(Unaudited)
\n(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 October 31, 2011 and July 3l, 2011, and\nits results of operations and cash flows for the three months ended October 31, 2011 and 2010. The\ncondensed consolidated balance sheet as of July 31, 2011 has been derived from the audited\nconsolidated financial statements of that date. The preparation of financial statements in\nconformity with accounting principles generally accepted in the United States of America (“GAAP”)\nrequires management to make estimates and assumptions that affect the reported amounts therein. Due\nto the inherent uncertainty involved in making estimates, actual results in future periods may\ndiffer from the estimates.\n

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Certain information and footnote disclosures normally included in financial statements\nprepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations\nof the Securities and Exchange Commission. Accordingly, the condensed consolidated financial\nstatements do not include all of the information and footnotes required by GAAP for complete\nfinancial statement presentation. It is suggested that these condensed consolidated financial\nstatements be read in conjunction with the consolidated financial statements and the notes thereto\nincluded in the Company’s latest annual report on Form 10-K for the year ended July 31, 2011.\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 quarter ended October 31, 2011, are as\nfollows:\n

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	Americas			Europe			Asia-Pacific		Total
Balance as of July 31, 2011	$	425,578			$	171,238		$	203,527		$	800,343

Translation adjustments		(3,045	)			(3,048	)		(1,947	)		(8,040	)

Balance as of October 31,\n2011	$	422,533			$	168,190		$	201,580		$	792,303

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Goodwill decreased $8,040 during the three months ended October 31, 2011 due to the negative\neffects of foreign currency translation. Goodwill at October 31, 2011 and July 31, 2011 did not\ninclude any accumulated impairment losses.\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 the\naccounting guidance for other intangible assets. The net book value of these assets was as follows:\n

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	October 31, 2011		July 31, 2011
	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 intangible assets:
Patents		5		$	9,939		$	(8,604	)	$	1,335			5		$	9,784	$	(8,556	)	$	1,228
Trademarks and other		7			9,292			(7,025	)		2,267			7			9,448		(6,599	)		2,849
Customer relationships		7			162,659			(121,832	)		40,827			7			165,566		(119,977	)		45,589
Non-compete\nagreements and other		4			16,114			(15,562	)		552			4			16,432		(15,760	)		672
Unamortized other intangible\nassets:
Trademarks		N/A			39,480			—			39,480			N/A			39,623		—			39,623

Total				$	237,484		$	(153,023	)	$	84,461					$	240,853	$	(150,892	)	$	89,961

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6\n

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The value of goodwill and other intangible assets in the condensed consolidated financial\nstatements at October 31, 2011 differs from the value assigned to them in the original allocation\nof purchase price due to the effect of fluctuations in the exchange rates used to translate the\nfinancial statements into the United States Dollar between the date of acquisition and October 31,\n2011.\n

\n\n

Amortization expense on intangible assets was $4,080 and $5,147 for the three-month periods\nended October 31, 2011 and 2010, respectively. The amortization over each of the next five fiscal\nyears is projected to be $16,436, $10,578, $5,617, $5,263 and $4,163 for the fiscal years ending\nJuly 31, 2012, 2013, 2014, 2015 and 2016, respectively.\n

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NOTE C — Comprehensive Income\n

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

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	Three Months Ended
	October 31, 2011			October 31, 2010
Net Income	$	32,732			$	26,281
Unrealized gain (loss) on cash flow hedges		1,330				(725	)
Prior service credit and amortization of\n(gain) loss on post-retirement medical plan		668				(63	)
Foreign currency translation adjustments (1)		(19,118	)			30,095

Total comprehensive income	$	15,612			$	55,588

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(1)		The cumulative translation adjustment in the table above includes the settlement of net\ninvestment hedges for the three months ended October 31, 2011 of ($584), net of tax.

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The decrease in total comprehensive income for the quarter ended October 31, 2011 as compared\nto the quarter ended October 31, 2010 was primarily due to the appreciation of the U.S. dollar\nagainst other currencies.\n

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NOTE D — Net Income per Common Share\n

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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

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	Three Months Ended
	October 31,
	2011			2010
Numerator: (in thousands)
Net income	$	32,732			$	26,281
Less:
Restricted stock dividends		(57	)			(56	)

Numerator for basic and diluted Class A net income per share	$	32,675			$	26,225

Less:
Preferential dividends		(818	)			(820	)
Preferential dividends on dilutive stock options		(5	)			(6	)

Numerator for basic and diluted Class B net income per share	$	31,852			$	25,399

Denominator: (in thousands)
Denominator for basic net income per share for both Class A\nand Class B		52,657				52,448
Plus: Effect of dilutive stock options		297				362

Denominator for diluted net income per share for both Class\nA and Class B	$	52,954			$	52,810

Class A Nonvoting Common Stock net income per share:
Basic	$	0.62			$	0.50
Diluted	$	0.62			$	0.50
Class B Voting Common Stock net income per share:
Basic	$	0.60			$	0.48
Diluted	$	0.60			$	0.48

\n\n\n

Options to purchase approximately 4,915,000 and 3,636,000 shares of Class A Nonvoting\nCommon Stock were not included in the computation of diluted net income per share for the quarters\nended October 31, 2011 and 2010, respectively, because the option exercise price was greater than\nthe average market price of the common shares and, therefore, the effect would be anti-dilutive.\n

\n\n

7\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 (expense) 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 months ended October 31, 2011 and\n2010:\n

\n\n


												Corporate
												and
	Americas		Europe			Asia-Pacific		Total Region	Eliminations		Totals
Three months ended October 31,\n2011:
Revenues from external customers	$	153,863		$	97,356		$	98,289	$	349,508		$	—		$	349,508
Intersegment revenues		10,225			762			7,442		18,429			(18,429	)		—
Segment profit		43,230			26,299			13,304		82,833			(3,263	)		79,570
Three months ended October 31,\n2010:
Revenues from external customers	$	145,988		$	92,050		$	91,550	$	329,588		$	—		$	329,588
Intersegment revenues		9,748			893			5,946		16,587			(16,587	)		—
Segment profit		39,359			24,061			16,829		80,249			(3,436	)		76,813

\n\n\n

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

\n\n


	Three months ended:
	October 31,
	2011			2010
Total profit from reportable segments	$	82,833			$	80,249
Corporate and eliminations		(3,263	)			(3,436	)
Unallocated amounts:
Administrative costs		(30,480	)			(31,569	)
Restructuring charges		—				(3,641	)
Investment and other income (expense)		(202	)			290
Interest expense		(5,047	)			(5,687	)

Income before income taxes		43,841				36,206
Income taxes		(11,109	)			(9,925	)

Net income	$	32,732			$	26,281

\n\n

8\n

\n\n\n\n

NOTE F — Stock-Based Compensation\n

\n\n\n

The Company has incentive stock plans under which the Board of Directors may grant\nunrestricted stock, nonqualified stock options, incentive stock options, shares of restricted stock\nand restricted stock units to eligible employees and Directors of the Company and its affiliates.\nThe stock options granted under the Company’s active incentive stock plans have an exercise price\nequal to the fair market value of the underlying stock at the date of grant and generally vest\nratably over a three-year period, with one-third becoming exercisable one year after the grant date\nand one-third additional in each of the succeeding two years. Stock options issued under these\nplans, referred to herein as “service-based” stock options, generally expire 10 years from the date\nof grant. 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. The Company granted restricted shares in\nfiscal 2008 and fiscal 2011 that have an issuance price equal to the fair market value of the\nunderlying stock at the date of grant. The restricted shares granted in fiscal 2008 were amended in\nfiscal 2011 to allow for vesting after a seven-year period upon meeting both performance and\nservice conditions. The restricted shares granted in fiscal 2011 vest ratably at the end of years\nthree, four and five upon meeting certain performance and service conditions. The restricted shares\ngranted in fiscal 2008 and 2011 are referred to herein as “performance-based restricted shares.”\n

\n\n

As of October 31, 2011, the Company has reserved 6,885,999 shares of Class A Nonvoting Common\nStock for outstanding stock options and restricted shares and 5,020,700 shares of Class A Nonvoting\nCommon Stock remain for future issuance of stock options\nand restricted shares under the active plans. The Company uses treasury stock or will issue\nnew Class A Nonvoting Common Stock to deliver shares 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 October 31, 2011 and 2010 was $3,591 ($2,190 net of taxes)\nand $4,069 ($2,482 net of taxes), respectively. As of October 31, 2011, total unrecognized\ncompensation cost related to share-based compensation awards was $22,882 pre-tax, net of estimated\nforfeitures, which the Company expects to recognize over a weighted-average period of 2.3 years.\n

\n\n

The Company has estimated the fair value of its service-based and performance-based stock\noption awards granted during the three months ended October 31, 2011 and 2010 using the\nBlack-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes\nvaluation model are reflected in the following table:\n

\n\n


	Three Months Ended			Three Months Ended
	October 31, 2011			October 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)		5.89				6.57			5.92				6.57
Expected volatility		39.40	%			39.21	%		40.22	%			39.39	%
Expected dividend yield		2.07	%			1.99	%		1.94	%			1.96	%
Risk-free interest rate		1.16	%			2.05	%		1.65	%			2.35	%
Weighted-average market value of\nunderlying stock at grant date	$	27.00			$	29.55		$	29.09			$	28.35
Weighted-average exercise price		27.00				29.55			29.09				28.35
Weighted-average fair value of options\ngranted during the period		8.37				10.01			9.58				9.82

\n\n\n

The Company uses historical data regarding stock option exercise behaviors to estimate\nthe expected term of options granted based on the period of time that options granted are expected\nto be 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 calculated as the average of the high and the low stock price on the date of the\ngrant.\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 October 31, 2011, 310,000\nperformance-based restricted shares were outstanding.\n

\n\n

The Company granted 415,000 performance-based stock options during the three months ended\nOctober 31, 2011, with a weighted average exercise price of $29.55 and a weighted average fair\nvalue of $10.01. The Company also granted 791,150 service-based stock options during the three\nmonths ended October 31, 2011, with a weighted average exercise price of $27.00 and a weighted\naverage fair value of $8.37.\n

\n\n

9\n

\n\n

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

\n\n


									Weighted
									Average
					Weighted			Remaining			Aggregate
					Average			Contractual			Intrinsic
Options	Shares			Exercise Price			Term			Value
Outstanding at July 31, 2011		5,726,017			$	29.24
New grants		1,206,150			$	27.88
Exercised		(69,803	)		$	20.49
Forfeited or expired		(49,365	)		$	28.58

Outstanding at October 31,\n2011		6,812,999			$	29.09				6.8		$	22,979

Exercisable at October 31,\n2011		3,975,963			$	29.83				5.3		$	14,652

\n\n\n

There were 3,975,963 and 3,301,195 options exercisable with a weighted average exercise\nprice of $29.83 and $29.10 at October 31, 2011 and 2010, respectively. The cash received from the\nexercise of options during the quarters ended October 31, 2011 and 2010 was $683 and $2,105,\nrespectively. The tax benefit on stock options exercised during the quarters ended October 31, 2011\nand 2010 was $469 and $440, respectively.\n

\n\n

The total intrinsic value of options exercised during the three months ended October 31, 2011\nand 2010, based upon the average market price at the time of exercise during the period, was $642\nand $1,320, respectively. The total fair value of stock options vested during the three months\nended October 31, 2011 and 2010, was $6,935 and $3,685, respectively.\n

\n\n\n

NOTE G — Stockholders’ Equity\n

\n\n\n

In fiscal 2009, the Company’s Board of Directors authorized a share repurchase plan for the\nCompany’s Class A Nonvoting Common Stock. The plan was implemented by purchasing shares in the open\nmarket or in privately negotiated transactions, with repurchased shares available for use in\nconnection with the Company’s stock-based plans and for other corporate purposes. The Company did\nnot repurchase shares during fiscal 2011. As of July 31, 2011, there remained 204,133 shares to\npurchase in connection with this share repurchase plan.\n

\n\n

On September 9, 2011, the Company’s Board of Directors authorized an additional share\nrepurchase program for up to two million additional shares of the Company’s Class A Nonvoting\nCommon Stock. The plan may be implemented by purchasing shares in the open market or in privately\nnegotiated transactions, with repurchased shares available for use in connection with the Company’s\nstock-based plans and for other corporate purposes. During the three months ended October 31, 2011,\nthe Company purchased 457,360 shares of its Class A Nonvoting Common Stock under this plan for\n$12,309. As of October 31, 2011, there remained 1,746,773 shares to purchase in connection with\nthis share repurchase plan.\n

\n\n\n

NOTE H — Employee Benefit Plans\n

\n\n\n

The Company provides postretirement medical benefits for eligible regular full and part-time\ndomestic employees (including spouses) outlined by the plan. Postretirement benefits are provided\nonly if the employee was hired prior to April 1, 2008, and retires on or after attainment of age 55\nwith 15 years of credited service. Credited service begins accruing at the later of age 40 or date\nof hire. All active employees first eligible to retire after July 31, 1992, are covered by an\nunfunded, contributory postretirement healthcare plan where employer contributions will not exceed\na defined dollar benefit amount, regardless of the cost of the program. Employer contributions to\nthe plan are based on the employee’s age and service at retirement.\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\n2012 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, 2011.\n

\n\n

10\n

\n\n\n

NOTE I — Fair Value Measurements\n

\n\n\n

In accordance with fair value accounting guidance, 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, our financial assets\nand liabilities that were accounted for at fair value on a recurring basis at October 31, 2011, and\nJuly 31, 2011, according to the valuation techniques the Company used to determine their fair\nvalues.\n

\n\n

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


	Fair Value Measurements Using Inputs
	Considered As
	Quoted Prices
	in Active		Significant
	Markets for		Other			Significant
	Identical		Observable			Unobservable
	Assets		Inputs			Inputs		Fair	Balance Sheet
	(Level 1)		(Level 2)			(Level 3)		Values	Classifications
October 31, 2011:
Trading Securities	$	11,207		$	—		$	—	$	11,207	Other assets
Foreign exchange contracts — cash flow hedges		—			296			—		296	Prepaid expenses and other current assets
Foreign exchange contracts		—			21			—		21	Prepaid expenses and other current assets

Total Assets	$	11,207		$	317		$	—	$	11,524


Foreign exchange contracts — cash flow hedges	$	—		$	188		$	—	$	188	Other current liabilities
Foreign exchange contracts — net investment hedges					2,656					2,656	Other current liabilities
Foreign exchange contracts		—			1			—		1	Other current liabilities
Foreign currency denominated debt — net\ninvestment hedge		—			106,125			—		106,125	Long term obligations, less current maturities

Total Liabilities	$	—		$	108,970		$	—	$	108,970

July 31, 2011:
Trading Securities	$	10,897		$	—		$	—	$	10,897	Other assets
Foreign exchange contracts — cash flow hedges		—			16			—		16	Prepaid expenses and other current assets
Foreign exchange contracts		—			3			—		3	Prepaid expenses and other current assets

Total Assets	$	10,897		$	19		$	—	$	10,916


Foreign exchange contracts — cash flow hedges	$	—		$	830		$	—	$	830	Other current liabilities
Foreign exchange contracts — net investment hedges		—			5,295			—		5,295	Other current liabilities
Foreign exchange contracts		—			2			—		2	Other current liabilities
Foreign currency denominated debt — net\ninvestment hedge		—			107,985			—		107,985	Long term obligations, less current maturities

Total Liabilities	$	—		$	114,112		$	—	$	114,112

\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 contracts: 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

11\n

\n\n\n

\n\n\n\n

\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 three months ended October 31, 2011.\n

\n\n

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

\n\n

The estimated fair value of the Company’s short-term and long-term debt obligations, based on\nthe quoted market prices for similar issues and on the current rates offered for debt of similar\nmaturities, was $414,631 and $416,694 at October 31, 2011 and July 31, 2011, respectively, as\ncompared to the carrying value of $391,318 and $393,178 at October 31, 2011 and July 31, 2011,\nrespectively.\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 three months ended October 31, 2011, the Company had no\nsignificant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent\nto their initial recognition.\n

\n\n\n

NOTE J — Restructuring\n

\n\n\n

In fiscal 2009, in response to the global economic downturn, the Company took several measures\nto address its cost structure. In addition to a company-wide salary freeze and decreased\ndiscretionary spending, the Company reduced its workforce by 25%. The Company reduced its workforce\nthrough voluntary and involuntary separation programs, voluntary retirement programs, and facility\nconsolidations. The Company continued the execution of its restructuring actions during fiscal\n2011. These actions included a reduction in its contract labor and decreased discretionary\nspending. As a result of these actions, the Company recorded restructuring charges of $3,641 during\nthe three months ended October 31, 2010. The restructuring charges included $2,665 of employee\nseparation costs, $951 of non-cash fixed asset write-offs, and $25 of other facility closure related\ncosts and contract termination costs.\n

\n\n

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

\n\n


	Employee			Asset
	Related			Write-offs			Other		Total
Beginning\nbalance, July 31,\n2011	$	2,207			$	—		$	49	$	2,256

Cash payments		(1,351	)			—			—		(1,351	)

Ending balance,\nOctober 31, 2011	$	856			$	—		$	49	$	905

\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. These contracts typically require the\nexchange of a foreign currency for U.S. dollars at a fixed rate at a future date, with maturities\nof less than 18 months, which qualify as cash flow hedges or net investment hedges under the\naccounting guidance for derivative instruments and hedging activities. The primary objective of the\nCompany’s foreign currency exchange risk management is to minimize the impact of currency movements\ndue to transactions in other than the respective subsidiaries’ functional currency and to minimize\nthe impact of currency movements on the Company’s net investment denominated in a currency other\nthan the U.S. Dollar. To achieve this objective, the Company hedges a portion of known exposures\nusing forward foreign exchange currency contracts. As of October 31, 2011 and July 31, 2011, the\nnotional amount of outstanding forward exchange contracts was $56,938 and $80,807, 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 quarters ended October 31, 2011 and 2010.\n

\n\n

12\n

\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, Japanese Yen, Swiss Franc and Singapore Dollar. Generally, these risk management\ntransactions will involve the use of foreign currency derivatives to protect against exposure\nresulting 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 October 31, 2011, unrealized gains of $252\nhave been included in OCI. As of July 31, 2011, unrealized losses of $1,535 have been included in\nOCI. All balances are expected to be reclassified from OCI to earnings during the next twelve\nmonths when the hedged transactions impact earnings.\n

\n\n

At October 31, 2011 and July 31, 2011, the Company had $296 and $16 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 October 31, 2011 and July 31, 2011, the\nCompany had $188 and $830, respectively, of forward exchange contracts designated as hedge\ninstruments included in “Other current liabilities” on the accompanying Condensed Consolidated\nBalance Sheets. At October 31, 2011 and July 31, 2011, the U.S. dollar equivalent of these\noutstanding forward foreign exchange contracts totaled $25,288 and $30,519, respectively, including\ncontracts to sell Euros, Canadian Dollars, Australian Dollars, British Pounds, U.S. Dollars, and\nSwiss Franc.\n

\n\n

The Company has also designated intercompany and third party foreign currency denominated debt\ninstruments as net investments hedges. During the three months ended October 31, 2011, the Company\ndesignated €4,581 of intercompany loans as net investment hedges to hedge portions of its net\ninvestment in European foreign operations. No intercompany loans were designated as net investment\nhedges as of July 31, 2011. On May 13, 2010, the Company completed the private placement of €75.0\nmillion aggregate principal amount of senior unsecured notes to accredited institutional investors.\nThis Euro-denominated debt obligation was designated as a net investment hedge to selectively hedge\nportions of its net investment in European foreign operations. As net investment hedges, the\ncurrency effects of the intercompany and third party debt obligations are reflected in the foreign\ncurrency translation adjustments component of accumulated other comprehensive income where they\noffset gains and losses recorded on the Company’s net investment in European operations. The\nCompany’s foreign denominated debt obligations are valued under a market approach using publicized\nspot prices.\n

\n\n

Additionally, the Company utilizes forward foreign exchange currency contracts designated as\nhedge instruments to hedge portions of the Company’s net investments in foreign operations. For\nhedges that meet the effectiveness requirements, the net gains or losses attributable to changes in\nspot exchange rates are recorded in cumulative translation within other comprehensive income. Any\nineffective portions are to be recognized in earnings. Recognition in earnings of amounts\npreviously recorded in cumulative translation is limited to circumstances such as complete or\nsubstantially complete liquidation of the net investment in the hedged foreign operation. At\nOctober 31, 2011 and July 31, 2011, the Company had $2,656 and $5,295, respectively, of forward\nforeign exchange currency contracts designated as net investment hedges included in “Other current\nliabilities” on the Condensed Consolidated Balance Sheet. At October 31, 2011 and July 31, 2011,\nthe U.S dollar equivalent of these outstanding forward foreign exchange contracts totaled $31,650\nand $50,000, respectively, including contracts to sell Euros and Singapore Dollars.\n

\n\n

13\n

\n\n

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

\n\n

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


	Asset Derivatives		Liability Derivatives
	October 31, 2011		July 31, 2011		October 31, 2011			July 31, 2011
Derivatives	Balance				Balance					Balance				Balance
designated as	Sheet	Fair		Sheet		Fair			Sheet	Fair		Sheet	Fair
hedging instruments	Location	Value		Location		Value			Location	Value		Location	Value
Cash flow hedges
Foreign exchange contracts\n	Prepaid expenses\nand other current\nassets\n	$	296		Prepaid expenses\nand other current\nassets\n		$	16		Other current liabilities\n	$	188		Other current liabilities\n	$	830
\n
Net investment hedges
Foreign exchange contracts\n	Prepaid expenses\nand other current\nassets\n	$	—		Prepaid expenses\nand other current\nassets\n		$	—		Other current liabilities\n	$	2,656		Other current liabilities\n	$	5,295
\n
Foreign currency denominated debt\n	Prepaid expenses\nand other current\nassets\n	$	—		Prepaid expenses\nand other current\nassets\n		$	—		Long term obligations, \nless current maturities\n	$	106,125		Long term obligations, \nless current maturities\n	$	107,985
\n
Total derivatives designated as hedging instruments\n		$	296				$	16			$	108,969			$	114,110
\n

Derivatives not designated as hedging instruments
Foreign exchange contracts\n	Prepaid expenses\nand other current\nassets\n	$	21		Prepaid expenses\nand other current\nassets\n		$	3		Other current liabilities\n	$	1		Other current liabilities\n	$	2
\n
Total derivatives not designated as hedging\ninstruments\n		$	21				$	3			$	1			$	2
\n

\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

\n\n

Amount of Gain

Location of

Amount of Gain

Location of Gain or

or (Loss)

Gain or (Loss)

Amount of Gain

or (Loss)

(Loss) Reclassified

Reclassified From

Recognized in

or (Loss)

Derivatives in

Recognized in

From Accumulated

Accumulated OCI

Income on

Recognized in

Cash Flow Hedging

OCI on Derivative

OCI into Income

Into Income

Derivative

Income on Derivative

Relationships

(Effective Portion)

(Ineffective Portion)

Three months

ended October 31,

2011

2010

2011

2010

2011

2010

Foreign exchange\ncontracts

230

(185

)

Cost of goods sold

(777

)

(100

)

Cost of goods sold

—

Total

230

(185

)

(777

)

(100

)

—

\n\n

14\n

\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

\n\n


									Amount of Gain		Location of
	Amount of Gain			Location of Gain or		or (Loss)		Gain or (Loss)	Amount of Gain
	or (Loss)			(Loss) Reclassified		Reclassified From		Recognized in	or (Loss)
Derivatives in Net	Recognized in			From Accumulated		Accumulated OCI		Income on	Recognized in
Invesment Hedging	OCI on Derivative			OCI into Income		into Income		Derivative	Income on Derivative
Relationships	(Effective Portion)			(Effective Portion)		(Effective Portion)		(Ineffective Portion)	(Ineffective Portion)
	Three months					Three months			Three months
	ended October 31,					ended October 31,			ended October 31,
	2011			2010				2011		2010				2011		2010
Foreign currency\nintercompany debt	$	(298	)		$	—		Investment and other income — net	$	—		$	—		Investment and other income — net		$	—	$	—
Foreign currency\ndenominated debt		(11,210	)			(6,720	)	Investment and other income — net		—			—		Investment and other income — net			—		—

Total	$	(11,508	)		$	(6,720	)		$	—		$	—				$	—	$	—

\n\n\n\n

NOTE L — Subsequent Events\n

\n\n\n

On November 17, 2011 the Board of Directors declared a quarterly cash dividend to shareholders\nof the Company’s Class A and Class B Common Stock of $0.185 per share payable on January 31, 2012\nto shareholders of record at the close of business on January 10, 2012.\n

\n\n\n

\n\n

15\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, direct sales and e-commerce capabilities. The\nCompany believes that its reputation for innovation, commitment to quality and service, and\ndedicated employees have made it a world leader in the markets it serves. The Company operates in\nAustralia, Belgium, Brazil, Canada, the Cayman Islands, China, Denmark, France, Germany, Hong Kong,\nIndia, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, Norway, the Philippines,\nPoland, Singapore, Slovakia, South Korea, Spain, Sweden, Thailand, Turkey, the United Arab\nEmirates, the United Kingdom and the United States. Brady sells through subsidiaries or sales\noffices in these countries, with additional sales through a dedicated team of international sales\nrepresentatives in New Zealand, Russia, Taiwan, Vietnam, Central Europe, the Middle East, Africa\nand South America.\n

\n\n

Results of Operations\n

\n\n\n

Sales for the quarter ended October 31, 2011, increased 6.0% to $349.5 million, compared to\n$329.6 million in the same period of the last fiscal year. Of the 6.0% increase in sales, organic\nsales increased by 3.5%, and divestitures, net of acquisitions reduced sales by 0.2%. The change in\nsales related to divestitures, net of acquisitions, resulted from the acquisition of ID Warehouse\nand the divestiture of Teklynx during fiscal 2011. The remaining increase in sales of 2.7% was due\nto fluctuations in the exchange rates used to translate financial results into the United States\nDollar for the three months ended October 31, 2011, compared to the same period in the previous\nyear. The increase in organic sales for the quarter ended October 31, 2011 was comprised of 5.7%\nand 3.7% increases in sales in the Americas and Europe segments, respectively, partially offset by\nthe 0.2% decline in sales in the Asia-Pacific segment. Net income for the quarter ended October 31,\n2011, was $32.7 million or $0.62 per diluted Class A Nonvoting Common Share, up 24.5% from $26.3\nmillion or $0.50 per diluted Class A Nonvoting Common Share reported in the first quarter of last\nfiscal year.\n

\n\n

Gross margin as a percentage of sales was 48.0% for the quarter ended October 31, 2011,\ncompared to 49.9% in the same period of the previous year. The primary driver for the decline in\ngross margin relates to the Asia-Pacific segment where the Company took on lower margin sales\nopportunities in an effort to offset volume declines.\n

\n\n

Research and development (“R&D”) expenses decreased 1.4% to $9.8 million during the three\nmonths ended October 31, 2011, compared to $9.9 million for the same period in the prior year. As a\npercentage of sales, R&D expenses decreased from 3.0% to 2.8% during the three months ended October\n31, 2011, compared to the three months ended October 31, 2010. The Company remains committed to\ninnovation and new product development and expects R&D expense to increase for the remainder of\nfiscal 2012.\n

\n\n

Selling, general, and administrative expenses (“SG&A”) decreased 0.4% to $108.9 million for\nthe three months ended October 31, 2011, compared to $109.3 million for the same period in the\nprior year. SG&A expense as percentage of sales declined to 31.2% in the first quarter of fiscal\n2012 compared to 33.2% in the same quarter last year. The Company has continued to focus on\nreducing its SG&A expenses as a percentage of sales, which is partially offset by its reinvestment\nin growth initiatives.\n

\n\n

Restructuring charges related to the reduction of the Company’s workforce and facility\nconsolidations were $3.6 million during the three-month period ended October 31, 2010.\n

\n\n

Interest expense decreased to $5.0 million for the quarter ended October 31, 2011 from $5.7\nmillion for the quarter ended October 31, 2010. The decrease was due to the Company’s lower\nprincipal balance under the outstanding debt agreements.\n

\n\n

The Company’s income tax rate was 25.3% for the quarter ended October 31, 2011 and 27.4% for\nthe same period of the previous year. The decrease in the Company’s income tax rate during the\nfirst quarter of fiscal 2012 was primarily due to the mix of profits in low and high tax countries\nas well as positive impacts from foreign tax credit benefits. The Company expects the full year\nincome tax rate for fiscal 2012 to be in the mid 20% range.\n

\n\n

Net income for the three months ended October 31, 2011, increased 24.5% to $32.7 million,\ncompared to $26.3 million for the same quarter of the previous year. Net income as a percentage of\nsales increased to 9.4% for the quarter ended October 31, 2011 from 8.0% for the same period in the\nprior year. Net income before restructuring related expenses was $28.9 million, or $0.55 per\ndiluted Class A Common Share, for the three months ended October 31, 2010.\n

\n\n

16\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 months ended October 31, 2011 and\n2010:\n

\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \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-			Total			and
(Dollars in thousands)	Americas			Europe			Pacific		Regions			Eliminations			Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
October 31, 2011	$	153,863			$	97,356		$	98,289			$	349,508			$	—		$	349,508
October 31, 2010	$	145,988			$	92,050		$	91,550			$	329,588			$	—		$	329,588
SALES GROWTH INFORMATION
Three months ended October 31, 2011
Organic		5.7	%			3.7	%		(0.2	)%			3.5	%			—			3.5	%
Currency		0.4	%			3.7	%		5.5	%			2.7	%			—			2.7	%
Acquisitions/Divestitures		(0.7	)%			(1.6	)%		2.1	%			(0.2	)%			—			(0.2	)%

Total		5.4	%			5.8	%		7.4	%			6.0	%			—			6.0	%
SEGMENT PROFIT
Three months ended:
October 31, 2011	$	43,230			$	26,299		$	13,304			$	82,833			$	(3,263	)	$	79,570
October 31, 2010	$	39,359			$	24,061		$	16,829			$	80,249			$	(3,436	)	$	76,813
Percentage increase (decrease)		9.8	%			9.3	%		(20.9	)%			3.2	%						3.6	%

\n\n\n

NET INCOME RECONCILIATION\n

\n\n


	Three months ended:
	October 31,
(Dollars in thousands)	2011			2010
Total profit from reportable segments	$	82,833			$	80,249
Corporate and eliminations		(3,263	)			(3,436	)
Unallocated amounts:
Administrative costs		(30,480	)			(31,569	)
Restructuring charges		—				(3,641	)
Investment and other income (expense)		(202	)			290
Interest expense		(5,047	)			(5,687	)

Income before income taxes		43,841				36,206
Income taxes		(11,109	)			(9,925	)

Net income	$	32,732			$	26,281

\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

17\n

\n\n

Americas:\n

\n\n\n

Sales in the Americas increased 5.4% to $153.9 million for the quarter ended October 31, 2011,\ncompared to $146.0 million for the same period in the prior year. Organic sales increased 5.7% for\nthe quarter ended October 31, 2011, compared to the same period last year. Fluctuations in the\nexchange rates used to translate financial results into the U.S. dollar increased sales by 0.4% in\nthe quarter. The fiscal 2011 divestiture of Teklynx reduced sales by 0.7% in the United States. The\nincrease in organic sales during the quarter was primarily due to the strong Brady brand growth in\nthe United States, Brazil, Canada, and Mexico, driven by an ongoing investment in R&D and new\nproduct launches.\n

\n\n

Segment profit increased 9.8% to $43.2 million for the quarter ended October 31, 2011,\ncompared to $39.4 million for the same\nperiod in the prior year. As a percentage of sales, segment profit increased to 28.1% for the\nquarter ended October 31, 2011 from 27.0% for the same period in the prior year. The segment profit\nincrease was primarily due to an improved gross profit margin as a result of selected price\nincreases that went into effect at the beginning of fiscal 2012, as well as the benefit of the\nsegment’s ongoing productivity initiatives.\n

\n\n

Europe:\n

\n\n\n

Sales in Europe increased 5.8% to $97.4 million for the quarter ended October 31, 2011,\ncompared to $92.1 million for the same period in the prior year. Organic sales increased 3.7% in\nthe quarter ended October 31, 2011 compared to the same period last year. Fluctuations in the\nexchange rates used to translate financial results into the U.S. dollar increased sales within the\nsegment by 3.7% in the quarter. The fiscal 2011 divestiture of Teklynx reduced sales by 1.6% in the\nquarter. The increase in organic sales during the quarter ended October 31, 2011 was driven\nprimarily by the growth of the direct marketing business within Northern and Southern Europe.\n

\n\n

Segment profit increased 9.3% to $26.3 million for the quarter ended October 31, 2011,\ncompared to $24.1 million for the same period in the prior year. As a percentage of sales, segment\nprofit increased to 27.0% for the quarter ended October 31, 2011 from 26.1% for the same period in\nthe prior year. The segment profit increase was primarily due to reduced selling expenses, and the\nbenefits from reorganization.\n

\n\n

Asia-Pacific:\n

\n\n\n

Asia-Pacific sales increased 7.4% to $98.3 million for the quarter ended October 31, 2011,\ncompared to $91.6 million for the same period in the prior year. Organic sales decreased 0.2% in\nthe quarter ended October 31, 2011, compared to the same period last year. Fluctuations in the\nexchange rates used to translate financial results into the U.S. dollar increased sales within the\nsegment by 5.5% in the quarter. The fiscal 2011 acquisition of ID Warehouse increased sales by 2.1%\nin the quarter. The relatively flat organic growth in the first quarter of fiscal 2012 was\nprimarily a result of increased sales from the segment’s on-going customer base diversification in\nthe mobile handset and other adjacent markets, partially offset by reduced demand from one of the\nCompany’s largest mobile handset customers.\n

\n\n

Segment profit decreased 20.9% to $13.3 million for the quarter ended October 31, 2011,\ncompared to $16.8 million for the same period in the prior year. As a percentage of sales, segment\nprofit decreased to 13.5% for the quarter ended October 31, 2011 from 18.4% for the same period in\nthe prior year. The decrease in segment profit was the result of lower margin sales opportunities\nand continued price pressure and inflation on raw materials and wages. The Thailand flood did not\nhave a material impact on the Company’s financial results for the period ended October 31, 2011 due\nto the timing of the event near the end of the quarter. The flood is expected to have the most\nsignificant impact on financial results for the second quarter ending January 31, 2012, with an\nestimated reduction in EPS of $0.05 per diluted share. Potential losses caused by the flooding are\nexpected to be partially covered by property and business interruption insurance. The impact on the\nCompany’s customers is not yet known, and the timing of the insurance recoveries could fall into\nsubsequent periods beyond fiscal year 2012.\n

\n\n

The Company has identified seven reporting units within its three reporting segments for\npurposes of the annual goodwill impairment analysis. The Asia-Pacific reporting segment has two\nreporting units: North/South Asia and Australia. The segment profit decrease within the\nAsia-Pacific region is primarily related to the Company’s North/South Asia reporting unit. The\nCompany last completed its annual impairment testing of goodwill in the fourth quarter of fiscal\n2011. The methodologies for valuing goodwill are applied consistently on a year-over-year basis,\nand the assumptions used in performing the 2011 impairment calculations were evaluated in light of\nmarket and business conditions. Brady continues to believe that the discounted cash flow model and\nmarket multiples model provide a reasonable and meaningful fair value estimate based upon the\nreporting units’ projections of future operating results and cash flows and replicates how market\nparticipants would value the Company’s reporting units. The projections of future operating results\nare based on both past performance and the projections and assumptions used in the Company’s\ncurrent and long-range operating plans. The Company’s estimates could be materially impacted by\nfactors such as significant negative industry or economic trends, disruptions to the Company’s\nbusiness, competitive forces, or changes in significant customers.\n

\n\n

18\n

\n\n

The North/South Asia reporting unit has goodwill of $163.7 million as of October 31, 2011.\nThis reporting unit has faced difficulties in reduced customer demand, increased price pressures,\nand business disruptions due to natural disasters. The Company believes that its long-term\nstrategies will be successful in returning the reporting unit to higher levels of profitability.\nThe valuation of any long lived asset is inherently subjective and dependent on projections of\nfuture operating results. If operating results do not improve, the Company may adjust its estimates\nof future operating results or change other key variables and assumptions utilized in the goodwill\nimpairment model. If such changes occur, these assets may be impaired in the future, which would\nreduce the Company’s earnings in the period in which the impairment charge is taken. Depending on\nthe size of the impairment, the Company may fail to meet certain of the financial covenants in its\nrevolving loan agreement, which, if not waived by the lenders, could result in the Company’s\noutstanding indebtedness under its debt and revolving loan agreements becoming immediately due and\npayable.\n

\n\n

Financial Condition\n

\n\n\n

Cash and cash equivalents were $371.6 million at October 31, 2011, a decline of $18.4 million\ncompared to $390.0 million at July 31, 2011. Cash from net income was offset by the annual incentive\ncompensation payment, quarterly dividend payment and the purchase of the Company’s Class A Common\nStock.\n

\n\n

The Company’s working capital, excluding cash and cash equivalents, increased to $98.0 million\nat October 31, 2011 from $66.4 million at July 31, 2011. Accounts receivable balances increased\n$4.4 million from July 31, 2011 to October 31, 2011 as a result of increased sales volumes during\nthe quarter. Inventories increased $5.5 million for the quarter as a result of increased production\nvolumes. The net decrease in current liabilities of $15.3 million was primarily due to the decrease\nin accrued wages due to the payment of the Company’s fiscal 2011 annual incentive compensation\nduring the quarter ended October 31, 2011.\n

\n\n

In the first quarter of fiscal 2012, the Company generated $15.3 million of cash from\noperations, a decrease of $0.9 million from the same period last year. The decrease was primarily\ndue to a moderate increase in the fiscal 2011 annual incentive compensation payment during the\nquarter ended October 31, 2011, compared to the quarter ended October 31, 2010.\n

\n\n

Capital expenditures were $5.8 million for the quarter ended October 31, 2011, compared to\n$2.8 million in the same period last year. The Company expects capital expenditures of\napproximately $25.0 million for the year ending July 31, 2012. Net cash used in financing\nactivities was $20.9 million for the quarter ended October 31, 2011, an increase of $13.4 million\nfrom the same period last year. The increase was primarily due to $12.3 million of shares of the\nCompany’s Class A Common Stock purchased during the three month period ended October 31, 2011.\n

\n\n

On October 26, 2011, 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 Nonvoting 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 October 31, 2011,\nthere were no outstanding borrowings under the credit facility.\n

\n\n

19\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 October\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 1.8 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 October 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 1.7 to 1.0 and the interest expense coverage ratio equal to 8.3 to 1.0.\n

\n\n

Long-term obligations, less current maturities, as a percentage of long-term obligations, less\ncurrent maturities, plus stockholders’ investment were 22.2% at October 31, 2011 and 22.3% at July\n31, 2011. Long-term obligations decreased by $1.9 million from July 31, 2011 to October 31, 2011\ndue to the positive impact of foreign currency translation on the Company’s Euro-denominated debt.\n

\n\n

Stockholders’ investment increased $1.7 million during the three months October 31, 2011. The\nincrease is a result of the Company’s net income of $32.7 million, offset by the Class A Common\nStock repurchase transactions of $12.3 million and the dividends paid on Class A and Class B Common\nStock of $9.1 million and $0.6 million, respectively.\n

\n\n

The Company’s cash balances are generated and held in numerous locations throughout the world.\nAt October 31, 2011 and July 31, 2011, approximately 59% and 69% of the Company’s cash and cash\nequivalents was held outside the United States, respectively. The Company’s growth has\nhistorically been funded by a combination of cash provided by operating activities and debt\nfinancing. The Company believes that its cash flow from operating activities, in addition to its\nborrowing capacity, are sufficient to fund its anticipated requirements for working capital,\ncapital expenditures, restructuring activities, acquisitions, common stock repurchases, scheduled\ndebt repayments, and dividend payments. The Company believes that its current credit arrangements\nare sound and that the strength of its balance sheet will allow financial flexibility to respond to\nboth internal growth opportunities and those available through acquisition.\n

\n\n

Subsequent Events Affecting Financial Condition\n

\n\n\n

On November 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 $0.185 per share payable on\nJanuary 31, 2012 to shareholders of record at the close of business on January 10, 2012.\n

\n\n

20\n

\n\n

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

\n\n

Operating Leases — The 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 October 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-K 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-K, 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-K, 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 Company’s most recently filed Form 10-K for the year ended July 31, 2011. These uncertainties\nmay cause Brady’s actual future results to be materially different than those expressed in its\nforward-looking statements. Brady does not undertake to update its forward-looking statements\nexcept as required by law.\n

\n\n

21\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 objective of the Company’s foreign currency exchange risk management is to minimize the\nimpact of currency movements on non-functional currency transactions and minimize the foreign\ncurrency translation impact on the Company’s operations. To achieve this objective, the Company\nhedges a portion of known exposures using forward contracts. Main exposures are related to\ntransactions denominated in the British Pound, the Euro, Canadian Dollar, Australian Dollar,\nSingapore Dollar, Japanese Yen, and the Swiss Franc. As of October 31, 2011, the notional amount of\noutstanding forward contracts designated as cash flow hedges was $25.3 million. The Company also\nhedged portions of its net investments in its foreign operations using forward foreign exchange\ncurrency contracts of $31.7 million, intercompany foreign currency denominated debt instruments of\n$6.2 million and Euro-denominated debt of $106.1 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 if there is a desire to modify the Company’s exposure to interest rates.\nAs of October 31, 2011, the Company had no interest rate derivatives.\n

\n\n

The Company is subject to the risk of changes in foreign currency exchange rates due to its\noperations in foreign countries. The Company has manufacturing facilities 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 Australian dollar, the Canadian dollar, the Singapore dollar, the\nEuro, the British Pound, the Brazilian Real, the Korean Won, and the Chinese Yuan. Changes in\nforeign currency exchange rates for the Company’s foreign subsidiaries reporting in local\ncurrencies are generally reported as a component of stockholders’ investment. The\nCompany’s currency translation adjustments recorded for the three months ended October 31, 2011 and\n2010 were $19.1 million unfavorable, and $30.0 million favorable, respectively. As of October 31,\n2011 and 2010, the Company’s foreign subsidiaries had net current assets (defined as current assets\nless current liabilities) subject to foreign currency translation risk of $407.4 million and $277.1\nmillion, respectively. These amounts were offset by net investment hedges of $144.0 million as of\nOctober 31, 2011, and $104.5 million as of October 31, 2010. The potential decrease in the net current assets as of October 31, 2011 from a\nhypothetical 10 percent adverse change in quoted foreign currency exchange rates would be $40.7\nmillion. This sensitivity analysis assumes a parallel shift in foreign currency exchange rates.\nExchange rates rarely move in the same direction relative to the dollar. This assumption may\noverstate the impact of changing exchange rates on individual assets and liabilities denominated in\na 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

22\n

\n\n

PART II. OTHER INFORMATION\n

\n\n

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


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

\n\n

The following table provides information with respect to the purchase of Class A Nonvoting\nCommon Stock during the three months ended October 31, 2011:\n


								Total Number of			Maximum Number
				Average			Shares Purchased			of Shares that May
	Total Number of		Price Paid			as Part of Publicly			Yet Be Purchased
Period	Shares Purchased		per Share			Announced Plans			Under the Plans
August 1, 2011 — August 31, 2011		—		$	—				—			204,133
September 1, 2011 — September 30,\n2011		369,228		$	27.17				369,228			1,834,905
October 1, 2011 — October 31, 2011		88,132		$	25.83				88,132			1,746,773

Total		457,360		$	26.91				457,360			1,746,773

\n\n

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


ITEM 6.		Exhibits

\n\n

(a) Exhibits\n

\n\n

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


	10.1			Change of Control Agreement, dated as of November 21, 2011, entered into with Stephen Millar
	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

\n\n\n

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly\ncaused this report to be signed on its behalf by the undersigned thereunto duly authorized.\n

\n\n

SIGNATURES\n\n

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


	BRADY CORPORATION \n
Date: December 6, 2011	/s/ FRANK M. JAEHNERT\n
	Frank. M. Jaehnert
	President & Chief Executive Officer

Date: December 6, 2011	/s/ THOMAS J. FELMER\n
	Thomas J. Felmer
	Senior Vice President & Chief Financial Officer \n(Principal Financial Officer)

\n\n

23\n

\n\n

EXHIBIT 10.1\n

\n\n\n

BRADY CORPORATION\n

\n\n\n

CHANGE OF CONTROL AGREEMENT\n

\n\n\n

AGREEMENT, made as of November 21, 2011, between Brady Corporation, a Wisconsin corporation,\n(“Corporation”) and Stephen Millar.\n

\n\n

WHEREAS, the Executive is now serving as an executive of the Corporation in a position of\nimportance and responsibility; and\n

\n\n

WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the\nCorporation and its policies, markets and financial and human resources, and the Executive has\nacquired certain confidential information and data with respect to the Corporation; and\n

\n\n

WHEREAS, the Corporation wishes to continue to receive the benefit of the Executive’s\nknowledge and experience and, as an inducement for continued service, is willing to offer the\nExecutive certain payments due to severance as a result of change of control as set forth herein;\n

\n\n

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the\nExecutive and Corporation agree as follows:\n

\n\n\n

SECTION 1. DEFINITIONS.\n

\n\n

(a) Change of Control. For purposes of this Agreement, a “Change of Control” shall occur if\nand when any person or group of persons (as defined in Section 13(d)(3) of the Securities and\nExchange Act of 1934) other than the members of the family of William H. Brady, Jr. and their\ndescendants, or trusts for their benefit, and the William H. Brady Jr. Family Trust, collectively,\ndirectly or indirectly controls in excess of 50% of the voting common stock of the Corporation.\n

\n\n

(b) Termination Due to Change of Control. A “Termination Due to Change of Control” shall\noccur if within the 24 month period beginning with the date a Change of Control occurs (i) the\nExecutive’s employment with the Corporation is involuntarily terminated (other than by reason of\ndeath, disability or Cause) or (ii) the Executive’s employment with the Corporation is voluntarily\nterminated by the Executive subsequent to (A) any reduction in the total of the Executive’s annual\nbase salary (exclusive of fringe benefits) and the Executive’s target bonus in comparison with the\nExecutive’s annual base salary and target bonus immediately prior to the date the Change of Control\noccurs, (B) a significant diminution in the responsibilities or authority of the Executive in\ncomparison with the Executive’s responsibility and authority immediately prior to the date the\nChange of Control occurs or (C) the imposition of a requirement by the Corporation that the\nExecutive relocate to a principal work location more than 50 miles from the Executive’s principal\nwork location immediately prior to the date the Change of Control occurs.\n

\n\n

(c) “Cause” means (i) the Executive’s willful and continued failure to substantially perform\nthe Executive’s duties with the Corporation (other than any such failure resulting from physical or\nmental incapacity) after written demand for performance is given to the Executive by the\nCorporation which specifically identifies the manner in which the Corporation believes the\nExecutive has not substantially performed and a reasonable time to cure has transpired, (ii) the\nExecutive’s conviction of (or plea of nolo contendere for the commission of) a felony, or (iii) the\nExecutive’s commission of an act of dishonesty or of any willful act of misconduct which results in\nor could reasonably be expected to result in significant injury (monetarily or otherwise) to the\nCorporation, as determined in good faith by the Board of Directors of the Corporation.\n

\n\n

(d) “Beneficiary” means any one or more primary or secondary beneficiaries designated in\nwriting by the Executive on a form provided by the Corporation to receive any benefits which may\nbecome payable under this Agreement on or after the Executive’s death. The Executive shall have\nthe right to name, change or revoke the Executive’s designation of a Beneficiary on a form provided\nby the Corporation. The designation on file with the Corporation at the time of the Executive’s\ndeath shall be controlling. Should the Executive fail to make a valid Beneficiary designation or\nleave no named Beneficiary surviving, any benefits due shall be paid to the Executive’s spouse, if\nliving; or if not living, then to the Executive’s estate.\n

\n\n\n

(e) “Code” means the Internal Revenue Code of 1986, as amended.\n

\n\n\n

SECTION 2. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL.\n

\n\n

(a) Following Termination Due to Change of Control, the Executive shall be paid an amount\nequal to two times the annual base salary paid the Executive by the Corporation in effect\nimmediately prior to the date the Change of Control occurs, and two times the average bonus payment\nreceived in the three years immediately prior to the date the Change of Control occurs. Such\namount shall be paid in 24 monthly installments beginning on the 15^th day of the month\nfollowing the month in which the Executive’s employment with the Corporation terminates.\n

\n\n

(b) If the scheduled payments under paragraph (a) above would result in disallowance of any\nportion of the Corporation’s deduction therefore under Section 162(m) of the Code, the payments\ncalled for under paragraph (a) shall be limited to the amount which is deductible, with the balance\nto be paid during the first taxable year in which the Corporation reasonably anticipates that the\ndeduction of such payment is not barred by Section 162(m). However, in such event, the Corporation\nshall pay the Executive on a quarterly basis an amount of interest based on the prime rate\nrecomputed each quarter on the unpaid scheduled payments.\n

\n\n

-2-\n

\n\n

(c) It is intended that (A) each payment or installment of payments provided under this\nSection 2 is a separate “payment” for purposes of Code Section 409A and (B) that the payments\nsatisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A,\nincluding those provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term\ndeferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and\n1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay). Notwithstanding\nanything to the contrary in this Agreement, if the Corporation determines that on the\nTermination Due to Change of Control the Executive is a “specified employee” (as such term is\ndefined under Treasury Regulation 1.409A-1(i)(1)) of the Corporation and that any payments to be\nprovided to Executive are or may become subject to the additional tax under Code Section\n409A(a)(1)(B) or any other taxes or penalties imposed under Code Section 409A (“Section 409A\nTaxes”), then such payments shall be delayed until the date that is six (6) months after the\nTermination Due to Change of Control. Any delayed payments shall be made in a lump sum on the\nfirst day of the seventh month following the Termination Due to Change of Control, or such earlier\ndate that, as determined by the Corporation, is sufficient to avoid the imposition of any Section\n409A Taxes on Executive.\n

\n\n\n

SECTION 3. EXCISE TAX, ATTORNEY FEES.\n

\n\n

(a) If the payments under Section 2 in combination with any other payments which the Executive\nhas the right to receive from the Corporation (the “Total Payments”) would result in the Executive\nincurring an excise tax as a result of Section 280(G) of the Code, the Corporation will reimburse\nthe Executive for such Excise Tax. Such reimbursement will be paid to Executive by the end of the\ntaxable year following the taxable year in which the Executive remits the related taxes to the\nInternal Revenue Service.\n

\n\n

(b) If the Executive is required to file a lawsuit to enforce the Executive’s rights under\nthis Agreement and the Executive prevails in such lawsuit, the Corporation will reimburse the\nExecutive for attorney fees incurred up to a maximum of $25,000.00.\n

\n\n\n

SECTION 4. DEATH AFTER THE EXECUTIVE HAS BEGUN RECEIVING PAYMENTS.\n

\n\n

Should the Executive die after Termination Due to Change of Control, but before receiving all\npayments due the Executive hereunder, any remaining payments due shall be made to the Executive’s\nBeneficiary.\n

\n\n\n

SECTION 5. CONFIDENTIAL INFORMATION AGREEMENT.\n

\n\n

The Executive has obligations under the separate Confidential Information Agreement between\nthe Executive and the Corporation which continue beyond the Executive’s termination of employment.\nThe payments to be made hereunder are conditioned upon the Executive’s compliance with the terms of\nthe Confidential Information Agreement. The payments made hereunder shall be reduced by any\npayments the Corporation makes to the Executive under Section 3 of the Confidential Information\nAgreement. In the event the Executive violates the provisions of the Confidential Information\nAgreement, no further payments shall be due hereunder and the Executive shall be obligated to repay\nall previous payments received hereunder in the same manner as provided in Section 4 of the\nConfidential Information Agreement.\n

\n\n

-3-\n

\n\n\n

SECTION 6. MISCELLANEOUS.\n

\n\n

(a) Non-Assignability. This Agreement is personal to the Executive and, without the prior\nwritten consent of the Corporation, shall not be assignable by the Executive\notherwise than by will or the laws of descent and distribution. This Agreement shall inure to\nthe benefit of and be binding upon the Corporation and its successors and assigns and shall also be\nenforceable by the Executive’s legal representatives.\n

\n\n

(b) Successors. The Corporation shall require any successor (whether direct or indirect, by\npurchase, merger, consolidation or otherwise) to all or substantially all of the business and/or\nassets of the Corporation expressly to assume and agree to perform this Agreement in the same\nmanner and to the same extent that the Corporation would have been required to perform it if no\nsuch succession had taken place. As used in this Agreement, “Corporation” shall mean both the\nCorporation as defined above and any such successor that assumes and agrees to perform this\nAgreement, by operation of law or otherwise.\n

\n\n

(c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the\nlaws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent\nnot preempted by federal law. The captions of this Agreement are not part of the provisions hereof\nand shall have no force or effect.\n

\n\n

(d) Notices. All notices and other communications under this Agreement shall be in writing\nand shall be given by hand delivery to the other party or by registered or certified mail, return\nreceipt requested, postage prepaid, addressed as follows:\n


		If to the Executive:		Stephen Millar
				S4-S6 Regents Park Estate
				391 Park Road
				Regents Park
				NSW
				2143
				Australia

		If to the Corporation:		Brady Corporation
				6555 West Good Hope Road
				Milwaukee, Wisconsin 53223
				Attention: Corporate Secretary

\n\n\n

or to such other address as either party furnishes to the other in writing in accordance with this\nparagraph. Notices and communications shall be effective when actually received by the addressee.\n

\n\n

(e) Construction. The invalidity or unenforceability of any provision of this Agreement shall\nnot affect the validity or enforceability of any other provision of this Agreement. If any\nprovision of this Agreement shall be held invalid or unenforceable in part, the remaining portion\nof such provision, together with all other provisions of this Agreement, shall remain valid and\nenforceable and continue in full force and effect to the fullest extent consistent with law.\n

\n\n

-4-\n

\n\n

(f) No Guarantee of Employment. Nothing contained in this Agreement shall give the Executive\nthe right to be retained in the employment of the Corporation or affect the right of the\nCorporation to dismiss the Executive.\n

\n\n

(g) Amendment; Entire Agreement. This Agreement may not be amended or modified except by a\nwritten agreement executed by the parties hereto or their respective successors and legal\nrepresentatives. This Agreement contains the entire agreement between the parties on the subjects\ncovered and replaces all prior writings, proposals, specifications or other oral or written\nmaterials relating thereto.\n

\n\n

(h) Impact on Other Plans. No amounts paid to the Executive under this Agreement will be\ntaken into account as “wages”, “salary”, “base pay” or any other type of compensation when\ndetermining the amount of any payment or allocation, or for any other purpose, under any other\nqualified or nonqualified plan or agreement of the Corporation, except as otherwise may be\nspecifically provided by such plan or agreement.\n

\n\n

(i) Other Agreements. This Agreement supersedes any other severance arrangement or Change of\nControl Agreement between the Corporation and the Executive. This Agreement does not confer any\npayments or benefits other than the payments described in Sections 2 and 3 hereof.\n

\n\n

(j) Withholding. To the extent required by law, the Corporation shall withhold any taxes\nrequired to be withheld with respect to this Agreement by the federal, state or local government\nfrom payments made hereunder or from other amounts paid to the Executive by the Corporation.\n

\n\n

(k) Facility of Payment. If the Executive or, if applicable, the Executive’s Beneficiary, is\nunder legal disability, the Corporation may direct that payments be made to a relative of such\nperson for the benefit of such person, without the intervention of any legal guardian or\nconservator, or to any legal guardian or conservator of such person. Any such distribution shall\nconstitute a full discharge with respect to the Corporation and the Corporation shall not be\nrequired to see to the application of any distribution so made.\n

\n\n\n

SECTION 7. CLAIMS PROCEDURE.\n

\n\n

(a) Claim Review. If the Executive or the Executive’s Beneficiary (a “Claimant”) believes\nthat he or she has been denied all or a portion of a benefit under this Agreement, he or she may\nfile a written claim for benefits with the Corporation. The Corporation shall review the claim and\nnotify the Claimant of the Corporation’s decision within 60 days of receipt of such claim, unless\nthe Claimant receives written notice prior to the end of the 60 day period stating that special\ncircumstances require an extension of the time for decision. The Corporation’s decision shall be\nin writing, sent by mail to the Claimant’s last known address, and if a denial of the claim, must\ncontain the specific reasons for the denial, reference to pertinent provisions of this Agreement on\nwhich the denial is based, a designation of any additional material necessary to perfect the claim,\nand an explanation of the claim review procedure.\n

\n\n

-5-\n

\n\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\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

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

\n\n

Date: December 6, 2011\n\n

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


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

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

\n\n

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

\n\n

Date: December 6, 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


/s/ THOMAS J. FELMER\n \n
Thomas J. Felmer
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 October\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: December 6, 2011\n\n

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


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

\n\n\n

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

\n\n

EXHIBIT 32.2\n

\n\n\n

SECTION 1350 CERTIFICATION\n

\n\n\n

\n\n

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

\n\n

Date: December 6, 2011\n\n

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


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

\n\n\n

\n\n


	Page

PART I. Financial Information		3

Item 1. Financial Statements (Unaudited)		3

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 Discussions and Analysis of Financial Condition and Results of Operations		16

Item 3. Quantitative and Qualitative Disclosures About Market Risk		22

Item 4. Controls and Procedures		22

PART II. Other Information		23

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

Item 6. Exhibits		23

Signatures		23

Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
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


	/s/ STEPHEN MILLAR\n
	Stephen Millar
	President Asia-Pacific & VP Brady Corporation

	Brady Corporation \n
	/s/ KRISTA J. EBBENS\n
	Krista J. Ebbens
	Corporate Secretary

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