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Brady Corporation reports sales and net income for its fiscal 2008 second quarter

MILWAUKEE (February 20, 2008)—Brady Corporation (NYSE: BRC), a world leader in identification solutions, reports sales and earnings for its second quarter ended January 31, 2008.

     Sales for the quarter were up 13 percent to $364.1 million, compared to $321.3 million in the second quarter of fiscal 2007. Base business growth was down 1 percent, acquisitions increased sales by 8 percent and currency exchange added 6 percent. Total sales increased 18 percent in Brady Americas, 3 percent in Direct Marketing & People Identification Americas, 24 percent in Europe, and 3 percent in the Asia/Pacific region.

     Net income for the quarter rose 35 percent to $26.7 million compared to $19.7 million in the quarter last year. Earnings per diluted Class A Common share increased 33 percent to $0.48 compared to $0.36 per share in the fiscal 2007 second quarter.

     Sales for the six months ended January 31, 2008, rose 14 percent to $744.3 million compared to $653.5 million in the same period last year. Net income for the first six months of fiscal 2008 rose 16 percent to $63.1 million compared to $54.2 million for the same period in fiscal 2007. Six-month earnings per diluted Class A Common share were up 15 percent to $1.14 compared to $0.99 in fiscal 2007.

     “We are pleased with our overall results for the quarter including good growth in net income and nice improvement in margins. Our profit improvements are a direct result of actions taken over the past year. A number of factors contributed to flat core growth, including a challenging economy in the US,” said Frank M. Jaehnert, Brady’s president and chief executive officer. “Recently, we consolidated leadership of our Direct Marketing & People Identification and Brady businesses in the Americas in order to bring greater consistency to our global management structure. Both businesses will now report to Matt Williamson, president, Brady Americas. This will further streamline and simplify our organization.”

     “I am very pleased to see the impact that our focus on working capital has had on operating cash flow generation which increased to $87.8 million from $37.1 million, up 137 percent year to date,” said Brady Chief Financial Officer Thomas J. Felmer. “We are continuing to focus on integrating acquisitions and streamlining our business to assure our cost structure is appropriate for the economic conditions, and rebalancing our business in Asia to focus on more proprietary and profitable segments. We reaffirm our guidance of sales from $1.43 to $1.46 billion and net income and diluted earnings per share of between $129 and $135 million, and $2.31 and $2.42 respectively.”

     A webcast regarding fiscal 2008 second quarter results will be available at www.investor.bradycorp.com beginning at 9:30 a.m. Central Standard Time today.

     Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Its products help customers increase safety, security, productivity

and performance and include high-performance labels and signs, safety devices, printing systems and software, and precision die-cut materials. Founded in 1914, the company has more than 500,000 customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee and employs more than 9,000 people at operations in the Americas, Europe and Asia/Pacific. Brady’s fiscal 2007 sales were approximately $1.363 billion.

     More information is available on the Internet at www.bradycorp.com.

###

Brady believes that certain statements in this news release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements related to future, not past, events included in this news release, including, without limitation, statements regarding Brady’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations are forward-looking statements. When used in this news release, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions and other factors, some of which are beyond Brady’s control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from future financial performance of major markets Brady serves, which include, without limitation, telecommunications, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, transportation; difficulties in making and integrating acquisitions; risks associated with newly acquired businesses; Brady’s ability to retain significant contracts and customers; future competition; Brady’s ability to develop and successfully market new products; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; interruptions to sources of supply; environmental, health and safety compliance costs and liabilities; Brady’s ability to realize cost savings from operating initiatives; Brady’s ability to attract and retain key talent; difficulties associated with exports; risks associated with international operations; fluctuations in currency rates versus the US dollar; technology changes; potential write-offs of Brady’s substantial intangible assets; risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products; business interruptions due to implementing business systems; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature contained from time to time in Brady’s U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section located in Item 1A of Part II of Brady’s Annual Report on Form 10-K for the period ended July 31, 2007. These uncertainties may cause Brady’s actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements.

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands)

	(Unaudited)
	Three Months Ended January 31,									Six Months Ended January 31,
							Percentage									Percentage
	2008			2007			Change			2008			2007			Change
Net sales	$	364,124			321,275			13.3	%	$	744,258			653,534			13.9	%
Cost of products sold		189,101			171,114			10.5	%		381,567			339,245			12.5	%
Gross margin		175,023			150,161			16.6	%		362,691			314,289			15.4	%
Operating expenses:
Research and development		10,071			9,082			10.9	%		19,050			17,614			8.2	%
Selling, general and administrative		122,508			108,355			13.1	%		242,859			212,010			14.6	%
Total operating expenses		132,579			117,437			12.9	%		261,909			229,624			14.1	%
Operating income		42,444			32,724			29.7	%		100,782			84,665			19.0	%
Other income and (expense):
Investment and other income (expense)		2,269			(106	)		-2240.6	%		2,387			532			348.7	%
Interest expense		(6,747	)		(5,244	)		28.7	%		(13,467	)		(9,979	)		35.0	%
Income before income taxes		37,966			27,374			38.7	%		89,702			75,218			19.3	%
Income taxes		11,276			7,665			47.1	%		26,642			21,061			26.5	%
Net income	$	26,690			19,709			35.4	%	$	63,060			54,157			16.4	%
		2008			2007						2008			2007
Per Class A Nonvoting Common Share:
Basic net income	$	0.49		$	0.37			32.4	%	$	1.16		$	1.01			14.9	%
Diluted net income	$	0.48		$	0.36			33.3	%	$	1.14		$	0.99			15.2	%
Dividends	$	0.15		$	0.14			7.1	%	$	0.30		$	0.28			7.1	%
Per Class B Voting Common Share:
Basic net income	$	0.49		$	0.37			32.4	%	$	1.14		$	0.99			15.2	%
Diluted net income	$	0.48		$	0.36			33.3	%	$	1.13		$	0.97			16.5	%
Dividends	$	0.15		$	0.14			7.1	%	$	0.28		$	0.26			7.7	%
Weighted average common shares outstanding (in Thousands):
Basic		54,510			53,894						54,430			53,814
Diluted		55,228			54,789						55,175			54,697

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

	(Unaudited)
	January 31, 2008		July 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	198,439	$	142,846
Short term investments		—		19,200
Accounts receivable, less allowance for losses ($8,960 and $9,109, respectively)		242,394		239,569
Inventories:
Finished products		82,783		80,486
Work-in-process		21,164		21,309
Raw materials and supplies		35,867		37,983
Total inventories		139,814		139,778
Prepaid expenses and other current assets		45,946		42,020
Total current assets		626,593		583,413
Other assets:
Goodwill		768,850		737,450
Other intangible assets, net		148,468		149,761
Deferred income taxes		31,070		32,508
Other		24,697		21,111
Total other assets		973,085		940,830
Property, plant and equipment:
Cost:
Land		6,394		6,332
Buildings and improvements		93,938		90,688
Machinery and equipment		264,611		248,356
Construction in progress		14,531		18,107
		379,474		363,483
Less accumulated depreciation		205,240		188,869
Net property, plant and equipment		174,234		174,614
Total	$	1,773,912	$	1,698,857
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	96,220	$	91,596
Wages and amounts withheld from employees		62,065		73,622
Taxes, other than income taxes		7,789		8,461
Accrued income taxes		12,804		24,677
Other current liabilities		53,129		60,254
Short-term borrowings and current maturities on long-term debt		21,436		21,444
Total current liabilities		253,443		280,054
Long-term obligations, less current maturities		478,572		478,575
Other liabilities		62,899		49,216
Total liabilities		794,914		807,845
Stockholders’ investment:
Common stock:
Class A nonvoting common stock — Issued 51,032,887 and 50,586,524 shares		510		506
Class B voting common stock — Issued and outstanding, 3,538,628 shares		35		35
Additional paid-in capital		284,761		266,203
Income retained in the business		586,111		540,238
Accumulated other comprehensive income		107,035		83,376
Other		546		654
Total stockholders’ investment		978,998		891,012
Total	$	1,773,912	$	1,698,857

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	(Unaudited)
	Six Months Ended
	January 31,
	2008			2007
Operating activities:
Net income	$	63,060		$	54,157
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,669			26,096
Deferred income taxes		(1,527	)		(542	)
Loss on disposal of property, plant & equipment		1,010			305
Non-cash portion of stock-based compensation expense		6,382			3,669
Changes in operating assets and liabilities (net of effects of business acquisitions):
Accounts receivable		7,080			(14,036	)
Inventories		7,571			(14,787	)
Prepaid expenses and other assets		(7,339	)		(8,590	)
Accounts payable and accrued liabilities		(17,117	)		(8,316	)
Income taxes		(1,266	)		(3,411	)
Other liabilities		325			2,514
Net cash provided by operating activities		87,848			37,059
Investing activities:
Acquisition of businesses, net of cash acquired		(24,552	)		(90,418	)
Payments of contingent consideration		(5,798	)		(9,329	)
Purchases of short-term investments		(10,350	)		—
Sales of short-term investments		29,550			11,500
Purchases of property, plant and equipment		(14,358	)		(31,901	)
Other		(3,259	)		(5,831	)
Net cash used in investing activities		(28,767	)		(125,979	)
Financing activities:
Payment of dividends		(16,285	)		(15,014	)
Proceeds from issuance of common stock		7,980			3,837
Principal payments on debt		(9	)		(26,231	)
Proceeds from issuance of debt		—			97,020
Income tax benefit from the exercise of stock options and deferred compensation distribution		4,093			763
Net cash (used in) provided by financing activities		(4,221	)		60,375
Effect of exchange rate changes on cash		733			1,945
Net increase (decrease) in cash and cash equivalents		55,593			(26,600	)
Cash and cash equivalents, beginning of period		142,846			113,008
Cash and cash equivalents, end of period		198,439			86,408
Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest	$	13,153		$	9,754
Income taxes, net of refunds		26,381			23,983
Acquisitions:
Fair value of assets acquired, net of cash	$	17,279		$	50,042
Liabilities assumed		(6,371	)		(15,617	)
Goodwill		13,644			55,993
Net cash paid for acquisitions	$	24,552		$	90,418

Information by regional segment for the three and six months ended January 31, 2008 and 2007 is as follows:

				Direct
				Marketing &
	Brady			People ID												Corporate and
(in thousands)	Americas			Americas			Europe			Asia Pacific			Subtotals			Eliminations			Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
January 31, 2008	$	95,303		$	61,318		$	122,615		$	84,888		$	364,124			—		$	364,124
January 31, 2007		80,510			59,478			98,846			82,441			321,275			—			321,275
Six months ended:
January 31, 2008	$	200,538		$	130,858		$	231,529		$	181,333		$	744,258			—		$	744,258
January 31, 2007		163,269			123,662			191,211			175,392			653,534			—			653,534
SALES GROWTH INFORMATION
Three months ended January 31, 2008:
Base		2.0	%		-4.1	%		1.6	%		-4.6	%		-1.0	%		—			-1.0	%
Currency		2.7	%		1.9	%		10.4	%		7.2	%		6.1	%		—			6.1	%
Acquisitions		13.7	%		5.3	%		12.1	%		0.4	%		8.2	%		—			8.2	%
Total		18.4	%		3.1	%		24.1	%		3.0	%		13.3	%		—			13.3	%
Six months ended January 31, 2008:
Base		5.1	%		-0.8	%		0.9	%		-3.9	%		0.3	%		—			0.3	%
Currency		2.2	%		1.6	%		10.1	%		6.9	%		5.7	%		—			5.7	%
Acquisitions		15.5	%		5.0	%		10.1	%		0.4	%		7.9	%		—			7.9	%
Total		22.8	%		5.8	%		21.1	%		3.4	%		13.9	%		—			13.9	%
SEGMENT PROFIT (LOSS)
Three months ended:
January 31, 2008	$	19,517		$	12,519		$	31,067		$	12,660		$	75,763		$	(2,347	)	$	73,416
January 31, 2007		14,473			14,920			22,604			12,394			64,391			(2,828	)		61,563
Percentage increase (decrease)		34.9	%		-16.1	%		37.4	%		2.1	%		17.7	%		-17.0	%		19.3	%
Six months ended:
January 31, 2008	$	43,975		$	32,167		$	60,967		$	32,050		$	169,159		$	(4,583	)	$	164,576
January 31, 2007		35,188			31,723			45,609			34,531			147,051			(5,638	)		141,413
Percentage increase (decrease)		25.0	%		1.4	%		33.7	%		-7.2	%		15.0	%		-18.7	%		16.4	%

NET INCOME RECONCILIATION

	Three months ended:						Six months ended:
	January 31,			January			January 31,			January 31,
(in thousands)	2008			31, 2007			2008			2007
Total profit for reportable segments	$	75,763		$	64,391		$	169,159		$	147,051
Corporate and eliminations		(2,347	)		(2,828	)	$	(4,583	)		(5,638	)
Unallocated amounts:
Administrative costs		(30,972	)		(28,839	)		(63,794	)		(56,748	)
Investment and other income		2,269			(106	)		2,387			532
Interest expense		(6,747	)		(5,244	)		(13,467	)		(9,979	)
Income before income taxes		37,966			27,374			89,702			75,218
Income taxes		(11,276	)		(7,665	)		(26,642	)		(21,061	)
Net income	$	26,690		$	19,709		$	63,060		$	54,157

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(in thousands)

	Fiscal 2007
	Q1		Q2		Q3		Q4		Total
EBITDA (1)
Net income	$	34,448	$	19,709					$	54,157
Interest expense		4,735		5,244						9,979
Income taxes		13,396		7,665						21,061
Depreciation and amortization		12,927		13,169						26,096
EBITDA (non-GAAP measure)	$	65,506	$	45,787	$	—	$	—	$	111,293

	Fiscal 2008
	Q1		Q2		Q3		Q4		Total
EBITDA (1)
Net income	$	36,370	$	26,690					$	63,060
Interest expense		6,720		6,747						13,467
Income taxes		15,366		11,276						26,642
Depreciation and amortization		14,168		15,501						29,669
EBITDA (non-GAAP measure)	$	72,624	$	60,214	$	—	$	—	$	132,838

(1) Brady is presenting EBITDA because it is used by many of our investors and lenders, and is presented as a convenience to them. EBITDA represents net income before interest expense, income taxes and depreciation and amortization. EBITDA is not a calculation based on generally accepted accounting principles (GAAP). The amounts included in the EBITDA calculation, however, are derived from amounts included in the Condensed Consolidated Statements of Income data. EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company’s operating performance, or as an alternative to operating cash flows as a measure of liquidity. The EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.