Brady (BRC) 8-K Brady Corporation reports fiscal 2011 second quarter results

EXHIBIT 99.1

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Investor contact: Aaron Pearce 414-438-6895
Media contact: Carole Herbstreit 414-438-6882

Brady Corporation reports fiscal 2011 second quarter results

MILWAUKEE (February 18, 2011)—Brady Corporation (NYSE: BRC), a world leader in identification solutions, today reported financial results for its fiscal 2011 second quarter ended January 31, 2011.

Second-quarter results:

Sales for the fiscal 2011 second quarter were up 11.2 percent to $329.0 million compared to $295.8 million in the second quarter of fiscal 2010. Organic sales growth was 9.8 percent, acquisitions, net of divestitures contributed 1.8 percent to sales, and the impact of foreign currency translation decreased sales by 0.4 percent. By segment, organic sales increased 9.7 percent in the Americas, 12.4 percent in Europe and 6.9 percent in the Asia-Pacific region.

Net income in the fiscal 2011 second quarter was up 61.3 percent to $24.2 million compared to $15.0 million in the same quarter last year. Excluding $1.5 million of after-tax restructuring charges in the second quarter of fiscal 2011 and $2.6 million of after-tax restructuring charges in the same quarter last year, net income was up 46.0 percent to $25.7 million compared to $17.6 million in the same quarter last year.

Earnings per diluted Class A Common Share were up 64.3 percent to $0.46 in the second quarter of fiscal 2011 compared to $0.28 in the second quarter of fiscal 2010. Excluding after-tax restructuring charges, earnings per diluted Class A Common Share increased 45.5 percent to $0.48 in the second quarter of fiscal 2011 compared to $0.33 per share in the same quarter of fiscal 2010.

Six-month results:

Sales for the six-month period ended January 31, 2011 were up 7.2 percent to $658.6 million compared to $614.3 million in the same period last year.

Net income for the six months ended January 31, 2011 was up 37.7 percent to $50.5 million compared to $36.7 million in the same period in fiscal 2010. Excluding $4.2 million of after-tax restructuring charges in the six-month period ended January 31, 2011 and $5.2 million of after-tax restructuring charges in the same period last year, net income was up 30.4 percent to $54.6 million compared to $41.9 million in the same period last year.

Earnings per diluted Class A Common Share were up 37.7 percent to $0.95 for the six-month period ended January 31, 2011 compared to $0.69 in the same period of fiscal 2010. Excluding after-tax restructuring charges, earnings per diluted Class A Common Share increased 30.4 percent to $1.03 for the six-month period ended January 31, 2011 compared to $0.79 per share in the same period of fiscal 2010.

Commentary and Guidance:

“We are pleased to see strong organic sales growth in all our regions, and are encouraged by the substantial growth in earnings resulting from the increased organic sales and our on-going focus on improving profitability,” said Frank M. Jaehnert, Brady’s President and Chief Executive Officer.

“Cash generation remains a highlight for Brady as we delivered $41.4 million of cash flow from operating activities in the quarter, resulting in an increase in our cash balance to $362.3 million at January 31, 2011. Our strong cash position along with our untapped $200 million line of credit provides us with adequate flexibility to take advantage of future growth opportunities,” said Brady Chief Financial Officer Thomas J. Felmer. “As a result of our strong second quarter earnings, we are increasing our full year fiscal 2011 guidance range for earnings per diluted Class A Common share from between $2.05 and $2.25 to between $2.15 and $2.35, excluding pre-tax restructuring charges of $7 to $10 million, or $0.10 to $0.14 per share. We also expect mid-single digit organic sales growth for the balance of fiscal 2011 as sales comparisons become more challenging in the second half of fiscal 2011. Our guidance reflects all cost savings we expect to realize this year from restructuring activities as well as from our Brady Business Performance System initiatives for operational improvements.”

A webcast regarding fiscal 2011 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. Brady’s 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 millions of customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and employs approximately 6,600 people at operations in the Americas, Europe and Asia-Pacific. Brady’s fiscal 2010 sales were approximately $1.26 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at www.bradycorp.com.

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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 the length or severity of the current worldwide economic downturn or timing or strength of a subsequent recovery; 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 develop and successfully market new products; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; fluctuations in currency rates versus the US dollar; unforeseen tax consequences; potential write-offs of Brady’s substantial intangible assets; Brady’s ability to retain significant contracts and customers; risks associated with international operations; Brady’s ability to maintain compliance with its debt covenants; technology changes; business interruptions due to implementing business systems; environmental, health and safety compliance costs and liabilities; future competition; interruptions to sources of supply; Brady’s ability to realize cost savings from operating initiatives; difficulties associated with exports; risks associated with restructuring plans; risks associated with obtaining governmental approvals and maintaining regulatory compliance; 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 I of Brady’s Form 10-K for the year ended July 31, 2010. 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
	2011			2010			Change			2011			2010			Change
Net sales	$	329,009		$	295,829			11.2	%	$	658,597		$	614,315			7.2	%
Cost of products sold		169,999			148,911			14.2	%		335,075			309,955			8.1	%
Gross margin		159,010			146,918			8.2	%		323,522			304,360			6.3	%
Operating expenses:
Research and development		11,732			10,632			10.3	%		21,676			20,241			7.1	%
Selling, general and administrative		108,064			108,735			-0.6	%		217,388			217,411			0.0	%
Restructuring charge		2,134			3,649			-41.5	%		5,775			7,250			-20.3	%
Total operating expenses		121,930			123,016			-0.9	%		244,839			244,902			0.0	%
Operating income		37,080			23,902			55.1	%		78,683			59,458			32.3	%
Other income and (expense):
Investment and other income		1,174			1,104			6.3	%		1,464			1,153			27.0	%
Interest expense		(5,850	)		(5,163	)		13.3	%		(11,537	)		(10,325	)		11.7	%
Income before income taxes		32,404			19,843			63.3	%		68,610			50,286			36.4	%
Income taxes		8,205			4,842			69.5	%		18,130			13,617			33.1	%
Net income	$	24,199		$	15,001			61.3	%	$	50,480		$	36,669			37.7	%
Per Class A Nonvoting Common Share:
Basic net income	$	0.46		$	0.29			58.6	%	$	0.96		$	0.70			37.1	%
Diluted net income	$	0.46		$	0.28			64.3	%	$	0.95		$	0.69			37.7	%
Dividends	$	0.18		$	0.175			2.9	%	$	0.36		$	0.35			2.9	%
Per Class B Voting Common Share:
Basic net income	$	0.46		$	0.29			58.6	%	$	0.94		$	0.68			38.2	%
Diluted net income	$	0.46		$	0.28			64.3	%	$	0.94		$	0.67			40.3	%
Dividends	$	0.18		$	0.175			2.9	%	$	0.34		$	0.33			3.1	%
Weighted average common shares outstanding (in thousands):
Basic		52,593			52,370						52,521			52,354
Diluted		53,053			53,096						52,932			53,020

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

	(Unaudited)
	January 31, 2011			July 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	362,302		$	314,840
Accounts receivable — Net		240,173			221,621
Inventories:
Finished products		56,085			52,906
Work-in-process		14,614			13,146
Raw materials and supplies		28,129			28,620
Total inventories		98,828			94,672
Prepaid expenses and other current assets		36,233			37,839
Total current assets		737,536			668,972
Other assets:
Goodwill		781,776			768,600
Other intangible assets, net		98,560			103,546
Deferred income taxes		45,087			39,103
Other		19,673			20,808
Property, plant and equipment:
Cost:
Land		6,331			6,265
Buildings and improvements		103,305			101,138
Machinery and equipment		294,414			289,727
Construction in progress		15,208			9,873
		419,258			407,003
Less accumulated depreciation		278,710			261,501
Property, plant and equipment — net		140,548			145,502
Total	$	1,823,180		$	1,746,531
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	92,696		$	96,702
Wages and amounts withheld from employees		52,161			67,285
Taxes, other than income taxes		8,898			7,537
Accrued income taxes		16,603			10,138
Other current liabilities		60,105			50,862
Current maturities on long-term debt		61,265			61,264
Total current liabilities		291,728			293,788
Long-term obligations, less current maturities		387,875			382,940
Other liabilities		66,120			64,776
Total liabilities		745,723			741,504
Stockholders’ investment:
Common stock:
Class A nonvoting common stock — Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 49,105,601 and 48,875,716 shares, respectively		513			513
Class B voting common stock — Issued and outstanding, 3,538,628 shares		35			35
Additional paid-in capital		308,002			304,205
Income retained in the business		750,038			718,512
Treasury stock — 1,845,886 and 2,175,771 shares, respectively of Class A nonvoting common stock, at cost		(56,069	)		(66,314	)
Accumulated other comprehensive income		79,674			50,905
Other		(4,736	)		(2,829	)
Total stockholders’ investment		1,077,457			1,005,027
Total	$	1,823,180		$	1,746,531

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	(Unaudited)
	Six Months Ended
	January 31,
	2011			2010
Operating activities:
Net income	$	50,480		$	36,669
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,502			27,366
Non-cash portion of restructuring charges		1,714			1,420
Non-cash portion of stock-based compensation expense		6,869			5,156
Gain on the sale of business		(4,394	)		—
Deferred income taxes		(4,926	)		(4,398	)
Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures):
Accounts receivable		(11,938	)		(10,300	)
Inventories		(879	)		(1,891	)
Prepaid expenses and other assets		2,384			(1,585	)
Accounts payable and accrued liabilities		(13,792	)		12,926
Income taxes		6,589			2,670
Net cash provided by operating activities		57,609			68,033
Investing activities:
Acquisition of business, net of cash acquired		(7,970	)		(20,299	)
Payments of contingent consideration		(979	)		—
Divestiture of business, net of cash retained in business		12,979			—
Purchases of property, plant and equipment		(9,045	)		(14,974	)
Other		(494	)		(570	)
Net cash used in investing activities		(5,509	)		(35,843	)
Financing activities:
Payment of dividends		(18,954	)		(18,344	)
Proceeds from issuance of common stock		4,909			1,672
Income tax benefit from the exercise of stock options and deferred compensation distribution		359			380
Net cash used in financing activities		(13,686	)		(16,292	)
Effect of exchange rate changes on cash		9,048			1,530
Net increase in cash and cash equivalents		47,462			17,428
Cash and cash equivalents, beginning of period		314,840			188,156
Cash and cash equivalents, end of period	$	362,302		$	205,584
Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest	$	9,138		$	10,313
Income taxes, net of refunds		17,398			10,817
Acquisitions:
Fair value of assets acquired, net of cash	$	4,624		$	8,829
Liabilities assumed		(1,446	)		(2,678	)
Goodwill		4,792			14,148
Net cash paid for acquisitions	$	7,970		$	20,299

Information by regional segment for the three and six months ended January 31, 2011 and 2010 is as follows:

													Corporate
							Asia-			Total			and
(in thousands)	Americas			Europe			Pacific			Region			Eliminations			Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
January 31, 2011	$	136,011		$	104,041		$	88,957		$	329,009			—		$	329,009
January 31, 2010	$	121,603		$	96,614		$	77,612		$	295,829			—		$	295,829
Six months ended:
January 31, 2011	$	281,999		$	196,091		$	180,507		$	658,597			—		$	658,597
January 31, 2010	$	257,842		$	190,949		$	165,524		$	614,315			—		$	614,315
SALES GROWTH INFORMATION
Three months ended January 31, 2011:
Base		9.7	%		12.4	%		6.9	%		9.8	%		—			9.8	%
Currency		0.8	%		-6.9	%		5.6	%		-0.4	%		—			-0.4	%
Acquisitions/Divestitures		1.4	%		2.2	%		2.1	%		1.8	%		—			1.8	%
Total		11.9	%		7.7	%		14.6	%		11.2	%		—			11.2	%
Six months ended January 31, 2011:
Base		6.8	%		6.6	%		3.1	%		5.7	%		—			5.7	%
Currency		0.8	%		-6.9	%		5.0	%		-0.5	%		—			-0.5	%
Acquisitions/Divestitures		1.8	%		3.0	%		1.0	%		2.0	%		—			2.0	%
Total		9.4	%		2.7	%		9.1	%		7.2	%		—			7.2	%
SEGMENT PROFIT
Three months ended:
January 31, 2011	$	31,015		$	29,165		$	11,524		$	71,704		$	(5,088	)	$	66,616
January 31, 2010	$	23,546		$	25,947		$	10,687		$	60,180		$	(3,683	)	$	56,497
Percentage increase		31.7	%		12.4	%		7.8	%		19.1	%					17.9	%
Six months ended:
January 31, 2011	$	70,374		$	53,226		$	28,353		$	151,953		$	(8,525	)	$	143,428
January 31, 2010	$	56,347		$	50,809		$	25,814		$	132,970		$	(6,603	)	$	126,367
Percentage increase		24.9	%		4.8	%		9.8	%		14.3	%					13.5	%

NET INCOME RECONCILIATION (in thousands)

	Three months ended:						Six months ended:
	January 31,			January 31,			January 31,			January 31,
	2011			2010			2011			2010
Total profit for reportable segments	$	71,704		$	60,180		$	151,953		$	132,970
Corporate and eliminations		(5,088	)		(3,683	)		($8,525	)		(6,603	)
Unallocated amounts:
Administrative costs		(27,402	)		(28,946	)		(58,970	)		(59,659	)
Restructuring charge		(2,134	)		(3,649	)		(5,775	)		(7,250	)
Investment and other income		1,174			1,104			1,464			1,153
Interest expense		(5,850	)		(5,163	)		(11,537	)		(10,325	)
Income before income taxes		32,404			19,843			68,610			50,286
Income taxes		(8,205	)		(4,842	)		(18,130	)		(13,617	)
Net income	$	24,199		$	15,001		$	50,480		$	36,669

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands)

	Fiscal 2011
	Q1		Q2		Q3		Q4		Total
EBITDA (1)
Net income	$	26,281	$	24,199					$	50,480
Interest expense		5,687		5,850						11,537
Income taxes		9,925		8,205						18,130
Depreciation and amortization		12,594		12,908						25,502
EBITDA (non-GAAP measure)	$	54,487	$	51,162	$	—	$	—	$	105,649
	Fiscal 2010
	Q1		Q2		Q3		Q4		Total
EBITDA (1)
Net income	$	21,668	$	15,001	$	23,695	$	21,592	$	81,956
Interest expense		5,162		5,163		5,147		5,750		21,222
Income taxes		8,775		4,842		7,193		6,636		27,446
Depreciation and amortization		13,817		13,549		12,910		12,746		53,022
EBITDA (non-GAAP measure)	$	49,422	$	38,555	$	48,945	$	46,724	$	183,646

(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.