Brady Corporation Reports Fiscal 2012 Second Quarter Results and Non-Cash Goodwill Impairment

Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for the fiscal 2012 second quarter ended January 31, 2012.

Quarter Ended January 31, 2012 Results:

Sales for the fiscal 2012 second quarter were down 2.6 percent to $320.6 million compared to $329.0 million in the second quarter of fiscal 2011. Organic sales declined by 1.8 percent, divestitures net of acquisitions reduced sales by 0.4 percent, and the impact of foreign currency translation decreased sales by 0.4 percent. By segment, organic sales increased 2.9 percent in the Americas, declined 5.7 percent in Europe and declined 4.4 percent in the Asia-Pacific region.

During the second quarter ended January 31, 2012, the Company recorded a non-cash impairment charge of $115.7 million for the write down of goodwill in the Asia-Pacific region. Operating results and financial forecasts in the Asia-Pacific region have been impacted by reduced sales volumes to one of the Company’s major mobile handset customers due to shifts in end market shares and compressed gross profit margins caused primarily by increased competition in the mobile handset industry. This non-cash impairment charge does not impact the Company’s future cash flow, profitability, liquidity, or compliance with debt covenants in its various credit agreements.

Net income (loss) in the fiscal 2012 second quarter was $(90.0) million compared to $24.2 million in the same quarter last year. Excluding the impact of the non-cash goodwill impairment charge outlined above and prior year restructuring charges, net income for the quarter ended January 31, 2012 was flat at $25.7 million.

Earnings (loss) per diluted Class A Common Share in the fiscal 2012 second quarter were $(1.72) compared to $0.46 in the same quarter last year. Excluding the impact of the non-cash goodwill impairment charge and prior year restructuring charges, earnings per diluted Class A Common Share were up 2.1 percent to $0.49 for the quarter ended January 31, 2012 compared to $0.48 in the same period in fiscal 2011.

Six Months Ended January 31, 2012 Results:

Sales for the six-month period ended January 31, 2012 were up 1.7 percent to $670.1 million compared to $658.6 million in the same period last year.

Net income (loss) for the six months ended January 31, 2012 was $(57.2) million compared to $50.5 million in the same period in fiscal 2011. Excluding the impact of the non-cash goodwill impairment charge and prior year restructuring charges, net income for the six months ended January 31, 2012 was up 7.1 percent to $58.5 million compared to $54.6 million in the same period in fiscal 2011.

Earnings (loss) per diluted Class A Common Share were $(1.09) for the six-month period ended January 31, 2012 compared to $0.95 in the same period of fiscal 2011. Excluding the impact of the non-cash goodwill impairment charge and prior year restructuring charges, earnings per diluted Class A Common Share for the six months ended January 31, 2012 were up 8.7 percent to $1.12 compared to $1.03 in the same period in fiscal 2011.

Commentary and Guidance:

“Today we announced an impairment charge related to our Asian business. As discussed earlier, reduced sales to our largest customer and increasing competitive pressures have led to this action. This month we began the process of splitting our Asia business into two dedicated teams - one team to focus on our die-cut business and the other team to focus on our MRO and identification businesses. This change should help increase our focus on both businesses as we work to accelerate the growth of our MRO business and improve growth and profitability of our die-cut business,” said Brady’s President and Chief Executive Officer Frank M. Jaehnert.

“We are encouraged by the continued recovery of the American economy and the strong profitability of our business in the Americas, but remain concerned with the European economy. Our focus going forward will be on expanding our business in emerging economies and higher growth vertical markets, moving to more digital business models and continuing to introduce innovative new products,” continued Jaehnert.

“Our second quarter was challenging as we had difficult comparables combined with certain headwinds this year, including the flooding in Thailand. Even with these challenges, we were able to increase net income as a percent of sales, excluding the goodwill impairment charge and we finished with a cash balance of $380 million at January 31, 2012,” said Brady Chief Financial Officer Thomas J. Felmer. “The non-cash goodwill impairment charge does not change our commitment to investing in core growth opportunities, paying dividends, and growing through acquisition. Given the uncertainties surrounding the European economy, the compressed margins in the mobile handset industry, and the depreciation of certain foreign currencies versus the U.S. dollar, we have modified our full year fiscal 2012 guidance for earnings per diluted Class A Common Share, exclusive of after-tax restructuring charges and the Asia goodwill impairment outlined above to between $2.20 and $2.40 from our previous guidance of between $2.30 and $2.50. Our guidance includes low single-digit organic sales growth in the Americas and Asia and approximately flat organic sales in Europe.”

A webcast regarding Brady’s fiscal 2012 second quarter financial results will be available at www.bradycorp.com beginning at 9:30 a.m. Central 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 as of July 31, 2011 employed approximately 6,500 people at operations in the Americas, Europe and Asia-Pacific. Brady’s fiscal 2011 sales were approximately $1.34 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.

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, 2011. 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.