Bar Bolens - Director of Investor Relations Frank Jaehnert – President, CEO David Mathieson – CFO, SVP Allan Klotsche – VP, President, Asia-Pacific. -:

Allison Poliniak - Wachovia Bank Rob Damron - 21st Century Ajit Pai - Thomas Weisel Partners Robert McCarthy - Baird

Good day, ladies and gentlemen and welcome to the FirstQuarter 2008 Brady Corporation Earnings Call. My name is Angelic and I'll beyour coordinator for today. At this time, all participants are in a listen-onlymode. We will facilitate a question-and-answer session towards the end oftoday's conference. (Operator Instructions). I will now turn the presentation over to your host fortoday's conference, Bar Bolens, Director of Investor Relations. Please, proceedma'am.

Good morning, everybody. Thank you for joining us. Duringour call this morning you will hear from Frank Jaehnert, CEO and then DavidMathieson, CFO who will be presenting today's quarterly financial review, aswell as the regional overview. Also joining us this morning is Allan Klotsche,President of Brady Asia Pacific and Global Die Cut who will provide the Asia portion of the regional reports. As usual, after brief presentations, we will open up thefloor to questions. Please note that in the beginning of this quarter of fiscal2008, we've changed our segments and have broken out our Americas business into DirectMarketing and People ID Americas and Brady Americas. Asia-Pacific and Europe remain the same. This reflects our currentmanagement of the business and our segments reported today reflect the newreporting format. We encourage you to follow along on the slides located onthe internet as we will be referring to the individual slides as we proceedthrough the presentation. These slides can be found on our website atwww.investor.bradycorp.com. We have a couple of minutes to get to those whilewe go through our Safe Harbor statement andother usual information. Please note that in this call we may make comments aboutforward-looking information. Words such as expect, believe and anticipate are afew examples of words identifying our forward-looking statement. It isimportant to note that forward-looking information is subject to various riskfactors and uncertainties, which could significantly impact expected results.Risk factors were noted in our news release this morning and Brady's 10-K filedwith the SEC in September of 2007. Second, please note that this teleconference is copyrightedby Brady Corporation and there may be no rebroadcasting of this withoutexpressed written consent of Brady. Note also that we will be tapping the calland broadcasting it over the internet for replay and your participation in thequestion and answer session will constitute your consent to being recorded. Thank you, and now here is Frank Jaehnert.

Thanks, Bar. Good morning. We are very pleased with thesolid start of fiscal 2008 as sales in net income reached record levels. We arealso pleased to see the results of our cost reduction efforts starting topay-off. So though the comparisons to the strong start last year in our Die Cutbusiness was booming, I am especially happy that we were able to exceed lastyears earnings. We also announced last week, the acquisition of Transposafe,which was a first acquisition we have made in the seven months. We have usedthis quite a period to work on the efficiency of our existing operations and tointegrate recently acquired businesses. We know that we are not operating yetas the well-oiled machine, so the seven months period of no acquisition hasbeen welcomed. Our efforts for the rest of this year and into next year will beto continue to work on quality of earnings and on working capital management. While we did have a relatively strong first quarter, we dohave some questions about the economy. With rising oil prices, with continuingweakening of the dollar and the concerns over the banking issues, we arecautious on the economic prospects. I will now turn the call over to David Mathieson, who willprovide the financial review. I will be back later to talk about our prioritiesfor fiscal 2008. David?

Thanks, Frank and good morning. On slide three, sales in thefirst quarter were up 14%, gross margin as a percent of sales have stoppeddeclining and were flat with last year at 49.4%. SG&A was up 50 basispoints, operating income was up 12% in dollars, although down slightly as apercent of sale. Net income was up 6% and diluted earnings per share were up 5%at $0.66. Cash flow from operating activities at $34 million was up verystrongly, a 174% over the last years first quarter. Our CapEx also moderatedfrom a big spend in fiscal 2006 to $7.4 million. On slide four, organic growth was 2%, with strong growth inBrady Americas, the continued decline in the dollar added 5% to top line inthis quarter. We added 7% from acquisitions made last fiscal year. On slide five, gross margin percentage stopped declining inthis quarter and the good news is that excluding acquisitions made in the last12 months, gross margin is up but only slightly. Our SG&A is up 50 basispoints, mainly due to ramp up in IT cost to continue the program we have inplace, including 10 SAP completed previous year on top of the 16 we did lastyear. On slide six, I believe our efforts in new productdevelopment are starting to payoff with the introduction of the new IPprinters, products which have been enthusiastically received by the market inNorth America and Europe. On slide seven, our operating income was up 12%, but therate, down 30 basis points. With additional interest expense and a tax rate higherthan last year, net income was up 6%. Our tax rate of 29.7% for the quarter ismainly impacted by the new FIN 48 accounting which will cause quarterlyvariations in the rates. We expect 29% for the full year as we expect the ratesin quarter to decrease to help get it back to 29%. On slide eight, last year's first quarter is a toughcomparison for us and we are pleased to see diluted earnings per share of 5%.As EBITDA excludes interest expense and tax, its 11% increase is more in linewith the 12% increase we saw in operating income. Slide nine we have introduced working capital into ourincentive plan this year. We identify there were so many businesses acquired inthe last four years, but more attention on this aspect of business we couldimprove our performance. We are now seeing inventory levels with theirs. Weinclude receivables, inventory, payables and deferred revenue and a definitionof working capital and major of these as a percent of the last three monthsrevenue annualized. We have gotten off to a great start with cash flow up $22million from last year, so we believe our working capital focus is paying offand to date CapEx is also around 50% of what we did last year. Slide 10, here's our balance sheet. We've a $188 million ofcash and equivalents, with cash building since the end of the fiscal year.We've not done an acquisition since the middle of April until last week, whichwas after this quarter's close. We paid the first [bill] of fixed interest debtin June and that's a $21 million of short-term debt. Slide 11, our gross debts EBITDA is $2.1 million with netdebt to pro forma EBITDA of $1.3 million. We believe we continue to remain conservativelyleveraged. On slide 12, we are pleased with the start we've made forthe year. We have executed well the cost reduction activities that we undertooklast year and like our positions in both mobile handsets and the smaller harddisk drives and consumer electronic businesses. But we are cautious compared tothe year last to some extent, due to weak economy and feel the current exchangerate fluctuations could reverse. As a result, we are not changing our guidancefor the full year at this time. Now let me cover Brady Americas on slide 13. Brady Americas’sales increased to a $105 million, an increase of 27%. We are pleased to reportstrong organic sales growth of 8% in the quarter with 2% from currency and 17%from acquisitions. The organic growth of 8% within the region was driven by astrong growth across most of our major market, including electrical and WireID, safety and industrial identification, laboratory and aerospace, defenseremained stronger. This growth was partially offset by a continued softness inthe electrical utility market due to the recoding situation. Brady Americas alsoexperienced solid organic growth in all countries in the region for thequarter. We are particularly encouraged by the strength of our label anddie-cut business to industrial and now electronic OEMs in Brazil. The acquisition of Asterisco in Brazil, in December of 2006,continues to yield synergies within our base business. We have recently movedthe Asterisco business into an adjacent facility to the Brady business, whichwill continue to provide productivity improvements. We also continue to focus onthe integration of SPC into our core MRO business. The initial results ofselling Sorbent products to existing Brady channel, has been positive. During the quarter, as David said, as I said, we introducethe new IT printer for industrial in MRO. Customers to date has been a successwith sales running ahead of plan, primarily in the U.S. Segment profit was 18%or $3.7 million to $24.5 million in the quarter, driven by increased salesvolume from both base business and acquisitions. Segment profit as a percent of sales was lower than theprior year at 23.2%, due mainly to the impact of acquisitions, followed bybusiness mix and a number of favorable items in last year’s first quarter. I will also cover Direct Marketing and People ID Americas.The Direct Marketing and People ID Americas to just 8% revenue growth in thefirst quarter, driven largely by acquisitions. Organic growth was 2%,acquisitions contributed 5% and foreign currency impact was 1% in the quarter. By market, our regulatory business was strong during thequarter. The non-residential construction markets also contributed nice growthin the early part of the quarter, however, softened as the quarter progressed.This was offset by softness in the manufacturing sector and a conscious shift awayfrom less profitable sales in one business. By geography, we experienced solidorganic growth in Brazil,moderate growth in the U.S.and moderate declines in Canada. During the quarter, we launched several new productsincluding our [inaudible] for management system and on the education market anda variety of new innovative access control card products. In addition, weenhanced our security management offerings with the launch of new accesscontrol system premises. We saw segment profitability expansion in the quarter, withsegment profits growing more than double with sales growth. Segment profit was$19.6 million, was higher than the prior year as a percent of sales by 200basis points at 28.3% due to continued integration and acquisitions and cost controlefforts, an effort that should continue into the future. For example, we haverecently completed the consolidation of the Jam.and Temtec businesses into the Brady People ID facilities in Burlington,Massachusetts and Xiamen,China, which resulted in theclosure of our [Seton], New York and Anaheim, Californiafacilities. During the second quarter, Emedwill be going live on SAP in December. We look forward to this SAPimplementation to continue to improve the efficiency of Emed and furtherintegrate it during marketing Americasbusinesses. We will also be completing the consolidation of the [inaudible]facilities acquired in the CIPI acquisition which should result in continuedimprovement in the profitability of our People ID business. Now let's look at Europe on slide 14. Sales for the European region were$108.9 million, increasing 18% over the same period last year. This businesswas flat with currency added 10% and acquisitions added 8%. By brand, thedirect marketing businesses showed solid growth over the first quarter lastyear, but as expected, sales from U.K No Smoking ban fell off sharply in thequarter. The Brady branch showed modest growth in the quarter, as we continueto focus on selected markets, heavily concentrated in MRO. In OEM markets, thepicture tends to be mixed, but nice results in traditional high-performancelabeling and wire identification, where we have launched new products underleveraging recent acquisitions. However, we continue to see a decline in thatOEM die-cut business. Results across the region variedgeographically. We experienced declines in the U.K.and Sweden however, we sawencouraging results in the [Benelux] with someEuropean and general regions growing, growth at performance GDP. We continuethe geographic expansion by launching our Seton business in Portugal. As our acquisitionintegrations continued to show positive results, both Scafftag andModernoTecnica outperformed ahead of the local economies GDP whereas Scafftaghas also facilitated growth in the United Arab Emirates. SorbentProducts driving new European business based in Belgium and we have seen anencouraging start with SPC as we leverage our distributor basis. Segment profit for the quarterwas $29.9 million, up 30% over prior year and increasing at a faster pace inthe top line. This reflects the continuing focus and more profitable productlines, the resizing of the Tradex headquarters function based in Sweden,another cost reduction activity. Our acquisitions were dilutive to this rate,they are still pretty profitable. As a result, our operating profit as apercent of sales rose from 24.3% to 27.5%. Perhaps we don't see any immediateslowing in the economy in Europe, we are watching it closely and expect to mixthe economic landscape in Europe in thefuture. I would now like to turn the callover to Al Klotsche with the Asian regional report.

Thanks, David. I will draw yourattention to slide number 14. For the first quarter in Asia,sales were $96.4 million, up slightly from last year's $93 million. Organicgrowth was down 3%, acquisitions had minimal impact on the quarter and currencyadded a positive 7%. You may recall the same quarter last year was a verystrong quarter, when we more than doubled our growth over the prior year as aresult of strong organic growth and the acquisitions of Tradex from day one.Overall, our results for the quarter were very much in line with ourexpectations. During the quarter, our mobilephone and consumer electronic themes focused on transferring our specificationpositions at the OEM's to the manufacturing locations within their supplychains. As reported last quarter, we felt good about both the number ofprograms and individual parts that we were involved with. Now that the volume productionsare running, we are also pleased with our allocation wins throughout the supplychain. As volumes began to ramp up during the quarter, we saw some rathersignificant shifts in market share within our customer base. Some of our formerleading customers lost market share while some of our newer customers, namelythe Korean OEM's, gained market share. We continue to benefit from having abroad region share across all of the major OEMs in the space as the OEMs jockeyfor market share pricing pressures remain high throughout the supply chain. While low-end phones and electronic devices are growingrapidly, we continue to see a healthy segment of the market demand feature-richdevices to drive the need from more Brady products. Some high-end phones modelsnow have twice as many Brady parts as they did just five years ago. Thisincrease is a combination of customer needs and our ability to supply a largerportion of the customers building materials. Our focus in market share is also growing with consumer electronicsmanufacturers ranging from MP3 players to GPS units to digital cameras. As youhave likely seen, the conversions of these devices, is happening at anincreasing pace and our experience with the electronic supply chain has us wellpositioned for future growth. After one year of integration with Tradex and Daewon, oursales organizations clearly understand their product and market focus and ournon-die-cut business seems to be responding favorably to that. Our highperformance label business continues to growth on the heels of establishedproducts and we are optimistic that with some of the new products we will beintroducing in the next quarter. This will provide even more of push. Our Safety and Facility identification business is alsogaining some nice traction with the support of a larger and more focused groupof channel partners that we have been developing over the last year. Thecombination of education, awareness and multiple approaches to the endcustomers appeared to be working well in this MRO market space. While our geographic expansion has slowed in comparison toprior quarters, we are pleased with the strong business ramp up in Dong Guan,Southern China, in Bangalore, India. Our DongGuan facility has steadily increasing their capabilities and productionvolumes. Brady Indiais also enjoying some very strong sales growth, despite the qualification oflocal customers taking longer than anticipated. We have also started production at our Japanese Greenfield,which is located outside of Tokyo.Our focus in Japan is toprovide stronger support to the Japanese design centers and then support thehigh-volume production as it moves outside of Japanto areas like China andparts of Southeast Asia. Elsewhere, thecombination of our businesses in Thailandand business rationalization in Southeast Asiahas helped focus our business and reduce operating expenses. The result of lastyears cost adjustments in Southeast Asia havebeen very positive for our business. Our performance in Australia continues to remain verysolid, both with our core business as well as the acquisitions that we havemade. Some of the boost that we have gotten from the Australian economy andspecific niche markets may not be as strong throughout all of calendar 2008 butour performance should continue to track on plan. Segment profit for the regionwas $19.4 million, down 12.4% from last year's segment profit of $22.1 million. We are looking forward to the last three quarters of thisyear. We remain positive on the full year. Our year-on-year performance willnow be compared to the softer quarters of last year. We continue to watchconsumption patterns in the U.S.and European markets during the holiday seasons, as this will have an obviousimpact on the demand of Asian manufactured goods. As we have over the pastyear, we will closely monitor variable expenses and quickly make adjustments ifand when necessary. I will now turn the call back to Frank Jaehnert.

Thanks, Allan. As I said earlier, we were very pleased tostart off the year as strong as we did, especially with the challenges we facedin the second half of fiscal 2007 in a tough comparisons to the strong firstquarter last year. However, we are by no means, where we want to be in thefuture. Brady is a much more diverse company then it was a couple of years ago,both geographically with 60% of our business outside the U.S. and also markets,such as the diverse electronics market, large mobile handset business,commercial buildings and retail and the new spaces served by our People IDbusiness to name just a few. : We feel good about our financial results in the firstquarter. We do have concerns that some of the markets in which we operate maybefacing some slower times ahead and are watching those markets that indicate uscarefully. That is the end of our prepared comments. And I will nowstart the Q&A. Angelic, please. : We feel good about our financial results in the firstquarter. We do have concerns that some of the markets in which we operate maybefacing some slower times ahead and are watching those markets that indicate uscarefully. That is the end of our prepared comments. And I will nowstart the Q&A. Angelic, please.

Thank you, sir. (Operator Instruction) Your first questioncomes from the line of Allison Poliniak of Wachovia Bank. Please proceed. Allison Poliniak -Wachovia Bank: Hi. Good morning.

Good morning.

Good morning, Allison. Allison Poliniak -Wachovia Bank: The question, the decline in OEM die-cut business in Europe, is that part of the market share shift that Alwas talking about; is there some other reason for that?

Peter?

Well, I think, maybe, Allison, probably better to answerthat. I think it is probably more to do with a little bit of that shift, alittle bit of migration over to Asia, but Al,I think you probably got a better perspective on that?

Our estimate, it’s a little bit of market shift, and it’s alittle bit of where the growth in mobile phones and consumer electronics arecoming from. So, it’s really nothing significant in terms of market share gainsor losses in Europe for us. Allison Poliniak -Wachovia Bank: Hey, great. And then second, your results, they showed areally positive impact in some of the cost reduction initiatives that you guyshave put in place. Can you talk a little bit about what we should be expectingin fiscal '08, some of the initiatives that are in your pipeline?

Are you talking about cost reduction, Allison? Allison Poliniak -Wachovia Bank: Exactly, you talked about the pipeline, some of theinitiatives for fiscal '08. Can you just go into those a little more?

Well, there’s nothing -- we have done, we spend somethinglike $20 million last fiscal year in cost reduction activity. There was nothingquite like that lined up for fiscal 2008. We're always working. As I said inthe past, we are always working on our last pipeline of many, many, manythings. There was nothing that we would call a, in particular, it’s just awhole range of continuing to source in China, continue to consolidatefacilities where it makes sense, just a whole range of many things, but nothingof the same order that we completed in 2007.

Allison, this is Frank. Let me just add a couple of commentsfrom my point of view. We have for instance, David mentioned earlier that weare in the process of consolidating two of our CIPI facilities that CIPI was anacquisition we've made a little bit over a year ago, and they have two largefacilities in China.We are in the process right now of combining them. Then, last year we had 16SAP implementations. As you can imagine, when you implement SAP in a site,first of all, you have to extra work of overtime, people trying to get use ofthe system. So that's when I referred to we are not a well-oiled machine. So we are basically in the 60 locations which are now tryingto increase efficiencies and utilize the new system. And also in out business,we have done so many consolidations. Like, we took three Korean operations, putit under one roof and we moved operations from Californiato China and to Mexico, altering the out business, and we areunder the process of consolidating somehow medical businesses from Minneapolis to Dallas, Texas. And when you look at allthis, there is plenty of things to work on, which short-term, we should seesome results over the next couple of months. But I think what David saidearlier is also true, we do not foresee at this point in time, unless we havesome big changes in the economy, that we are going to have something similar interms of restructuring that we had last year. Allison Poliniak -Wachovia Bank: Okay, great. Thank you.

Your next question comes from theline of Rob Damron of 21st Century. Please proceed. Rob Damron - 21st Century: Good morning, everyone.

Good morning. Rob Damron - 21st Century: Lets see, first of all, I justwant to make sure that there were no onetime costs in the quarter, or if therewere, can you quantify any of those?

No, there is nothing ofsignificance, Rob. Rob Damron - 21st Century: Okay. And then secondly, youmentioned the -- kind of new, some of the new products as a result of yourresearch and development. I guess first of all, can you quantify for us howmuch of your growth, your core growth has been from new products in the lastquarter? And then what's the expectation in terms of the pipeline of newproducts going forward?

Well, we are very pleased withthis new product, and maybe the market described what a new product does, butRob, as I've said before, most of our new products, most of it is replacing andcannibalizing older products. So we don't expect to get anything significantfrom organic growth with these. What we do do is maintain market leadership,and we maintain our high growth margins but nothing significantly drivingorganic growth.

For the product that we singledout (This is Matt Williamson speaking), there is a Thermal Transfer Printer, soit is an expansion of our family of printers that we've been selling for morethan a decade. This particular printer we've launched in North America andEurope in the last quarter, and the unique thing about this is the softwarethat really enhances the usability of this product for the end users to createa really hassle free experience. And because of the reception ofthe end users, we've had a really successful launch of this particular product.And as I mentioned, an expansion of products that we've had that are similar tothis, but this particular one is a little bit more unique in terms of it'ssoftware characteristics but not something that devolves the specific resultsfor. Rob Damron - 21st Century: Okay, that's helpful. And then,just a last question on SAP. You mentioned 16 implementations last year; Iguess, where are we in this process? How many do we expect in fiscal '08?

Yeah, we expect about 10 this year, and of course that'salso driven by the number of acquisitions which we are making because typicallywhen we acquire business, they are not an SAP. Sometimes they are, but most ofthe time they are not. So we have a constant opportunity to implement oursystem and then get better efficiencies out of this. But the main facilities atBrady are now on SAP. And we have a couple of lot ones at Emed, for instance inthis year, but all the big operations in Europe and the Americas are on SAP. So we aretalking more smaller ones. Like, we can go to Australia, and it's a very compleximplementation because they have several businesses there, but its nothing ofmajor magnitude, doesn't take anything away from complexity.

Yeah, we expect about 10 this year, and of course that'salso driven by the number of acquisitions which we are making because typicallywhen we acquire business, they are not an SAP. Sometimes they are, but most ofthe time they are not. So we have a constant opportunity to implement oursystem and then get better efficiencies out of this. But the main facilities atBrady are now on SAP. And we have a couple of lot ones at Emed, for instance inthis year, but all the big operations in Europe and the Americas are on SAP. So we aretalking more smaller ones. Like, we can go to Australia, and it's a very compleximplementation because they have several businesses there, but its nothing ofmajor magnitude, doesn't take anything away from complexity. Rob Damron - 21st Century: Okay. That's helpful. Thank you.

(Operator Instruction) Your next question comes from theline of Ajit Pai of Thomas Weisel Partners. Please proceed. Ajit Pai - ThomasWeisel Partners: Good morning.

Good morning, Ajit.

Good morning, Ajit. Ajit Pai - ThomasWeisel Partners: Couple of quick questions, the first one is just looking atyour gross margins, I think its flat year-over-year despite sort of a shift inmix away from the die-cut, if I got the numbers right. So, does that mean thatthe core business actually -- the non die-cut business actually saw some grossmargin pressures? And then the second question, in terms of color for yourcosts, not the ones that are variables that you can get rid off in terms ofinfrastructure etc. or personnel, are there any other inflationary pressuresthat you are seeing building up and their cost of raw material, as well as inwages, in the country that you are operating and even in local currency there?

Let me start, and then maybe David can help me here. This isFrank. First of all, I think David said that the underlying gross margin beforeacquisitions went up modestly. So, having said there also -- so there -- Ithink that's pretty positive. The second thing is we had a pretty strongbusiness in die-cut in this quarter because that's particularly when thebusiness ramps up, so if you compare sequentially to prior quarters, our phasein die-cut was larger than it was for instance in the fourth and the thirdquarters of the last fiscal year. So, while we are saying that over time through acquisitionsprimarily in MRO space, we're going to see a stronger presence in MRO than inOEM and especially in die-cut, this doesn't mean that every quarter this is thecase, and the last quarter was pretty strong in die-cut. David?

Yeah, I would echo what Frank says. Plus, it is a prettytough comparison over the strong first quarter last year.

Yeah, I would echo what Frank says. Plus, it is a prettytough comparison over the strong first quarter last year. Ajit Pai - ThomasWeisel Partners: So, are you seeing inflationary pressures as far as wages inlocal currency in sort of foreign geographies and even in the United Statesgoes, and are you seeing any inflationary pressures in your raw material buildup right now?

Nothing that I would call, I think. The place of oilconcerns us because that seeps into just about everything, things like freight,postage, but we're successful in passing [inaudible] through our directmarketing businesses, Ajit. I wouldn't say there was any one particularcommodity where you are concentrated, but the price of oil is inflationary.

Nothing that I would call, I think. The place of oilconcerns us because that seeps into just about everything, things like freight,postage, but we're successful in passing [inaudible] through our directmarketing businesses, Ajit. I wouldn't say there was any one particularcommodity where you are concentrated, but the price of oil is inflationary. Ajit Pai - ThomasWeisel Partners: Okay. If you had to sort of broadly define how muchinflation you are seeing, would it be in very low single-digits, or would it bein mid single-digits, or higher than that?

I would say very low single-digits.

I would say very low single-digits. Ajit Pai - ThomasWeisel Partners: And therefore wages?

Yeah, it's the same.

Yeah, it's the same. Ajit Pai - ThomasWeisel Partners: It's the same. Okay; thank you so much.

(Operator Instruction). Your next question comes from theline of Robert McCarthy of Baird. Please proceed. Robert McCarthy -Baird: Good morning, everybody.

Good morning, Rob.

Good morning, Rob. Robert McCarthy -Baird: Let me ask you first about the new segment reportingstructure. I'd be interested in, and since this is first time its beingintroduced to us, maybe you could talk a little bit about how we should thinkabout the financial profile of the two segments going forward. For example, Imight hypothesize that Brady Americas, without the Direct Marketing and PeopleID business, might be a bit faster growing, but perhaps a little more cyclicalor volatile, but I'd love to hear your comments about the way you think aboutthe two businesses, growth trajectory and profitability.

I'll start again, and anybody who wants to add some comment.The Direct Marketing People ID business is primarily MRO, whereas BradyAmericas is a combination of MRO and OEM, and therefore your comment that BradyAmericas might be a more volatile because of more OEM exposure. I think that'sa correct comment. But the majority of Brady Americas is still MRO. So, I am not sure if you want to see -- if you want to talkabout a material difference in the volatility of the two businesses, and thisdoesn't mean that all direct marketing business is not volatile. If we go intoa recession all businesses typically see volatility, but I think there is OEMcomponent in Brady Americas that is little bit more subject to volatility.

Yeah. I think, you are not far from where we are on thatroad. I would say Brady Americas has higher growth prospects on average spend,Direct Marketing and People ID where we, in Direct Marketing in particular,where the premium price slice of the market, which I don’t believe is growingas fast as the general market. Robert McCarthy -Baird: And perhaps it might be obvious, but I assume that when wesee the traditional elements of segment reporting in your SEC filings, we'llsee that the Direct Marketing and People ID business is a significantly higherreturn on investment business.

I am not sure that’s the case because of the profile and theamount of acquisitions that we've done in that business Rob. Robert McCarthy -Baird: Impacting goodwill?

Yes. Robert McCarthy -Baird: Yes, okay. Alright. And when you're talking about the DirectMarketing, People ID business and the performance in the quarter, you made aspecific comment about shifting away from less profitable products. Was thatjust something that you saw driven by the customer, or is there somethingproactive happening there?

Well, it's proactive in that part, that’s something we docontinuously. Robert McCarthy -Baird: And then I have couple of small detailed questions relatedto other comments you made. For example, the CIPI consolidation in China,is that something you've already reserved for?

Yes, it is. Robert McCarthy -Baird: And now that it’s the last quarter that we're going to haveany of this impact on a year-to-year basis, could you share with us how much,well and what would organic growth have been in Asia Pacific absent the impactof the [Maxtor] loss?

I don’t think we have this number handy; do we?

No, I don’t think it would be materially different either. Robert McCarthy -Baird: Okay. So, then if I can of…

And in fact, just to highlight something there. Robert McCarthy -Baird: Yes.

I think disk drive business actually created double-digit inthe first quarter. So, very pleased to position and how disk drive.

Yes. I think what we see when youlook at the negative growth rate, Rob in the quarter. We just had a great firstquarter last year, as well as, shortly after we acquired Devonand Tradex, I think they acquired them in May and June. And then the firstquarter ended in October, and it was just a spectacular quarter last year. So, we started all of theseacquisitions, all of a sudden in second quarter when we saw the slowdown. Andso, we are comparing ourselves to a very good quarter last year, and I thinkoutside we grew twice. So we doubled off our sales in the quarter. Now that’s acombination of acquisition in the organic growth, but if I recall it correctly,organic growth in the first quarter last year was also very good. Robert McCarthy -Baird: And then, I understand that. Sogoing forward in Asia Pacific, when you had -- sure the operating margin islower than it was last year, but of course it's significantly better than you'vereported over the last three quarters. Clearly, I don't think this would becontroversial. You expect to see all sequel economically. You expect to seesignificant year-over-year margin improvement as we go through the balance ofthe year in Asia Pacific, right?

Yeah. I think that's good to seethat. That is a big cost for Asia Pacific. Just to highlight somethingsequentially from the fourth quarter last year, sales in Asiaare up 20%, and segment profits are up 80%. So this is always a big ask forthis business, and we are very pleased with the outcome. Robert McCarthy -Baird: Understood. And if I may, thenthe last thing I wanted to ask about is your discussion about working capital.I don't believe you've shared with us before any specific objectives. I don'tknow if you have something you can quantify on an enterprise wide basis. Andthen within that, it's separate from that, I wondered if you could talk aboutthe main levers. I assume we are talking about inventory primarily, and if so,could you talk about in what parts of the business do you see particularopportunity for improvement?

Well, we've acquired so manybusinesses throughout in the last four years. Normally tech businesses,businesses that don't have their professional credit management that we have orthey don't have the practices that we have in inventory for example or theydon't have the clout to deal with large suppliers. Robert McCarthy -Baird: Okay.

Businesses where and the publishingbusinesses that were bought recently have very nice business models where weask for a three-year subscription. So we look at that and think, boy we couldreally improve, especially in those businesses that we've acquired. Note, thereare forces against working capital coming down. Everybody plays the same game,so if you're not playing the game, then you're going to -- your working capitalis going to get washed. Plus, we've had significant business in Asia, and our OEM where our customers don't want to payfor 90 days and usually end up paying 110 days, and that business is growingfaster than the rest of the world. So our goal this year is lets stop workingcapital going out. Let's stabilize working capital, and then future years we'lllook at reducing it.

And I think, Rob, if you look at the last couple of years, Ithink we made 28 acquisitions in the last four years, and we have donesignificantly more. We have rounded up last two years. Our number one prioritywas to get the structure right, like I said earlier; we combined locations infactories in Korea, in China, and in the U.S. so far. So the first step wasto get the structure right, and then now, since we have the structure right forthe majority of our acquisition, now we can work on efficiencies or activity,working capital and so forth. And last year, when we had after the first quarter, the fallof our die cut business, again the priority was on the structure and gettingthe cost down and getting the capacity right sized. And now we think goingforward, we'll spend much more time on issues like working capital. You askedabout have we quantified; we have quantified it internally. We have not shared;this is voluntary at this point of time. We are very early in the process. Wehad relatively quarter. I wouldn't read too much in the first call successesbecause we are still early, but at one point of time David would want to thinkabout sharing some of those goals, but it's not the time yet. Robert McCarthy -Baird: Understood. Okay. Thank you very much.

(Operator Instructions). You do have a follow-up questionfrom the line of Robert McCarthy of Baird. Please proceed, sir. Robert McCarthy -Baird: I'm sorry. I came up with one that I had overlooked. David,you probably misspoke, but when you were talking about tax rate expectationsand little bit volatility that you have quarter-to-quarter, we heard you saythat you thought you'd see a correction to normalize to the full year number inthe third quarter. I assume you meant in the second quarter?

No. Actually, I didn't misspeak. I got it right in my --probably I speak about nodding the head. Robert McCarthy -Baird: Well, then you are probably gratified to know that someoneis paying attention.

Thank you, Rob. Robert McCarthy -Baird: Thanks a lot.

I'd now like to turn the presentation back over to Miss BarbBolens, Director of Investor Relations. Please proceed, ma'am.

Thank you, Angelic. We thank you for your participationtoday and would like to remind you that the audio and slides from this call todayare available on our website. The replay of this taped call will be availablevia the phone beginning today at 11:30 central time. The phone number to accessthe call is 888-286-8010 and a pass code of 59802759. The replay will beavailable for one week until 11:59 p.m. on November 27th. As always, if youhave questions, please feel free to contact us, and again thanks for yourinterest in Brady, and have a great day. Operator, please disconnect the call.

Ladies and gentlemen, this does conclude the presentation.You may now disconnect. Have a great day.