Aaron Pearce – Director Investor Relations Frank Jeahnert – President, Chief Executive Officer Thomas Felmer – Chief Financial Officer Matthew Williamson – VP and President of Brady Americas Peter Sephton – VP and President of Brady Europe Allan Klotsche – VP and President of Brady Asia Robert Tatterson – Chief Technology Officer Bentley Curran – Chief Information Officer

Charles Brady – BMO Capital Partners Allison Poliniak – Wells Fargo Jason Ursaner – CJS Securities Paul Mammola – Sidoti & Co. Anthony Kure – Keybanc Capital Markets Dan for Robert McCarthy – Robert W. Baird George Staphos – Bank of America/Merrill Lynch Rick Lane

Welcome to the second quarter 2010 Brady Corporation earnings conference call. (Operator Instructions) I would now like to turn the conference over to your host for today, Mr. Aaron Pearce, Director of Investor Relations.

Good morning, this is Aaron Pearce, Director of Investor Relations for Brady. Welcome to our fiscal 2010 second quarter conference call. We’re happy you could join us. During the call this morning you will hear from Frank Jaehnert, CEO, Tom Felmer, CFO. They will be presenting Brady’s quarterly financial review. Also joining us this morning is Matt Williamson, President of Brady America’s, Peter Sephton, President of Brady Europe and Al Klotsche, President of Asia Pacific who will all assist in providing the regional reports. As usual, after brief presentations by the team, we will open up the floor to questions. We encourage you to follow along with the slides located on the internet as we will be referring to the individual slides as we proceed through the presentation. These slides can be found on our website at www.investor.bradycorp.com. We will start with Slide 3. You will have a few minutes to get to those slides while we go through our Safe Harbor statement and other usual information. Please note that in this call we may make comments about forward-looking information. Words such as expect, believe, anticipate are a few examples of words identified as forward-looking statements. It’s important to note that forward-looking information is subject to various risk factors and uncertainties which could significantly impact expected results. Risk factors are noted in our news release this morning and in Brady’s 10-K filed with the SEC in September of 2009. Also, please note that this teleconference is copywrited by Brady Corporation and there may be no rebroadcasting of this without the express written consent of Brady. Note also that Brady will be recording this call and broadcasting it on the internet and your participation in the question and answer session will constitute your consent to being recorded. Thank you. And now here’s Frank Jaehnert.

Good morning and thank you for joining us. I’m pleased to report that our quarterly sales of $296 million improved 11% over the same period in fiscal 2009. Our organic sales increased by 2.9%, acquisitions accounted for 0.9% and currency added another 7.2% to growth. It should be noted that the prior year provides weak comparables especially in the Asia Pacific region where sales were down in the prior year due to New Year holiday and globally in part due to the economic recession. We are also pleased to see the impact of our ongoing restructuring activities and process improvement activities had on our gross margin which increased to 49.7% from 47.3% in the prior year quarter. As a result, excluding the after tax impact of restructuring charges on an income of $17.6 million and earnings per diluted share of $0.33 both strong in the same period of last year, we had net income and EPS before restructuring, we are $9.8 million and $0.19. As you could see in our press release, the primary reason for our total company core growth is our relative strength seen in the Asia Pacific region. We remain very committed to investing in key initiatives to drive organic growth; in particular, new product development activities. In the past quarter we launched several new products addressing our customer’s needs. We also continue to invest in growth through acquisitions, acquiring a label manufacturing in Brazil. I’m pleased with the progress we have made in the first half of fiscal 2010. However, visibility into our end markets continues to be limited and we are cautious about the breadth and depth of the economic recovery. As a result, we are maintaining our previously published net income EPS guidance for fiscal 2010. I will be back later to summarize our thoughts for the remainder of the fiscal year and here’s Tom Felmer with a review of the financials.

Thank you Frank. As Frank mentioned we were pleased with the second quarter financial performance. While we are seeing progress in both sales and profits, we should also point out that last year’s second quarter was soft due to several factors including many of our customers having extended shut downs last year as they dealt with the global recession and the Lunar New Year which impacts our Asian business fell in the second quarter last year while it will fall in our third quarter this year. As we move on to Slide 4, you can see our second quarter income statement compared with the prior year. Frank just reported on our sales and gross margin. Our gross margin continues to be one of the highlights of our performance throughout the economic downturn and it continues to strengthen as we return to growth. This quarter’s gross margin expansion is even more notable because it comes in a seasonably low sales quarter and Asian sales were a greater portion of our greater overall sales mix. SG&A was up $15.1 million compared with last year. Approximately half of the SG&A increase was due to currency and the other half due to the return of commissions, bonuses and some discretionary spending in this year’s financials while these expenses were not incurred last year. We also increased our investment in R&D to $2.1 million as we continue to focus on building our new product pipeline. Interest expense was down $1.1 million compared with last year as we paid down $88 million of debt over the past 12 months. GAAP net income for the quarter was $15 million resulting in diluted EPS of $0.28 per share. However, when adjusting for after tax restructuring charges of $2.6 million, we generated $17.6 million and $0.33 per diluted share. Moving on to Slide 5, we see the impact of our normal seasonality quarter over quarter but encouraging improvements in our sales year over year as organic sales increased by 2.9%. Our gross margin and operating margins in the quarter were helped by savings that we are realizing from the restructuring and our ongoing process improvement initiatives through lean and Brady businesses performances. For the quarter, our gross margin was 49.7% up from our seasonally much strong first quarter gross margin of 49.4% and the second quarter of last year’s gross margin of $47.3%. On Slide 6 you can see an increase in our SG&A for the quarter. As I just mentioned our increase in SG&A was driven by currency and the return of commissions, bonuses and other discretionary expenses. We have maintained much of our sales and marketing infrastructure in order to maintain high service levels to our customers and gain market share through the recession. We are however, beginning to expand the focus of our BBPS and lean event from our operations to our SG&A functions. We believe that there is an opportunity to maintain our service levels and selling effectiveness with a more efficient SG&A process. On Slide 7 we highlight our net income and diluted earnings per share showing a nice improvement over last year’s second quarter. As expected our second quarter sales and profits dropped below first quarter levels as they normally do because of the slowdown in electronics production in Asia and fewer working days in all three regions due to the holiday seasons. On Slide 8 we break out our restructuring charges for the current quarter in both F’10 and F’09. The after tax impact of this quarter’s restructuring charges was $2.6 million or $0.05 per share. We remain on plan to take $15 million in restructuring charges for the year as announced in our F’10 guidance discussion in September. Moving on to Slide 9, we summarize our second quarter cash flows. As outlined, we continue to generate strong cash flow from operating activities and strong free cash flow in excess of net income. Free cash flow for the quarter was $28.2 million or 188% of net income. On the cash balance block, we generated $34.2 million of cash from operating activities. After a break in acquisition activity for several quarters, we are again utilizing some of our cash for acquisitions as we spent $18.5 million in acquisitions in the second quarter. We also invested $6 million in capital expenditures this quarter and currency exchange had a negative impact decreasing our cash position by $2.6 million. Our cash balance at January 31, was $206 million which we believe gives us adequate flexibility for future investments. Moving on to Slide 10, gross debt remains at $391 million and net debt is approximately $186 million at the end of the quarter. As expected, our trailing 12 month debt to EBITDA ratio has improved in Q2 due to last year’s particularly weak second quarter being replaced by a stronger second quarter this year. We believe we have sufficient capacity to take on additional debt should we choose to invest in additional acquisitions in the future. And finally on Slide 11 you can see that we continue to make investments in R&D. Our investments in new product development and associated with results are accelerating. We’ve outlined the key new products that were introduced in the quarter on this slide. These include significant upgrades and expansions of our products such as the BMP 71 portable printing system launching on the heels of last quarter’s BMP 21. The BMP 71 offers some of the most advanced technology ever seen in a portable printer and is being very well received by our customers. Also launched this quarter is the BBP 72 double sided printer, our B-345 PermaSleeve markers designed to exacting military standards, Transtherm Gap Filler in our electronics market, and the B-6427 Halogen Wire markers. At this time I’d like to turn the call over to Matt Williamson for an update on the America’s business.

Good morning. Please refer to Slide 12. America sales in the second quarter were $121.6 million, down 1.1% compared to the prior year. Organic sales decline of 4.3% accounted for the majority of the sales decline with the impact from currency a positive 2.6%, and we only had the benefit of one month sales from our recent acquisition in Brazil contributing .6% of sales. Although our sales continue to be softer in the quarter than last year, we see an overall improving growth trend versus 2009. In the Brady U.S. business we saw a slight sales decline versus the prior year as our MRO business continued to decline compared to the second quarter of fiscal ’09 but at a lower rate. Our sales to the U.S. OEM markets have started to improve versus last year and sequentially as we have focused sales initiatives in several key markets. Overall though, we have not yet seen significant signs of economic recovery in this business. Our strategy has been to drive organic sales by focusing on the introduction of new differentiated products, growing in new markets and preparing to launch our new transactional website. The new BMP 21 printer and consumables launched in the first quarter of fiscal 2010 continue to exceed our sales plan in the second quarter. Response from customers and our channel partners in the electrical data common and industrial markets is very positive regarding the quality and ease of use of this product which is translating into sales. As Tom mentioned, our strategy to grow by innovative new products was bolstered with the recent launch of the BMP 71 portable printers and consumables that are geared to the safety, industrial and electrical markets. The product represents a major leap forward versus current Brady and competitive products in its ease of use and flexibility for our customers and high performance label and sign printing applications. We also launched a new Transthern printer and PermaSleeve high temperature wire identification materials for the aerospace mass transit and industrial markets. Out side of the U.S. we have seen improving results with growth in Canada and Brazil. In Sao Paulo Brazil we acquired Stick Color to improve and help us drive our growth in Brazil’s improving OEM markets. Stick Color manufactures customer specific screen printed labels, overlays and nameplates for the transportation, electronic, light goods and general and industrial markets. Sales were approximately $9 million annually. One month of Stick Color’s results are included in our second quarter. Our Mexico business although small, continues to show consistent strong growth over the prior year. Our direct marketing business has been negatively impacted by employment losses at U.S. customers. To drive growth in these businesses, we are focusing on new customer acquisition, e-business initiatives and new product and productions. New easier to use websites for our businesses including our Seaton brands were launched in the second quarter and we are investing in programs to drive more traffic to these sites. Our strategy to drive sales through new products is also playing out in these businesses with the launch of new compliance products and our latest version of our premises access control software. Segment profit for the Americas increased 6.8% to $23.5 million in the quarter. As a percent of sales, segment profit increased to 19.4% compared to 17.9% in the prior year. Our strategy to improve gross margin continues to pay off as we have driven productivity improvements with lean and manufacturing in addition to numerous facility consolidations concluded or in process plus other operational improvement initiatives. These have improved our cost structure and resulted in improved gross margins and bottom line profit. Since our lean management principals have grown we are now in the early stages of focusing on opportunities in the front end of our business. Additionally, we have reinstated incentive compensation salary increases. We remain tight on adding headcount and discretionary spending. Going forward, we remain cautious about any real sales growth in our largest markets, thus our focus on our sales and operational improvements to drive profitable organic growth and to take market share in a down economy.

Good morning everybody. I’ll draw your attention now to Slide 13. Sales in Europe were $96.6 million for the quarter, up 10.8% versus the prior year. Organic sales were down 1.6% against the same quarter the previous year. Acquisitions added 2% to sales and currency contributed 10.4%. In general our business performed slightly better in the second quarter than we had expected, sustained by what appears to be a slowly improving economic climate. In particular, the agility of our direct marketing business to external changes has once again proved key to this improvement. During the last six weeks of the quarter, significant parts of Europe were hit by severe winter conditions which gave a boost to our winter products in our catalog and our plants in the U.K. and Germany underlying the core business volumes also improved leading to second quarter sales slightly above those of the same period in fiscal 2009. Our sales through the internet continues to grow month after month of double digit rates as we continue to roll out new applications aimed at online buyers. This tactical multi-channel agility is at the core of our strategy for our direct marketing businesses and follows the success we have seen with Europe with changes in the past. Our extensive reach into the market linked with local sourcing and logistics expertise allows us to respond and capitalize on opportunities very quickly. Brady brand showed a slight improvement sequentially over the previous quarter although sales are still below those of fiscal 2009. The main reasons for this is the slow recovery of European exports and are generally less amongst the main industry players to commit to new capital investment. We’ve seen some general improvement in growth in our MRO business benefiting from our segment focus on process industries and laboratory identification but the continued weakness of our OEM business especially in Germany and the Scandinavian countries has just about denied us growth overall. Business in the U.K., France was more encouraging and our business in Eastern Europe and some our near markets such as Turkey are in growth but start from a relatively small base. We continue to sustain our sales efforts with a drive to greater selling effectiveness and accelerated flow of new product launches for both the medium and low end of the market. New product launches in Europe this quarter included the BBP 72 bench top Thermal Printer, targeting growth in aerospace and mass transit and on premise tools as Matt outlined. These are designed with two print heads that heat print tubing printer that can print on both top and bottom of the sleeve simultaneously. Looking forward, we are preparing for the stages launch of our BMP 71 printer in the next quarter in Europe. During the second quarter we continued to accelerate the integration of our U.K. business that we acquired in the previous quarter called Welca. This business is rapidly proving to be a solid contributor to our existing U.K. direct marketing business. Europe segment profits for the quarter was $25.9 million which was 13.1% above the same quarter of last year. Profits as a percentage of sales increased from 26.3% in the prior year to 26.9% of the current year. In generally we can take some encouragement from this especially with our profit improvement and the improvement in our quality of earnings which were achieved in a macro economic environment which remains still very challenging. While the economic barometer points towards growth in Europe, record levels of unemployment and a hesitant credit market still remains. Furthermore, the tensions within the Euro’s and government deficits continue to impact the investment climate. For Brady in Europe this translates into a market that’s unwilling to invest in capital expenditure and other growth investments and as a result, we also remain cautious in our outlook for the remainder of the year. Now I’ll pass over to Al Klotsche who will report on Asia.

I would ask that you turn your attention to Slide 14. Asia Pacific sales for the second quarter were $77.6 million, up 38% from prior year. Organic sales increased 25.7% while currency had a positive impact of 12.2%. Despite continued challenges with the global economy, we were very pleased with our second quarter. Our growth in the consumer electronics market was driven by solutions where we truly add value to our customers versus the more customized applications. The solutions we have focused on are most often used in high end electronics where volumes may be a bit lower, but their higher prices are reflective of the value they provide. These solutions help our customers improve on problems such as excess heat generation, optical clarity and extended battery life. Our focus on customer groups with common problems has allowed us to quickly replicate our new products and capabilities success stories. We continue to be encouraged by the speed of convergence of consumer electronic devices and see many new opportunities in the coming quarters for further innovation. We have also adjusted our manufacturing footprint to align with this newer business strategy with the recent consolidation of two our facilities in southern China. While not giving up any machine capacity, we are now able to better manage our supply chains and other resources. In southeast Asia, our business continues on a very strong pace as the team continues to leverage the unique manufacturing capabilities that we have in converting and precision stamping. The relative health of the computer industry plus the disproportionate growth that comes from some of the solutions we are providing has resulted in a nice top line growth, excellent capacity utilization and thus increased profitability. Our MRO business which is spread throughout the region continues to gain momentum as a result of our increased investment and focus. We continue to expand the number of channel partners who can take our solutions to new markets both geographically and vertically. The newly introduced MRO products that Matt and Peter have discussed are doing quite well in Asia despite not being tailored to meet the specific needs of our market. Our investment in localized R&D resources now gives us the opportunity to modify some of these solutions to meet the specific and unique needs in the Asia Pacific region. This quarter we have launched a new material, B-6427. This new wire marker construction is unique in that it is halogen free and has a self laminating feature which provides superior abrasion resistance. Our business in Australia is beginning to wake up from a long recession the likes of which we have seen in North America and Europe. The overall recovery in Australia is highlighted by the re-opening of major activities in the mining sector in western Australia where we have a strong presence. We have also consolidated our businesses in Sydney now into one facility. This space and cost savings is a great example of the efficiencies that result from a team who is aggressively driven lean principals throughout the entire operation. Segment profit in the region was $10.7 million up 159% from last year’s segment profit of $4.5 million in the second quarter. As a percent of sales, profit was 13.8% versus 7.3% the prior year. Much of our improvement has come from our focus on driving waste out of all of our business processes, better facility rationalization and the benefits of the newly launched products. Looking forward, our customers continue to watch their inventories very closely and have reduced the average size of their orders, thus reducing some of our visibility to the future. We expect the third quarter to start out slowly with the Lunar New Year falling in the middle of February and then pick up as new programs ramping up for the summer and the fall. I’ll now turn the call back to Tom Felmer.

Thanks Al. On Slide 15 you can see that we are reaffirming the full year guidance that we provided our November conference call. While we are somewhat encouraged by our results this quarter, we still have limited visibility to future business conditions and accordingly, remain cautious primarily with our businesses in Europe and the Americas. Nonetheless, we still anticipate some lift in third and fourth quarter sales as the global economy begins to gradually improve and we enter a seasonally stronger period for our businesses. Additional guidance assumptions for restructuring and capital expenditures and depreciation and amortization remain unchanged and are also listed on Slide 15. You also see a 100 basis point improvement in our tax rate projection for the full year from 28% down to 27% due to the relative strength of our business in Asia where tax rates are generally lower compared to the U.S. and Europe. Now I’d like to turn the call back to Frank for his closing comments.

We are pleased with the direction the business is moving in especially given the continued uncertainty in the economy. As we noted in first quarter our cost reduction efforts continue to impact our business positively as reflected in our quarter’s performance and our growth relative to our investments and developing new proprietary products are beginning to bear fruit. We are optimistic about the momentum we have begun to build and will do what we can to ensure it continues. However, we believe that there continues to be significant uncertainty as to how robust the economic recovery truly is. In short, we are concerned that the economy remains fragile and may not recover at a solid pace. Because of this uncertainty, we continue to be somewhat cautious in our outlook. We thank you for your interest in Brady. We will now start the Q&A.

(Operator Instructions) Your first question comes from Charles Brady – BMO Capital Partners. Charles Brady – BMO Capital Partners: With respect to SG&A I guess going forward, you said that you held onto a lot of that SG&A infrastructure. Commissions are coming back. So from a percentage of sales standpoint, even from a dollar standpoint, if I look at a Q2 run rate on a dollar standpoint which is basically flat with Q1, is that kind of run rate level we’re up against right now given where you see sales playing out over the rest of the 2010?

We talked about the delta from the run rate you see from Q2 to Q4 of last year. It’s popped and about half of it is due to currency and half due to the return of some of those infrastructure costs that we actually called out when we gave our initial guidance. So we would anticipate them being in a similar range going forward. I also commented that while we continue to focus our lean efforts on the operations side of the business, we’re starting to work on using some of those similar techniques in looking at the SG&A and on the carpet side of our business. It’s a focus area for us but from a run rate standpoint, I would say that those numbers are correct. Charles Brady – BMO Capital Partners: In terms of R&D spending, and obviously you’ve ramped that up a lot with new products coming out, I’m wondering for the balance of the fiscal year, was there more of a first half run up in R&D expense and it ought to tail off at bit now that you’ve had a bunch of products come out are you maintaining this level throughout the fiscal year?

We have our Chief Technology Officer Bob with us and maybe you want to comment on this.

Definitely we ramped up our activity over the last year in terms of real productive activity and also we have the impact of incentive compensation coming into play this year as well. So I think the level of activity is going to continue on as you see here. I think the important things is we’re also working on the productivity side both in terms of productivity and efficiency of the R&D execution obviously to get more output for the same input but also bringing in higher quality programs into the process so we look forward to greater impact as we go forward.

In general I would like to repeat a comment I’ve made over the years which we have really been able to execute on the R&D side. There are two line items in the profit and loss statement which I would like to see going up as a percent of sales. One is profit and the other one is investment or expenses related to new product development including R&D. We have struggled over the last couple of years to make this happen, but I think we have a lot of momentum going on in R&D so I would not mind if R&D as a percent of sales would go up. But at the same time of course, we are pushing on cost of goods sold and SG&A as a percent of sales to go down, and I think what Tom said earlier, and I’d like to echo this. We have seen a tremendous amount of progress in our gross margins I think primarily driven by our lean efforts, Brady business performance system and I think exceeding our expectations and encouraged by this. We are now starting to push this on the carpet and trying to do what we have done in the cost of goods sold side also in SG&A. So while this probably is not anything short term, I certainly don’t want to give any guidance or any numbers on this, we believe there’s opportunity going forward. Charles Brady – BMO Capital Partners: If you look at the cell phone and handset market, can you give us a broader sense of applications, w here the market is at today, where you see it moving? Is it moving? Is there still good growth momentum in more of a higher content cell phone or is the push into simplified phones in the developing markets driving the market over the next 12 months or so?

I’d say that you see on both ends of the spectrum a lot of growth, certainly in the high end feature rich phone. That is the segment of the total market that’s growing the fastest and that’s really where we’ve concentrated our new product development efforts. The low end phone into the developing markets are also growing pretty well but not as fast as the feature rich and the part that’s kind of stagnant a little bit is that middle end of the mobile phone segments.

Your next question comes from Allison Poliniak – Wells Fargo. Allison Poliniak – Wells Fargo: Could you quantify the impact of the change in the winter holidays? Is it a point to sales or is it more, should we be thinking?

I’m not sure I can quantify that. It’s different every year and with people bleeding their inventories down so far before, we actually have had some calls for supplying product during Lunar New Year which is happening so it’s really difficult to say year over year what the impact is to us as a company.

It means that one week of holidays which was second quarter, this year it’s going to be the third quarter. Allison Poliniak – Wells Fargo: Could you give your thoughts on the acquisition environment currently and then more specifically as it relates to Brady?

We think there is more activity in the M&A market in general. We don’t see too much activity from private equity. It’s more strategics, who we are. As far as Brady is concerned, we have intentionally stopped all acquisition activity when the recession started in the fall last year to preserve cash because we didn’t know how bad it would really get. But we have started again to make acquisitions. Also, many of the acquisitions we have made, this was an acquisition we have talked to for about one and a half years, then the recession started, we stopped talking to them but we kept them interested and are now able to execute on this. We have several companies we are talking to and we have talked for awhile, because you can never tell which one is going to happen because there’s always a price question. But we are being more active and more encouraged by the bottom out of the economy and of course our good position.

Your next question comes from Jason Ursaner – CJS Securities. Jason Ursaner – CJS Securities: Looking at the gross margin line, it improved sequentially on $23 million lower revenue and even with some of the growth coming from Asia Pacific which I generally thought was lower margin, so is this just realizing the benefit of the cost restructuring or is there a product mix that’s playing a factor here?

We look at it and again a year ago we had a lot of our restructuring activities took place in the second quarter so we have the full impact of that in this year’s second quarter plus we’ve been tracking now for about a year and a half or so on lean and BBPS and I think you’re starting to see the momentum and the impact of that taking place, and we have lean events going on all the time in all of our facilities around the world. So you’re seeing that benefit and there’s some benefit from price and maybe in Asia as Al talked about, and continuing to focus on moving upstream into the more complex cell phones and providing parts there. I think you may be seeing some of that impact as well, and that’s also impacting the overall profit of Asia as Al talked about. Jason Ursaner – CJS Securities: With all the costs you’ve taken out, how should we think about incremental margins the business can achieve from additional revenue?

I’ve been with the company for 14 years and every time Brady comes out of a recession with gross margins close to 50%, we have quite some leverage. I don’t think it’s going to be any different this time. Jason Ursaner – CJS Securities: If I just look at it year to year, you added about $29.5 million revenue and it contributed $21 million gross margin which would be about 70% incremental margin. Is that at least a decent starting point or would that be not really in the right range with $20 million of that increase from currency?

I think the restructuring activity we had with the recession was more than a year ahead of the cost so we have a combination here on top of the normal leverage so going forward I think you more or less will see a normal leverage and not so much the effect anymore the restructuring. So in other words, I cannot answer your question. Jason Ursaner – CJS Securities: In the investment income, there was a pretty strong delta sequentially. Are you investing cash more aggressively or is there some mark to market on investment that hit that?

It’s all related to deferred compensation.

It’s just moved around the different P&L lines. It moves around. It could be SG&A in other income. Jason Ursaner – CJS Securities: On SG&A, I know that you were asked a little bit about it, but I’m trying to make sense of the number being flat sequentially. Was there any one time related to the acquisition or new hiring or is it all just the higher accruals in there and currency?

Are you talking about the SG&A from last year to this year? Jason Ursaner – CJS Securities: No, just for the quarter.

It’s not material.

I think in general to SG&A what I’d like to say is we have in every recession we’ve had, we have always cut back and take restructuring when we felt it was prudent. On the other hand we are aware that financially we are above average strong company so we don’t have to cut back as a prospecting in direct marketing and that’s a very easy way to reduce your SG&A but you’ll regret it two or three years later. Because of our financial strength, we don’t have to do things like this. We are not just quarter to quarter. We are in for the long term and we have cut back in SG&A significantly less than we have cut back in other areas because we believe this is the time where our financial strength should be used to take share and to be there in front of our customers. So I would say that’s part of the relatively higher SG&A you can see. To a certain extent, they are also intentional. In addition to commissions coming back, discretionary spending coming back and bonuses coming back that we have talked about earlier. Jason Ursaner – CJS Securities: Based on the adjusted targets for this year, you wouldn’t expect any reversals of accruals at this point in the second half at current rates.

At this point of time we’re not planning for this and as you know we have not changed our guidance now for half a year. So there is no reason to adjust anything. And it depends on the economy of course and the exchange rates and what have you.

Your next question comes from Paul Mammola – Sidoti & Co. Paul Mammola – Sidoti & Co.: I was hoping that Matt and Peter can give us a sense of how the businesses trended during the quarter. Was January stronger than November? I’m just surprised that the business isn’t seeing a volume upturn yet given what’s seen as a little bit of an uptick in the general economy?

We did see an uptick towards the end but as I pointed out we saw that through the sale of winter products. But you know, when you look at the uptick in the European economies it’s very, very marginal and the thing that really attracts our business is fixed capital formation so investment, and that’s still declining in Europe. It was down 10.6% last year. It’s down 2.9% this year. So whilst we’ve seen a very, very marginal uptick in the Euro’s, it’s generally trended to capital investment.

First of all we are seeing as you look at the quarter that we’re improving over the quarter and we would expect that to continue to improve although we’re not super optimistic about the economy, but we would expect it to improve. Our sales bottomed out toward the early part of summer last year so we would continue to see the improvement in the quarter continue. But in addition to what Peter said, when you look at our business, take for example, direct marketing business, the people ID business, they’re very much linked to projects that companies are doing, their willingness to invest in facility upgrades, in projects as it relates to the number of employees they have. So in the people ID business, their willingness to invest in a project for access and security control into these facilities, and this is an area where there is not question businesses have held off on. The manufacturing and construction markets in the U.S. particularly have held us back. We have a lot of business in those markets and we haven’t seen a lot of improvement in those industries. So as those will improve our business will improve also. So we’re projecting most of our business right now improvement to come from things that we’re doing to improve our market position. Paul Mammola – Sidoti & Co.: For the same two businesses can you give us a sense of how pricing is right now? Would you say competitors are price rational and have you negotiated any changes in pricing with distributors for the year?

We haven’t had any price increases this year at all. Very selectively on products but as opposed to previous years where we’ve had major price changes for the most part across the board increases, we have not had that and due to the market that we’re in we’re not planning on that going forward.

I’d echo that for Europe. In previous year’s we’ve had some latitude in price and it’s not as if we’re finding aggressive pricing out there, but I don’t think with the market we can really ramp up our prices. You can see it in all the financial reports. You can see it in Europe and America, gross margins are increasing so we’re finding our ability to sustain pricing but it’s a tough environment for our marketing and our operation team to maintain those gross margins. Paul Mammola – Sidoti & Co.: I would assume that pricing for films, plastic based products, paper products from pulp are going up. Is there any big cost difference between what is in your raw material right now relative to your finished product inventory?

I would say nothing material right now. Paul Mammola – Sidoti & Co.: Al, could you just take us quickly again through why you’re collapsing a couple of facilities given good utilization there, good year over year growth and was there any meaningful idle capacity in the quarter as you moved machinery?

The reason that we’re doing it is with our focus on lean, we’re finding that, and specifically I’ll talk about our two facilities in south China. Both facilities were able to free up enough space that we decided to move both of those facilities, our leases had come up, into one new shared facility with less space that the combination of the previous two. So it’s just our continued effort around rationalizing our cost base and whereas five years ago our customers were demanding next door instantaneous service which we like to give them and we had given them in the past, as cost pressures have increased, they’ve had to recognize and accept the fact that the next door instantaneous service isn’t always going to be available.

First of all, I’m very pleased how this whole lean initiative has changed our culture. The biggest surprise to me has been how much space it frees up, inventory reshuffling into sales and manufacturing and so forth. I would say it has been the biggest surprise to me. We are freeing up space everywhere. We have consolidated in the U.S. We have taken manufacturing out of two operations, personal contact and put it into our e-net location. We have moved some of our adoption from other facilities to Mexico for instance and still have space. So that to me is the biggest surprise.

Your next question comes from Anthony Kure – Keybanc Capital Markets. Anthony Kure – Keybanc Capital Markets: This question is about Europe. Just looking at what’s going on in the Euro zone these days, and you alluded to it in your comments but do you expect a step down in Europe going forward or are you looking for more of the same flat growth as you proceed through the rest of the year.

I think it’s more of the same. I just picked up the numbers from the previous question. The thing that really hurts our business is OECB described it as gross fixed capital formation, and that was down 10.5% at this point last year and it’s capping down about minus 2.9% so that rate decline is slowing down, and we’d expect to track that. Anthony Kure – Keybanc Capital Markets: Broadly speaking across all the businesses, could you comment on inventory levels and where we stand there with what your opinion is as far as the channel goes and what their shelf space looks like?

In the U.S., just like our own company the inventories went down in our distributors and in our end users over the course of the last year and I would say that at this point there is modest changes there in terms of going down, but I think in the OEM space we’ve seen that they’re depleted and they’re starting to buy again. That’s one of the reasons why our OEM businesses is increasing. So I don’t see where inventories are going to down much further unless the economy was to tank.

I’d like to echo that for Europe. We have an efficient service model. We don’t expect publishers to hold inventory so as the economy is up or down they hold. They’re pretty professional companies and they hold a fairly optimum level of stock. I wouldn’t expect much change. Anthony Kure – Keybanc Capital Markets: As far as currency impact in Asia, can you remind me what the big contributors are there either positive or negative? What drives currency in Asia?

I think that two that drove us the most are the Australian dollar and the Korean Yuan this quarter.

Your next question comes from Dan for Robert McCarthy – Robert W. Baird. Dan for Robert McCarthy – Robert W. Baird: In November Nokia mentioned a 10% handset volume increase for calendar year 2010. Can you talk about how your growth expectations would compare to that number?

We don’t comment on individual customers. Dan for Robert McCarthy – Robert W. Baird: Could you comment on how you would see your growth expectations compared to that overall handset volume increase?

If you look at the market, we historically have tracked our exceeded the market. The only thing I would say is that looking forward, that middle end of the market segment that I was talking about, we would probably de-emphasize our efforts a little bit more and put our efforts more on the higher end solutions. So I’m less concerned about our top line sales as I am the profitability of our sales to our sector. So we’re really focused on understanding what our customers’ unmet problems are, delivering unique and differentiated solutions which are going to uphold margins and allow for continued reinvestment in R&D. Dan for Robert McCarthy – Robert W. Baird: Moving to the e-business initiatives, you introduced the new website in early November and the other new sites you mentioned. Could you help us quantify any progress at these sites?

We are seeing more traffic on those sites for sure. Now of course we just launched them, but we saw a spike in Italy. Bentley is our Chief Information Officer who is also in the room here.

I would say that it’s too early to tell at this point, but the major improvements in the site, usability, improvements and some of our search engine optimization is going to allow us to perform better going forward. But at this point it’s too early to tell and the plan to continue this progress in the Brady market are on schedule and we’re looking forward to the next quarter as these improvements go into the site.

Your next question comes from George Staphos – Bank of America/Merrill Lynch. George Staphos – Bank of America/Merrill Lynch: Bigger picture, you mentioned that visibility right now is still somewhat limited as you’re entering the next quarter and my sense is that normally the case whenever you’re in a recovery. Visibility is quite limited. How would you and how would the team compare the trends that you’re seeing and the response you’re getting from customers regarding the outlook versus past recessions? In other words, are we seeing the normal hesitancy from your customers and if that’s the case then obviously that bodes well for the future.

Let me give you a general not customer specific answer. This is a recession which is unlike any other recession in the past. I think we have permanently shaped or changed the way people think about taking on risk and of course as you know, risk was driving a lot of the growth in the past. So I think maybe even similar to the great depression, if you meet people from the great depression, those people have been changed in their behavior. I don’t think it’s quite like this, but I think the risk tolerance has gone down. So from this point of view, that certainly is different from in prior recessions and that’s what goes into my big picture thinking. That’s not customers. It’s just what I’m seeing going on and all over the world globally. As far as customer specific do we hear anything different this time as compared to the last recession, Al can you speak to that?

In the U.S. market I think it’s very similar, tentative and slow to come out of it. Outside of the U.S. when you look at the Latin America market, Mexico and Brazil particularly, there is growing consumers there, and they’re coming out of the recession faster and we’re benefiting from that.

We haven’t seen anything like this before so the jury is still out on the pace of recovery, but there will be a certain pace of recovery and in some instances it will be game changing. But my general sense is that when I look at the business market, people are moving ahead cautiously and I think people can see light at the end of the tunnel.

I would have said in the past and I think I did say in the past recession we’re going to wake up one day and all of a sudden sales growth is coming back and we don’t even know why. One day we wake up and it’s back. I don’t think that’s going to happen this time. We’re not going to wake up one day and all of a sudden we don’t know how to fill orders. I think it’s going to be much more subdued this time. At least that’s how we are planning. If I’m wrong, it would be fantastic because we have the machine capacity to ramp up fast and I don’t think we would have any problems hiring people with the unemployment we have all over the world. George Staphos – Bank of America/Merrill Lynch: How do you then correlate that or reconcile that with your marketing plans? In other words, you could argue that perhaps you don’t need to be as aggressive in new product development etc. because you’ll be able to see and market to your customers. We’ll be able to see that wave coming at a greater distance than perhaps in the past.

There are two components to our growing sales. One is growth in market and the economy and one is growth compared to competition and I think every time we launch a new product we see our sales benefit nicely from it. Also, if we continue to invest in our marketing operation or in our sales team, internal sales, external sales, people on the street, we might not benefit from the economy but I think we benefit from seeing share from competition and this has been our strength going back through all recessions. We see companies, some of our competitors really struggling and cut back everywhere and we have the luxury of not doing that. Now I do realize we could show higher profits if we were to cut back stronger, but as I said earlier, we are, in the third and fourth quarter, over the next couple of years. This strategy has served us well and I do believe it will serve us well this time as well.

Your next question comes from Rick Lane.

On the CapEx side is $25 million a run rate you think that will sustain you? What are you looking at over the next couple of years?

I think we’ve said historically that about 2% of sales is required to operate the business. That takes care of the general maintenance of the business as well as some efficiency and some upgrades.

I would say one thing that has changed again with our lean initiatives; we are able to increase what we can manufacture on our machines now because we reduced set up time and the increased yield. So where as we would maybe have had to expand capacity in the past I think we can push this out. So I think when you see investment, it’s not just replacement. It’s not so much expansion of capacity anymore what we are looking for over the next couple of years. It’s probably new technology improvement.

It’s exactly that. I think we’re seeing improved efficiencies with our current assets but we’re going to continue investing and perhaps invest purposely more in investments for new technologies and new product capabilities.

So more of a shift in the R&D really.

Yes, manufacturing technology stepping up and expanding capacity. We try to get as much as we can out of existing equipment and invest for our new technologies which provide an advantage. Al talked about in Asia in the hard drive industry the competitive advantage we had for quite some time because we can manufacture something that nobody else can and they’ve been trying for years and that’s the kind of investment we would certainly like to continue to make as opposed to expansion of capacity.

Just to help clarify in more of an intermediate sense, you’ve heard me ask this question in this way. From where we sit the factors of mix, seasonality, restructuring benefits, adding all those things into the mix makes it really hard to analyze Brady from a volume based incremental margin type of a typical analysis. Notwithstanding the long term focus that you’re going to applying lean to the carpet side of the business, longer term were you implying that the $109 million level is a reasonable run rate to look at SG&A?

No, we are never satisfied. So if you ask me am I happy with $109 million, I’m not happy with $109 million. I don’t want to say if it’s a reasonable run rate going forward. I don’t want to go there. But we constantly push forward. As we look at our SG&A, sales are tight. If you look at our cost of goods sold as a percent of sales, it’s low if you compare to our peers. So going forward we want to increase the quality of earnings and so we’re going to push certainly to get cost of goods sold as a percent of sales down and we have maybe a head start here because of lean. But I think going forward there is more opportunity in SG&A to come down as a percent of sales. So earnings quality probably comes from SG&A, maybe a little bit less from cost of goods sold and we might invest more in R&D.

Likewise though, given the fact that you’ve got things screwed down pretty tight there to begin with and obviously the absolute level of business is operating at a pretty low level. I’m just thinking that most of the leverage over the next year to year and a half on the SG&A front would really come from incremental volume than it would any lean initiatives that take time to work their way into the equation.

I think it’s all a question of how fast the economy recovers, how much do our sales grow when the economy comes back and how fast can we move lean to the carpet. We certainly don’t want to wait for the economy and say are we just going to sit there at $109 million in the last quarter and the economy is going to help us get our SG&A in a safe zone. We’re going to work until the economy comes back and our sales grow, even better.

On the gross margin side likewise, is 49% to 50% in the current environment not a bad way to think of it, ignoring of course the enormous leverage that you do get on incremental sales in your business that you’d earlier talked about but on the current level of business is that a reasonable way to look at it?

I think it’s in the range of our historic levels. It’s reasonable. Are we happy with 50%? It’s certainly better than 47% but we’ve seen times when we’ve been more than that so our goals are always higher but it’s in the range and as for a short term, the next quarter or two it’s probably reasonable.

Al, now that you’ve been operating over there for quite awhile and you’ve obviously increased the percentage of your business to the more differentiated solutions and tried to focus the business on that and get away from the lower end commodity phones, I’m curious how you would describe the mix between commodity and non commodity and do you feel more comfortable than you did two years ago about your relationship you have with those customers and their customers buying into the differentiated solutions that you’re providing or is it still a day to day absolute battle? How would you describe that?

I think when you play in the electronics industry thee is always a challenge on a short term basis because of the pressures that we as consumers put on the industry in general. But I feel very good. I love our market position because as a company we’re looking to grow and when you look at consumer electronics for the next five to ten years or so, there is a lot of projected growth in that industry. Our key is to capitalize on the right subsectors of growth within that and I feel really good that our customers are responding really well to the new products that we’re bringing into the marketplace.

What would you guess you mix is now between commodity and more value add, understanding the definition is a little nebulous.

I think because the definition is so cloudy and because some of our competitors may be interested in that information, I’d rather not comment.

There are no further questions. I would like to turn the call over to Aaron Pearce for closing remarks.

We thank you for your participation today and would like to remind you that the audio and slides from this call today are also available on our website at www.investor.bradycorp.com The replay of this conference call will be available by the phone beginning at noon central standard time today, February 19. The phone number to access the call is 888-286-8010 or internationally at 617-801-6888 and the pass code is 31963808 and the phone replay will be available until Friday, February 26. As always if you have questions, please contact us. Thank you for your interest in Brady and have a great day.