UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

~~FORM 10-Q~~


☑
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended January 31, ~~2018~~2024


☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number 1-14959

BRADY CORPORATION

(Exact name of registrant as specified in its charter)


Wisconsin						39-0178960

6555 West Good Hope Road



~~6555 West Good Hope Road, Milwaukee, Wisconsin~~		~~53223~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~

Milwaukee, Wisconsin 53223

(Address of principal executive offices and zip code)

(414) 358-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Trading Symbol	Name of each exchange on which registered
Class A Nonvoting Common Stock, par value $0.01 per share		BRC
	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ☑No¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesþ☑No¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

þ☑

Accelerated filer

¨☐

Emerging growth company

¨☐

Non-accelerated filer

¨☐

Smaller reporting company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐Noþ

~~APPLICABLE ONLY TO CORPORATE ISSUERS~~

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.~~☑

As of February 20, ~~2018,~~2024, there were ~~48,208,281~~44,792,961 outstanding shares of Class A Nonvoting Common Stock and 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which is held by affiliates of the Registrant, is the only voting stock.

Table of Contents

~~FORM 10-Q~~

~~BRADY CORPORATION~~

INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in ~~Thousands, Unaudited)~~

Thousands)

January 31, 2018 July 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 115,327
$ 133,944
Accounts receivable—net 164,400
149,638
Inventories:
Finished products 72,629
69,760
Work-in-process 19,472
18,117
Raw materials and supplies 21,344
19,147
Total inventories 113,445
107,024
Prepaid expenses and other current assets 20,950
17,208
Total current assets 414,122
407,814
Other assets:
Goodwill 443,873
437,697
Other intangible assets 50,131
53,076
Deferred income taxes 9,899
35,456
Other 18,579
18,077
Property, plant and equipment:
Cost:
Land 7,535
7,470
Buildings and improvements 98,256
98,228
Machinery and equipment 265,640
261,192
Construction in progress 6,176
4,109
377,607
370,999
Less accumulated depreciation 279,826
272,896
Property, plant and equipment—net 97,781
98,103
Total $ 1,034,385
$ 1,050,223
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Notes payable $ 585
$ 3,228
Accounts payable 64,365
66,817
Wages and amounts withheld from employees 49,679
58,192
Taxes, other than income taxes 7,997
7,970
Accrued income taxes 6,085
7,373
Other current liabilities 42,961
43,618
Total current liabilities 171,672
187,198
Long-term obligations 70,615
104,536
Other liabilities 60,125
58,349
Total liabilities 302,412
350,083
Stockholders’ investment:
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively, and outstanding 48,238,412 and 47,814,818 shares, respectively 513
513
Class B voting common stock—Issued and outstanding, 3,538,628 shares 35
35
Additional paid-in capital 325,733
322,608
Earnings retained in the business 515,872
507,136
Treasury stock—3,023,075 and 3,446,669 shares, respectively, of Class A nonvoting common stock, at cost (75,090 ) (85,470 )
Accumulated other comprehensive loss (35,090 ) (44,682 )
Total stockholders’ investment 731,973
700,140
Total $ 1,034,385
$ 1,050,223


	January 31, 2024		July 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	143,860	$	151,532
Accounts receivable, net of allowance for credit losses of $6,531 and $8,467, respectively	185,569		184,420
Inventories	164,944		177,078
Prepaid expenses and other current assets	12,147		11,790
Total current assets	506,520		524,820
Property, plant and equipment—net	190,777		142,149
Goodwill	590,535		592,646
Other intangible assets	57,108		62,096
Deferred income taxes	14,899		15,716
Operating lease assets	24,686		29,688
Other assets	23,079		22,142
Total	$	1,407,604	$	1,389,257
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	80,114	$	79,855
Accrued compensation and benefits	56,408		71,470
Taxes, other than income taxes	13,345		13,575
Accrued income taxes	8,228		12,582
Current operating lease liabilities	12,758		14,726
Other current liabilities	66,449		65,828
Total current liabilities	237,302		258,036
Long-term debt	48,090		49,716
Long-term operating lease liabilities	12,510		16,217
Other liabilities	70,970		74,369
Total liabilities	368,872		398,338
Stockholders’ equity:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 44,792,328 and 45,008,724 shares, respectively	513		513
Class B voting common stock—Issued and outstanding, 3,538,628 shares	35		35
Additional paid-in capital	353,794		351,771
Retained earnings	1,090,045		1,021,870
Treasury stock—6,469,159 and 6,252,763 shares, respectively, of Class A nonvoting common stock, at cost	(305,714)		(290,209)
Accumulated other comprehensive loss	(99,941)		(93,061)
Total stockholders’ equity	1,038,732		990,919
Total	$	1,407,604	$	1,389,257

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~EARNINGS~~INCOME

(Dollars in Thousands, Except Per Share Amounts, Unaudited)


	Three months ended January 31,						Six months ended January 31,
	Three months ended January 31,														Three months ended January 31,		Six months ended January 31,
	2018			2017			2018			2017			2024	2023		2024		2023
Net sales	$	287,780		$	268,001		$	577,931		$	548,177
Cost of products sold	144,088			133,843			288,174			273,661
Cost of goods sold
Gross margin	143,692			134,158			289,757			274,516
Operating expenses:
Research and development
Research and development
Research and development	11,314			9,481			21,834			18,627
Selling, general and administrative	97,582			94,715			197,716			192,719
Total operating expenses	108,896			104,196			219,550			211,346
Operating income	34,796			29,962			70,207			63,170
Other income (expense):
Investment and other income	1,056			596			1,272			107
Investment and other income
Investment and other income
Interest expense	(829		)	(1,458		)	(1,692		)	(3,190		)
Earnings before income taxes	35,023			29,100			69,787			60,087
Income before income taxes
Income tax expense	30,750			3,803			39,678			12,237
Net earnings	$	4,273		$	25,297		$	30,109		$	47,850
Net earnings per Class A Nonvoting Common Share:
Net income
Net income per Class A Nonvoting Common Share:
Basic
Basic
Basic	$	0.08		$	0.50		$	0.58		$	0.94
Diluted	$	0.08		$	0.49		$	0.57		$	0.93
Dividends	$	0.21		$	0.21		$	0.42		$	0.41
Net earnings per Class B Voting Common Share:
Net income per Class B Voting Common Share:
Basic
Basic
Basic	$	0.08		$	0.50		$	0.57		$	0.93
Diluted	$	0.08		$	0.49		$	0.56		$	0.91
Dividends	$	0.21		$	0.21		$	0.40		$	0.39
Weighted average common shares outstanding (in thousands):
Weighted average common shares outstanding:
Basic
Basic
Basic	51,698			51,054			51,569			50,844
Diluted	52,719			51,954			52,551			51,721

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Dollars in Thousands, Unaudited)

Three months ended January 31, Six months ended January 31,
2018 2017 2018 2017
Net earnings $ 4,273
$ 25,297
$ 30,109
$ 47,850
Other comprehensive income (loss):
Foreign currency translation adjustments 17,846
(2,292 ) 12,461
(16,546 )

Net investment hedge and long-term intercompany loan translation adjustments (2,005 ) 1,984
(3,177 ) 5,169

Cash flow hedges:
Net loss recognized in other comprehensive income (loss) (304 ) (403 ) (537 ) (106 )
Reclassification adjustment for losses included in net earnings 158
10
182
415
(146 ) (393 ) (355 ) 309
Pension and other post-retirement benefits:
Net gain recognized in other comprehensive income (loss) 592
72
592
72
Actuarial gain amortization (141 ) (136 ) (271 ) (272 )
451
(64 ) 321
(200 )

Other comprehensive income (loss), before tax 16,146
(765 ) 9,250
(11,268 )
Income tax benefit (expense) related to items of other comprehensive income (loss) 827
(535 ) 342
(2,201 )
Other comprehensive income (loss), net of tax 16,973
(1,300 ) 9,592
(13,469 )
Comprehensive income $ 21,246
$ 23,997
$ 39,701
$ 34,381


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Net income	$	43,628	$	37,986	$	90,869	$	77,427
Other comprehensive income (loss):
Foreign currency translation adjustments	14,591		30,562		(5,773)		12,890

Cash flow hedges:
Net gain recognized in other comprehensive income (loss)	1,083		776		789		1,669
Reclassification adjustment for gains included in net income	(254)		(217)		(1,539)		(798)
	829		559		(750)		871

Pension and other post-retirement benefits actuarial (gain) loss amortization	(151)		27		(302)		(116)

Other comprehensive income (loss), before tax	15,269		31,148		(6,825)		13,645
Income tax benefit (expense) related to items of other comprehensive income (loss)	73		(4)		(55)		62
Other comprehensive income (loss), net of tax	15,342		31,144		(6,880)		13,707
Comprehensive income	$	58,970	$	69,130	$	83,989	$	91,134

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Thousands, Unaudited)


	Three months ended January 31, 2024
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at October 31, 2023	$	548	$	352,421	$	1,057,773	$	(300,467)	$	(115,283)	$	994,992
Net income	—		—		43,628		—		—		43,628
Other comprehensive income, net of tax	—		—		—		—		15,342		15,342
Issuance of shares of Class A Common Stock under stock plan	—		273		—		2,466		—		2,739
Stock-based compensation expense	—		1,100		—		—		—		1,100
Repurchase of shares of Class A Common Stock, including excise taxes	—		—		—		(7,713)		—		(7,713)
Cash dividends on Common Stock:
Class A — $0.2350 per share	—		—		(10,525)		—		—		(10,525)
Class B — $0.2350 per share	—		—		(831)		—		—		(831)
Balances at January 31, 2024	$	548	$	353,794	$	1,090,045	$	(305,714)	$	(99,941)	$	1,038,732


	Six months ended January 31, 2024
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at July 31, 2023	$	548	$	351,771	$	1,021,870	$	(290,209)	$	(93,061)	$	990,919
Net income	—		—		90,869		—		—		90,869
Other comprehensive loss, net of tax	—		—		—		—		(6,880)		(6,880)
Issuance of shares of Class A Common Stock under stock plan	—		(3,389)		—		6,393		—		3,004
Tax benefit and withholdings from deferred compensation distributions	—		149		—		—		—		149
Stock-based compensation expense	—		5,263		—		—		—		5,263
Repurchase of shares of Class A Common Stock, including excise taxes	—		—		—		(21,898)		—		(21,898)
Cash dividends on Common Stock:
Class A — $0.4700 per share	—		—		(21,090)		—		—		(21,090)
Class B — $0.4534 per share	—		—		(1,604)		—		—		(1,604)
Balances at January 31, 2024	$	548	$	353,794	$	1,090,045	$	(305,714)	$	(99,941)	$	1,038,732

Table of Contents


	Three months ended January 31, 2023
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at October 31, 2022	$	548	$	346,064	$	920,482	$	(228,855)	$	(126,514)	$	911,725
Net income	—		—		$	37,986	—		—		37,986
Other comprehensive income, net of tax	—		—		—		—		31,144		31,144
Issuance of shares of Class A Common Stock under stock plan	—		1,026		—		1,308		—		2,334
Stock-based compensation expense	—		1,423		—		—		—		1,423
Repurchase of shares of Class A Common Stock	—		—		—		(5,791)		—		(5,791)
Cash dividends on Common Stock:
Class A — $0.2300 per share	—		—		(10,603)		—		—		(10,603)
Class B — $0.2300 per share	—		—		(814)		—		—		(814)
Balances at January 31, 2023	$	548	$	348,513	$	947,051	$	(233,338)	$	(95,370)	$	967,404


	Six months ended January 31, 2023
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at July 31, 2022	$	548	$	345,266	$	892,417	$	(217,856)	$	(109,077)	$	911,298
Net income	—		—		77,427		—		—		77,427
Other comprehensive income, net of tax	—		—		—		—		13,707		13,707
Issuance of shares of Class A Common Stock under stock plan	—		(1,200)		—		2,379		—		1,179
Tax benefit and withholdings from deferred compensation distributions	—		66		—		—		—		66
Stock-based compensation expense	—		4,381		—		—		—		4,381
Repurchase of shares of Class A Common Stock	—		—		—		(17,861)		—		(17,861)
Cash dividends on Common Stock:
Class A — $0.4600 per share	—		—		(21,224)		—		—		(21,224)
Class B — $0.4434 per share	—		—		(1,569)		—		—		(1,569)
Balances at January 31, 2023	$	548	$	348,513	$	947,051	$	(233,338)	$	(95,370)	$	967,404

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


	Six months ended January 31,
	Six months ended January 31,								Six months ended January 31,
	2018			2017			2024	2023
Operating activities:
Net earnings	$	30,109		$	47,850
Net income
Net income
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	12,840			14,102
Non-cash portion of stock-based compensation expense	5,897			5,394
Depreciation and amortization
Depreciation and amortization
Stock-based compensation expense
Deferred income taxes	26,028			(4,547		)
Other
Changes in operating assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivable	(10,945		)	3,407
Inventories	(4,150		)	224
Prepaid expenses and other assets	(3,153		)	220
Accounts payable and other liabilities	(12,695		)	(9,384		)
Accounts payable and accrued liabilities
Income taxes	(1,471		)	(3,932		)
Net cash provided by operating activities	42,460			53,334

Investing activities:
Investing activities:
Investing activities:
Purchases of property, plant and equipment
Purchases of property, plant and equipment
Purchases of property, plant and equipment	(8,469		)	(7,235		)
Other	(729		)	593
Net cash used in investing activities	(9,198		)	(6,642		)

Financing activities:
Financing activities:
Financing activities:
Payment of dividends
Payment of dividends
Payment of dividends	(21,373		)	(20,852		)
Proceeds from exercise of stock options	9,948			14,659
Proceeds from borrowing on credit facilities	17,439			144,533
Repayment of borrowing on credit facilities	(57,314		)	(195,002		)
Income tax on equity-based compensation, and other	(2,342		)	(640		)
Payments for employee taxes withheld from stock-based awards
Purchase of treasury stock
Proceeds from borrowing on credit agreement
Repayment of borrowing on credit agreement
Other
Net cash used in financing activities	(53,642		)	(57,302		)

Effect of exchange rate changes on cash	1,763			(5,410		)
Effect of exchange rate changes on cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents
Net decrease in cash and cash equivalents
Net decrease in cash and cash equivalents	(18,617		)	(16,020		)
Cash and cash equivalents, beginning of period	133,944			141,228

Cash and cash equivalents, end of period	$	115,327		$	125,208
Cash and cash equivalents, end of period
Cash and cash equivalents, end of period

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months EndedJanuary 31, ~~2018~~2024

(Unaudited)

(In thousands, except share and per share amounts)

NOTE A — Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Brady Corporation and subsidiaries (the "Company," "Brady," "we," or "our") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing statements contain all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of the Company as of January 31, ~~2018~~2024 and July 31, ~~2017~~,2023, its results of operations and comprehensive income for the three and six months ended January 31, ~~2018~~2024 and ~~2017~~,2023, and cash flows for the six months ended January 31, ~~2018~~2024 and ~~2017~~.2023. The condensed consolidated balance sheet as of July 31, ~~2017~~,2023 has been derived from the audited consolidated financial statements as of that date. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from the estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statement presentation. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s ~~annual report~~Annual Report on Form 10-K for the year ended July 31, ~~2017~~.2023.

NOTE B — ~~Goodwill~~New Accounting Pronouncements

Standards not yet adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The guidance requires expanded interim and annual disclosures of segment information including the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. The guidance is effective for the Company's fiscal 2025 Form 10-K and interim periods thereafter. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The guidance requires expanded annual disclosures including the standardization and disaggregation of income tax rate reconciliation categories and the amount of income taxes paid by jurisdiction. The guidance is effective for the Company’s fiscal 2026 Form 10-K. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

NOTE C — Additional Balance Sheet Information

Inventories

Inventories consisted of the following as of January 31, 2024 and July 31, 2023:


	January 31, 2024		July 31, 2023
Finished products	$	96,003	$	103,350
Work-in-process	26,200		26,884
Raw materials and supplies	42,741		46,844
Total inventories	$	164,944	$	177,078

Table of Contents

Property, plant and equipment

Property, plant and equipment is presented net of accumulated depreciation in the amount of $299,746 and $292,680 as of January 31, 2024 and July 31, 2023, respectively.

NOTE D — Other Intangible Assets

~~Changes in the carrying amount~~Other intangible assets as of ~~goodwill for the~~ ~~six months ended~~ January 31, ~~2018, were as follows:~~

IDS WPS Total
Balance as of July 31, 2017 $ 391,864
$ 45,833
$ 437,697
Translation adjustments 4,110
2,066
6,176
Balance as of January 31, 2018 $ 395,974
$ 47,899
$ 443,873

~~Goodwill at January 31, 2018~~2024 and July 31, ~~2017, included $118,637 and $209,392~~2023 consisted of ~~accumulated impairment losses within~~ the ~~Identification Solutions ("IDS") and Workplace Safety ("WPS") segments, respectively, for a total of $328,029. There were no impairment charges recorded during the six months ended January 31, 2018.~~following:

Other intangible assets include patents, trademarks, and customer relationships with finite lives being amortized in accordance with the accounting guidance for other intangible assets. The Company also has unamortized indefinite-lived trademarks that are classified as other intangible assets. The net book value of these assets was as follows:


																	January 31, 2024				July 31, 2023
	January 31, 2018								July 31, 2017
	Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value
	Weighted Average Amortization Period (Years)																	Weighted Average Amortization Period (Years)	Gross Carrying Amount	Accumulated Amortization		Net Book Value	Weighted Average Amortization Period (Years)	Gross Carrying Amount	Accumulated Amortization	Net Book Value
Amortized other intangible assets:
Patents	5	$	1,441	$	(697	)	$	744	5	$	1,358	$	(471	)	$	887
Trademarks and other	9	4,654		(4,469		)	185		9	4,528		(4,229		)	299
Tradenames
Tradenames
Tradenames
Customer relationships	8	61,501		(35,545		)	25,956		8	60,759		(31,909		)	28,850
Technology
Unamortized other intangible assets:
Trademarks	N/A	23,246		—			23,246		N/A	23,040		—			23,040
Tradenames
Tradenames
Tradenames
Total		$	90,842	$	(40,711	)	$	50,131		$	89,685	$	(36,609	)	$	53,076

The ~~increase~~decrease in the gross carrying amount of other intangible assets as of January 31, ~~2018,~~2024 compared to July 31, ~~2017,~~2023 was primarily due to the effect of currency fluctuations during the six-month period.

Amortization expense of intangible assets was ~~$1,617~~$2,364 and $~~1,688~~$3,258 for the three months ended January 31, ~~2018~~2024 and ~~2017~~,2023, respectively, and ~~$3,310~~$4,719 and ~~$3,583~~$6,889 for the six months ended January 31, ~~2018~~2024 and ~~2017,~~2023, respectively.

NOTE E — Leases

The ~~amortization over each~~Company leases certain manufacturing facilities, warehouse and office spaces, and vehicles accounted for as operating leases. Lease terms typically range from one year to ten years. As of January 31, 2024, the Company did not have any finance leases.

Operating lease expense was $3,804 and $3,868 for the three months ended January 31, 2024 and 2023, respectively, and $7,869 and $7,648 for the six months ended January 31, 2024 and 2023, respectively, which was recognized in either "Cost of goods sold" or "Selling, general and administrative" expenses in the condensed consolidated statements of income, based on the nature of the ~~next five fiscal years is projected~~lease. Short-term lease expense, variable lease expenses, and sublease income was immaterial to ~~be $6,578, $6,223, $5,217, $5,174~~ ~~and $5,017~~the condensed consolidated statements of income for the ~~fiscal years ending July~~three and six months ended January 31, ~~2018~~, ~~2019~~, ~~2020~~, ~~2021~~2024 and ~~2022, respectively.~~2023.

Supplemental cash flow information related to the Company's operating leases for the six months ended January 31, 2024 and 2023 was as follows:


	Six months ended January 31,
	2024		2023
Operating cash outflows from operating leases	$	8,585	$	8,766
Operating lease assets obtained in exchange for new operating lease liabilities (1)	2,551		6,545

(1)Includes new leases and remeasurements or modifications of existing leases.

NOTE CF — Accumulated Other Comprehensive Loss

Other comprehensive loss consists of foreign currency translation adjustments, which includes net investment hedges and long-term intercompany loan translation adjustments, unrealized gains ~~and losses~~ from cash flow ~~hedges and net investment~~ hedges, and the unamortized gain on post-retirement plans, net of their related tax effects.

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The following table illustrates the changes in the balances of each component of accumulated other comprehensive loss, net of tax, for the six months ended January 31, ~~2018:~~2024:

Unrealized gain (loss) on cash flow hedges Unamortized gain on post-retirement plans Foreign currency translation adjustments Accumulated other comprehensive loss
Beginning balance, July 31, 2017 $ 109
$ 2,620
$ (47,411 ) $ (44,682 )
Other comprehensive (loss) income before reclassification (598 ) 382
9,953
9,737
Amounts reclassified from accumulated other comprehensive loss 126
(271 ) —
(145 )
Ending balance, January 31, 2018 $ (363 ) $ 2,731
$ (37,458 ) $ (35,090 )


	Unrealized gain on cash flow hedges		Unamortized gain on post-retirement plans		Foreign currency translation adjustments		Accumulated other comprehensive loss
Beginning balance, July 31, 2023	$	1,641	$	756	$	(95,458)	$	(93,061)
Other comprehensive income (loss) before reclassification	350		—		(5,773)		(5,423)
Amounts reclassified from accumulated other comprehensive loss	(1,155)		(302)		—		(1,457)
Ending balance, January 31, 2024	$	836	$	454	$	(101,231)	$	(99,941)

The ~~decrease~~increase in accumulated other comprehensive loss as of January 31, ~~2018,~~2024 compared to July 31, ~~2017,~~2023 was primarily due to the ~~depreciation~~appreciation of the U.S. dollar against certain other currencies during the six-month period. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation, including foreign currency translation on intercompany notes and net investment hedges, net of tax. Of the total $145 in amounts reclassified from accumulated other comprehensive loss, the $126 loss on cash flow hedges was reclassified into cost of products sold, and the $271 gain on post-retirement plans was reclassified into selling, general and administrative expenses ("SG&A") on the condensed consolidated statement of earnings for the six months ended January 31, 2018.

The changes in accumulated other comprehensive loss by component, net of tax, for the six months ended January 31, ~~2017,~~2023 were as follows:

Unrealized loss on cash flow hedges Unamortized gain on post-retirement plans Foreign currency translation adjustments Accumulated other comprehensive loss
Beginning balance, July 31, 2016 $ (857 ) $ 2,236
$ (56,124 ) $ (54,745 )
Other comprehensive (loss) income before reclassification (80 ) 72
(13,442 ) (13,450 )
Amounts reclassified from accumulated other comprehensive loss 253
(272 ) —
(19 )
Ending balance, January 31, 2017 $ (684 ) $ 2,036
$ (69,566 ) $ (68,214 )


	Unrealized gain on cash flow hedges		Unamortized gain on post-retirement plans		Foreign currency translation adjustments		Accumulated other comprehensive loss
Beginning balance, July 31, 2022	$	954	$	1,436	$	(111,467)	$	(109,077)
Other comprehensive income before reclassification	1,593		—		12,890		14,483
Amounts reclassified from accumulated other comprehensive loss	(598)		(178)		—		(776)
Ending balance, January 31, 2023	$	1,949	$	1,258	$	(98,577)	$	(95,370)

The ~~increase~~decrease in accumulated other comprehensive loss as of January 31, ~~2017,~~2023 compared to July 31, ~~2016,~~2022 was primarily due to the ~~appreciation~~depreciation of the U.S. dollar against certain other currencies during the six-month period. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation, including foreign currency translation on intercompany notes and net investment hedges, net of tax.

Of the ~~total $19 in~~ amounts reclassified from accumulated other comprehensive loss the $253 loss on cash flow hedges was reclassified into cost of products sold, and the $272 gain on post-retirement plans was reclassified into SG&A on the condensed consolidated statement of earnings forduring the six months ended January 31, ~~2017.~~2024 and 2023, unrealized gains on cash flow hedges were reclassified to "Cost of goods sold" and unamortized gains on post-retirement plans were reclassified into "Investment and other income" on the condensed consolidated statements of income.

The following table illustrates the income tax benefit (expense) on the components of other comprehensive income (loss) for the three and six months ended January 31, ~~2018~~2024 and ~~2017:~~2023:


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Income tax benefit (expense) related to items of other comprehensive income (loss):
Cash flow hedges	$	73	$	58	$	(55)	$	124
Pension and other post-retirement benefits	—		(62)		—		(62)
Income tax benefit (expense) related to items of other comprehensive income (loss)	$	73	$	(4)	$	(55)	$	62

Three months ended January 31, Six months ended January 31,
2018 2017 2018 2017
Income tax benefit (expense) related to items of other comprehensive income (loss):
Net investment hedge translation adjustments $ 1,029
$ (556 ) $ 694
$ (2,125 )
Cash flow hedges 78
(8 ) (117 ) (137 )
Pension and other post-retirement benefits (209 ) —
(209 ) —
Other income tax adjustments and currency translation (71 ) 29
(26 ) 61
Income tax benefit (expense) related to items of other comprehensive income (loss) $ 827
$ (535 ) $ 342
$ (2,201 )

NOTE DG — Revenue Recognition

The Company recognizes revenue when control of the product or service transfers to the customer at an amount that represents the consideration expected to be received in exchange for those products and services. The Company’s revenues are primarily from the sale of identification solutions and workplace safety products that are shipped and billed to customers. All revenue is from contracts with customers and is included in “Net sales” on the condensed consolidated statements of income. See Note H, “Segment Information,” for the Company’s disaggregated revenue disclosure.

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The Company offers extended warranty coverage that is included in the sales price of certain products, which it accounts for as service warranties. The Company accounts for the deferred revenue associated with extended service warranties as a contract liability. The balance of contract liabilities associated with service warranty performance obligations was $2,979 and $2,757 as of January 31, 2024 and July 31, 2023, respectively. The current portion and non-current portion of contract liabilities are included in “Other current liabilities” and “Other liabilities," respectively, on the condensed consolidated balance sheets. The Company recognized revenue of $321 and $311 during the three months ended January 31, 2024 and 2023, respectively, and $635 and $617 during the six months ended January 31, 2024 and 2023, respectively, that was included in the contract liability balance at the beginning of the respective period from the amortization of extended service warranties. Of the contract liability balance outstanding at January 31, 2024, the Company expects to recognize 21% by the end of fiscal 2024, an additional 33% by the end of fiscal 2025, and the remaining balance thereafter.

NOTE H — Segment Information

The Company is organized and managed within two regions: Americas & Asia and Europe & Australia, which are the reportable segments. The following is a summary of net sales by segment and geographic region for the three and six months ended January 31, 2024 and 2023:


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Net sales:
Americas & Asia
Americas	$	185,976	$	195,102	$	382,262	$	386,431
Asia	25,667		24,965		51,007		52,131
Total	$	211,643	$	220,067	$	433,269	$	438,562
Europe & Australia
Europe	$	98,371	$	93,760	$	194,704	$	183,952
Australia	12,610		12,422		26,634		26,304
Total	$	110,981	$	106,182	$	221,338	$	210,256

Total Company	$	322,624	$	326,249	$	654,607	$	648,818

The following is a summary of segment profit for the three and six months ended January 31, 2024 and 2023:


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Segment profit:
Americas & Asia	$	43,895	$	40,174	$	93,792	$	81,319
Europe & Australia	15,054		13,459		31,798		30,217
Total profit from reportable segments	$	58,949	$	53,633	$	125,590	$	111,536

Total profit from reportable segments is a measure of operating income that excludes administrative costs related to corporate functions that are otherwise included in the Company's operating income. The following is a reconciliation of total profit from reportable segments to income before income taxes for the three and six months ended January 31, 2024 and 2023:


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Total profit from reportable segments	$	58,949	$	53,633	$	125,590	$	111,536
Unallocated amounts:
Administrative costs	(5,023)		(4,852)		(11,934)		(11,369)
Investment and other income	2,684		968		3,122		811
Interest expense	(790)		(1,239)		(1,556)		(2,133)
Income before income taxes	$	55,820	$	48,510	$	115,222	$	98,845

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NOTE I — Net ~~Earnings~~Income per Common Share

Reconciliations of the numerator and denominator of the basic and diluted per share computations for the Company’s Class A and Class B common stock are summarized as follows:


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Numerator (in thousands):
Net income (Numerator for basic and diluted income per Class A Nonvoting Common Share)	$	43,628	$	37,986	$	90,869	$	77,427
Less:
Preferential dividends	—		—		(748)		(769)
Preferential dividends on dilutive stock options	—		—		(5)		(4)
Numerator for basic and diluted income per Class B Voting Common Share	$	43,628	$	37,986	$	90,116	$	76,654
Denominator (in thousands):
Denominator for basic income per share for both Class A and Class B	48,374		49,745		48,440		49,806
Plus: Effect of dilutive equity awards	351		264		328		243
Denominator for diluted income per share for both Class A and Class B	48,725		50,009		48,768		50,049
Net income per Class A Nonvoting Common Share:
Basic	$	0.90	$	0.76	$	1.88	$	1.55
Diluted	$	0.90	$	0.76	$	1.86	$	1.55
Net income per Class B Voting Common Share:
Basic	$	0.90	$	0.76	$	1.86	$	1.54
Diluted	$	0.90	$	0.76	$	1.85	$	1.53

Three months ended January 31, Six months ended January 31,
2018 2017 2018 2017
Numerator: (in thousands)
Earnings (Numerator for basic and diluted Class A Nonvoting Common Share) $ 4,273
$ 25,297
$ 30,109
$ 47,850
Less:
Preferential dividends —
—
(799 ) (788 )
Preferential dividends on dilutive stock options —
—
(16 ) (14 )
Numerator for basic and diluted earnings per Class B Voting Common Share $ 4,273
$ 25,297
$ 29,294
$ 47,048
Denominator: (in thousands)
Denominator for basic earnings per share for both Class A and Class B 51,698
51,054
51,569
50,844
Plus: Effect of dilutive stock options and restricted stock units 1,021
900
982
877
Denominator for diluted earnings per share for both Class A and Class B 52,719
51,954
52,551
51,721
Net earnings per Class A Nonvoting Common Share:
Basic $ 0.08
$ 0.50
$ 0.58
$ 0.94
Diluted $ 0.08
$ 0.49
$ 0.57
$ 0.93
Net earnings per Class B Voting Common Share:
Basic $ 0.08
$ 0.50
$ 0.57
$ 0.93
Diluted $ 0.08
$ 0.49
$ 0.56
$ 0.91

~~Options~~Potentially dilutive securities attributable to ~~purchase~~ ~~705,069~~outstanding stock options and ~~768,617~~ ~~shares of Class A Nonvoting Common Stock for~~restricted stock units were excluded from the ~~three months ended January 31, 2018 and~~ ~~2017, respectively, and 721,100 and 770,010 shares for the six months ended January 31, 2018 and 2017, respectively, were not included in the computation~~calculation of diluted ~~net~~ earnings per share ~~because~~where the ~~option~~combined exercise price ~~was~~and average unamortized fair value were greater than the average market price of the ~~common shares and, therefore,~~Company's Class A Nonvoting Common Stock because the effect would have been anti-dilutive.

~~NOTE E — Segment Information~~

The ~~Company is organized~~amount of anti-dilutive shares were 49,562 and managed on a global basis within three operating segments, Identification Solutions, Workplace Safety, and People Identification ("PeopleID"), which aggregate into two reportable segments that are organized around businesses with consistent products and services: IDS and WPS. The Identification Solutions and PeopleID operating segments aggregate into the IDS reporting segment, while the WPS reporting segment is comprised solely of the Workplace Safety operating segment. The Company evaluates short-term segment performance based on segment profit and customer sales. Interest expense, investment and other income, income taxes, and certain corporate administrative expenses are excluded when evaluating segment performance.

~~The following is a summary of segment information~~634,999 for the ~~three and six months ended January 31, 2018 and 2017:~~

Three months ended January 31, Six months ended January 31,
2018 2017 2018 2017
Sales to External Customers
ID Solutions $ 206,432
$ 190,962
$ 416,137
$ 392,226
Workplace Safety 81,348
77,039
161,794
155,951
Total Company $ 287,780
$ 268,001
$ 577,931
$ 548,177
Segment Profit
ID Solutions $ 34,088
$ 28,961
$ 69,925
$ 62,035
Workplace Safety 7,055
6,059
13,500
12,504
Total Company $ 41,143
$ 35,020
$ 83,425
$ 74,539

~~The following is a reconciliation of segment profit to earnings before income taxes for the three and six months ended January 31, 2018 and 2017:~~

Three months ended January 31, Six months ended January 31,
2018 2017 2018 2017
Total profit from reportable segments $ 41,143
$ 35,020
$ 83,425
$ 74,539
Unallocated amounts:
Administrative costs (6,347 ) (5,058 ) (13,218 ) (11,369 )
Investment and other income 1,056
596
1,272
107
Interest expense (829 ) (1,458 ) (1,692 ) (3,190 )
Earnings before income taxes $ 35,023
$ 29,100
$ 69,787
$ 60,087

~~NOTE F – Stock-Based Compensation~~

The Company has an incentive stock plan under which the Board of Directors may grant nonqualified stock options to purchase shares of Class A Nonvoting Common Stock, restricted stock units ("RSUs"), or restricted and unrestricted shares of Class A Nonvoting Common Stock to employees and non-employee directors. Certain awards may be subject to pre-established performance goals.

The options issued under the plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Options issued under the plan, referred to herein as “service-based” stock options, generally expire 10 years from the date of grant.

Restricted and unrestricted shares and RSUs issued under the plan have a grant date fair value equal to the fair market value of the underlying stock at the date of grant. Shares issued under the plan are referred to herein as either "service-based" or "performance-based" restricted shares and RSUs. The service-based RSUs granted under the plan generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. The performance-based RSUs granted under the plan generally vest at the end of a three-year service period provided specified company financial performance metrics are met.

As of January 31, 2018, the Company has reserved 3,341,296 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs, and restricted shares and 4,014,866 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs, and restricted and unrestricted shares under the plan. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares under the plan.

The Company recognizes the compensation cost of all share-based awards at the time it is deemed probable the award will vest. This cost is recognized on a straight-line basis over the vesting period of the award. If it is determined that it is unlikely the award will vest, the expense recognized to date for the award is reversed in the period in which this is evident and the remaining expense is not recorded. Total stock-based compensation expense recognized by the Company during the three months ended January 31, ~~2018~~2024 and ~~2017, was~~ ~~$2,153~~ (~~$1,614~~ ~~net of taxes)~~2023, respectively, and ~~$2,238~~ (~~$1,387~~ ~~net of taxes), respectively. Expense recognized during~~181,674 and 609,266 for the six months ended January 31, ~~2018~~2024 and ~~2017, was $5,897 ($4,423 net of taxes) and $5,394 ($3,344 net of taxes),~~2023, respectively.

~~As of~~ ~~January 31, 2018~~, total unrecognized compensation cost related to stock-based compensation awards was $14,492 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 1.9 years.

~~The Company has estimated the grant date fair value of its service-based stock option awards granted during the~~ ~~six months ended January 31, 2018~~ ~~and~~ ~~2017, using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model are reflected in the following table:~~

Six months ended January 31,
Black-Scholes Option Valuation Assumptions 2018 2017
Expected term (in years) 6.07
6.11
Expected volatility 26.52 % 29.43 %
Expected dividend yield 2.72 % 2.70 %
Risk-free interest rate 1.96 % 1.26 %
Weighted-average market value of underlying stock at grant date $ 36.85
$ 35.13
Weighted-average exercise price $ 36.85
$ 35.13
Weighted-average fair value of options granted during the period $ 7.96
$ 7.56

The Company uses historical data regarding stock option exercise behaviors to estimate the expected term of options granted based on the period of time that options granted are expected to be outstanding. Expected volatilities are based on the historical volatility of the Company’s stock. The expected dividend yield is based on the Company’s historical dividend payments and historical yield. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the length of time corresponding to the expected term of the option. The market value is calculated as the average of the high and the low stock price on the date of the grant.

~~A summary of stock option activity under the Company’s share-based compensation plans for the~~ ~~six months ended January 31, 2018, is presented below:~~

Options Shares
Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
Outstanding at July 31, 2017 2,879,801 $ 27.40

New grants 364,046 36.85

Exercised (397,402) 31.01

Forfeited or expired (62,125) 32.25

Outstanding at January 31, 2018 2,784,320 $ 28.01
6.3 $ 28,850
Exercisable at January 31, 2018 1,962,475 $ 26.61
5.3 $ 23,097

~~There were 1,962,475 and 2,037,018 options exercisable with a weighted average exercise price of~~ ~~$26.61~~ ~~and~~ ~~$28.67~~ at ~~January 31, 2018~~ ~~and~~ ~~2017~~, respectively. The total intrinsic value of options exercised during the six months ended January 31, 2018 and 2017, based upon the average market price at the time of exercise during the period, was $2,935 and $6,719, respectively. The total fair value of stock options vested during the six months ended January 31, 2018 and 2017, was $3,004 and $2,890, respectively.

~~The cash received from the exercise of options during the three months ended January 31, 2018 and~~ ~~2017~~, was $6,699 and $5,846, respectively. The cash received from the exercise of options during the six months ended January 31, 2018, and 2017 was $9,948 and $14,659, respectively. The tax benefit on options exercised during the three months ended January 31, 2018 and ~~2017, was $512 and~~ ~~$353, respectively. The tax benefit on options exercised during the six months ended January 31, 2018 and~~ ~~2017, was~~ ~~$895~~ ~~and~~ ~~$1,453, respectively.~~

~~The following table summarizes the RSU activity under the Company's share-based compensation plans for the~~ ~~six months ended January 31, 2018~~:

Service-Based RSUs Shares
Weighted
Average
Grant Date Fair Value
Outstanding at July 31, 2017 517,108
$ 25.61
New grants 86,032
36.68
Vested (137,237 ) 24.73
Forfeited (23,423 ) 26.92
Outstanding at January 31, 2018 442,480
$ 27.97

The service-based RSUs granted during the six months ended January 31, 2017, had a weighted-average grant date fair value of $35.12. The total fair value of service-based RSUs vested during the six months ended January 31, 2018 and 2017, was $5,002 and $3,853, respectively.

Performance-Based RSUs Shares Weighted
Average
Grant Date Fair Value
Outstanding at July 31, 2017 58,206
$ 32.03
New grants 56,290
33.12
Vested —
—
Forfeited —
—
Outstanding at January 31, 2018 114,496
$ 32.57

The performance-based RSUs granted during the six months ended January 31, 2017, had a weighted-average grant date fair value of $32.03. The aggregate intrinsic value of unvested service-based and performance-based RSUs outstanding at January 31, 2018, and expected to vest was $21,304.

NOTE GJ — Fair Value Measurements

In accordance with fair value accounting guidance, the ~~Company’s assets and liabilities measured at~~Company determines fair value based on the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The inputs used to measure fair value are classified ~~in one of~~into the following ~~categories:~~hierarchy:

Level 1 — ~~Assets or liabilities for which fair value is based on unadjusted~~Unadjusted quoted prices in active markets for identical instruments that are accessible as of the reporting date.

Level 2 — ~~Assets or liabilities for which fair value is based on other~~Other significant pricing inputs that are either directly or indirectly observable.

Level 3 — ~~Assets or liabilities for which fair value is based on significant~~Significant unobservable pricing inputs, ~~to the extent little or no market data is available,~~ which result in the use of management's own assumptions.

The following ~~tables set forth by level within~~table summarizes the ~~fair value hierarchy our~~Company's financial assets and liabilities that were accounted for at fair value on a recurring basis at as of January 31, ~~2018~~2024 and July 31, ~~2017, according to the valuation techniques the Company used to determine their fair values.~~2023:


	January 31, 2024		July 31, 2023		Fair Value Hierarchy
Assets:
Deferred compensation plan assets	$	18,825	$	18,288	Level 1
Foreign exchange contracts	695		492		Level 2
Liabilities:
Foreign exchange contracts	28		189		Level 2

Inputs
Considered As

Quoted Prices in Active Markets for Identical
Assets (Level 1)
Significant Other Observable Inputs (Level 2) Fair Values Balance Sheet Classifications
January 31, 2018
Trading securities $ 14,726
$ —
$ 14,726
Other assets
Foreign exchange contracts —
379
379
Prepaid expenses and other current assets
Total Assets $ 14,726
$ 379
$ 15,105

Foreign exchange contracts $ —
$ 1,054
$ 1,054
Other current liabilities
Total Liabilities $ —
$ 1,054
$ 1,054

July 31, 2017
Trading securities $ 13,994
$ —
$ 13,994
Other assets
Foreign exchange contracts —
1,354
1,354
Prepaid expenses and other current assets
Total Assets $ 13,994
$ 1,354
$ 15,348

Foreign exchange contracts $ —
$ 1,577
$ 1,577
Other current liabilities
Total Liabilities $ —
$ 1,577
$ 1,577

Table of Contents

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

~~Trading securities:~~Deferred compensation plan assets: The Company’s deferred compensation investments consist of investments in mutual ~~funds.~~funds, which are included in "Other assets" on the condensed consolidated balance sheets. These investments were classified as Level 1 as the shares of these investments trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.

Foreign exchange contracts: The Company’s foreign exchange contracts were classified as Level 2 as the fair value was based on the present value of the future cash flows using external models that use observable inputs, such as interest rates, yield curves and foreign exchange rates. See Note H,K, “Derivatives and Hedging Activities,” for additional information.

~~There have been no transfers of assets or liabilities between the fair value hierarchy levels outlined above during the~~ ~~six months ended January 31, 2018. In addition, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the~~ ~~six months ended January 31, 2018~~.

The ~~Company’s financial instruments, other than those presented in the disclosures above, include~~fair values of cash and cash equivalents, accounts receivable, ~~notes payable,~~ accounts payable, and other ~~liabilities. The fair values of these financial instruments~~liabilities approximated carrying values ~~because of~~due to their short-term nature.

The estimated fair value of the Company’s short-term and long-term debt obligations, excluding notes payable, based on the quoted market prices for similar issues and on the current rates offered for debt of similar maturities was $74,668 and $109,303 at January 31, 2018 and July 31, 2017, respectively, as compared to the carrying value of $70,624 and $104,536 at January 31, 2018 and July 31, 2017, respectively.

NOTE HK — Derivatives and Hedging Activities

The Company utilizes forward foreign exchange currency contracts to reduce the exchange rate risk of specific foreign currency denominated transactions. These contracts typically require the exchange of a foreign currency for U.S. dollars at a fixed rate aton a future date, with maturities of less than 18 months,, which qualify as cash flow hedges or net investment hedges under the accounting guidance for derivative instruments and hedging activities. The primary objective of the Company’s foreign currency exchange risk management program is to minimize the impact of currency movements due to transactions in other than the respective subsidiaries’ functional currency and to minimize the impact of currency movements on the Company’s net investment denominated in a currency other than the U.S. dollar. To achieve this objective, the Company hedges a portion of known exposures using forward foreign exchange currency contracts. ~~As of January 31, 2018 and July 31, 2017, the notional amount of outstanding forward exchange contracts was $18,236 and $81,195, respectively.~~

~~The Company hedges a portion of known exposures using forward exchange contracts.~~ Main foreign currency exposures are related to transactions denominated in the British Pound, Euro, Canadian dollar, Australian dollar, Mexican Peso, Chinese Yuan, Malaysian Ringgit and ~~Mexican peso.~~Singapore dollar. Generally, these risk management transactions will involve the use of foreign currency derivatives to minimize the impact of currency movements on non-functional currency transactions.

~~Hedge effectiveness is determined by how closely the changes in fair value~~The U.S. dollar equivalent notional amounts of the hedging instrument offset the changes in the fair value or cash flows of the hedged item. Hedge accounting is permitted only if the hedging relationship is expected to be highly effective at the inception of the hedge and on an on-going basis. Gains or losses on the derivative related to hedge ineffectiveness are recognized in current earnings.outstanding forward exchange contracts were as follows:


	January 31, 2024		July 31, 2023
Designated as cash flow hedges	$	26,552	$	39,661
Non-designated hedges	4,716		4,803
Total foreign exchange contracts	$	31,268	$	44,464

Cash Flow Hedges

The Company has designated a portion of its forward foreign exchange contracts as cash flow hedges and recorded these contracts at fair value on the condensed consolidated balance sheets. For these instruments, the effective portion of the gain or loss on the derivative is reported as a component of ~~OCI~~other comprehensive income ("OCI") and reclassified into ~~earnings~~income in the same period or periods during which the hedged transaction affects ~~earnings.~~income. As of January 31, ~~2018~~2024 and ~~2017,~~July 31, 2023, unrealized ~~losses~~gains of ~~$856~~$831 and ~~$451~~$1,580 have been included in OCI, respectively. Balances are reclassified from OCI to earnings when the hedged transactions impact earnings. For the three months ended January 31, 2018 and 2017, the Company reclassified losses of $158 and $10 from OCI into earnings, respectively. For the six months ended January 31, 2018 and 2017, the Company reclassified losses of $182 and gains of $415 from OCI into earnings, respectively. At January 31, 2018, the U.S. dollar equivalent of these outstanding forward foreign exchange contracts totaled $15,043, including contracts to sell Euros, Canadian dollars, and U.S. dollars.

Net Investment Hedges

~~As of April 30, 2017, €45 million of Euro-denominated senior unsecured notes~~The Company has designated certain third party foreign currency denominated debt borrowed under its credit agreement as net investment hedges. These debt obligations, denominated in Euros and British Pounds, were designated as net investment hedges to hedge portions of ~~its~~the Company's net investment in its European operations. The Company’s foreign currency denominated debt obligations are valued under a market approach using publicized spot ~~prices.~~

~~Non-Designated Hedges~~

~~For~~prices, and the ~~three~~net gains or losses attributable to the changes in spot prices are recorded as cumulative translation within AOCI and ~~six months ended January 31, 2018,~~are included in the ~~Company recognized losses~~foreign currency translation adjustments section of ~~$2 and gains of $20, respectively, in “Investment and other income” on~~ the condensed consolidated statements of ~~earnings~~comprehensive income. As of January 31, 2024 and July 31, 2023, the cumulative balance recognized in accumulated other comprehensive income were losses of $1,207 and $1,746, respectively, on any outstanding foreign currency denominated debt obligations.

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The following table summarizes the amount of pre-tax gains and losses related to ~~non-designated hedges. For the three and six months ended January 31, 2017, the Company recognized losses of $3,313 and $5,046, respectively.~~derivatives designated as hedging instruments:


	Three months ended January 31,				Six months ended January 31,
	2024		2023		2024		2023
Gains (losses) recognized in OCI:
Forward exchange contracts (cash flow hedges)	$	1,083	$	776	$	789	$	1,669
Foreign currency denominated debt (net investment hedges)	(969)		(841)		539		(841)
Gains reclassified from OCI into cost of goods sold
Forward exchange contracts (cash flow hedges)	254		217		1,539		798

Fair values of derivative instruments in the condensed consolidated balance sheets were as follows:


	January 31, 2024						July 31, 2023
	Prepaid expenses and other current assets		Other current liabilities		Long-term obligations		Prepaid expenses and other current assets		Other current liabilities		Long-term obligations
Derivatives designated as hedging instruments:
Foreign exchange contracts (cash flow hedges)	$	686	$	28	$	—	$	485	$	189	$	—
Foreign currency denominated debt (net investment hedges)	—		—		35,090		—		—		36,716
Derivatives not designated as hedging instruments:
Foreign exchange contracts (non-designated hedges)	9		—		—		7		—		—
Total derivative instruments	$	695	$	28	$	35,090	$	492	$	189	36,716

Asset Derivatives Liability Derivatives
January 31, 2018 July 31, 2017 January 31, 2018 July 31, 2017

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value
Derivatives designated as hedging instruments
Cash flow hedges
Foreign exchange contracts Prepaid expenses and other current assets $ 377
Prepaid expenses and other current assets $ 1,067
Other current liabilities $ 1,046
Other current liabilities $ 1,569
Net investment hedges
Foreign currency denominated debt Prepaid expenses and other current assets —
Prepaid expenses and other current assets —
Long term obligations, less current maturities 55,800
Long term obligations, less current maturities 53,280
Total derivatives designated as hedging instruments $ 377
$ 1,067
$ 56,846
$ 54,849
Derivatives not designated as hedging instruments
Foreign exchange contracts Prepaid expenses and other current assets $ 2
Prepaid expenses and other current assets $ 287
Other current liabilities $ 8
Other current liabilities $ 7
Total derivatives not designated as hedging instruments $ 2
$ 287
$ 8
$ 7

NOTE IL — Income Taxes

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Reform Act reduces the U.S. federal corporateThe income tax rate ~~from 35.0% to 21.0%~~for the three months ended January 31, 2024 and 2023 was 21.8% and 21.7%, imposes a one-time tax on deemed repatriated earnings of foreign subsidiaries, eliminates the domestic manufacturing deduction and moves to a partial territorial system by providing a 100% dividend received deduction on certain qualified dividends from foreign subsidiaries. As the Company has a July 31 fiscal year end, the lower corporaterespectively. The income tax rate ~~will be phased~~for the six months ended January 31, 2024 and 2023, was 21.1% and 21.7%, respectively. The decrease in ~~resulting~~the tax rate in ~~a U.S. statutory federal~~the six-month period was primarily due to tax benefits from stock-based compensation and other permanent adjustments. The Company expects its ongoing annual income tax rate to be approximately 22% based on its current global business mix and based on tax laws and statutory rates currently in effect.

NOTE M — Contingencies

In the normal course of ~~26.9% for~~business, the ~~fiscal year ending July 31, 2018 and 21.0% for subsequent fiscal years.~~

As part of the transition to the partial territorial tax system, the Tax Reform Act imposes a one-time tax on the mandatory deemed repatriation of historical earnings of foreign subsidiaries. Companies can claim certain credits for foreign taxes deemed paid on foreign earningsCompany is subject to a variety of investigations, claims, suits, and other legal proceedings, including but not limited to, intellectual property, employment, unclaimed property, tort, and breach of contract matters. Any legal proceedings are subject to inherent uncertainties, and these matters and their potential effects may change in the ~~mandatory~~future. The Company records a liability for contingencies when a loss is deemed ~~repatriation. The Company’s provisional calculations resulted in an income tax charge of $402 related~~ to be probable and the ~~deemed repatriation of the historical earnings of foreign subsidiaries during the three and six-month periods ended January 31, 2018. Existing foreign tax credit carryforwards~~loss can be ~~used to offset this tax and, as a result, no cash payments will be required related to this charge.~~

The reduction in the U.S. federal income tax rate requires the Company to remeasure its U.S. deferred tax assets and liabilities to the income tax rate at which the deductible or taxable event is expected to be realized, and changes the statutory U.S. federal tax from 35.0% to 26.9% for the entire year ending July 31, 2018. Additionally, the Company established a valuation allowance for deferred tax assets related to foreign tax credits, primarily related to the impact of the Tax Reform Act on the Company's ability to generate future foreign-source income. The provisional impact of the Tax Reform Act related to the remeasurement of deferred tax assets and liabilities, the impact on the Company’s fiscal 2018 earnings from the reduced tax rate, and the establishment of the valuation allowance discussed above resulted in income tax expense of $18,832 for the three and six-month periods ended January 31, 2018.

The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”), foreign derived intangible income ("FDII") and base erosion anti-abuse tax (“BEAT”) enacted under the Tax Reform Act, which are not effective until fiscal year 2019. The condensed consolidated financial statements for the three and six month periods ended January 31, 2018, do not include a provisional estimate associated with either GILTI, FDII or BEAT.

As a result of the Tax Reform Act, the Company expects that it will repatriate certain historical and future foreign earnings periodically, which in certain jurisdictions may be subject to withholding and income taxes. These additional withholding and income taxes are being recorded as a deferred tax liability associated with the basis difference in such jurisdictions. During the three and six-month periods ended January 31, 2018, the Company recorded a provisional income tax expense of $1,826 related to the recording of a deferred tax liability for future withholding and income taxes on the distribution of foreign earnings. The uncertainty related to the taxation of such withholding and income taxes on distributions under the Tax Reform Act and the finalization of future cash repatriation plans make the deferred tax liability a provisional amount.

The final enactment impacts of the Tax Reform Act may differ from the above estimates due to changes in interpretation, legislative action to address questions that arise, changes in accounting standards for income taxes or related interpretations in response to the Tax Reform Act, or any updates or changes to information the Company has utilized to develop the estimates, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries. The U.S. Securities and Exchange Commission has issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Reform Act to finalize the recording of the related tax impacts.

~~NOTE J — New Accounting Pronouncements~~

In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"), which simplifies and reduces the complexity of the hedge accounting requirements and better aligns an entity's financial reporting for hedging relationships with its risk management activities. The guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. This new guidance will require a modified retrospective adoption approach to existing hedging relationships as of the adoption date. The Company is currently evaluating the impact of this update on its consolidated financial statements and disclosures.

In January 2017, the FASB issued ASU 2017-04, "Goodwill and Other, Simplifying the Test for Goodwill Impairment," which simplifies the accounting for goodwill impairment. The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. This guidance is effective for annual periods beginning after December 15, 2019, and interim periods thereafter; however, early adoption is permitted for any impairment tests performed after January 1, 2017. This guidance will only impact the Company's consolidated financial statements if there is a future impairment of goodwill.

In February 2016, the FASB issued ASU 2016-02, "Leases," which replaces the current lease accounting standard. The update will require, among other items, lessees to recognize the assets and liabilities that arise from most leases on the balance sheet. This guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The ASU must be adopted using a modified retrospective approach and early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," which eliminates the transaction-and industry-specific revenue recognition guidance under current GAAP and replaces it with a principles-based approach for determining revenue recognition. The new guidance requires revenue recognition when control of the goods or services transfers to the customer, replacing the existing guidance which requires revenue recognition when the risks and rewards transfer to the customer. Under the new guidance, companies should recognize revenues in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services.

ASU 2014-09 (and related updates) is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted for annual periods beginning after December 15, 2016. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the standard. The Company's efforts to evaluate the impact and to prepare for its adoption on August 1, 2018 are underway as the Company has reviewed representative forms of agreements with customers globally and is in the process of evaluating the impact of the new standard on its consolidated financial statements. The Company is also assessing its process for accumulating the required information for enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue under the new standard.reasonably estimated. The Company currently ~~anticipates applying~~believes that the ~~modified retrospective approach when adopting this guidance.~~outcomes of such proceedings will not have a material adverse impact on its business, financial position, results of operations or cash flows.

NOTE KN — Subsequent Events

On February 20, ~~2018,~~2024, the Board of Directors declared a quarterly cash dividend to shareholders of the Company’s Class A and Class B Common Stock of ~~$0.2075~~$0.235 per share payable on April 30, ~~2018,~~2024, to shareholders of record at the close of business on April 9, ~~2018.~~2024.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~AND FINANCIAL CONDITION~~

Overview

Brady Corporation is a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia. Within each of the reportable segments, the Company sells products under the product identification, wire identification, healthcare identification and safety and facility identification product lines to a diverse base of customers. The ~~IDS segment is primarily involved in the design, manufacture,~~product identification, wire identification, and ~~distribution of~~healthcare identification product lines include high-performance and innovative ~~identification~~products that are designed, manufactured, and ~~healthcare products.~~distributed within the Company's value chain. The ~~WPS segment provides workplace~~ safety and ~~compliance~~facility identification product line includes a broad range of stock and custom products ~~half~~that the Company manufactures, as well as a wide variety of ~~which are internally manufactured~~products that the Company purchases and ~~half are externally sourced. Approximately 45% of our total sales are derived outside of the United States. Foreign sales within the IDS and WPS segments are approximately 35% and 65%, respectively.~~resells as a distributor.

The ability to provide customers with a ~~vast array~~broad range of proprietary, customized and diverse products for use in various applications across multiple ~~customers~~industries and geographies, along with a commitment to quality and service, have made Brady a leader in many of its markets. ~~The~~Brady's long-term sales growth and profitability ~~of our segments~~ will depend not only on ~~improved demand in end markets and~~ the overall economic environment and our ability to successfully navigate changes in the macro environment, but also on our ability to ~~continuously improve operational excellence, focus on the customer,~~ develop and market innovative ~~new~~ products, ~~and to~~deliver a high level of customer service, advance our digital ~~capabilities. In~~capabilities, and continuously improve the efficiency of our ~~IDS business, our~~global operations. Our strategy for growth includes an increased focus on ~~key customers,~~certain industries and products, streamlining our product offerings, expanding into higher growth end-markets, improving the overall customer experience, developing technologically advanced, innovative, and proprietary products, and improving ~~the efficiency and effectiveness of the~~our digital capabilities.

The following are key initiatives supporting our strategy in fiscal 2024:

•Investing in organic growth by enhancing our research and development ~~("R&D") function. In our WPS business, our strategy for growth includes a focus on workplace safety critical industries,~~process and utilizing customer feedback and observations to develop innovative new ~~product offerings, and increased investment in digital capabilities.~~

~~The Company is targeting the following key initiatives in fiscal 2018:~~

~~Enhancing our innovation development process and the speed to deliver high-value, innovative~~ products that ~~align with our target markets.~~solve customer needs and improve environmental sustainability.

~~Driving operational excellence and providing~~•Providing our customers with the highest level of customer service.

~~Executing~~•Expanding and enhancing our sales capabilities through an improved digital presence and the use of data-driven marketing automation tools.

•Maintaining profitability through pricing mechanisms to mitigate the impacts of ongoing supply chain disruptions and inflationary pressures while ensuring prices are market competitive.

•Integrating acquisitions to further enhance our strategic position and accelerate long-term sales growth.

•Driving operational excellence and executing sustainable efficiency gains ~~throughout our global operations as well as~~within our selling, general and administrative ~~structures.~~

~~Expanding our digital presence.~~

~~Growing through focused sales~~structures and ~~marketing efforts in selected vertical markets and strategic accounts.~~

~~Enhancing~~within our global operations including insourcing of critical products and manufacturing activities while reducing our environmental footprint.

•Building on our culture of diversity, equity and inclusion to increase employee ~~development process~~engagement and enhance recruitment and retention practices in order to ~~attract~~drive differentiated performance and ~~retain key talent.~~execute our strategy.

Macroeconomic Conditions and Trends

The Company has experienced, and expects to continue to experience, inflationary pressures and supply chain and other business disruptions through the end of fiscal 2024. While we have seen certain pressures alleviate, we expect raw materials and labor cost inflation to continue. Thus far, the Company has been able to mitigate the impact of inflation through pricing actions and the execution of sustainable efficiency gains.

We believe we have the financial strength to continue to invest in organic sales growth opportunities including sales, marketing and R&D, as well as inorganic sales opportunities including acquisitions, while continuing to drive sustainable efficiency gains and automation in our operations and selling, general and administrative ("SG&A") functions and return capital to our shareholders in the form of dividends and share repurchases. At January 31, 2024, we had cash of $143.9 million, as well as a credit agreement with $250.1 million available for future borrowing, which can be increased up to $1,110.1 million at the Company's option and subject to certain conditions, for total available liquidity of $1,254.0 million.

We believe that our financial resources and liquidity levels, including the remaining undrawn amount of the credit agreement and our ability to increase that credit line as necessary are sufficient to manage the continuing impact of economic or geopolitical events which may result in reduced sales, net income, or cash provided by operating activities. Refer to Risk Factors, included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended July 31, 2023, for further discussion of the possible impact of global economic or geopolitical events on our business.

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Results of Operations

A comparison of results of operating income for the three and six months ended January 31, ~~2018~~2024 and ~~2017,~~2023, is as follows:


	Three months ended January 31,								Six months ended January 31,
	Three months ended January 31,																															Three months ended January 31,													Six months ended January 31,
(Dollars in thousands)	2018		% Sales		2017		% Sales		2018		% Sales		2017		% Sales		(Dollars in thousands)	2024					% Sales					2023					% Sales			2024					% Sales					2023						% Sales
Net sales	$	287,780			$	268,001			$	577,931			$	548,177
Gross margin	143,692		49.9	%	134,158		50.1	%	289,757		50.1	%	274,516		50.1	%
Gross margin
Gross margin																		162,083					50.2		%			156,440					48.0	%		333,802					51.0		%			311,704						48.0	%
Operating expenses:
Research and development
Research and development
Research and development	11,314		3.9	%	9,481		3.5	%	21,834		3.8	%	18,627		3.4	%	16,832			5.2		5.2		%			15,377				4.7		4.7	%		32,534			5.0			5.0		%			29,310			4.5			4.5	%
Selling, general and administrative	97,582		33.9	%	94,715		35.3	%	197,716		34.2	%	192,719		35.2	%	Selling, general and administrative	91,325			28.3			28.3		%			92,282			28.3		28.3	%		187,612			28.7				28.7	%			182,227			28.1			28.1	%
Total operating expenses	108,896		37.8	%	104,196		38.9	%	219,550		38.0	%	211,346		38.6	%	Total operating expenses	108,157			33.5			33.5		%			107,659			33.0		33.0	%		220,146			33.6				33.6	%			211,537			32.6			32.6	%
Operating income	$	34,796	12.1	%	$	29,962	11.2	%	$	70,207	12.1	%	$	63,170	11.5	%	Operating income	$	53,926		16.7			16.7		%			$	48,781		15.0		15.0	%		$	113,656		17.4				17.4	%			$	100,167		15.4			15.4	%

References in this Form 10-Q to “organic sales” refer to sales calculated in accordance with ~~U.S.~~ GAAP, excluding the impact of foreign currency ~~translation.~~translation and sales recorded from divested companies up to the first anniversary of their divestiture. The Company's organic sales disclosures exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying sales trends in our businesses and facilitating comparisons of our sales performance with prior periods.

~~Sales~~Net sales for the three months ended January 31, ~~2018, increased 7.4%~~2024 declined 1.1% to ~~$287.8~~$322.6 million compared to ~~$268.0~~$326.2 million in the same period ofin the prior year, which consisted of organic sales growth of ~~3.2%~~1.6% and an increase from foreign currency translation of 0.8%, which were offset by a ~~positive currency impact of 4.2%~~decrease due to ~~the weakening~~divestitures of ~~the U.S. Dollar against certain other currencies as compared to the same period in the prior year.~~3.5%. Organic sales grew ~~4.7%~~1.2% in the ~~IDS~~Americas & Asia segment and ~~declined 0.5%~~2.5% in the ~~WPS~~Europe & Australia segment during the three months ended January 31, 2018, compared to the same period in the prior year. The IDS segment realized sales growth in the Product ID, Wire ID, and Safety and Facility ID product lines, partially offset by a decline in the Healthcare ID product line compared to the prior year. The WPS segment realized growth in the digital channel, but was offset by a decline in traditional catalog channel sales when2024 compared to the same period in the prior year.

~~Sales~~Net sales for the six months ended January 31, ~~2018,~~2024 increased ~~5.4%~~0.9% to ~~$577.9~~$654.6 million compared to ~~$548.2~~$648.8 million in the same period ofin the prior ~~year, which~~year. The increase consisted of organic sales growth of 2.2% and an increase from foreign currency translation of 1.1%, which was partially offset by a decrease of 2.4% ~~and a positive currency impact of 3.0%.~~due to divestitures. Organic sales grew ~~3.8%~~2.3% in the ~~IDS~~Americas & Asia segment and ~~declined 1.0%~~2.0% in the ~~WPS~~Europe & Australia segment during the six months ended January 31, 2018, compared to the same period in the prior year. The IDS segment realized sales growth in the Product ID, Wire ID, and Safety and Facility ID product lines, partially offset by a decline in the Healthcare ID product line. Catalog channel sales in the WPS segment declined, but were partially ofsset by digital channel sales growth when2024 compared to the same period in the prior year.

Gross margin ~~for~~increased 3.6% to $162.1 million in the three months ended January 31, ~~2018, increased 7.1% to $143.7 million,~~2024 compared to ~~$134.2~~$156.4 million in the same period ~~of the prior year, and increased 5.6% to $289.8 million for the six months ended January 31, 2018, compared to $274.5 million~~ in ~~the same period of~~ the prior year. As a percentage of net sales, gross margin ~~decreased~~increased to ~~49.9% for~~50.2% from 48.0% in the three-month period. Gross margin increased 7.1% to $333.8 million in the six months ended January 31, 2024 compared to $311.7 million in the same period in the prior year. As a percentage of net sales, gross margin increased to 51.0% from 48.0% in the six-month period. The increase in gross margin as a percentage of net sales was primarily due to organic sales growth in higher gross margin product lines during both the three and six-month periods.

R&D expenses increased 9.5% to $16.8 million in the three months ended January 31, ~~2018 from 50.1%~~2024 compared to $15.4 million in the same period ofin the prior ~~year, primarily due to price reductions in our Workplace Safety business.~~year. As a percentage of net sales, ~~gross margin remained flat at 50.1% for~~R&D expenses increased to 5.2% from 4.7% in the three-month period. R&D expenses increased 11.0% to $32.5 million in the six months ended January 31, ~~2018,~~2024 compared to ~~the same period of the prior year. On-going efforts continue to streamline manufacturing processes and operational efficiencies in manufacturing facilities are offsetting increases in costs.~~

~~R&D expenses for the three months ended January 31, 2018, increased 19.3% to $11.3 million, compared to $9.5~~$29.3 million in the same period ~~of the prior year, and increased 17.2% to $21.8 million for the six months ended January 31, 2018, compared to $18.6 million~~ in ~~the same period of~~ the prior year. As a percentage of net sales, R&D expenses increased to 5.0% from 4.5% in the six-month period. The ~~increases~~increase in ~~both the three and six month periods were~~R&D spending was primarily due to ~~increased investments~~an increase in ~~several~~R&D headcount. The Company remains committed to investing in new ~~software~~product development to increase sales within our businesses. Investments in new printing systems, materials and ~~printer updates within~~an industrial track and trace solution remain the ~~IDS segment.~~primary focus of R&D expenditures in fiscal 2024.

~~Selling, general~~SG&A expenses include selling and administrative ~~expenses ("SG&A") include selling~~ costs directly attributed to the ~~IDS~~Americas & Asia and ~~WPS~~Europe & Australia segments, as well as certain other administrative expenses including finance, information technology, human resources, and other administrative expenses. SG&A ~~increased 3.0%~~expenses decreased 1.0% to ~~$97.6~~$91.3 million ~~for~~in the three months ended January 31, ~~2018,~~2024 compared to $92.3 million in the same period in the prior year. The decrease in SG&A expenses during the three months ended January 31, 2024 compared to the same period in the prior year was primarily due to reduced headcount and ~~2.6%~~advertising expense from divested businesses and a decrease in amortization expense, partially offset by increased headcount in sales and technology roles. As a percentage of sales, SG&A remained consistent at 28.3% in the three-month period.

SG&A expenses increased 3.0% to ~~$197.7~~$187.6 million for the six months ended January 31, ~~2018,~~2024 compared to ~~$94.7~~$182.2 million in the same period in the prior year. As a percentage of net sales, SG&A increased to 28.7% from 28.1% in the six-month period. The increase in SG&A expenses was primarily due to increased headcount in sales and technology roles, foreign

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currency translation and investments in digital advertising, partially offset by reduced headcount and advertising expense from divested businesses and a decrease in amortization expense.

Operating income increased 10.5% to $53.9 million and ~~$192.7~~increased 13.5% to $113.7 million for the three and six months ended January 31, 2024, respectively, compared to $48.8 million and $100.2 million in the same periods ofin the prior ~~year, respectively.~~year. The ~~increases~~increase in operating income in both the three and ~~six month~~six-month periods ~~were~~was primarily due to the ~~impact of the weakening U.S. dollar on the translation of foreign SG&A expenses, which were partially offset by reduced SG&A expenses due to efficiency gains.~~

Operating income was $34.8 million during the three months ended January 31, 2018, compared to $30.0 million for the three months ended January 31, 2017, resulting in a 16.1% increase. Operating income was $70.2 million during the six months ended January 31, 2018, compared to $63.2 million for the six months ended January 31, 2017, resulting in an 11.1% increase. The increase in ~~the three and six month periods were primarily due to increased sales~~segment profit in the ~~IDS~~Americas & Asia segment ~~reduced selling expense in the WPS segment,~~as a result of organic sales growth and ~~the positive impact of foreign currency fluctuations; partially offset by increased R&D expenses.~~

improved gross profit margin as noted above.

OPERATING INCOME TO NET ~~EARNINGS~~INCOME


	Three months ended January 31,										Six months ended January 31,
	Three months ended January 31,																															Three months ended January 31,												Six months ended January 31,
(Dollars in thousands)	2018			% Sales		2017			% Sales		2018			% Sales		2017			% Sales		(Dollars in thousands)	2024			% Sales				2023				% Sales			2024					% Sales				2023					% Sales
Operating income	$	34,796		12.1	%	$	29,962		11.2	%	$	70,207		12.1	%	$	63,170		11.5	%	Operating income	$	53,926	16.7		16.7		%		$	48,781	15.0		15.0	%			$	113,656	17.4			17.4	%			$	100,167	15.4			15.4	%
Other income (expense):
Investment and other income	1,056			0.4	%	596			0.2	%	1,272			0.2	%	107			—	%
Investment and other income
Investment and other income																						2,684			0.8		%		968				0.3	%		3,122					0.5	%			811					0.1	%
Interest expense	(829		)	(0.3	)%	(1,458		)	(0.5	)%	(1,692		)	(0.3	)%	(3,190		)	(0.6	)%	Interest expense	(790)		(0.2)		(0.2)		%		(1,239)		(0.4)		(0.4)	%			(1,556)		(0.2)			(0.2)	%			(2,133)		(0.3)			(0.3)	%
Earnings before income tax	35,023			12.2	%	29,100			10.9	%	69,787			12.1	%	60,087			11.0	%
Income before income taxes																					Income before income taxes	55,820			17.3		%		48,510				14.9	%		115,222					17.6	%			98,845					15.2	%
Income tax expense	30,750			10.7	%	3,803			1.4	%	39,678			6.9	%	12,237			2.2	%	Income tax expense	12,192		3.8		3.8		%		10,524		3.2		3.2	%			24,353		3.7			3.7	%			21,418		3.3			3.3	%
Net earnings	$	4,273		1.5	%	$	25,297		9.4	%	$	30,109		5.2	%	$	47,850		8.7	%
Net income																					Net income	$	43,628		13.5		%		$	37,986			11.6	%		$	90,869				13.9	%			$	77,427				11.9	%

Investment and other income was ~~$1.1~~$2.7 million and $3.1 million for the three ~~months ended January 31, 2018,~~ and ~~was $1.3 million for the~~ six months ended January 31, ~~2018,~~2024, respectively, compared to ~~investment and other income of $0.6~~$1.0 million and ~~$0.1~~$0.8 million in the same periods ofin the prior ~~year, respectively. These changes~~year. The increase in income during the three and ~~six month~~six-month periods ~~were~~was primarily due to an increase in the market value of securities held in deferred compensation plans ~~as well as increased~~and an increase in interest income.

Interest expense decreased to $0.8 million ~~from $1.5~~and $1.6 million for the three ~~months ended January 31, 2018,~~ and ~~decreased to $1.7 million from $3.2 million for the~~ six months ended January 31, ~~2018,~~2024, respectively, compared to $1.2 million and $2.1 million in the same periods in the prior year. The decrease in interest expense was primarily due to a decrease in outstanding borrowings on the Company's credit agreement, which was partially offset by an increase in interest rates on the Company's credit agreement compared to the same periods in the prior year. ~~For both the three and six-month periods, the decrease in interest expense was due to the Company's declining principal balance under its outstanding debt agreements.~~

The ~~Company’s~~Company's income tax rate was ~~87.8%~~21.8% and 21.7% for the three months ended January 31, ~~2018, compared to 13.1% for~~2024 and 2023, respectively, and the ~~same period in the prior year. The~~ income tax rate was ~~56.9%~~21.1% and 21.7% for the six months ended January 31, ~~2018, compared to 20.4% for the same period of the prior year. The increase in the income tax rates in both the three~~2024 and six-month periods ended January 31, 2018, was primarily due to the enactment of the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) which resulted in $21.1 million of additional tax expense. In the prior three and six-month periods ended January 31, 2017, the Company’s income tax rate was reduced from its historical average in the high-20% range due to foreign tax credits generated from a cash repatriation to the U.S.2023, respectively. Refer to Note ~~I - Income Taxes~~L, "Income Taxes" for additional ~~details regarding~~information on the Company's income ~~taxes.~~

tax rates.

Business Segment Operating Results

The Company is organized and managed on a global basis within three operating segments, Identification Solutions, Workplace Safety, and People Identification ("PeopleID"), which aggregate into two reportable segments that are organized around businesses with consistent products and services: IDS and WPS. The Identification Solutions and PeopleID operating segments aggregate into the IDS reporting segment, while the WPS reporting segment is comprised solely of the Workplace Safety operating segment. The Company evaluates short-term segment performance based on segment profit and customer sales. Interest expense, investment and other income, income tax expense, and certain corporate administrative expenses are excluded when evaluating segment performance.

Table of Contents

The following is a summary of segment information for the three and six months ended January 31, ~~2018,~~2024 and ~~2017:~~2023:


	Three months ended January 31,						Six months ended January 31,
	2024			2023			2024			2023
SALES GROWTH INFORMATION
Americas & Asia
Organic	1.2		%	6.9		%	2.3		%	5.4		%
Currency	0.1		%	(1.0)		%	—		%	(1.2)		%
Divestiture	(5.1)		%	—		%	(3.5)		%	—		%
Total	(3.8)		%	5.9		%	(1.2)		%	4.2		%
Europe & Australia
Organic	2.5		%	5.2		%	2.0		%	8.9		%
Currency	2.0		%	(8.9)		%	3.3		%	(12.8)		%
Total	4.5		%	(3.7)		%	5.3		%	(3.9)		%
Total Company
Organic	1.6		%	6.3		%	2.2		%	6.6		%
Currency	0.8		%	(3.7)		%	1.1		%	(5.1)		%
Divestiture	(3.5)		%	—		%	(2.4)		%	—		%
Total	(1.1)		%	2.6		%	0.9		%	1.5		%
SEGMENT PROFIT
Americas & Asia	$	43,895		$	40,174		$	93,792		$	81,319
Europe & Australia	15,054			13,459			31,798			30,217
Total	$	58,949		$	53,633		$	125,590		$	111,536
SEGMENT PROFIT AS A PERCENT OF NET SALES
Americas & Asia	20.7		%	18.3		%	21.6		%	18.5		%
Europe & Australia	13.6		%	12.7		%	14.4		%	14.4		%
Total	18.3		%	16.4		%	19.2		%	17.2		%

Three months ended January 31, Six months ended January 31,
(Dollars in thousands) 2018 2017 2018 2017
SALES TO EXTERNAL CUSTOMERS
ID Solutions $ 206,432
$ 190,962
$ 416,137
$ 392,226
Workplace Safety 81,348
77,039
161,794
155,951
Total $ 287,780
$ 268,001
$ 577,931
$ 548,177
SALES GROWTH INFORMATION
ID Solutions
Organic 4.7 % 1.9 % 3.8 % 1.3 %
Currency 3.4 % (1.3 )% 2.3 % (0.9 )%
Total 8.1 % 0.6 % 6.1 % 0.4 %
Workplace Safety
Organic (0.5 )% (0.2 )% (1.0 )% (1.3 )%
Currency 6.1 % (2.1 )% 4.7 % (1.8 )%
Total 5.6 % (2.3 )% 3.7 % (3.1 )%
Total Company
Organic 3.2 % 1.3 % 2.4 % 0.5 %
Currency 4.2 % (1.5 )% 3.0 % (1.1 )%
Total 7.4 % (0.2 )% 5.4 % (0.6 )%
SEGMENT PROFIT
ID Solutions $ 34,088
$ 28,961
$ 69,925
$ 62,035
Workplace Safety 7,055
6,059
13,500
12,504
Total $ 41,143
$ 35,020
$ 83,425
$ 74,539
SEGMENT PROFIT AS A PERCENT OF SALES
ID Solutions 16.5 % 15.2 % 16.8 % 15.8 %
Workplace Safety 8.7 % 7.9 % 8.3 % 8.0 %
Total 14.3 % 13.1 % 14.4 % 13.6 %
Americas & Asia

~~The following is a reconciliation of segment profit to earnings before income taxes for the three and six months ended January 31, 2018 and 2017:~~

Three months ended January 31, Six months ended January 31,
2018 2017 2018 2017
Total profit from reportable segments $ 41,143
$ 35,020
$ 83,425
$ 74,539
Unallocated amounts:
Administrative costs (6,347 ) (5,058 ) (13,218 ) (11,369 )
Investment and other income (expense) 1,056
596
1,272
107
Interest expense (829 ) (1,458 ) (1,692 ) (3,190 )
Earnings before income taxes $ 35,023
$ 29,100
$ 69,787
$ 60,087

~~ID Solutions~~

~~Approximately 70% of~~Americas & Asia net sales ~~in the IDS segment were generated in the Americas region, 20% in Europe and 10% in Asia. IDS sales increased 8.1%~~declined 3.8% to ~~$206.4~~$211.6 million for the three months ended January 31, ~~2018,~~2024 compared to ~~$191.0~~$220.1 million ~~for~~in the same period in the prior year, which consisted of organic sales growth of ~~4.7%~~1.2% and an increase from foreign currency translation of 0.1%, which were offset by a ~~positive currency impact~~decrease due to divestitures of ~~3.4%~~5.1%. ~~IDS~~Americas & Asia net sales ~~increased 6.1%~~decreased 1.2% to ~~$416.1~~$433.3 million for the six months ended January 31, ~~2018,~~2024 compared to ~~$392.2~~$438.6 million ~~for~~in the same period in the prior ~~year. Organic~~year, which consisted of organic sales ~~increased 3.8% and currency fluctuations increased sales~~growth of 2.3% that was offset by ~~2.3% during the six months ended January 31, 2018.~~

a decrease due to divestitures of 3.5%.

Organic sales in the Americas ~~grew~~increased in the ~~low-single~~low single digits ~~for~~in both ~~the three and six months ended January 31, 2018, compared to the same periods in the prior year. Organic growth in the IDS Americas region for~~ the three and six-month periods was led by the Wire ID product line, the Product ID product line, and, to a lesser extent, the Safety and Facility ID product line. This organic growth was partially offset by a decline in the Healthcare ID product line due to continued pricing pressures within certain product categories resulting from the consolidation of group purchasing organizations, compared to the same periods in the prior year.

~~The IDS business in Europe realized high-single digit organic sales growth for the three and six months~~ ended January 31, 2018, compared to the same periods in the prior year. The IDS Europe region realized organic sales growth in the Product ID, Wire ID, and Safety and Facility ID product lines for the three and six months ended January 31, 2018,2024 compared to the same periods in the prior year. Organic sales growth ~~was led by our businesses based in western Europe, in particular, increases in sales through the Company's distribution channels for both~~during the three and six-month ~~periods.~~

periods was primarily driven by the wire identification, safety and facility identification, and product identification product lines, which was partially offset by an organic sales decline in the healthcare identification product line.

Organic sales in Asia ~~grew~~increased in the ~~high-single~~mid-single digits for ~~both~~ the three months ended January 31, 2024 and were essentially flat for the six months ended January 31, ~~2018,~~2024 compared to the same periods in the prior year. The ~~IDS Asia region realized~~ organic sales increase during the three-month period was primarily driven by sales growth in all major countries led by increased volume in China and India. Organic sales were essentially flat during the ~~Original Equipment Manufacturer ("OEM") category, which was partially~~six-month period, with sales growth in India and Japan being offset by ~~decreases~~a decline in ~~the Maintenance, Repair, and Overhaul ("MRO") category driven by the weakening of the utility market~~volume in China ~~for~~during the three months ended January 31, 2018, compared to the same period in the prior year. Organic sales for the six months ended January 31, 2018, grew in both the OEM and MRO categories, compared to the same period in the prior year. Organic sales increased throughoutfirst quarter of fiscal 2024.

Americas & Asia ~~for the three and six-month periods and was led by China where sales increased in the high-single digits and double digits, respectively.~~

~~Segment~~segment profit increased 9.3% to ~~$34.1~~$43.9 million for the three months ended January 31, ~~2018,~~2024 compared to ~~$29.0~~$40.2 million in the same period in the prior year. Segment profit increased 15.3% to $93.8 million for the six months ended January 31, 2024 compared to $81.3 million in the same period in the prior year. As a percentage of net sales, segment profit increased to ~~16.5%~~20.7% from ~~15.2% in the same period of the prior year. Segment profit increased to $69.9 million from $62.0 million~~18.3% for the ~~six months ended January 31, 2018, compared to the same~~three-month period, ~~in the prior year. As a percentage of sales,~~and segment profit increased to ~~16.8%~~21.6% from 15.8% for same period in the prior year. The increase in segment profit for both the three and six-month periods was primarily driven by sales growth and operational efficiencies in our manufacturing processes in all regions.

~~Workplace Safety~~

~~Approximately 50% of net sales in the WPS segment were generated in Europe, 35% in the Americas and 15% in Australia. WPS sales increased 5.6% to $81.3 million~~18.5% for the ~~three months~~six-month period ended January 31, 2018, and 3.7% to $161.8 million for the six months ended January 31, 2018, compared to $77.0 million and $156.0 million, respectively, for the same periods in the prior year. Organic sales declined 0.5% and 1.0% in the three and six months ended January 31, 2018, respectively, compared to the same periods in the prior year. Foreign currency translation increased sales by 6.1% and 4.7% for the three and six months ended January 31, 2018, respectively, due to the weakening of the U.S. dollar against certain other major currencies as compared to the same periods in the prior year.

The WPS business in Europe realized low-single digit organic sales growth for the three and six months ended January 31, 2018, compared to the same periods in the prior year. This growth was driven primarily by our businesses in France and due to improvements in website functionality, growth in new customers, and key account management. We experienced high-single digit growth in digital sales, partially offset by a slight decline in traditional catalog channel during the three and six months ended January 31, 2018, compared to the same periods in the prior year.

Organic sales in the Americas declined in the low-single digits and mid-single digits for the three and six months ended January 31, 2018, respectively, compared to the same periods in the prior year. This decrease was primarily due to lower response rates to catalog promotions and continued pricing pressures in industrial end markets. Catalog channel sales decreased in the low-single digits and mid-single digits during the three and six months ended January 31, 2018, respectively, compared to the same periods in the prior year. Digital channel sales decreased during the three and six months ended January 31, 2018, compared to the same periods in the prior year. The decline in digital sales was caused by a transition to a new digital sales platform during the three months ended January 31, 2018, which is expected to return to sales growth in the remainder of the year.

Organic sales in Australia grew in the low-single digits for the three and six months ended January 31, 2018, compared to the same periods in the prior year. The WPS business diversified its product offering to many different industries in Australia as sales to the mining industry have become less significant over the past several years. The WPS business continues to focus on enhancing its expertise in these industries to drive sales growth, as well as addressing its cost structure to improve profitability.

Segment profit increased to $7.1 million from $6.1 million for the three months ended January 31, 2018, and to $13.5 million from $12.5 million for the six months ended January 31, 2018, compared to the same periods in the prior year. As a percentage of sales, segment profit increased to 8.7% from 7.9% for the three months ended January 31, 2018, and to 8.3% from 8.0% for

~~the six months ended January 31, 2018,~~2024 compared to the same periods in the prior year. The increase in segment profit as a percentage of net sales was primarily due to ~~efficiency opportunities throughout our manufacturing processes~~organic sales growth in higher gross margin product lines during both the three and ~~our selling, general, and administrative cost structure.~~six-month periods.

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~~Financial Condition~~Europe & Australia

~~Cash and cash equivalents decreased by $18.6~~Europe & Australia net sales increased 4.5% to $111.0 million ~~and $16.0 million during~~for the ~~six~~three months ended January 31, ~~2018~~2024 compared to $106.2 million in the same period in the prior year, which consisted of organic sales growth of 2.5% and ~~2017, respectively. The significant changes were as follows:~~

Six months ended January 31,
(Dollars in thousands) 2018 2017
Net cash flow provided by (used in):
Operating activities $ 42,460
$ 53,334
Investing activities (9,198 ) (6,642 )
Financing activities (53,642 ) (57,302 )
Effect of exchange rate changes on cash 1,763
(5,410 )
Net decrease in cash and cash equivalents $ (18,617 ) $ (16,020 )

~~Net cash provided by operating activities decreased~~an increase from foreign currency translation of 2.0%. Europe & Australia net sales increased 5.3% to ~~$42.5~~$221.3 million for the six months ended January 31, ~~2018,~~2024 compared to ~~$53.3~~$210.3 million in the same period in the prior year, which consisted of organic sales growth of 2.0% and an increase from foreign currency translation of 3.3%.

Organic sales in Europe increased in the low-single digits in both the three and six-month periods ended January 31, 2024 compared to the same periods in the prior year. ~~The decrease~~Organic sales during the three-month period grew in ~~cash provided~~the product identification, safety and facility identification and wire identification product lines. Organic sales grew in all major product lines with the strongest growth in the safety and facility identification product line during the six-month period.

Organic sales in Australia increased in the low-single digits in both the three and six months ended January 31, 2024 compared to the same periods in the prior year. Organic sales were driven by ~~operating activities of $9.3 million~~consistent growth in both digital and sales from all other channels in both the three and six-month periods, which was primarily ~~due~~the result of price increases implemented in the prior year, as well as increased volume in all major product lines.

Europe & Australia segment profit increased 11.9% to $15.1 million from $13.5 million, and as a percentage of net sales, segment profit increased ~~accounts receivable of $14.4 million resulting~~to 13.6% from 12.7% for the ~~timing of higher sales throughout the current six-month period~~three months ended January 31, 2024 compared to the same period in the prior year. ~~In addition, average days~~Segment profit increased 5.2% to $31.8 million from $30.2 million and as a percentage of net sales, ~~outstanding ("DSO") increased in~~segment profit was 14.4% for both the Americas and Europe regions where sales were the strongest. Inventories increased during the current six-month period due to an increase in expected sales compared to the same period in the prior year, resulting in a cash outflow of $4.4 million. In addition, cash payments for annual incentive compensation increased in the current six-month period compared to the same period in the prior year. These decreases in cash provided by operating activities were partially offset by an increase in net earnings including non-cash items in the current six-month period compared to the same period in the prior year.

~~Net cash used in investing activities was $9.2 million for~~ the six months ended January 31, ~~2018, compared to $6.6 million in the same period of the prior year.~~2024 and 2023. The increase in ~~cash used in investing activities of $2.6 million included an increase in capital expenditures for the purchase of manufacturing equipment and facility upgrades in the United States and Europe.~~

~~Net cash used in financing activities~~segment profit during both periods was ~~$53.6 million~~primarily due to organic sales growth during the six months ended January 31, 2018, compared to $57.3 million in the same period of the prior year. The change of $3.7 million was due to lower net repayments on credit facilities primarily due to the decrease in net cash provided by operating activities in the current period.2024.

The effect of fluctuations in exchange rates increased cash balances by $7.2 million during the six months ended January 31, 2018, primarily due to cash balances held in currencies that appreciated against the U.S. dollar.

On May 13, 2010, the Company completed a private placement of €75.0 million aggregate principal amount of senior unsecured notes to accredited institutional investors. The €75.0 million of senior notes consisted of €30.0 million aggregate principal amount of 3.71% Series 2010-A Senior Notes, which were repaid during fiscal 2017,Liquidity and €45.0 million aggregate principal amount of 4.24% Series 2010-A Senior Notes, due May 13, 2020, with interest payable on the notes semiannually. This private placement was exempt from the registration requirements of the Securities Act of 1933. The notes have been fully and unconditionally guaranteed on an unsecured basis by the Company’s domestic subsidiaries.

On September 25, 2015, the Company and certain of its subsidiaries entered into an unsecured $300 million multi-currency revolving loan agreement with a group of six banks. At the Company's option, and subject to certain conditions, the available amount under the revolving loan agreement may be increased from $300 million to $450 million. As of January 31, 2018, the outstanding balance on the credit facility was $14.9 million, and the maximum outstanding balance during the six months ended January 31, 2018, was $51.3 million. The Company also had letters of credit outstanding under the loan agreement of $3.2 million as of January 31, 2018, and there was $281.9 million available for future borrowing, which can be increased to $431.9 million at the Company's option, subject to certain conditions. The revolving loan agreement has a final maturity date of September 25, 2020. As such, the borrowing is included in "Long-term obligations" on the condensed consolidated balance sheets.

The Company’s debt agreements require it to maintain certain financial covenants, including a ratio of debt to the trailing 12 months EBITDA, as defined in the debt agreements, of not more than a 3.25 to 1.0 ratio (leverage ratio) and the trailing 12 months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of January 31, 2018, the Company

~~was in compliance with these financial covenants, with the leverage ratio, as defined by the agreements, equal to 0.4 to 1.0 and the interest expense coverage ratio equal to 44.0 to 1.0.~~

Capital Resources

The Company's cash balances are generated and held in numerous locations throughout the world. At January 31, ~~2018, approximately 87%~~2024, 98% of the Company's cash and cash equivalents were held outside the United States. The Company's organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, ~~common stock~~research and development, share repurchases, ~~scheduled debt repayments,~~ and dividend payments for the next 12 ~~months.~~months and beyond. Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments.

Cash Flows

~~Off-Balance Sheet Arrangements~~Cash and cash equivalents were $143.9 million at January 31, 2024, a decrease of $7.7 million from July 31, 2023. The significant changes were as follows:


	Six months ended January 31,
(Dollars in thousands)	2024		2023
Net cash flow provided by (used in):
Operating activities	$	98,351	$	57,384
Investing activities	(60,832)		(8,156)
Financing activities	(42,964)		(57,128)
Effect of exchange rate changes on cash	(2,227)		2,041
Net decrease in cash and cash equivalents	$	(7,672)	$	(5,859)

Net cash provided by operating activities was $98.4 million for the six months ended January 31, 2024 compared to $57.4 million in the same period of the prior year. The increase in cash provided by operating activities was primarily due to improved profitability, reduced inventory spend and lower annual incentive compensation payments compared to the same period in the prior year.

Net cash used in investing activities consisted of $60.8 million of capital expenditures in the six months ended January 31, 2024 compared to $8.2 million in the same period of the prior year. The increase in cash used in investing activities was primarily due to the purchase of a previously leased facility in Mexico, in addition to facility construction costs in Belgium.

Net cash used in financing activities was $43.0 million in the six months ended January 31, 2024 compared to $57.1 million in the same period in the prior year. The decrease in cash used in financing activities was primarily due to a decrease of

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$16.1 million in net repayments on the credit agreement in the six months ended January 31, 2024 compared to the same period of the prior year, which was partially offset by an increase in share repurchases in the current six-month period.

Material Cash Requirements

Our material cash requirements for known contractual obligations include capital expenditures, borrowings on our credit agreement and lease obligations. We believe that net cash provided by operating activities will continue to be adequate to meet our liquidity and capital needs for these items over the next 12 months and in the long-term beyond the next 12 months. We also have cash requirements for purchase orders and contracts for the purchase of inventory and other goods and services, which are based on current and anticipated customer needs and are fulfilled by our suppliers within short time horizons. We do not have significant agreements for the purchase of inventory or other goods or services specifying minimum order quantities. In addition, we may have liabilities for uncertain tax positions, but we do not believe that the cash requirements to meet any of these liabilities will be material.

Credit Agreement

On August 1, 2019, the Company and certain of its subsidiaries entered into an unsecured $200 million multi-currency credit agreement with a group of five banks.

On December 21, 2021, the Company and certain of its subsidiaries entered into an amendment to the credit agreement dated August 1, 2019 to adjust to alternative benchmarks due to the elimination of the London Inter-bank Offered Rate (LIBOR).

On November 14, 2022, the Company and certain of its subsidiaries entered into a Second Amendment to Credit Agreement (“Amendment No. 2”) with a group of six banks, which amended the original credit agreement dated August 1, 2019. Amendment No. 2 amended the credit agreement to, among other items, (a) increase the lending commitments by $100 million for total lending commitments of $300 million, (b) extend the final maturity date to November 14, 2027, (c) increase the interest rate on certain borrowings by 0.125%, and (d) increase the available amount under the credit agreement, at the Company's option and subject to certain conditions, from $300 million up to (i) an amount equal to the incremental borrowing necessary to bring the Company's consolidated net debt-to-EBITDA ratio as defined in the credit agreement to 2.5 to 1.0 plus (ii) $200 million. Borrowings under Amendment No. 2 are unsecured and are guaranteed by certain of the Company's domestic subsidiaries.

As of January 31, 2024, the outstanding balance on the Company's credit agreement was $48.1 million. The maximum amount outstanding on the credit agreement during the six months ended January 31, 2024 was $63.0 million. As of January 31, 2024, the U.S. dollar-denominated borrowings of $13.0 million bear interest at 6.6%; the Euro-denominated borrowings of €23.0 million bear interest at 4.8%; and the British Pound-denominated borrowings of £8.0 million bear interest at 6.1% for a weighted average interest rate of 5.5%. The Company had letters of credit outstanding under the credit agreement of $1.8 million as of January 31, 2024, and there was $250.1 million available for future borrowing, which can be increased to $1,110.1 million at the Company's option, subject to certain conditions. The credit agreement has a final maturity date of November 14, 2027. As such, borrowings were classified as long-term on the condensed consolidated balance sheets.

Covenant Compliance

The ~~Company does not have material off-balance sheet arrangements. The Company is not aware~~Company's credit agreement requires it to maintain certain financial covenants, including a ratio of factors that are reasonably likely to adversely affect liquidity trends, other than the risk factors described in this and other Company filings. However, the following additional information is provided to assist those reviewing the Company’s financial statements.

~~Operating Leases - The leases generally are entered into for manufacturing facilities, warehouses and office space, computer equipment and Company vehicles.~~

Purchase Commitments - The Company has purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of its business. In the aggregate, such commitments are not in excess of current market prices and are not materialdebt to the trailing twelve months EBITDA, as defined in the credit agreement, of not more than a 3.5 to 1.0 ratio (leverage ratio) and the trailing twelve months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of January 31, 2024, the Company was in compliance with these financial ~~position~~covenants, with a ratio of debt to EBITDA, as defined by the ~~Company. Due~~agreement, equal to 0.2 to 1.0 and the proprietary nature of many of the Company’s materials and processes, certain supply contracts contain penalty provisions for early termination. The Company does not believe a material amount of penalties will be incurred under these contracts based upon historical experience and current expectations.interest expense coverage ratio equal to 95.9 to 1.0.

~~Other Contractual Obligations - The Company does not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity.~~

Forward-Looking Statements

In this quarterly report on Form 10-Q, statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, ~~earnings,~~income, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.

The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors,

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some of which are beyond Brady's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from:

•Increased cost of raw materials and labor as well as raw material shortages and supply chain disruptions

~~Brady's ability~~•Decreased demand for the Company's products

•Ability to compete effectively or to successfully execute ~~our~~the Company's strategy

~~Brady's ability~~•Ability to develop technologically advanced products that meet customer demands

•Difficulties in protecting ~~our~~ websites, networks, and systems against security breaches and difficulties in preventing phishing attacks, social engineering or malicious break-ins

~~Decreased demand for~~•Ability to identify, integrate, and grow acquired companies, and to manage contingent liabilities from divested businesses

•Risks associated with the ~~Company's products~~loss of key employees

~~Brady's ability to retain large customers~~

•Extensive regulations by U.S. and non-U.S. governmental and ~~self regulatory~~self-regulatory entities

~~Brady's ability to execute facility consolidations and maintain acceptable operational service metrics~~

•Litigation, including product liability claims

~~Risks associated with the loss~~•Adverse impacts of ~~key employees~~regional epidemics or global pandemics

~~Divestitures and contingent liabilities from divestitures~~

~~Brady's ability to properly identify, integrate, and grow acquired companies~~

•Foreign currency fluctuations

~~The impact~~•Potential write-offs of ~~the Tax Reform Act~~goodwill and ~~any~~ other ~~changes~~intangible assets

•Changes in tax legislation and tax rates

~~Potential write-offs of Brady's substantial intangible assets~~

•Differing interests of voting and non-voting shareholders and changes in the regulatory and business environment around dual-class voting structures

~~Brady's ability to meet certain financial covenants required by our debt agreements.~~

•Numerous other matters of national, regional and global scale, including major public health crises and government responses thereto and those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission

filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of ~~the~~Brady's Form 10-K ~~filed with~~for the ~~SEC on September 13, 2017.~~

year ended July 31, 2023.

These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to the Company’s ~~annual report~~Annual Report on Form 10-K for the year ended July 31, ~~2017.~~2023. There has been no material change in this information since ~~July 31, 2017.~~the 2023 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Brady Corporation maintains a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of its management, including its President and Chief Executive Officer (the "Chief Executive Officer") and its Chief Financial Officer, Chief Accounting Officer and Treasurer (the "Chief Financial Officer"), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, the Company’s ~~President and~~ Chief Executive Officer and Chief Financial Officer ~~and Treasurer~~ concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.

There were no ~~significant~~ changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

~~Our financial position,~~The Company’s business, results of operations, financial condition, and cash flows are subject to various ~~risks. The following risk factor is an addition to the risk factors discussed~~risks and uncertainties, including those described in Part I, Item 1A, ~~Risk Factors, in our~~“Risk Factors” of Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended July 31, ~~2017.~~

Changes in tax legislation or tax rates could adversely affect results of operations and financial statements. Additionally, audits by taxing authorities could result in tax payments for prior periods.

~~We are subject to income taxes~~2023. There have been no material changes from the risk factors set forth in the ~~U.S. and in many non-U.S. jurisdictions. As such, our earnings are subject to risk due to changing tax laws and tax rates around~~2023 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company maintains a share repurchase program for the world. Our tax filings are subject to audit by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in payments or assessments that differ from our reserves, our future net earningsCompany's Class A Nonvoting Common Stock. The program may be ~~adversely impacted.~~

implemented by purchasing shares in the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company's stock-based plans and for other corporate purposes.

On ~~December 22, 2017,~~August 30, 2023, the ~~U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The changes included~~Company's Board of Directors authorized an increase in the ~~Tax Reform Act are broad and complex. The final transition impacts~~Company's share repurchase program, authorizing the repurchase of an additional $100.0 million of the ~~Tax Reform Act~~Company's Class A Nonvoting Common Stock, which expanded upon the Company's prior authorization. The share repurchase program may ~~differ~~be implemented from time to time on the ~~provisional estimates provided due~~open market or in privately negotiated transactions and has no expiration date. As of January 31, 2024, there was $88.2 million worth of repurchase authority remaining pursuant to ~~changes in interpretations, any legislative action~~the existing share repurchase program.

The following table provides information with respect to ~~address questions that arise, any changes in accounting standards for income taxes or related interpretations, or any updates or changes to estimates we have utilized to calculate~~ the transition impacts. Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are evolving as a result of the Base Erosion and Profit Shifting reporting requirements (“BEPS”) recommendedpurchases by the G8, G20 and Organization for Economic Cooperation and Development (“OECD”). As these and other tax laws and related regulations change, our financial results change, our financial results could be materially impacted. GivenCompany of Class A Nonvoting Common Stock during the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes on our earnings and cash flow, but such changes could adversely impact our financial results.three months ended January 31, 2024:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (Dollars in Thousands)
November 1, 2023 - November 30, 2023	117,371	$	53.20	117,371	$	89,648
December 1, 2023 - December 31, 2023	25,744	55.60		25,744	88,217
January 1, 2024 - January 31, 2024	—	—		—	88,217
Total	143,115	$	53.63	143,115	$	88,217

We review the probability of the realization of our deferred tax assets quarterly based on forecasts of taxable income in both the U.S. and foreign jurisdictions. As part of this review, we utilize historical results, projected future operating results, eligible carry-forward periods, tax planning opportunities, and other relevant considerations. Adverse changes in profitability and financial outlook in both the U.S. and/or foreign jurisdictions, or changes in our geographic footprint may require changes in the valuation allowance for deferred tax assets.

ITEM 5. OTHER INFORMATION

During the three months ended January 31, ~~2018, we recorded a provisional valuation allowance of $22.1 million against previously recorded foreign tax credit carryforwards as a result~~2024, no director or Section 16 officer of the ~~passage~~Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is identified in Item 408(a) of ~~the Tax Reform Act, which modifies our ability to utilize foreign tax credits in future periods. At any point in time, there are a number~~Regulation S-K.

Table of tax proposals at various stages of legislation throughout the globe. While it is impossible for us to predict whether some or all of these proposals will be enacted, it likely would have an impact on our results of operations and financial statements.Contents

ITEM 6. EXHIBITS


Exhibit No.		Exhibit Description
~~(a)~~	~~Exhibits~~


31.1
~~31.1~~	Rule 13a-14(a)/15d-14(a) Certification of ~~J. Michael Nauman~~Russell R. Shaller

31.2			Rule 13a-14(a)/15d-14(a) Certification of ~~Aaron J. Pearce~~Ann E. Thornton

32.1			Section 1350 Certification of ~~J. Michael Nauman~~Russell R. Shaller

32.2			Section 1350 Certification of ~~Aaron J. Pearce~~Ann E. Thornton

101.INS			XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.)
~~101~~
101.SCH		~~Interactive Data File~~	XBRL Taxonomy Schema Document

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			XBRL Taxonomy Extension Label Linkbase Document

101.PRE			XBRL Taxonomy Presentation Label Linkbase Document

104			Cover Page Inline XBRL data (contained in Exhibit 101)


*			Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~SIGNATURES~~

BRADY CORPORATION

~~BRADY CORPORATION~~

Date: February 22, ~~2018~~2024

/s/ ~~J. MICHAEL NAUMAN~~RUSSELL R. SHALLER

~~J. Michael Nauman~~Russell R. Shaller

President and Chief Executive Officer

(Principal Executive Officer)

Date: February 22, ~~2018~~2024

/s/ ~~AARON J. PEARCE~~ANN E. THORNTON

~~Aaron J. Pearce~~Ann E. Thornton

Chief Financial Officer, Chief Accounting Officer and Treasurer

(Principal Financial Officer and Principal Accounting Officer)




	Page
PART I. Financial Information		3
Item 1. Financial Statements (Unaudited)		3
Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of ~~Earnings~~Income		4
Condensed Consolidated Statements of Comprehensive Income		5
Condensed Consolidated Statements of Stockholders' Equity		6
Condensed Consolidated Statements of Cash Flows		68
Notes to Condensed Consolidated Financial Statements		79
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~and Financial Condition~~		1916
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2722
Item 4. Controls and Procedures		2722
PART II. Other Information		2823
Item 1A. Risk Factors		23
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds		23
Item 5. Other Information		23
Item 6. Exhibits		2824
Signatures		2925



	IDS		WPS		Total
Balance as of July 31, 2017	$	391,864	$	45,833	$	437,697
Translation adjustments	4,110		2,066		6,176
Balance as of January 31, 2018	$	395,974	$	47,899	$	443,873



	Unrealized loss on cash flow hedges			Unamortized gain on post-retirement plans			Foreign currency translation adjustments			Accumulated other comprehensive loss
Beginning balance, July 31, 2016	$	(857	)	$	2,236		$	(56,124	)	$	(54,745	)
Other comprehensive (loss) income before reclassification	(80		)	72			(13,442		)	(13,450		)
Amounts reclassified from accumulated other comprehensive loss	253			(272		)	—			(19		)
Ending balance, January 31, 2017	$	(684	)	$	2,036		$	(69,566	)	$	(68,214	)



	Six months ended January 31,
Black-Scholes Option Valuation Assumptions	2018			2017
Expected term (in years)	6.07			6.11
Expected volatility	26.52		%	29.43		%
Expected dividend yield	2.72		%	2.70		%
Risk-free interest rate	1.96		%	1.26		%
Weighted-average market value of underlying stock at grant date	$	36.85		$	35.13
Weighted-average exercise price	$	36.85		$	35.13
Weighted-average fair value of options granted during the period	$	7.96		$	7.56



Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at July 31, 2017	2,879,801	$	27.40
New grants	364,046	36.85
Exercised	(397,402)	31.01
Forfeited or expired	(62,125)	32.25
Outstanding at January 31, 2018	2,784,320	$	28.01	6.3	$	28,850
Exercisable at January 31, 2018	1,962,475	$	26.61	5.3	$	23,097



Service-Based RSUs	Shares		Weighted Average Grant Date Fair Value
Outstanding at July 31, 2017	517,108		$	25.61
New grants	86,032		36.68
Vested	(137,237	)	24.73
Forfeited	(23,423	)	26.92
Outstanding at January 31, 2018	442,480		$	27.97



Performance-Based RSUs	Shares	Weighted Average Grant Date Fair Value
Outstanding at July 31, 2017	58,206	$	32.03
New grants	56,290	33.12
Vested	—	—
Forfeited	—	—
Outstanding at January 31, 2018	114,496	$	32.57



	Inputs Considered As
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Fair Values		Balance Sheet Classifications
January 31, 2018
Trading securities	$	14,726	$	—	$	14,726	Other assets
Foreign exchange contracts	—		379		379		Prepaid expenses and other current assets
Total Assets	$	14,726	$	379	$	15,105
Foreign exchange contracts	$	—	$	1,054	$	1,054	Other current liabilities
Total Liabilities	$	—	$	1,054	$	1,054
July 31, 2017
Trading securities	$	13,994	$	—	$	13,994	Other assets
Foreign exchange contracts	—		1,354		1,354		Prepaid expenses and other current assets
Total Assets	$	13,994	$	1,354	$	15,348
Foreign exchange contracts	$	—	$	1,577	$	1,577	Other current liabilities
Total Liabilities	$	—	$	1,577	$	1,577



	Asset Derivatives						Liability Derivatives
	January 31, 2018			July 31, 2017			January 31, 2018			July 31, 2017
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Cash flow hedges
Foreign exchange contracts	Prepaid expenses and other current assets	$	377	Prepaid expenses and other current assets	$	1,067	Other current liabilities	$	1,046	Other current liabilities	$	1,569
Net investment hedges
Foreign currency denominated debt	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	—		Long term obligations, less current maturities	55,800		Long term obligations, less current maturities	53,280
Total derivatives designated as hedging instruments		$	377		$	1,067		$	56,846		$	54,849
Derivatives not designated as hedging instruments
Foreign exchange contracts	Prepaid expenses and other current assets	$	2	Prepaid expenses and other current assets	$	287	Other current liabilities	$	8	Other current liabilities	$	7
Total derivatives not designated as hedging instruments		$	2		$	287		$	8		$	7

~~Wisconsin~~

~~39-0178960~~

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)