Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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 ~~April 30,~~October 31, 2019

OR



¨ ☐	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~~CORPORATION

(Exact name of registrant as specified in its charter)



Wisconsin		39-0178960
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



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

~~(414)~~ (414) 358-6600

(Registrant’s telephone number, including area code)

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit 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☑

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

As of ~~May 21,~~November 19, 2019, there were ~~49,284,372~~49,766,327 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.

FORM 10-Q

BRADY CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


	April 30, 2019				July 31, 2018			October 31, 2019				July 31, 2019
	(Unaudited)							(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	238,432			$	181,427		$	295,093			$	279,072
Accounts receivable—net	162,094				161,282			162,561				158,114
Inventories	119,895				113,071			119,612				120,037
Prepaid expenses and other current assets	18,746				15,559			16,642				16,056
Total current assets	539,167				471,339			593,908				573,279
Property, plant and equipment—net	99,491				97,945			112,565				110,048
Goodwill	412,378				419,815			411,328				410,987
Other intangible assets	38,135				42,588			34,860				36,123
Deferred income taxes	7,068				7,582			7,447				7,298
Other	19,638				17,662
Operating lease assets								52,233				—
Other assets								18,881				19,573
Total	$	1,115,877			$	1,056,931		$	1,231,222			$	1,157,308
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	64,584			$	66,538		$	59,385			$	64,810
Wages and amounts withheld from employees	52,849				67,619
Accrued compensation and benefits								63,794				62,509
Taxes, other than income taxes	7,886				8,318			8,885				8,107
Accrued income taxes	4,378				3,885			6,790				6,557
Current operating lease liabilities								14,857				—
Other current liabilities	48,169				44,567			52,092				49,796
Current maturities on long-term debt								50,144				50,166
Total current liabilities	177,866				190,927			255,947				241,945
Long-term obligations	50,303				52,618
Long-term operating lease liabilities								40,124				—
Other liabilities	63,164				61,274			58,616				64,589
Total liabilities	291,333				304,819			354,687				306,534
Stockholders’ equity:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,284,372 and 48,393,617 shares, respectively	513				513
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,764,799 and 49,458,841 shares, respectively								513				513
Class B voting common stock—Issued and outstanding, 3,538,628 shares	35				35			35				35
Additional paid-in capital	330,051				325,631			327,241				329,969
Retained earnings	612,474				553,454			663,808				637,843
Treasury stock—1,977,115 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost	(50,083		)		(71,120		)
Treasury stock—1,496,688 and 1,802,646 shares, respectively, of Class A nonvoting common stock, at cost								(43,779		)		(46,332		)
Accumulated other comprehensive loss	(68,446		)		(56,401		)	(71,283		)		(71,254		)
Total stockholders’ equity	824,544				752,112			876,535				850,774
Total	$	1,115,877			$	1,056,931		$	1,231,222			$	1,157,308

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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


	Three months ended April 30,								Nine months ended April 30,							Three months ended October 31,
	2019				2018				2019				2018			2019				2018
Net sales	$	289,745			$	298,421			$	865,367			$	876,352		$	286,947			$	293,196
Cost of goods sold	143,996				147,339				433,269				435,513			145,542				146,657
Gross margin	145,749				151,082				432,098				440,839			141,405				146,539
Operating expenses:
Research and development	11,437				11,678				33,837				33,512			10,967				11,326
Selling, general and administrative	94,691				101,695				281,988				299,411			89,547				94,591
Total operating expenses	106,128				113,373				315,825				332,923			100,514				105,917
Operating income	39,621				37,709				116,273				107,916			40,891				40,622
Other income (expense):
Investment and other income	2,065				31				3,425				1,303
Investment and other income (expense)																1,380				(17		)
Interest expense	(708		)		(761		)		(2,137		)		(2,453		)	(701		)		(712		)
Income before income taxes	40,978				36,979				117,561				106,766			41,570				39,893
Income tax expense	6,197				10,979				22,916				50,657			4,072				9,256
Net income	$	34,781			$	26,000			$	94,645			$	56,109		$	37,498			$	30,637
Net income per Class A Nonvoting Common Share:
Basic	$	0.66			$	0.50			$	1.80			$	1.09		$	0.71			$	0.59
Diluted	$	0.65			$	0.49			$	1.78			$	1.07		$	0.70			$	0.58
Dividends	$	0.21			$	0.21			$	0.64			$	0.62		$	0.22			$	0.21
Net income per Class B Voting Common Share:
Basic	$	0.66			$	0.50			$	1.79			$	1.07		$	0.69			$	0.57
Diluted	$	0.65			$	0.49			$	1.76			$	1.05		$	0.68			$	0.56
Dividends	$	0.21			$	0.21			$	0.62			$	0.61		$	0.20			$	0.20
Weighted average common shares outstanding (in thousands):
Weighted average common shares outstanding:
Basic	52,766				51,747				52,499				51,628			53,143				52,201
Diluted	53,480				52,729				53,215				52,610			53,736				52,958

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands, Unaudited)



	Three months ended April 30,								Nine months ended April 30,							Three months ended October 31,
	2019				2018				2019				2018			2019				2018
Net income	$	34,781			$	26,000			$	94,645			$	56,109		$	37,498			$	30,637
Other comprehensive loss:
Foreign currency translation adjustments	(7,337		)		(12,834		)		(10,641		)		(3,549		)	50				(8,790		)

Cash flow hedges:
Net gain recognized in other comprehensive loss	220				657				377				119
Reclassification adjustment for (gains) losses included in net income	(292		)		264				(579		)		446
	(72		)		921				(202		)		565
Pension and other post-retirement benefits:
Net (loss) gain recognized in other comprehensive loss	—				—				(169		)		592
Actuarial gain amortization	(124		)		(163		)		(423		)		(434		)
Net gain (loss) recognized in other comprehensive loss																196				(380		)
Reclassification adjustment for gains included in net income																(381		)		(47		)
	(124		)		(163		)		(592		)		158			(185		)		(427		)

Pension and other post-retirement benefits actuarial gain amortization																(105		)		(155		)

Other comprehensive loss, before tax	(7,533		)		(12,076		)		(11,435		)		(2,826		)	(240		)		(9,372		)
Income tax expense related to items of other comprehensive loss	(348		)		(980		)		(610		)		(638		)
Income tax benefit (expense) related to items of other comprehensive loss																211				(458		)
Other comprehensive loss, net of tax	(7,881		)		(13,056		)		(12,045		)		(3,464		)	(29		)		(9,830		)
Comprehensive income	$	26,900			$	12,944			$	82,600			$	52,645		$	37,469			$	20,807

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


	Nine months ended April 30,							Three months ended October 31,
	2019				2018			2019				2018
Operating activities:
Net income	$	94,645			$	56,109		$	37,498			$	30,637
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	17,836				19,047			5,634				5,960
Non-cash portion of stock-based compensation expense	10,311				7,581			3,618				4,965
Deferred income taxes	3,796				26,501			1,009				2,164
Other								1,533				218
Changes in operating assets and liabilities:
Accounts receivable	332				(10,710		)	(4,362		)		(6,709		)
Inventories	(9,254		)		(7,790		)	249				(3,125		)
Prepaid expenses and other assets	(2,204		)		480			(1,404		)		(2,197		)
Accounts payable and other liabilities	(19,176		)		(133		)
Accounts payable and accrued liabilities								(5,193		)		(14,288		)
Income taxes	616				(1,863		)	266				1,193
Net cash provided by operating activities	96,902				89,222			38,848				18,818

Investing activities:
Purchases of property, plant and equipment	(17,528		)		(14,755		)	(7,724		)		(6,009		)
Other	(1,810		)		(197		)	527				337
Net cash used in investing activities	(19,338		)		(14,952		)	(7,197		)		(5,672		)

Financing activities:
Payment of dividends	(33,488		)		(32,110		)	(11,533		)		(11,096		)
Proceeds from exercise of stock options	20,333				10,011			3,411				13,001
Payments for employee taxes withheld from stock-based awards								(7,269		)		(2,937		)
Proceeds from borrowing on credit facilities	13,637				17,439			—				5,737
Repayment of borrowing on credit facilities	(13,568		)		(69,012		)	—				(2,269		)
Other	(5,185		)		(3,622		)	65				(1,772		)
Net cash used in financing activities	(18,271		)		(77,294		)
Net cash (used in) provided by financing activities								(15,326		)		664

Effect of exchange rate changes on cash	(2,288		)		(17		)
Effect of exchange rate changes on cash and cash equivalents								(304		)		(3,061		)

Net increase (decrease) in cash and cash equivalents	57,005				(3,041		)
Net increase in cash and cash equivalents								16,021				10,749
Cash and cash equivalents, beginning of period	181,427				133,944			279,072				181,427

Cash and cash equivalents, end of period	$	238,432			$	130,903		$	295,093			$	192,176

See Notes to Condensed Consolidated Financial ~~Statements.~~Statements

BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Nine~~Three Months Ended~~April 30,~~October 31, 2019

(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 ~~April 30,~~October 31, 2019 and July 31, ~~2018~~,2019, its results of operations and comprehensive income for the three ~~and~~ ~~nine~~ months ended ~~April 30,~~October 31, 2019 and 2018,, and cash flows for the ~~nine~~three months ended ~~April 30,~~October 31, 2019 and ~~2018~~.2018. The condensed consolidated balance sheet as of July 31, ~~2018~~,2019 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 on Form 10-K for the year ended July 31, ~~2018~~.2019.

NOTE B — New Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU")~~ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," 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 periods in fiscal years beginning after December 15, 2018, with early adoption permitted. ~~This new guidance will require a~~The Company adopted ASU 2017-12 effective August 1, 2019, using the required modified retrospective adoption approach to apply this guidance to existing hedging relationships as of the adoption ~~date. The Company is currently evaluating the~~date, which did not have a material impact ~~of this update~~ on its consolidated financial ~~statements and disclosures.~~statements.

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. The Company has not adopted this guidance, which will only impact the Company's consolidated financial statements if there is a future impairment of goodwill.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which changes the impairment model for most financial instruments. Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under ASU 2016-13, the Company will be required to use a current expected credit loss model ("CECL") that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. This guidance becomes effective for interim periods in fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of this ASU will have on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASC 842"), which ~~replaces~~replaced the current lease accounting standards. The update requires, among other items, lessees to recognize the assets and liabilities that arise from most leases on the balance sheet and disclose key information about leasing arrangements. This guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The ASU allows for either a full-retrospective or a modified-retrospective approach and early adoption is permitted. In July 2018, the FASB ~~approved~~issued ASU 2018-11 "Leases (Topic 842): Targeted Improvements," which provides, among other items, an ~~optional~~additional transition method ~~to allow companies to apply the new lease standard as of the adoption date and recognize~~allowing a ~~cumulative-effect~~

cumulative effect adjustment to ~~beginning~~the opening balance of retained earnings induring the period of adoption.

ASC 842 is effective for interim periods in fiscal years beginning after December 15, 2018.

The Company has formed a team to implement the new lease standard and has implemented a third-party software program to track and store its leases. The implementation team has been evaluating the Company’s global lease portfolio, determining the reporting requirements of the new standard, and is in the process of implementing changes to its processes and internal controls to support lease accounting and disclosure requirements. The Company expects to record right-of-use assets and lease liabilities as a result of the new lease standard; however, it is still evaluating the magnitude of the impact on its consolidated financial statements. The Company plans to adopt the new standardadopted ASU 2016-02 (and related updates) effective August 1, 2019, using the optional transition ~~method.~~

~~In May 2014, the FASB issued~~method provided in ASU 2014-09, "Revenue from Contracts with Customers" ("Topic 606"), which eliminates the transaction and industry-specific revenue recognition guidance and replaced 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. The Company adopted ASU 2014-09 (and related updates) effective August 1, 2018 using the modified retrospective method2018-11 to apply this guidance to ~~all contracts~~the impacted lease population at the date of initial application. Results for reporting periods beginning after August 1, ~~2018~~2019, are presented under ~~Topic 606,~~ASU 2016-02, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect induring those periods.

The ~~results~~Company elected the package of ~~applying Topic 606 were~~practical expedients permitted within the new standard, which among other things, allows the Company to carryforward the historical lease accounting of expired or existing leases with respect to lease identification, lease classification and accounting treatment for initial direct costs as of the adoption date. The Company also elected the practical expedient related to lease versus nonlease components, allowing the Company to recognize lease and nonlease components as a single lease. Lastly, the Company elected the hindsight practical expedient, allowing the Company to use hindsight in determining the lease term and assessing impairment of right-of-use assets when transitioning to ASC 842. The Company has made a policy election not ~~material~~ to ~~the Company's consolidated financial condition, results~~capitalize leases with an initial term of ~~operations, cash flows, business processes, controls,~~12 months or ~~systems.~~ less.

Upon adoption of ASC 842, the Company recorded ~~a cumulative adjustment to the opening balance~~additional operating lease assets and liabilities of ~~retained earnings~~$55,984 and $58,544, respectively, as of August 1, ~~2018,~~2019, which ~~resulted in a decrease~~included operating lease assets and liabilities of $9,769 and $9,674, respectively, for leases that commenced on the adoption date of August 1, 2019. No cumulative effect adjustment to retained earnings was recognized upon adoption of ~~$2,137, net~~the new standard. Adoption of ~~tax. The adjustment was primarily due to~~ASC 842 did not have a ~~change in timing of when revenue and~~material impact on the ~~related costs for certain extended service-type warranties are recognized, as required per Topic 606.~~

Company's cash flows or operating results. Refer to Note ~~C "Revenue Recognition"~~E "Leases" for additional information and required disclosures under the new standard.

NOTE C — ~~Revenue Recognition~~

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. The Company considers the purchase orders, which in some cases are governed by master sales or distributor agreements, to be its contracts with customers. For each contract, the Company considers the commitment to transfer products, each of which is distinct, to be its identified performance obligations.

~~Timing~~

The majority of the Company's revenue is earned and recognized at a point in time through ship-and-bill performance obligations, when control of the product is transferred to the customer, which typically occurs upon shipment or delivery to the customer, depending on freight terms. To determine when control has transferred, the Company considers if there is a present right to payment; and if legal title, physical possession, and the significant risks and rewards of ownership of the asset has transferred to the customer. Once a product has shipped or has been delivered, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

~~Measurement~~

Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for the transfer of product, which is generally the price stated in the contract specific for each item sold, adjusted for the value of expected returns, discounts, rebates, or other allowances offered to the Company's customers as a reduction of the transaction price. Certain discounts and price assurances are fixed and known at the time of sale. Expected returns and other allowances are variable and are estimated using the expected value method based upon historical experience. Rebates offered to customers are retrospective and typically defined in the master sales or distributor agreements, and therefore are recorded using the most likely amount method based on the terms of the contract. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

~~Payment Terms~~

While the Company’s standard payment terms are net 30 days, the specific payment terms and conditions in its customer contracts vary. In some cases, customers pay for their goods at time of shipment or upon delivery; in other cases, after appropriate credit evaluation, an open credit line is granted and payment is due in arrears. Contracts with payment in arrears are recognized in the condensed consolidated balance sheet as accounts receivable.

~~Warranties~~

The Company offers standard warranty coverage on substantially all products that it sells, and accounts for this standard warranty coverage as an assurance warranty. As such, no transaction price is allocated to the standard warranty, and the Company records a liability for product warranty obligations at the time of sale to a customer based upon historical warranty experience.

The Company also sells extended warranty coverage for certain products, which it accounts for as service warranties. In most cases, the extended service warranty is included with the purchase of the product. In applying Topic 606, the Company considers the extended service warranty to be a separate performance obligation in the contract and allocates a portion of the transaction

price to the service warranty based on the estimated stand-alone selling price. Under Topic 606, the extended warranty transaction price is initially recorded as deferred revenue on the consolidated balance sheet and recognized on a straight-line basis over the life of the service warranty period. The deferred revenue is considered a contract liability as the Company has a right to payment at the time the product with the related extended service warranty is shipped or delivered and therefore, payment is received in advance of the Company's performance. The balance of contract liabilities as of April 30, 2019, was $2,791. This also represents the amount of unsatisfied performance obligations related to contracts that extend beyond one year. Of this amount, the Company expects to recognize 48% by the end of fiscal 2020, an additional 25% by the end of fiscal 2021, and the balance thereafter. Upon adoption of Topic 606, at the beginning of fiscal 2019, the contract liability balance was $2,796. The current portion of contract liabilities and the non-current portion are included in “Other current liabilities” and “Other liabilities," respectively, on the consolidated balance sheet. During the three and nine months ended April 30, 2019, the Company recognized revenue of $315 and $937, respectively, that was included in the contract liability balance at the beginning of the period, which was from the amortization of extended service warranties.

~~Practical Expedients~~

With the exception of the performance obligations related to the extended service warranties, the Company's contracts have an original expected duration of one year or less. As a result, the Company has elected to use the practical expedient to not disclose its remaining performance obligations for contracts that have an original expected length of one year or less.

The Company applied the portfolio approach to its ship-and-bill contracts that have similar characteristics as it reasonably expects that the effects on the financial statements of applying this guidance to the portfolio of contracts would not differ materially from applying this guidance to the individual contracts within the portfolio.

As the Company’s product sale contracts and standard payment terms have a duration of less than one year, it uses the practical expedient applicable to such contracts and does not consider the time value of money.

~~Sales, use, value-add and other similar taxes assessed by governmental authorities and collected concurrent with revenue-producing activities are excluded from revenue.~~

The Company accounts for shipping and handling activities that occur after control of the related products transfers to the customer as fulfillment activities and are therefore recognized as revenue at time of shipping.

The Company expenses incremental direct costs of obtaining a contract (e.g., sales commissions) when incurred because the amortization period is generally twelve months or less. Contract costs are expensed in "Selling, general, and administrative expenses" on the condensed consolidated statements of income.

~~Refer to Note H, "Segment Information," for the Company's disaggregated revenue disclosure.~~

~~NOTE D —~~ Additional Balance Sheet Information

Inventories

Inventories as of ~~April 30,~~October 31, 2019, and July 31, ~~2018,~~2019, consisted of the following:



	October 31, 2019				July 31, 2019
Finished products	$	76,538			$	77,532
Work-in-process	20,696				20,515
Raw materials and supplies	22,378				21,990
Total inventories	$	119,612			$	120,037

April 30, 2019 July 31, 2018
Finished products $ 76,117
$ 73,133
Work-in-process 22,240
19,903
Raw materials and supplies 21,538
20,035
Total inventories $ 119,895
$ 113,071

Property, plant and equipment

Property, plant and equipment is presented net of accumulated depreciation in the amount of ~~$274,476~~$277,055 and ~~$280,778~~$273,880 as of ~~April 30,~~October 31, 2019, and July 31, ~~2018,~~2019, respectively.

NOTE ED — Other Intangible Assets

Other intangible assets include ~~patents, trademarks, and~~ customer relationships, patents, and trademarks 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:



	October 31, 2019														July 31, 2019
	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:
Customer relationships and other	9		$	46,594			$	(30,634	)		$	15,960			9		$	46,595			$	(29,343	)		$	17,252
Unamortized other intangible assets:
Trademarks	N/A		18,900				—				18,900				N/A		18,871				—				18,871
Total			$	65,494			$	(30,634	)		$	34,860					$	65,466			$	(29,343	)		$	36,123

April 30, 2019 July 31, 2018

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:
Customer relationships and other 8 $ 52,203
$ (33,487 ) $ 18,716
9 $ 61,944
$ (38,872 ) $ 23,072
Unamortized other intangible assets:
Trademarks N/A 19,419
—
19,419
N/A 19,516
—
19,516
Total $ 71,622
$ (33,487 ) $ 38,135
$ 81,460
$ (38,872 ) $ 42,588
The change in the gross carrying amount of other intangible assets as of October 31, 2019 compared to July 31, 2019 was due to the effects of currency fluctuations during the three-month period.

Amortization expense ofon intangible assets was ~~$1,443~~$1,291 and $~~1,620~~$1,436 for the three months ended ~~April 30, 2019 and~~ ~~2018, respectively, and $4,314 and $4,930 for the nine months ended April 30,~~October 31, 2019 and 2018, respectively. ~~The amortization~~Amortization expense over each of the next five fiscal years is projected to be $~~5,708, $5,183, $5,144, $5,002~~$5,164, $5,164, $4,898, $2,025 and $~~2,025~~$0 for the fiscal years ending July 31, 2020, 2021, 2022, 2023 and 2024, respectively.

NOTE E — Leases

The Company leases certain manufacturing facilities, warehouses and office space, computer equipment, and vehicles accounted for as operating leases. Lease terms typically range from one year to fifteen years. As of October 31, 2019, the Company did not have any finance leases.

The Company determines if an arrangement contains a lease at contract inception. The contract is considered to contain a lease if it provides the Company with the right to direct the use of and the right to obtain substantially all of the economic benefits from an identified asset in exchange for consideration. The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date based on the present value of the future lease payments over the expected lease term. Additionally, the ROU asset includes any lease payments made on or before the commencement date, initial direct costs incurred, and is reduced by any lease incentives received.

Some of the Company’s leases include options to extend the lease agreement. The exercise of an extension is at the Company’s sole discretion. The majority of renewal options are not included in the calculation of ROU assets and liabilities as they are not reasonably certain to be exercised. Some of the Company's lease agreements include rental payments that are adjusted periodically for inflation or the change in an index or rate, which are considered to be variable lease payments. Due to the nature of the Company’s variable lease payments, they are generally excluded from the initial measurement of the ROU asset and lease liability and are recognized in the period in which the obligation for those payments is incurred. The Company has lease agreements that include both lease and non-lease components, which the Company has elected to account for as a single lease component. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Generally, the discount rate implicit within the Company’s leases cannot be readily determined, and therefore the Company uses its incremental borrowing rate to determine the present value of the future lease payments. The incremental borrowing rate is estimated based on the sovereign credit rating for the countries in which the Company has its largest operations, adjusted for several factors, such as internal credit spread, lease terms and other market information available at the lease commencement date.

Operating leases are reflected in “Operating lease assets,” “Current operating lease liabilities,” and “Long-term operating lease liabilities” on the Company's condensed consolidated balance sheets.

Short-term lease expense, variable lease expenses, and sublease income was immaterial to the condensed consolidated statements of income.

The following table summarizes lease expense recognized for the three months ended October 31, 2019:



			Three months ended
	Condensed Consolidated Statements of Income Location		October 31, 2019
Operating lease cost	Cost of goods sold		$	4,095
Operating lease cost	Selling, general, and administrative expenses		1,310

The following table summarizes maturity of the Company's lease liabilities as of October 31, 2019:



Years ended July 31,	Operating Leases
Remainder of 2020	$	12,556
2021	15,599
2022	12,647
2023	9,265
2024	5,502
Thereafter	3,181
Total lease payments	$	58,750
Less interest	(3,769		)
Present value of lease liabilities	$	54,981

The weighted average remaining lease terms and discount rates for the Company's operating leases as of October 31, 2019 was as follows:



	October 31, 2019
Weighted average remaining lease term (in years)	4.1
Weighted average discount rate	3.4	%

Supplemental cash flow information related to the Company's operating leases for the three months ended October 31, 2019, ~~2020~~, ~~2021~~, ~~2022~~ ~~and~~ ~~2023, respectively.~~was as follows:



	Three months ended
	October 31, 2019
Operating cash flows from operating leases	$	4,010
Operating lease assets obtained in exchange for new operating lease liabilities	9,952

Operating lease assets obtained in exchange for new operating lease liabilities include $9,769 of operating lease assets related to leases that commenced on August 1, 2019, which were included in the adoption impact of the new lease accounting standard.

The following table summarizes future minimum lease payments under operating leases as of July 31, 2019:



Years ended July 31,	Operating Leases
2020	$	18,450
2021	16,132
2022	13,439
2023	10,065
2024	5,656
Thereafter	3,502
Total lease payments	$	67,244

NOTE F – Stockholders' Equity

The following table illustrates the changes in the balances of each component of stockholders' equity for the three months ended October 31, 2019:



		Common Stock				Additional Paid-In Capital				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total Stockholders' Equity
Balances at July 31, 2019		$	548			$	329,969			$	637,843			$	(46,332	)		$	(71,254	)		$	850,774
Net income		—				—				37,498				—				—				37,498
Other comprehensive loss, net of tax		—				—				—				—				(29		)		(29		)
Issuance of shares of Class A Common Stock under stock plan		—				(6,410		)		—				2,553				—				(3,857		)
Tax benefit and withholdings from deferred compensation distributions		—				64				—				—				—				64
Stock-based compensation expense		—				3,618				—				—				—				3,618
Purchase of shares of Class A Common Stock		—				—				—				—				—				—
Cash dividends on Common Stock
Class A — $0.22 per share		—				—				(10,822		)		—				—				(10,822		)
Class B — $0.20 per share		—				—				(711		)		—				—				(711		)
Balances at October 31, 2019		$	548			$	327,241			$	663,808			$	(43,779	)		$	(71,283	)		$	876,535

The following table illustrates the changes in the balances of each component of stockholders' equity for the three months ended October 31, 2018:



		Common Stock				Additional Paid-In Capital				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total Stockholders' Equity
Balances at July 31, 2018		$	548			$	325,631			$	553,454			$	(71,120	)		$	(56,401	)		$	752,112
Net income		—				—				30,637				—				—				30,637
Other comprehensive loss, net of tax		—				—				—				—				(9,830		)		(9,830		)
Issuance of shares of Class A Common Stock under stock plan		—				(4,505		)		—				14,569				—				10,064
Tax benefit and withholdings from deferred compensation distributions		—				91				—				—				—				91
Stock-based compensation expense		—				4,965				—				—				—				4,965
Purchase of shares of Class A Common Stock		—				—				—				(1,863		)		—				(1,863		)
Cumulative adjustment for ASU 2014-09, net of tax		—				—				(2,137		)		—				—				(2,137		)
Cash dividends on Common Stock
Class A — $0.21 per share		—				—				(10,403		)		—				—				(10,403		)
Class B — $0.20 per share		—				—				(693		)		—				—				(693		)
Balances at October 31, 2018		$	548			$	326,182			$	570,858			$	(58,414	)		$	(66,231	)		$	772,943

Incentive Stock Plans

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 majority of the Company’s annual share-based awards are granted in the first quarter of the fiscal year.

Total stock-based compensation expense recognized by the Company during the three months ended October 31, 2019 and 2018, was $3,618 ($3,089 net of taxes) and $4,965 ($4,319 net of taxes), respectively. As of October 31, 2019, total unrecognized compensation cost related to share-based awards was $15,461 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 2.3 years.

Stock Options

The stock 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 ratably 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 “time-based” stock options, generally expire 10 years from the date of grant.

The Company has estimated the fair value of its time-based stock option awards granted during the three months ended October 31, 2019 and 2018, using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model are reflected in the following table:



		Three months ended October 31,
Black-Scholes Option Valuation Assumptions		2019				2018
Expected term (in years)		6.20				6.20
Expected volatility		25.85		%		25.83		%
Expected dividend yield		2.63		%		2.71		%
Risk-free interest rate		1.64		%		3.01		%
Weighted-average market value of underlying stock at grant date		$	54.05			$	43.96
Weighted-average exercise price		$	54.05			$	43.96
Weighted-average fair value of options granted during the period		$	10.63			$	9.70

The following is a summary of stock option activity for the three months ended October 31, 2019:



Time-Based Options		Shares		Weighted Average Exercise Price				Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at July 31, 2019		1,594,716		$	31.63
New grants		247,297		54.05
Exercised		(381,698)		27.05
Forfeited or expired		(2,221)		40.25
Outstanding at October 31, 2019		1,458,094		$	36.62			7.2		$	28,976
Exercisable at October 31, 2019		933,905		$	30.59			6.0		$	24,192

The total fair value of stock options vested during the three months ended October 31, 2019 and 2018, was $2,537 and $2,798, respectively. The total intrinsic value of stock options exercised during the three months ended October 31, 2019 and 2018, based upon the average market price at the time of exercise during the period, was $10,225 and $9,423, respectively.

The cash received from the exercise of stock options during the three months ended October 31, 2019 and 2018, was $3,411 and $13,001, respectively. The tax benefit from the exercise of stock options during the three months ended October 31, 2019 and 2018, was $2,541 and $2,356, respectively.

RSUs

The Company issues "time-based" and "performance-based" RSUs under the incentive stock plan. The time-based RSUs issued under the plan generally vest ratably over a three-year period and have a grant date fair value equal to the fair market value of the underlying stock at the date of grant. The performance-based RSUs issued under the plan vest at the end of a three-year service period provided specified financial performance metrics are met. The fair value of performance-based RSUs was determined by a third-party valuation involving the use of a Monte Carlo simulation.

The following tables summarize the RSU activity for the three months ended October 31, 2019:



Time-Based RSUs		Shares			Weighted Average Grant Date Fair Value
Outstanding at July 31, 2019		188,638			$	38.15
New grants		69,328			54.10
Vested		87,002			36.00
Forfeited		(454	)		40.43
Outstanding at October 31, 2019		344,514			$	45.72

The time-based RSUs granted during the three months ended October 31, 2018, had a weighted-average grant date fair value of $33.16. The total fair value of time-based RSUs vested during the three months ended October 31, 2019 and 2018, was $4,615 and $4,795, respectively.



Performance-Based RSUs		Shares			Weighted Average Grant Date Fair Value
Outstanding at July 31, 2019		158,410			$	38.33
New grants		38,946			75.00
Vested		(87,928	)		32.03
Outstanding at October 31, 2019		109,428			$	50.79

The performance-based RSUs granted during the three months ended October 31, 2018, had a weighted-average grant date fair value of $50.70. The aggregate intrinsic value of unvested time-based and performance-based RSUs outstanding at October 31, 2019 and expected to vest was $24,748.

NOTE G — Accumulated Other Comprehensive Loss

Other comprehensive loss consists of foreign currency 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.

The following table illustrates the changes in the balances of each component of accumulated other comprehensive loss, net of tax, for the ~~nine~~three months ended ~~April 30,~~October 31, 2019:



	Unrealized gain on cash flow hedges				Unamortized gain on post-retirement plans				Foreign currency translation adjustments				Accumulated other comprehensive loss
Beginning balance, July 31, 2019	$	707			$	2,800			$	(74,761	)		$	(71,254	)
Other comprehensive income before reclassification	136				—				226				362
Amounts reclassified from accumulated other comprehensive loss	(286		)		(105		)		—				(391		)
Ending balance, October 31, 2019	$	557			$	2,695			$	(74,535	)		$	(71,283	)

Unrealized gain on cash flow hedges Unamortized gain on post-retirement plans Foreign currency translation adjustments Accumulated other comprehensive loss
Beginning balance, July 31, 2018 $ 863
$ 3,302
$ (60,566 ) $ (56,401 )
Other comprehensive income (loss) before reclassification 233
(169 ) (11,252 ) (11,188 )
Amounts reclassified from accumulated other comprehensive loss (434 ) (423 ) —
(857 )
Ending balance, April 30, 2019 $ 662
$ 2,710
$ (71,818 ) $ (68,446 )
The change in the accumulated other comprehensive loss as of October 31, 2019, compared to July 31, 2019, was negligible primarily due to the stability of the U.S. dollar against certain other currencies. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation, foreign currency translation on intercompany notes, and the settlements of net investment hedges, net of tax. Of the total $391 in amounts reclassified from accumulated other comprehensive loss, the $286 gain on cash flow hedges was reclassified into cost of goods sold and the $105 gain on post-retirement plans was reclassified into selling, general and administrative expenses ("SG&A") on the condensed consolidated statements of income for the three months ended October 31, 2019.

The changes in accumulated other comprehensive loss by component, net of tax, for the three months ended October 31, 2018, were as follows:



	Unrealized gain on cash flow hedges				Unamortized gain on post-retirement plans				Foreign currency translation adjustments				Accumulated other comprehensive loss
Beginning balance, July 31, 2018	$	863			$	3,302			$	(60,566	)		$	(56,401	)
Other comprehensive loss before reclassification	(491		)		—				(9,149		)		(9,640		)
Amounts reclassified from accumulated other comprehensive loss	(35		)		(155		)		—				(190		)
Ending balance, October 31, 2018	$	337			$	3,147			$	(69,715	)		$	(66,231	)

The increase in accumulated other comprehensive loss as of ~~April 30, 2019,~~October 31, 2018, compared to July 31, 2018, was primarily due to the appreciation of the U.S. dollar against certain other ~~currencies during the nine-month period.~~currencies. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation, ~~including~~ foreign currency translation on ~~long-term~~ intercompany notes, and the settlements of net investment hedges, net of tax. Of the total ~~$857~~$190 in amounts reclassified from accumulated other comprehensive loss, the ~~$434~~$35 gain on cash flow hedges was reclassified into cost of goods sold and the ~~$423~~$155 gain on post-retirement plans was reclassified into ~~investment and other income~~SG&A on the condensed consolidated ~~statement~~statements of income for the ~~nine~~three months ended ~~April 30, 2019.~~

~~The changes in accumulated other comprehensive loss by component, net of tax, for the nine months ended April 30, 2018, were as follows:~~

Unrealized gain 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 (124 ) 414
(3,630 ) (3,340 )
Amounts reclassified from accumulated other comprehensive loss 310
(434 ) —
(124 )
Ending balance, April 30, 2018 $ 295
$ 2,600
$ (51,041 ) $ (48,146 )

~~The increase in accumulated other comprehensive loss as of April 30, 2018, compared to July~~October 31, 2017, was primarily due to the appreciation of the U.S. dollar against certain other currencies during the nine-month period. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation, including foreign currency translation on long-term intercompany notes and net investment hedges, net of tax. Of the total $124 in amounts reclassified from accumulated

other comprehensive loss, the $310 loss on cash flow hedges was reclassified into cost of goods sold, and the $434 gain on post-retirement plans was reclassified into selling, general and administrative expenses ("SG&A") on the condensed consolidated statement of income for the nine months ended April 30, 2018.

The following table illustrates the income tax expense on the components of other comprehensive loss for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 and 2018:



	Three months ended October 31,
	2019				2018
Income tax benefit (expense) related to items of other comprehensive loss:
Cash flow hedges	$	35			$	(100	)
Other income tax adjustments and currency translation	176				(358		)
Income tax benefit (expense) related to items of other comprehensive loss	$	211			$	(458	)

Three months ended April 30, Nine months ended April 30,
2019 2018 2019 2018
Income tax expense related to items of other comprehensive loss:
Cash flow hedges $ 38
$ (262 ) $ —
$ (379 )
Pension and other post-retirement benefits —
—
—
(178 )
Other income tax adjustments and currency translation (386 ) (718 ) (610 ) (81 )
Income tax expense related to items of other comprehensive loss $ (348 ) $ (980 ) $ (610 ) $ (638 )

NOTE GH — ~~Net Income per Common Share~~Revenue Recognition

~~Reconciliations~~The Company recognizes revenue when control of the ~~numerator~~product or service transfers to the customer at an amount that represents the consideration expected to be received in exchange for those products and ~~denominator~~services. The Company’s revenues are primarily from the sale of identification 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 ~~basic and diluted per share computations~~condensed consolidated statements of income. See Note I “Segment Information” for the Company’s ~~Class A~~disaggregated revenue disclosure.

The Company’s contracts with customers consist of purchase orders, which in some cases are governed by master supply or distributor agreements. The majority of the Company's revenue is earned and ~~Class B common stock~~recognized at a point in time through ship-and-bill performance obligations where the customer typically obtains control of the product upon shipment or delivery, depending on freight terms.

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. At the time of sale, the extended warranty transaction price is recorded as deferred revenue and is recognized on a straight-line basis over the life of the service warranty period.

The balance of contract liabilities associated with service warranty performance obligations was $2,802 and $2,782 as of October 31, 2019 and July 31, 2019, respectively. This also represents the amount of unsatisfied performance obligations related to contracts that extend beyond one year. The current portion and non-current portion of contract liabilities are ~~summarized as follows:~~

Three months ended April 30, Nine months ended April 30,
2019 2018 2019 2018
Numerator:
Income (Numerator for basic and diluted Class A Nonvoting Common Share) $ 34,781
$ 26,000
$ 94,645
$ 56,109
Less:
Preferential dividends —
—
(815 ) (799 )
Preferential dividends on dilutive stock options —
—
(13 ) (16 )
Numerator for basic and diluted income per Class B Voting Common Share $ 34,781
$ 26,000
$ 93,817
$ 55,294
Denominator: (in thousands)
Denominator for basic income per share for both Class A and Class B 52,766
51,747
52,499
51,628
Plus: Effect of dilutive stock options and restricted stock units 714
982
716
982
Denominator for diluted income per share for both Class A and Class B 53,480
52,729
53,215
52,610
Net Income per Class A Nonvoting Common Share:
Basic $ 0.66
$ 0.50
$ 1.80
$ 1.09
Diluted $ 0.65
$ 0.49
$ 1.78
$ 1.07
Net Income per Class B Voting Common Share:
Basic $ 0.66
$ 0.50
$ 1.79
$ 1.07
Diluted $ 0.65
$ 0.49
$ 1.76
$ 1.05

~~Options to purchase 269,606~~included in “Other current liabilities” and ~~675,329 shares~~“Other liabilities," respectively, on the condensed consolidated balance sheets. The Company recognized revenue of ~~Class A Nonvoting Common Stock for~~$315 and $308 during the three months ended ~~April 30,~~October 31, 2019 and 2018, respectively, ~~and 407,477 and 705,843 shares for the nine months ended April 30, 2019 and 2018, respectively, were not~~that was included in the ~~computation of diluted net income per share because~~contract liability balance at the ~~option exercise price was greater than the average market price~~beginning of the ~~common shares~~respective period from the amortization of extended service warranties. Of the contract liability balance outstanding at October 31, 2019, the Company expects to recognize 29% by the end of fiscal 2020, an additional 27% by the end of fiscal 2021, and ~~therefore,~~ the ~~effect would~~remaining balance thereafter.

With the exception of the performance obligations related to the extended service warranties, the Company's contracts have ~~been anti-dilutive.~~an original expected duration of one year or less. As a result, the Company has elected to use the practical expedient to not disclose its remaining performance obligations for contracts that have an original expected length of one year or less.

NOTE HI — Segment Information

The Company is organized and managed on a global basis within three operating segments, Identification Solutions, Workplace Safety, and People Identification ("~~People ID"~~PDC"), which aggregate into two reportable segments that are organized around businesses with consistent products and services: IDS and WPS. The Identification Solutions and ~~People ID~~PDC 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 (expense), income taxes, and certain corporate administrative expenses are excluded when evaluating segment performance.

~~Net~~ The following is a summary of net sales by segment and geographic region for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 and ~~2018 is as follows:~~

2018:

Three months ended April 30, Nine months ended April 30,
2019 2018 2019 2018
Net sales:
ID Solutions
Americas $ 143,557
$ 139,061
$ 427,671
$ 412,271
Europe 48,984
51,248
145,094
147,623
Asia 21,438
21,845
68,518
68,397
Total $ 213,979
$ 212,154
$ 641,283
$ 628,291
Workplace Safety
Americas $ 25,778
$ 28,790
$ 74,861
$ 81,747
Europe 38,372
44,846
113,816
129,887
Australia 11,616
12,631
35,407
36,427
Total $ 75,766
$ 86,267
$ 224,084
$ 248,061
Total Company
Americas $ 169,335
$ 167,851
$ 502,532
$ 494,018
Europe 87,356
96,094
258,910
277,510
Asia-Pacific 33,054
34,476
103,925
104,824
Total $ 289,745
$ 298,421
$ 865,367
$ 876,352



	Three months ended October 31,
	2019				2018
Net sales:
ID Solutions
Americas	$	149,363			$	145,791
Europe	43,381				48,828
Asia	22,243				23,481
Total	$	214,987			$	218,100
Workplace Safety
Americas	$	24,303			$	24,751
Europe	36,026				37,655
Australia	11,631				12,690
Total	$	71,960			$	75,096
Total Company
Americas	$	173,666			$	170,542
Europe	79,407				86,483
Asia-Pacific	33,874				36,171
Total	$	286,947			$	293,196

Segment profit for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 and 2018 iswas as follows:



	Three months ended October 31,
	2019				2018
Segment profit:
ID Solutions	$	42,443			$	41,562
Workplace Safety	5,157				5,541
Total Company	$	47,600			$	47,103

Three months ended April 30, Nine months ended April 30,
2019 2018 2019 2018
Segment profit:
ID Solutions $ 39,892
$ 36,970
$ 119,311
$ 106,896
Workplace Safety 6,099
7,537
16,301
21,037
Total Company $ 45,991
$ 44,507
$ 135,612
$ 127,933

The following is a reconciliation of segment profit to income before income taxes for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 and 2018:



	Three months ended October 31,
	2019				2018
Total profit from reportable segments	$	47,600			$	47,103
Unallocated amounts:
Administrative costs	(6,709		)		(6,481		)
Investment and other income (expense)	1,380				(17		)
Interest expense	(701		)		(712		)
Income before income taxes	$	41,570			$	39,893

Three months ended April 30, Nine months ended April 30,
2019 2018 2019 2018
Total profit from reportable segments $ 45,991
$ 44,507
$ 135,612
$ 127,933
Unallocated amounts:
Administrative costs (6,370 ) (6,798 ) (19,339 ) (20,017 )
Investment and other income 2,065
31
3,425
1,303
Interest expense (708 ) (761 ) (2,137 ) (2,453 )
Income before income taxes $ 40,978
$ 36,979
$ 117,561
$ 106,766

NOTE IJ — Net 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 October 31,
	2019				2018
Numerator (in thousands):
Income (Numerator for basic and diluted income per Class A Nonvoting Common Share)	$	37,498			$	30,637
Less:
Preferential dividends	(828		)		(815		)
Preferential dividends on dilutive stock options	(10		)		(13		)
Numerator for basic and diluted income per Class B Voting Common Share	$	36,660			$	29,809
Denominator: (in thousands)
Denominator for basic income per share for both Class A and Class B	53,143				52,201
Plus: Effect of dilutive equity awards	593				757
Denominator for diluted income per share for both Class A and Class B	53,736				52,958
Net income per Class A Nonvoting Common Share:
Basic	$	0.71			$	0.59
Diluted	$	0.70			$	0.58
Net income per Class B Voting Common Share:
Basic	$	0.69			$	0.57
Diluted	$	0.68			$	0.56

Stock-based awards to purchase 323,719 and 679,902 shares of Class A Nonvoting Common Stock for the three months ended October 31, 2019 and 2018, respectively, were not included in the computation of diluted net income per share because the grant price was greater than the average market price of the common shares and, therefore, the effect would have been anti-dilutive.

NOTE K — 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 ~~April 30,~~October 31, 2019 and July 31, ~~2018, according to the valuation techniques the Company used to determine their fair values.~~2019.



	October 31, 2019				July 31, 2019				Fair Value Hierarchy
Assets:
Trading securities	$	15,212			$	15,744			Level 1
Foreign exchange contracts	595				474				Level 2
Liabilities:
Foreign exchange contracts	12				5				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
April 30, 2019
Trading securities $ 15,890
$ —
$ 15,890
Other assets
Foreign exchange contracts —
532
532
Prepaid expenses and other current assets
Total Assets $ 15,890
$ 532
$ 16,422

Foreign exchange contracts $ —
$ 10
$ 10
Other current liabilities
Total Liabilities $ —
$ 10
$ 10

July 31, 2018
Trading securities $ 14,383
$ —
$ 14,383
Other assets
Foreign exchange contracts —
1,077
1,077
Prepaid expenses and other current assets
Total Assets $ 14,383
$ 1,077
$ 15,460

Foreign exchange contracts $ —
$ 3
$ 3
Other current liabilities
Total Liabilities $ —
$ 3
$ 3

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

Trading securities: 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 J,L, “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 ~~nine~~three months ended ~~April 30,~~October 31, 2019. ~~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~~ ~~nine months ended April 30, 2019~~.

The ~~Company’s financial instruments, other than those presented in the disclosures above, include~~fair values of cash and cash equivalents, accounts receivable, 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 following table summarizes the estimated fair value of the Company’s ~~short-term and~~ long-term debt obligations, including current maturities, at October 31, 2019 and July 31, 2019, which was based on the quoted market prices for similar issues and on the current rates offered for debt of similar ~~maturities was $52,092 and $55,707 at April 30, 2019 and July 31, 2018, respectively, as compared to the carrying value of $50,303 and $52,618 at April 30, 2019 and July 31, 2018, respectively.~~maturities.



	October 31, 2019								July 31, 2019
	Carrying Value				Fair Value				Carrying Value				Fair Value
Current maturities on long-term debt	$	50,144			$	51,076			$	50,166			$	51,566

NOTE JL — 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 April 30, 2019 and July 31, 2018, the notional amount of outstanding forward exchange contracts was $10,231 and $32,667, respectively.~~

The Company hedges a portion of known exposures using forward exchange contracts. Main 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 income.outstanding forward exchange contracts were as follows:



	October 31, 2019				July 31, 2019
Designated as cash flow hedges	$	19,540			$	26,013
Non-designated hedges	3,385				3,376
Total foreign exchange contracts	$	22,925			$	29,389

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 other comprehensive income ("OCI") and reclassified into income in the same period or periods during which the hedged transaction affects ~~earnings.~~income. As of ~~April 30,~~October 31, 2019 and ~~2018,~~July 31, 2019, unrealized gains of ~~$815~~$620 and ~~$65~~$805 have been included in OCI, respectively. ~~Balances~~These balances are expected to be reclassified from OCI to income ~~when~~during the hedged transactions impact income. For the three months ended April 30, 2019 and 2018, the Company reclassified gains of $292 and losses of $264 from OCI into income, respectively. For the nine months ended April 30, 2019 and 2018, the Company reclassified gains of $579 and losses of $446 from OCI into income, respectively. At April 30, 2019, the U.S. dollar equivalent of these outstanding forward foreign exchange contracts totaled $6,823, including contracts to sell Euros and contracts to buy Mexican pesos.next twelve months.

Net Investment Hedges

The Company has designated ~~€45 million~~certain third party-foreign currency denominated debt instruments as net investment hedges. On May 13, 2010, the Company completed the private placement of ~~Euro-denominated~~€75,000 aggregate principal amount of senior unsecured notes consisting of €30,000 aggregate principal amount of 3.71% Series 2010-A Senior Notes, which were repaid during fiscal 2017, and €45,000 aggregate principal amount of 4.24% Series 2010-A Senior Notes, due May 13, 2020. This Euro-denominated debt obligation was designated as a net investment ~~hedges~~hedge to selectively hedge portions of the Company's net investment in European foreign operations. The Company’s foreign denominated debt obligations are valued under a market approach using publicized spot ~~prices.~~prices, and the net gains or losses attributable to the changes in spot prices are recorded as cumulative translation within AOCI and are included in the foreign currency translation adjustments section of the condensed consolidated statements of comprehensive income. As of October 31, 2019 and July 31, 2019, the cumulative balance recognized in accumulated other comprehensive income were gains of $12,462 and $12,440, respectively, on the Euro-denominated debt obligations.

The following table summarizes the amount of pre-tax gains and losses related to derivatives designated as hedging instruments:



	Three months ended October 31,
	2019				2018
Gains (losses) recognized in OCI:
Foreign exchange contracts (cash flow hedges)	$	196			$	(380	)
Foreign currency denominated debt (net investment hedges)	22				1,620
Gains reclassified from OCI into cost of goods sold:
Forward exchange contracts (cash flow hedges)	381				47

Non-Designated Hedges

The Company recognized losses of $6$8 and ~~$49~~$33 for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 ~~respectively,~~ and ~~gains of $9 and $29 for the three and nine months ended April 30,~~ 2018, respectively, in ~~“Investment~~“Investment and other ~~income”~~income (expense)” on the condensed consolidated statements of income related to non-designated hedges.

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



	October 31, 2019												July 31, 2019
	Prepaid expenses and other current assets				Other current liabilities				Current maturities on long-term obligations				Prepaid expenses and other current assets				Other current liabilities				Current maturities on long-term obligations
Derivatives designated as hedging instruments:
Foreign exchange contracts (cash flow hedges)	$	591			—				—				$	472			—				—
Foreign currency denominated debt (net investment hedges)	—				—				50,166				—				—				50,189
Derivatives not designated as hedging instruments:
Foreign exchange contracts	4				12				—				2				5				—
Total derivative instruments	$	595			$	12			$	50,166			$	474			$	5			$	50,189

Asset Derivatives Liability Derivatives
April 30, 2019 July 31, 2018 April 30, 2019 July 31, 2018

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 $ 528
Prepaid expenses and other current assets $ 1,076
Other current liabilities $ —
Other current liabilities $ —
Net investment hedges
Foreign currency denominated debt Prepaid expenses and other current assets —
Prepaid expenses and other current assets —
Long term obligations 50,332
Long term obligations 52,668
Total derivatives designated as hedging instruments $ 528
$ 1,076
$ 50,332
$ 52,668
Derivatives not designated as hedging instruments
Foreign exchange contracts Prepaid expenses and other current assets $ 4
Prepaid expenses and other current assets $ 1
Other current liabilities $ 10
Other current liabilities $ 3
Total derivatives not designated as hedging instruments $ 4
$ 1
$ 10
$ 3

NOTE KM – ~~Stockholders' Equity~~Income Taxes

The ~~following table illustrates the changes in the balances of each component of stockholders' equity~~effective income tax rate for the three months ended ~~April 30, 2019:~~

Common
Stock Additional
Paid-In
Capital Retained Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total Stockholders' Equity
Balances at January 31, 2019 $ 548
$ 328,978
$ 588,918
$ (54,498 ) $ (60,565 ) $ 803,381
Net income —
—
34,781
—
—
34,781
Other comprehensive loss, net of tax —
—
—
—
(7,881 ) (7,881 )
Issuance of shares of Class A Common Stock under stock plan —
(1,433 ) —
4,415
—
2,982
Stock-based compensation expense —
2,506
—
—
—
2,506
Cash dividends on Common Stock
Class A — $0.21 per share —
—
(10,473 ) —
—
(10,473 )
Class B — $0.21 per share —
—
(752 ) —
—
(752 )
Balances at April 30, 2019 $ 548
$ 330,051
$ 612,474
$ (50,083 ) $ (68,446 ) $ 824,544

~~The following table illustrates the changes in the balances of each component of stockholders' equity for the nine months ended April 30, 2019:~~

Common
Stock Additional
Paid-In
Capital Retained Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total Stockholders' Equity
Balances at July 31, 2018 $ 548
$ 325,631
$ 553,454
$ (71,120 ) $ (56,401 ) $ 752,112
Net income —
—
94,645
—
—
94,645
Other comprehensive loss, net of tax —
—
—
—
(12,045 ) (12,045 )
Issuance of shares of Class A Common Stock under stock plan —
(6,100 ) —
24,219
—
18,119
Tax benefit and withholdings from deferred compensation distributions —
209
—
—
—
209
Stock-based compensation expense —
10,311
—
—
—
10,311
Purchase of shares of Class A Common Stock —
—
—
(3,182 ) —
(3,182 )
Cumulative adjustment for ASU 2014-09, net of tax(Note B)
—
—
(2,137 ) —
—
(2,137 )
Cash dividends on Common Stock
Class A — $0.64 per share —
—
(31,291 ) —
—
(31,291 )
Class B — $0.62 per share —
—
(2,197 ) —
—
(2,197 )
Balances at April 30, 2019 $ 548
$ 330,051
$ 612,474
$ (50,083 ) $ (68,446 ) $ 824,544

~~The following table illustrates the changes in the balances of each component of stockholders' equity for the three months ended April 30, 2018:~~

Common
Stock Additional
Paid-In
Capital Retained Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total Stockholders' Equity
Balances at January 31, 2018 $ 548
$ 325,733
$ 515,872
$ (75,090 ) $ (35,090 ) $ 731,973
Net income —
—
26,000
—
—
26,000
Other comprehensive loss, net of tax —
—
—
—
(13,056 ) (13,056 )
Issuance of shares of Class A Common Stock under stock plan —
(16 ) —
77
—
61
Stock-based compensation expense —
1,684
—
—
—
1,684
Purchase of shares of Class A Common Stock —
—
—
(1,278 ) —
(1,278 )
Cash dividends on Common Stock
Class A — $0.21 per share —
—
(10,003 ) —
—
(10,003 )
Class B — $0.21 per share —
—
(734 ) —
—
(734 )
Balances at April 30, 2018 $ 548
$ 327,401
$ 531,135
$ (76,291 ) $ (48,146 ) $ 734,647

~~The following table illustrates the changes in the balances of each component of stockholders' equity for the nine months ended April 30, 2018:~~

Common
Stock Additional
Paid-In
Capital Retained Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total Stockholders' Equity
Balances at July 31, 2017 $ 548
$ 322,608
$ 507,136
$ (85,470 ) $ (44,682 ) $ 700,140
Net income —
—
56,109
—
—
56,109
Other comprehensive loss, net of tax —
—
—
—
(3,464 ) (3,464 )
Issuance of shares of Class A Common Stock under stock plan —
(3,001 ) —
10,879
—
7,878
Tax benefit and withholdings from deferred compensation distributions —
213
—
(422 ) —
(209 )
Stock-based compensation expense —
7,581
—
—
—
7,581
Purchase of shares of Class A Common Stock —
—
—
(1,278 ) —
(1,278 )
Cash dividends on Common Stock
Class A — $0.62 per share —
—
(29,970 ) —
—
(29,970 )
Class B — $0.60 per share —
—
(2,140 ) —
—
(2,140 )
Balances at January 31, 2018 $ 548
$ 327,401
$ 531,135
$ (76,291 ) $ (48,146 ) $ 734,647

~~NOTE L — Income Taxes~~

~~The effective income tax rates for the three~~October 31, 2019 and ~~nine months ended April 30, 2019, were 15.1%~~2018 was 9.8% and ~~19.5%~~23.2%, respectively. The Company expects its ongoing annual effective income tax rate to be ~~in the mid-20 percent range~~approximately 20% based on its current global business mix. The effective income tax ~~rates~~rate for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 ~~were~~was lower than the expected income tax rate due to the ~~reversal of certain reserves for uncertain tax positions due to the~~ favorable settlement of ~~such foreign and~~a domestic ~~tax matters, partially offset by an increase in the valuation allowance against foreign tax credit carryforwards.~~

~~The effective~~ income tax ~~rates for the three~~audit and ~~nine months ended April 30, 2018, were 29.7% and 47.4%, respectively. The income~~ tax ~~rates were significantly impacted by the recognition of additional tax expense of $21,060 primarily due to the enactment of the Tax Cuts and Jobs Act (the "Tax Reform Act") passed in December 2017.~~benefits from stock-based compensation.

NOTE MN — Subsequent Events

On ~~May 21,~~November 19, 2019, the Board of Directors declared a quarterly cash dividend to shareholders of the Company’s Class A and Class B Common Stock of ~~$0.2125~~$0.2175 per share payable on ~~July~~January 31, ~~2019,~~2020, to shareholders of record at the close of business on ~~July~~January 10, ~~2019.~~2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF 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 IDS segment is primarily involved in the design, manufacture, and distribution of high-performance and innovative identification and healthcare products. The WPS segment provides workplace safety and compliance products, approximately half of which are internally manufactured and half of which are externally sourced.

The long-term sales growth and profitability of our segments will depend not only on improved demand in end markets and

the overall economic environment, but also on our ability to continuously improve operational excellence, focus on the customer, develop and market innovative new products, and to advance our digital capabilities. In our Identification Solutions ("ID Solutions" or "IDS") business, our strategy for growth includes an increased focus on certain industries and products, a focus on improving the customer buying experience, and increasing investment in research and development ("R&D") to develop new products. In our Workplace Safety ("WPS") business, our strategy for growth includes a focus on workplace safety critical industries, innovative new product offerings, compliance expertise, customization expertise, and improving our digital capabilities.

The following are key initiatives supporting the strategy in fiscal ~~2019:~~2020:

Enhancing our ~~innovation~~research and development process and improving the ~~speed~~time to ~~deliver~~launch high-value, innovative products in alignment with our target markets.

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

~~Executing~~Driving operational excellence and executing sustainable efficiency gains within our global operations and within our selling, general and administrative ~~structures as well as throughout our global operations by making investments in equipment and machinery to drive automation.~~structures.

Expanding and enhancing our sales capabilities through an improved digital ~~presence.~~presence and increased sales resources.

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

Enhancing our ~~global~~ employee development process to create an engaged workforce and to attract and retain key talent.

Results of Operations

A comparison of results of ~~operating income~~Operating Income for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 and 2018 is as follows:


	Three months ended April 30,														Nine months ended April 30,													Three months ended October 31,
(Dollars in thousands)	2019				% Sales			2018				% Sales			2019				% Sales			2018				% Sales		2019				% Sales			2018				% Sales
Net sales	$	289,745						$	298,421						$	865,367						$	876,352					$	286,947						$	293,196
Gross margin	145,749				50.3	%		151,082				50.6	%		432,098				49.9	%		440,839				50.3	%	141,405				49.3	%		146,539				50.0	%
Operating expenses:
Research and development	11,437				3.9	%		11,678				3.9	%		33,837				3.9	%		33,512				3.8	%	10,967				3.8	%		11,326				3.9	%
Selling, general and administrative	94,691				32.7	%		101,695				34.1	%		281,988				32.6	%		299,411				34.2	%	89,547				31.2	%		94,591				32.3	%
Total operating expenses	106,128				36.6	%		113,373				38.0	%		315,825				36.5	%		332,923				38.0	%	100,514				35.0	%		105,917				36.1	%
Operating income	$	39,621			13.7	%		$	37,709			12.6	%		$	116,273			13.4	%		$	107,916			12.3	%	$	40,891			14.3	%		$	40,622			13.9	%

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 and divestitures. 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 ~~the Company's~~our businesses and facilitating comparisons of our sales performance with prior periods. ~~All analytical commentary within the Results of Operations section regarding the change in~~

Net sales ~~when compared to prior periods are in reference to organic sales.~~

~~Sales~~ for the three months ended ~~April 30,~~October 31, 2019, decreased ~~2.9%~~2.1% to ~~$289.7~~$286.9 million, compared to ~~$298.4~~$293.2 million in the same period of the prior ~~year, which~~year. The decrease consisted of an organic sales ~~growth~~decline of ~~2.4%, that was more than offset by~~0.4% and a decrease from foreign currency translation of ~~3.8% and a divestiture impact of 1.5%~~1.7%. Organic sales ~~grew 4.0%~~declined 0.2% in the IDS segment and declined ~~1.6%~~0.8% in the WPS segment during the three months ended ~~April 30,~~October 31, 2019, compared to the same period in the prior year. The IDS segment realized sales growth in the Safety and Facility ID product line, and remained essentially flat to slightly down in the Product ID, Wire ID and ~~Wire~~Healthcare ID product lines ~~partially offset by a slight decline in the Healthcare ID product line~~ compared to the prior year. The WPS segment realized ~~a slight decline~~low-single digit sales growth in digital sales, ~~through the digital channel due to the performance of the business in the Americas. Digital~~while sales ~~increased in both Europe and Australia compared to the same period in the prior year. Sales~~ through the catalog channel ~~continued the trend of a low-single digit decline compared to the same period~~declined in the ~~prior year.~~low-single digits.

~~Sales~~Gross margin for the ~~nine~~three months ended ~~April 30,~~October 31, 2019, decreased ~~1.3%~~3.5% to ~~$865.4~~$141.4 million, compared to ~~$876.4~~$146.5 million in the same period of the prior year, which consisted of organic sales growth of 3.1%, that was more than offset by a decrease from foreign currency translation of 2.8% and a divestiture impact of 1.6%. Organic sales grew 4.4% in the IDS segment and declined 0.2% in the WPS segment during the nine months ended April 30, 2019, compared to the same period in the prior year. The IDS segment realized sales growth in the Safety and Facility ID, Product ID, and Wire 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 sales through the digital channel and a low-single digit decline in sales through the catalog channel when compared to the same period in the prior year.

Gross margin decreased 3.5% to $145.7 million for the three months ended April 30, 2019, and decreased 2.0% to $432.1 million for the nine months ended April 30, 2019, compared to $151.1 million and $440.8 million in the same periods of the prior year, respectively. As a percentage of net sales, gross margin decreased to ~~50.3%~~49.3% for the three months ended ~~April 30, 2019, and 49.9% for the nine months ended April 30,~~October 31, 2019, from ~~50.6% and 50.3%~~50.0% in the same ~~periods~~period of the prior ~~year, respectively.~~year. The ~~decreases~~decrease in gross margin as a percentage of net sales ~~were~~was primarily due to increased input costs such as personnel, material, tariff, and freight ~~and personnel~~ costs, along with reduced sales volume, which ~~were~~was partially mitigated by ~~selected price increases and~~ our ongoing efforts to streamline manufacturing processes and drive operational efficiencies, including increased automation in our manufacturing facilities.

Research and development (“R&D&D”) expenses for the three months ended ~~April 30,~~October 31, 2019, decreased ~~2.1%~~3.2% to ~~$11.4~~$11.0 million, compared to ~~$11.7~~$11.3 million in the same period of the prior year. As a percentage of sales, R&D expenses remained essentially flat for the three months ended October 31, 2019, compared to the same period of the prior year. The decrease in ~~the three-month period~~R&D spending was primarily due to the timing of expenditures related to ongoing new product development projects. ~~R&D expenses for the nine months ended April 30, 2019, remained essentially flat at $33.8 million, compared to $33.5 million in the same period of the prior year.~~ The Company remains committed to investing in new product development ~~in connection with our focus on increasing new product~~to increase sales within our IDS and WPS businesses. Investments in new ~~software~~printers and ~~printer updates~~materials continue to be the primary focus of R&D expenditures.

Selling, general and administrative expenses ("SG&A") include selling and administrative costs directly attributed to the IDS and WPS segments, as well as certain other corporate administrative expenses including finance, information technology, human resources, and other administrative expenses. SG&A decreased ~~6.9%~~5.3% to ~~$94.7~~$89.5 million for the three months ended ~~April 30, 2019, and 5.8% to $282.0 million for the nine months ended April 30,~~October 31, 2019, compared to ~~$101.7 million and $299.4~~$94.6 million in the same ~~periods~~period of the prior ~~year, respectively.~~year. As a percentage of ~~net~~ sales, SG&A ~~decreased to 32.7%~~was 31.2% for the three months ended ~~April 30,~~October 31, 2019, ~~and 32.6% for the nine months ended April 30, 2019, from 34.1% and 34.2%~~compared to 32.3% in the same ~~periods~~period of the prior ~~year, respectively.~~year. Approximately ~~half~~one-third of the ~~decreases~~decrease in ~~both the three and nine-month periods were~~SG&A was due to the impact of foreign currency translation, and the remainder ~~of the decreases were~~was due to ongoing efficiency ~~activities throughout our~~gains and continued efforts to reduce SG&A ~~functions and the impact of the sale of a business in the prior year.~~costs.

Operating income ~~increased 5.1% to $39.6~~was $40.9 million and $40.6 million for ~~the~~ three months ended ~~April 30,~~October 31, 2019 and ~~7.7% to $116.3 million for the nine months ended April 30, 2019, compared to $37.7 million and $107.9 million in the same periods of the prior year,~~2018, respectively. The ~~increases in both the three and nine-month periods were~~increase was primarily due to increased ~~organic sales and~~ segment profit ~~within~~in the IDS ~~business along with~~segment and reduced SG&A ~~expenses.~~in both segments.

OPERATING INCOME TO NET INCOME


	Three months ended April 30,														Nine months ended April 30,													Three months ended October 31,
(Dollars in thousands)	2019				% Sales			2018				% Sales			2019				% Sales			2018				% Sales		2019				% Sales			2018				% Sales
Operating income	$	39,621			13.7	%		$	37,709			12.6	%		$	116,273			13.4	%		$	107,916			12.3	%	$	40,891			14.3	%		$	40,622			13.9	%
Other income (expense):
Investment and other income	2,065				0.7	%		31				—	%		3,425				0.4	%		1,303				0.1	%
Investment and other income (expense)																												1,380				0.5	%		(17		)		—	%
Interest expense	(708		)		(0.2	)%		(761		)		(0.3	)%		(2,137		)		(0.2	)%		(2,453		)		(0.3	)%	(701		)		(0.2	)%		(712		)		(0.2	)%
Income before income tax	40,978				14.1	%		36,979				12.4	%		117,561				13.6	%		106,766				12.2	%	41,570				14.5	%		39,893				13.6	%
Income tax expense	6,197				2.1	%		10,979				3.7	%		22,916				2.6	%		50,657				5.8	%	4,072				1.4	%		9,256				3.2	%
Net income	$	34,781			12.0	%		$	26,000			8.7	%		$	94,645			10.9	%		$	56,109			6.4	%	$	37,498			13.1	%		$	30,637			10.4	%

Investment and other income (expense) was ~~$2.1 million and $3.4~~$1.4 million for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019, compared to $0.0 million ~~and $1.3 million~~for the same period in the ~~same periods of the~~ prior ~~year, respectively.~~year. The ~~increases in both the three and nine-month periods were~~increase was primarily due to ~~an increase in interest income and~~ an increase in the market value of securities held in deferred compensation plans and an increase in interest income when compared to the same ~~periods~~period in the prior year.

Interest expense ~~decreased to~~remained essentially flat at $0.7 ~~million from $0.8~~ million for the three months ended ~~April 30,~~October 31, 2019, ~~and decreased to $2.1~~from $0.7 million from $2.5 million for the nine months ended April 30, 2019, compared to the same periods in the prior year. For both the three and nine-month periods, the decreases in interest expense were due to the Company's declining principal balances under its outstanding debt agreements.

~~The income tax rate was 15.1% for the three months ended April 30, 2019, compared to 29.7%~~ for the same period in the prior year as there was minimal change in the Company's principal balance under its outstanding debt agreements compared to the same period in the prior year.

The Company’s income tax rate was ~~19.5%~~9.8% for the ~~nine~~three months ended ~~April 30,~~October 31, 2019, compared to ~~47.4% for~~23.2% in the same period ofin the prior year. Refer to Note ~~L - Income Taxes~~M "Income Taxes" for additional ~~details regarding~~information on the Company's effective income ~~taxes.~~tax rate.

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 ("~~People ID"~~PDC"), which aggregate into two reportable segments that are organized around businesses with consistent products and services: IDS and WPS. The Identification Solutions and ~~People ID~~PDC 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 (expense) income, income ~~tax expense,~~taxes, and certain corporate administrative expenses are excluded when evaluating segment performance.

The following is a summary of segment information for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019 and 2018:


	Three months ended April 30,						Nine months ended April 30,					Three months ended October 31,
	2019			2018			2019			2018		2019			2018
SALES GROWTH INFORMATION
ID Solutions
Organic	4.0	%		3.7	%		4.4	%		3.7	%	(0.2	)%		5.7	%
Currency	(3.1	)%		4.1	%		(2.3	)%		3.0	%	(1.2	)%		(1.7	)%
Total	0.9	%		7.8	%		2.1	%		6.7	%	(1.4	)%		4.0	%
Workplace Safety
Organic	(1.6	)%		1.7	%		(0.2	)%		(0.1	)%	(0.8	)%		2.2	%
Currency	(5.3	)%		7.4	%		(3.7	)%		5.7	%	(3.4	)%		(2.6	)%
Divestitures	(5.3	)%		—	%		(5.8	)%		—	%	—	%		(6.2	)%
Total	(12.2	)%		9.1	%		(9.7	)%		5.6	%	(4.2	)%		(6.6	)%
Total Company
Organic	2.4	%		3.2	%		3.1	%		2.7	%	(0.4	)%		4.7	%
Currency	(3.8	)%		5.0	%		(2.8	)%		3.6	%	(1.7	)%		(2.0	)%
Divestitures	(1.5	)%		—	%		(1.6	)%		—	%	—	%		(1.7	)%
Total	(2.9	)%		8.2	%		(1.3	)%		6.3	%	(2.1	)%		1.0	%
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions	18.6	%		17.4	%		18.6	%		17.0	%	19.7	%		19.1	%
Workplace Safety	8.0	%		8.7	%		7.3	%		8.5	%	7.2	%		7.4	%
Total	15.9	%		14.9	%		15.7	%		14.6	%	16.6	%		16.1	%

ID Solutions

IDS net sales ~~increased 0.9%~~decreased 1.4% for the three months ended ~~April 30,~~October 31, 2019, compared to the same period in the prior year, which consisted of an organic sales ~~growth~~decline of ~~4.0%~~0.2% and a decrease from foreign currency translation of ~~3.1%,~~1.2%.

Organic sales in the Americas increased in the low-single digits for the three months ended October 31, 2019, compared to the same period in the prior year. ~~IDS sales increased 2.1% for the nine months ended April 30, 2019, which consisted of organic sales growth of 4.4% and a decrease from foreign currency translation of 2.3%, compared~~The increase was primarily due to ~~the same period in the prior year.~~

Organic sales in the Americas grew in the low-single and mid-single digits for the three and nine months ended April 30, 2019, respectively, compared to the same periods in the prior year. Organic sales growth in the IDS Americas region for the three and nine-month periods was driven by the Safety and Facility ID, Product ID, and Wire ID product lines, partially offset by a decline in the Healthcare ID product line. Organic sales grew in the mid-single digits in the United States for both periods and grew in the low-single and mid-single digits in the rest of the Americas for the three and nine-month periods, respectively. Increased printer and consumables sales throughout the region was a primary driver of the organic sales growth.

Organic sales in Europe grew in the mid-single digits for both the three and nine months ended April 30, 2019, compared to the same periods in the prior year. The IDS Europe region realized organic sales growth in the Safety and Facility ID and Product ID product lines for both the three and nine months ended April 30, 2019, compared to the same periods in the prior year. Organic sales growth was led by Western Europe for the three-month period, while both Western Europe and emerging geographies grew organic sales for the nine-month period. Increased printer consumables and lockout/tagout device sales throughout the region were primary drivers of the organic sales growth.

Organic sales in Asia grew in the low-single digits for both the three and nine months ended April 30, 2019, compared to the same periods in the prior year. The IDS Asia region realized organic sales growth in the Product ID, Safety and Facility ID, and Wire ID product lines for both the three and nine months ended April 30, 2019, compared to the same periods in the prior year.lines. Organic sales grew in the low-single digits ~~within China for both~~in the ~~three~~United States and ~~nine-month periods and grew~~declined in the low-single ~~and mid-single~~ digits in the rest of ~~Asia~~the Americas.

Organic sales in Europe decreased in the mid-single digits for the three months ended October 31, 2019, as compared to the same period in the prior year, primarily due to a decline in the Safety and ~~nine-month periods, respectively. Increased printer and consumable sales throughout the region was a primary driver of the~~Facility ID product line. The organic sales ~~growth.~~decline was due to businesses in emerging geographies due to a decline in economic activity, and to a lesser extent certain businesses based in Western Europe.

Organic sales in Asia decreased in the low-single digits for the three months ended October 31, 2019, as compared to the same period in the prior year. The decrease was primarily due to a decline in the Safety and Facility ID and Product ID product lines, partially offset by growth in the Wire ID product line. Organic sales declined in the mid-single digits within China partially due to the direct and indirect impact of tariffs, and remained essentially flat in the rest of Asia.

Segment profit increased 2.1% to ~~$39.9 million and $119.3~~$42.4 million for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019, ~~respectively,~~ compared to ~~$37.0~~$41.6 million ~~and $106.9 million for~~in the same ~~periods in~~period of the prior year. As a percentage of net sales, segment profit

increased to 18.6% for both the three and nine months ended April 30, 2019, from 17.4% and 17.0% for the same periods in the prior year. The increases in segment profit for both the three and nine-month periods were driven by organic sales growth and efficiency gains throughout SG&A.

~~Workplace Safety~~

~~WPS sales decreased 12.2%~~ was 19.7% for the three months ended ~~April 30,~~ October 31,

2019, compared to 19.1% in the same period of the prior year. The increase in segment profit was primarily driven by efficiency gains throughout SG&A in all regions.

Workplace Safety

WPS net sales decreased 4.2% for the three months ended October 31, 2019, compared to the same period in the prior year, which consisted of an organic sales decline of ~~1.6%,~~0.8% and a decrease from foreign currency translation of ~~5.3%, and a decrease from a divestiture of 5.3%, compared to the same period in the prior year.~~3.4%. Sales through the digital channel ~~decreased slightly due to~~increased in the ~~performance of the Americas business,~~low-single digits while sales through the catalog channel decreased in the low-single ~~digits~~digits.

Organic sales in Europe increased modestly for the ~~three-month period. WPS sales decreased 9.7% for the nine~~three months ended ~~April 30,~~October 31, 2019, ~~which consisted of an organic sales declined of 0.2%, a decrease from foreign currency translation of 3.7%, and a decrease from a divestiture of 5.8%,~~ compared to the same period in the prior year. Organic sales growth in France and Belgium was largely offset by a decline in sales in Germany due to reduced demand in industrial production and exports. Sales throughout the rest of Europe remained essentially flat. Sales through the digital channel ~~grew~~increased in the ~~low-single~~mid-single digits while sales through the catalog channel decreased in the low-single digits.

Organic sales in the Americas declined in the low-single digits for the ~~nine-month period.~~

~~The WPS business in Europe realized low-single digit organic sales growth for both the~~ three ~~and nine~~ months ended ~~April 30,~~October 31, 2019, compared to the same ~~periods~~period in the prior year. ~~The organic sales growth for both the three and nine-month periods~~This decrease was driven ~~primarily~~ by ~~businesses based~~a low-single digit decline in ~~France, Belgium, and Germany due to improvements in website functionality, growth in new customers, and key account management. WPS Europe experienced nearly 15% growth in digital channel sales, while~~ catalog sales ~~remained essentially flat during~~and a slight decline in sales through the ~~three and nine months ended April 30, 2019, compared to the same periods in the prior year.~~

Organic sales in the Americas decreased approximately 10% for the three months ended April 30, 2019 and decreased in the high-single digits for the nine months ended April 30, 2019, compared to the same periods in the prior year. ~~WPS Americas~~digital channel. This business continued to experience ~~the~~a negative impact on sales from ~~the~~a digital platform that was implemented in ~~the prior year~~fiscal 2018 and ~~realized a decline in sales for both the three and nine-month periods. The business~~ transitioned to a new digital platform ~~toward the end of the three months ended January 31,~~in fiscal 2019 to address this decline. The functionality of the new digital platform ishas improved compared to the former digital ~~platform,~~platform; however, sales have not yet returned to the level experienced prior to the initial platform change ~~from last year. Catalog channel sales declined~~ in ~~the mid-single digits for both the three and nine-month periods due to lower response rates to catalog promotions.~~fiscal 2018.

Organic sales in Australia ~~grew~~declined in the low-single digits in both the digital and ~~mid-single digits~~traditional catalog channel for the three ~~and nine~~ months ended ~~April 30,~~October 31, 2019, ~~respectively,~~as compared to the same ~~periods in~~period of the prior year. The ~~organic~~decrease in sales ~~growth for the nine-month period~~ was driven by both the digital sales and catalog channels. Digital sales primarily drove the growth for the three-month period. The Australian business is growing its customer base, and its diversified product offering continuesdue to ~~expand into additional target~~reduced demand in our primary end markets, ~~such as commercial~~which include non-residential construction and industrial ~~construction.~~manufacturing.

Segment profit decreased to ~~$6.1 million from $7.5~~$5.2 million for the three months ended ~~April 30, 2019, and to $16.3 million from $21.0 million for the nine months ended April 30,~~October 31, 2019, compared to $5.5 million in the same ~~periods in~~period of the prior year. As a percentage of net sales, segment profit decreased to ~~8.0% from 8.7%~~7.2% for the three months ended ~~April 30, 2019, and to 7.3% from 8.5% for the nine months ended April 30,~~October 31, 2019, compared to 7.4% in the same ~~periods in~~period of the prior year. The ~~decreases~~decrease in segment profit ~~were~~was due to the decrease in sales volumes in the North American ~~business, as well as the divestiture of a business in the prior period~~and Australian businesses and foreign currency ~~translation.~~translation, partially offset by efficiency gains throughout SG&A.

Financial Condition

Cash and cash equivalents ~~increased $57.0~~were $295.1 million ~~and decreased $3.0~~at October 31, 2019, an increase of $16.0 million ~~during the nine months ended April 30, 2019 and 2018, respectively.~~from July 31, 2019. The significant changes were as follows:


	Nine months ended April 30,							Three months ended October 31,
(Dollars in thousands)	2019				2018			2019				2018
Net cash flow provided by (used in):
Operating activities	$	96,902			$	89,222		$	38,848			$	18,818
Investing activities	(19,338		)		(14,952		)	(7,197		)		(5,672		)
Financing activities	(18,271		)		(77,294		)	(15,326		)		664
Effect of exchange rate changes on cash	(2,288		)		(17		)	(304		)		(3,061		)
Net increase (decrease) in cash and cash equivalents	$	57,005			$	(3,041	)
Net increase in cash and cash equivalents								$	16,021			$	10,749

Net cash provided by operating activities was ~~$96.9~~$38.8 million for the ~~nine~~three months ended ~~April 30,~~October 31, 2019, compared to ~~$89.2~~$18.8 million in the same period of the prior year. The increase was primarily due to a change ~~was driven by~~in the timing of annual incentive compensation payments compared to the prior year, as well as an increase in net income adjusted for non-cash ~~items, which was partially offset by an increase in cash used for working capital in support of growth when compared to the same period in the prior year.~~items.

Net cash used in investing activities was ~~$19.3~~$7.2 million for the ~~nine~~three months ended ~~April 30,~~October 31, 2019, compared to ~~$15.0~~$5.7 million used in the same period of the prior year. The increase in cash used in investing activities was primarily driven by an increase in capital expenditures for the purchase of manufacturing equipment and facility ~~upgrades.~~upgrades in Europe, Mexico, and the United States.

Net cash used in financing activities was ~~$18.3~~$15.3 million during the ~~nine~~three months ended ~~April 30,~~October 31, 2019, compared to ~~$77.3~~$0.7 million provided in the same period of the prior year. The change was primarily due to a decrease in cash proceeds from the exercise of ~~$51.6 million in net credit facility repayments~~stock options and an increase ~~of $10.3 million~~ in ~~proceeds~~cash payments for employee taxes withheld from ~~stock option exercises when compared to the same period~~stock-based awards in the ~~prior year.~~current three-month period.

The effect of fluctuations in exchange rates decreased cash balances by $0.3 million primarily due to cash held in currencies that depreciated against the U.S. dollar during three months ended October 31, 2019.

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, 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,~~August 1, 2019, the Company and certain of its subsidiaries entered into an unsecured ~~$300~~$200 million multi-currency revolving loan agreement with a group of ~~six banks.~~five banks that replaced and terminated the Company’s previous loan agreement that had been entered into on September 25, 2015. Under the new revolving loan agreement, the Company has the option to select either a base interest rate (based upon the higher of the federal funds rate plus one-half of 1% or the prime rate of the Bank of Montreal plus a margin based on the Company’s consolidated net leverage ratio), or the Eurocurrency interest rate (at the LIBOR rate plus a margin based on the Company’s consolidated net leverage ratio) plus 1%. At the Company's option, and subject to certain conditions, the available amount under the revolving loan agreement may be increased from ~~$300~~$200 million to ~~$450~~$400 million. As of ~~April 30,~~October 31, 2019, there were no borrowings outstanding on the credit facility, and ~~the maximum~~there was no outstanding ~~balance~~balances during the ~~nine~~three months ended ~~April 30, 2019, was $3.4 million.~~October 31, 2019. The Company ~~also~~ had letters of credit outstanding under the loan agreement of ~~$3.3~~$3.6 million as of ~~April 30,~~October 31, 2019 and there was ~~$296.7~~$196.4 million available for future borrowing, which can be increased to ~~$446.7~~$396.4 million at the Company's option, subject to certain conditions. The revolving loan agreement has a final maturity date of ~~September 25, 2020.~~August 1, 2024. As such, the borrowing is included in "Long-term ~~obligations"~~obligations, less current maturities" 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~~3.5 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 ~~April 30,~~October 31, 2019, the Company was in compliance with these financial covenants, with the ~~leverage~~ ratio of debt to EBITDA, as defined by the agreements, equal to ~~0.3~~0.0 to 1.0 and the interest expense coverage ratio equal to ~~69.4~~72.1 to 1.0.

The Company's cash balances are generated and held in numerous locations throughout the world. At ~~April 30,~~October 31, 2019, approximately ~~54%~~44% of the Company's cash and cash equivalents were held outside the United States. The Company's 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 repurchases, scheduled debt repayments, and dividend payments for the next 12 months.

Off-Balance Sheet Arrangements

The Company does not have material off-balance sheet arrangements. The Company is not aware 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 investments in facilities such as 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 material to the financial position of the Company. Due to 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.

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, 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, 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:

Brady's ability to compete effectively or to successfully execute ~~our~~its strategy

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

Difficulties in protecting ~~our sites,~~websites, networks, and systems against security breaches

Decreased demand for the Company's products

~~Brady's ability to retain large customers~~Raw material and other cost increases

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

Risks associated with the loss of key employees

Divestitures, contingent liabilities from divestitures and the failure to identify, integrate, and grow acquired companies

Litigation, including product liability claims

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

Foreign currency fluctuations

~~The impact of the U.S. Tax Reform Act and any other changes~~Changes in tax legislation and tax rates

Potential write-offs of Brady's substantial intangible assets

~~Differing interests of voting and non-voting shareholders~~

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

Numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, ~~2018.~~2019.

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 on Form 10-K for the year ended July 31, ~~2018.~~2019. There has been no material change in this information since July 31, ~~2018.~~2019.

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 and its Chief Financial Officer and Treasurer, 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.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS


~~(a)~~	~~Exhibits~~



Exhibit No.		Exhibit Description

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

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

32.1		Section 1350 Certification of J. Michael Nauman

32.2		Section 1350 Certification of Aaron J. Pearce

~~101~~101.INS	~~Interactive Data File~~	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.SCH		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)

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

Date: ~~May 23,~~November 21, 2019						/s/ J. MICHAEL NAUMAN
						J. Michael Nauman
						President and Chief Executive Officer
						(Principal Executive Officer)


Date: ~~May 23,~~November 21, 2019						/s/ AARON J. PEARCE
						Aaron J. Pearce
						Chief Financial Officer and Treasurer
						(Principal Financial Officer)

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