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, 2019~~

ORJanuary 31, 2020, 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~~	Wisconsin	53223
(Address of principal executive ~~offices)~~			(offices and Zip Code)

~~(414) 358-6600~~

(414) 358-6600

(Registrant’s telephone number, including area code)

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



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

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

Indicate by check mark whether the registrant has submitted electronically 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, 2019,~~February 18, 2020, there were ~~49,284,372~~49,811,300 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			January 31, 2020			July 31, 2019
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	238,432		$	181,427		$	289,803		$	279,072
Accounts receivable—net	162,094			161,282			151,511			158,114
Inventories	119,895			113,071			120,788			120,037
Prepaid expenses and other current assets	18,746			15,559			18,889			16,056
Total current assets	539,167			471,339			580,991			573,279
Property, plant and equipment—net	99,491			97,945			112,782			110,048
Goodwill	412,378			419,815			410,455			410,987
Other intangible assets	38,135			42,588			33,580			36,123
Deferred income taxes	7,068			7,582			7,120			7,298
Other	19,638			17,662
Operating lease assets							49,117			—
Other assets							21,753			19,573
Total	$	1,115,877		$	1,056,931		$	1,215,798		$	1,157,308
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	64,584		$	66,538		$	51,233		$	64,810
Wages and amounts withheld from employees	52,849			67,619
Accrued compensation and benefits							38,561			62,509
Taxes, other than income taxes	7,886			8,318			7,703			8,107
Accrued income taxes	4,378			3,885			6,075			6,557
Current operating lease liabilities							14,901			—
Other current liabilities	48,169			44,567			48,590			49,796
Current maturities on long-term debt							49,627			50,166
Total current liabilities	177,866			190,927			216,690			241,945
Long-term obligations	50,303			52,618
Long-term operating lease liabilities							36,993			—
Other liabilities	63,164			61,274			62,191			64,589
Total liabilities	291,333			304,819			315,874			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 49,810,101 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			329,263			329,969
Retained earnings	612,474			553,454			685,758			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—1,451,386 and 1,802,646 shares, respectively, of Class A nonvoting common stock, at cost							(43,155		)	(46,332		)
Accumulated other comprehensive loss	(68,446		)	(56,401		)	(72,490		)	(71,254		)
Total stockholders’ equity	824,544			752,112			899,924			850,774
Total	$	1,115,877		$	1,056,931		$	1,215,798		$	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 January 31,						Six months ended January 31,
	2019			2018			2019			2018			2020			2019			2020			2019
Net sales	$	289,745		$	298,421		$	865,367		$	876,352		$	276,665		$	282,426		$	563,612		$	575,622
Cost of goods sold	143,996			147,339			433,269			435,513			137,538			142,616			283,080			289,273
Gross margin	145,749			151,082			432,098			440,839			139,127			139,810			280,532			286,349
Operating expenses:
Research and development	11,437			11,678			33,837			33,512			10,517			11,074			21,484			22,400
Selling, general and administrative	94,691			101,695			281,988			299,411			87,366			92,706			176,913			187,297
Total operating expenses	106,128			113,373			315,825			332,923			97,883			103,780			198,397			209,697
Operating income	39,621			37,709			116,273			107,916			41,244			36,030			82,135			76,652
Other income (expense):
Investment and other income	2,065			31			3,425			1,303			1,760			1,377			3,140			1,360
Interest expense	(708		)	(761		)	(2,137		)	(2,453		)	(647		)	(717		)	(1,348		)	(1,429		)
Income before income taxes	40,978			36,979			117,561			106,766			42,357			36,690			83,927			76,583
Income tax expense	6,197			10,979			22,916			50,657			8,804			7,463			12,876			16,719
Net income	$	34,781		$	26,000		$	94,645		$	56,109		$	33,553		$	29,227		$	71,051		$	59,864
Net income per Class A Nonvoting Common Share:
Basic	$	0.66		$	0.50		$	1.80		$	1.09		$	0.63		$	0.56		$	1.33		$	1.14
Diluted	$	0.65		$	0.49		$	1.78		$	1.07		$	0.62		$	0.55		$	1.32		$	1.13
Dividends	$	0.21		$	0.21		$	0.64		$	0.62		$	0.22		$	0.21		$	0.44		$	0.43
Net income per Class B Voting Common Share:
Basic	$	0.66		$	0.50		$	1.79		$	1.07		$	0.63		$	0.56		$	1.32		$	1.13
Diluted	$	0.65		$	0.49		$	1.76		$	1.05		$	0.62		$	0.55		$	1.31		$	1.11
Dividends	$	0.21		$	0.21		$	0.62		$	0.61		$	0.22		$	0.21		$	0.42		$	0.41
Weighted average common shares outstanding (in thousands):
Weighted average common shares outstanding:
Basic	52,766			51,747			52,499			51,628			53,320			52,532			53,232			52,366
Diluted	53,480			52,729			53,215			52,610			53,827			53,206			53,781			53,082

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,
2019 2018 2019 2018
Net income $ 34,781
$ 26,000
$ 94,645
$ 56,109
Other comprehensive loss:
Foreign currency translation adjustments (7,337 ) (12,834 ) (10,641 ) (3,549 )

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 )
(124 ) (163 ) (592 ) 158

Other comprehensive loss, before tax (7,533 ) (12,076 ) (11,435 ) (2,826 )
Income tax expense related to items of other comprehensive loss (348 ) (980 ) (610 ) (638 )
Other comprehensive loss, net of tax (7,881 ) (13,056 ) (12,045 ) (3,464 )
Comprehensive income $ 26,900
$ 12,944
$ 82,600
$ 52,645



	Three months ended January 31,						Six months ended January 31,
	2020			2019			2020			2019
Net income	$	33,553		$	29,227		$	71,051		$	59,864
Other comprehensive (loss) income:
Foreign currency translation adjustments	(1,009		)	5,486			(959		)	(3,304		)

Cash flow hedges:
Net gain recognized in other comprehensive (loss) income	363			537			559			157
Reclassification adjustment for gains included in net income	(105		)	(240		)	(486		)	(287		)
	258			297			73			(130		)
Pension and other post-retirement benefits:
Net loss recognized in other comprehensive (loss) income	(309		)	(169		)	(309		)	(169		)
Actuarial gain amortization	(105		)	(144		)	(210		)	(299		)
	(414		)	(313		)	(519		)	(468		)

Other comprehensive (loss) income, before tax	(1,165		)	5,470			(1,405		)	(3,902		)
Income tax (expense) benefit related to items of other comprehensive (loss) income	(42		)	196			169			(262		)
Other comprehensive (loss) income, net of tax	(1,207		)	5,666			(1,236		)	(4,164		)
Comprehensive income	$	32,346		$	34,893		$	69,815		$	55,700

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,						Six months ended January 31,
	2019			2018			2020			2019
Operating activities:
Net income	$	94,645		$	56,109		$	71,051		$	59,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	17,836			19,047			11,672			11,909
Non-cash portion of stock-based compensation expense	10,311			7,581
Stock-based compensation expense							5,384			7,805
Deferred income taxes	3,796			26,501			1,272			4,423
Other							1,664			1,279
Changes in operating assets and liabilities:
Accounts receivable	332			(10,710		)	6,209			2,562
Inventories	(9,254		)	(7,790		)	(1,311		)	(6,602		)
Prepaid expenses and other assets	(2,204		)	480			(2,621		)	(2,310		)
Accounts payable and other liabilities	(19,176		)	(133		)
Accounts payable and accrued liabilities							(39,777		)	(35,334		)
Income taxes	616			(1,863		)	(436		)	592
Net cash provided by operating activities	96,902			89,222			53,107			44,188

Investing activities:
Purchases of property, plant and equipment	(17,528		)	(14,755		)	(13,100		)	(12,127		)
Other	(1,810		)	(197		)	(3,406		)	(452		)
Net cash used in investing activities	(19,338		)	(14,952		)	(16,506		)	(12,579		)

Financing activities:
Payment of dividends	(33,488		)	(32,110		)	(23,136		)	(22,263		)
Proceeds from exercise of stock options	20,333			10,011			4,686			18,498
Payments for employee taxes withheld from stock-based awards							(7,733		)	(3,362		)
Proceeds from borrowing on credit facilities	13,637			17,439			—			5,737
Repayment of borrowing on credit facilities	(13,568		)	(69,012		)	—			(5,688		)
Other	(5,185		)	(3,622		)	134			(2,973		)
Net cash used in financing activities	(18,271		)	(77,294		)	(26,049		)	(10,051		)

Effect of exchange rate changes on cash	(2,288		)	(17		)	179			(776		)

Net increase (decrease) in cash and cash equivalents	57,005			(3,041		)
Net increase in cash and cash equivalents							10,731			20,782
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		$	289,803		$	202,209

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Nine~~Six Months Ended~~April 30, 2019~~January 31, 2020

(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, 2019~~January 31, 2020 and July 31, ~~2018~~,2019, its results of operations and comprehensive income for the three and ~~nine~~six months ended ~~April 30,~~January 31, 2020 and 2019, ~~and~~ ~~2018~~, and cash flows for the ~~nine~~six months ended ~~April 30, 2019~~January 31, 2020 and ~~2018~~.2019. 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 February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASC 842"), which replaced the former 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. In July 2018, the FASB issued ASU 2018-11 "Leases (Topic 842): Targeted Improvements," which provides, among other items, an additional transition method allowing a cumulative effect adjustment to the opening balance of retained earnings during the period of adoption. ASC 842 is effective for interim periods in fiscal years beginning after December 15, 2018.

The Company adopted ASU 2016-02 (and related updates) effective August 1, 2019, using the optional transition method provided in ASU 2018-11 to apply this guidance to the impacted lease population at the date of initial application. Results for reporting periods beginning after August 1, 2019, are presented under ASU 2016-02, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect during those periods.

The Company elected the package of 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 to capitalize leases with an initial term of 12 months or less.

Upon adoption of ASC 842, the Company recorded additional operating lease assets and liabilities of $55,984 and $58,544, respectively, as of August 1, 2019, which 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 the new standard. Adoption of ASC 842 did not have a material impact on the Company's cash flows or operating results. Refer to Note E "Leases" for additional information and required disclosures under the new standard.

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.~~date, which did not have a material impact on its consolidated financial statements.

Standards not yet adopted

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 ~~update~~ASU will have on ~~its~~the consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, "Goodwill and Other, Simplifying the Test for Goodwill Impairment," which simplifies the accounting for goodwill impairment. The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. This guidance is effective for annual periods beginning after December 15, 2019, and interim periods thereafter; however, early adoption is permitted for any impairment tests performed after January 1, 2017. 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 ~~February 2016,~~December 2019, the FASB issued ASU ~~2016-02, "Leases,~~2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)," which ~~replaces~~simplifies the ~~current lease~~ accounting ~~standards.~~for income taxes. The ~~update requires, among other items, lessees~~new guidance removes certain exceptions to ~~recognize~~ the ~~assets~~general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intraperiod tax allocation and ~~liabilities~~calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under U.S. GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that ~~arise from most leases on~~an entity reflect the ~~balance sheet and disclose key information about leasing arrangements.~~effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. This guidance is effective for annual periods beginning after December 15, ~~2018,~~2020, and interim periods ~~within those annual periods. The ASU allows for either a full-retrospective or a modified-retrospective approach and~~thereafter; however, early adoption is permitted. ~~In July 2018,~~The Company is currently evaluating the ~~FASB approved an optional transition method to allow companies to apply the new lease standard as of~~impact that the adoption ~~date and recognize a cumulative-effect adjustment to beginning retained earnings in~~of this ASU will have on the ~~period of adoption.~~

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 standard effective August 1, 2019 using the optional transition method.~~

~~In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" ("Topic 606"), which eliminates the transaction~~statements 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 method to apply this guidance to all contracts at the date of initial application. Results for reporting periods beginning after August 1, 2018 are presented under Topic 606, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods.

The results of applying Topic 606 were not material to the Company's consolidated financial condition, results of operations, cash flows, business processes, controls, or systems. Upon adoption, the Company recorded a cumulative adjustment to the opening balance of retained earnings as of August 1, 2018, which resulted in a decrease to retained earnings of $2,137, net of tax. The adjustment was primarily due to a change in timing of when revenue and the related costs for certain extended service-type warranties are recognized, as required per Topic 606.

~~Refer to Note C "Revenue Recognition" for additional information and required disclosures under the new standard.~~disclosures.

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, 2019,~~January 31, 2020, and July 31, ~~2018,~~2019, consisted of the following:



	January 31, 2020		July 31, 2019
Finished products	$	77,951	$	77,532
Work-in-process	21,477		20,515
Raw materials and supplies	21,360		21,990
Total inventories	$	120,788	$	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~~$280,961 and ~~$280,778~~$273,880 as of ~~April 30, 2019,~~January 31, 2020, 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:



	January 31, 2020								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	$	46,561	$	(31,897	)	$	14,664	9	$	46,595	$	(29,343	)	$	17,252
Unamortized other intangible assets:
Trademarks	N/A	18,916		—			18,916		N/A	18,871		—			18,871
Total		$	65,477	$	(31,897	)	$	33,580		$	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 January 31, 2020 compared to July 31, 2019 was due to the effects of currency fluctuations during the six-month period.

Amortization expense of intangible assets was ~~$1,443~~$1,291 and $~~1,620~~$1,434 for the three months ended ~~April 30,~~January 31, 2020 and 2019, ~~and~~ ~~2018~~, respectively, and ~~$4,314~~$2,582 and ~~$4,930~~$2,870 for the ~~nine~~six months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ respectively. The amortization over each of the next five fiscal years is projected to be $~~5,708~~5,163, $~~5,183~~5,163, $~~5,144~~4,894, $~~5,002~~2,025 and $~~2,025~~0 for the fiscal years ending July 31, ~~2019~~2020, ~~2020~~2021, ~~2021~~2022, ~~2022~~2023 and ~~2023~~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 January 31, 2020, the Company did not have any finance leases.

The Company determines whether 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 for the three and six months ended January 31, 2020.

The following table summarizes lease expense recognized for the three and six months ended January 31, 2020:



		Three months ended		Six months ended
	Condensed Consolidated Statements of Income Location	January 31, 2020		January 31, 2020
Operating lease cost	Cost of goods sold	$	2,092	$	4,962
Operating lease cost	Selling, general, and administrative expenses	2,182		4,716

The following table summarizes the maturity of the Company's lease liabilities as of January 31, 2020:



Years ended July 31,	Operating Leases
Remainder of 2020	$	8,426
2021	15,780
2022	12,797
2023	9,427
2024	5,580
Thereafter	3,268
Total lease payments	$	55,278
Less interest	(3,384		)
Present value of lease liabilities	$	51,894

The weighted average remaining lease terms and discount rates for the Company's operating leases as of January 31, 2020 were as follows:



	January 31, 2020
Weighted average remaining lease term (in years)	3.9
Weighted average discount rate	3.4	%

Supplemental cash flow information related to the Company's operating leases for the six months ended January 31, 2020, were as follows:



	Six months ended
	January 31, 2020
Operating cash outflows from operating leases	$	8,216
Operating lease assets obtained in exchange for new operating lease liabilities	10,637

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 January 31, 2020:



	Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
Balances at October 31, 2019	$	548	$	327,241	$	663,808		$	(43,779	)	$	(71,283	)	$	876,535
Net income	—		—		33,553			—			—			33,553
Other comprehensive loss, net of tax	—		—		—			—			(1,207		)	(1,207		)
Issuance of shares of Class A Common Stock under stock plan	—		187		—			624			—			811
Tax benefit and withholdings from deferred compensation distributions	—		69		—			—			—			69
Stock-based compensation expense	—		1,766		—			—			—			1,766
Cash dividends on Common Stock
Class A — $0.22 per share	—		—		(10,833		)	—			—			(10,833		)
Class B — $0.22 per share	—		—		(770		)	—			—			(770		)
Balances at January 31, 2020	$	548	$	329,263	$	685,758		$	(43,155	)	$	(72,490	)	$	899,924

The following table illustrates the changes in the balances of each component of stockholders' equity for the six months ended January 31, 2020:



	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	—		—			71,051			—			—			71,051
Other comprehensive loss, net of tax	—		—			—			—			(1,236		)	(1,236		)
Issuance of shares of Class A Common Stock under stock plan	—		(6,223		)	—			3,177			—			(3,046		)
Tax benefit and withholdings from deferred compensation distributions	—		133			—			—			—			133
Stock-based compensation expense	—		5,384			—			—			—			5,384
Cash dividends on Common Stock
Class A — $0.44 per share	—		—			(21,655		)	—			—			(21,655		)
Class B — $0.42 per share	—		—			(1,481		)	—			—			(1,481		)
Balances at January 31, 2020	$	548	$	329,263		$	685,758		$	(43,155	)	$	(72,490	)	$	899,924

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



	Common Stock		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
Balances at October 31, 2018	$	548	$	326,182		$	570,858		$	(58,414	)	$	(66,231	)	$	772,943
Net income	—		—			29,227			—			—			29,227
Other comprehensive loss, net of tax	—		—			—			—			5,666			5,666
Issuance of shares of Class A Common Stock under stock plan	—		(162		)	—			5,235			—			5,073
Tax benefit and withholdings from deferred compensation distributions	—		118			—			—			—			118
Stock-based compensation expense	—		2,840			—			—			—			2,840
Purchase of shares of Class A Common Stock	—		—			—			(1,319		)	—			(1,319		)
Cash dividends on Common Stock
Class A — $0.21 per share	—		—			(10,415		)	—			—			(10,415		)
Class B — $0.21 per share	—		—			(752		)	—			—			(752		)
Balances at January 31, 2019	$	548	$	328,978		$	588,918		$	(54,498	)	$	(60,565	)	$	803,381

The following table illustrates the changes in the balances of each component of stockholders' equity for the six months ended January 31, 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	—		—			59,864			—			—			59,864
Other comprehensive loss, net of tax	—		—			—			—			(4,164		)	(4,164		)
Issuance of shares of Class A Common Stock under stock plan	—		(4,667		)	—			19,804			—			15,137
Tax benefit and withholdings from deferred compensation distributions	—		209			—			—			—			209
Stock-based compensation expense	—		7,805			—			—			—			7,805
Purchase of shares of Class A Common Stock	—		—			—			(3,182		)	—			(3,182		)
Adoption of ASU 2014-09, "Revenue from Contracts with Customers"	—		—			(2,137		)	—			—			(2,137		)
Cash dividends on Common Stock
Class A — $0.43 per share	—		—			(20,818		)	—			—			(20,818		)
Class B — $0.41 per share	—		—			(1,445		)	—			—			(1,445		)
Balances at January 31, 2019	$	548	$	328,978		$	588,918		$	(54,498	)	$	(60,565	)	$	803,381

NOTE G — Accumulated Other Comprehensive Loss

Other comprehensive loss consists of foreign currency translation adjustments which includes net investment hedges, 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~~six months ended ~~April 30, 2019:~~January 31, 2020:



	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 (loss) before reclassification	468			(216		)	(913		)	(661		)
Amounts reclassified from accumulated other comprehensive loss	(365		)	(210		)	—			(575		)
Ending balance, January 31, 2020	$	810		$	2,374		$	(75,674	)	$	(72,490	)

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 increase in accumulated other comprehensive loss as of ~~April 30,~~January 31, 2020, compared to July 31, 2019, was primarily due to the appreciation of the U.S. dollar against certain other currencies during the six-month period. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation and the settlements of net investment hedges, net of tax. Of the total $575 in amounts reclassified from accumulated other comprehensive loss, the $365 gain on cash flow hedges was reclassified into cost of goods sold, and the $210 gain on post-retirement plans was reclassified into investment and other income on the condensed consolidated statements of income for the six months ended January 31, 2020.

The changes in accumulated other comprehensive loss by component, net of tax, for the six months ended January 31, 2019, 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 income (loss) before reclassification	47			(169		)	(3,528		)	(3,650		)
Amounts reclassified from accumulated other comprehensive loss	(215		)	(299		)	—			(514		)
Ending balance, January 31, 2019	$	695		$	2,834		$	(64,094	)	$	(60,565	)

The increase in accumulated other comprehensive loss as of January 31, 2019, compared to July 31, 2018, was primarily due to the appreciation of the U.S. dollar against certain other currencies during the ~~nine-month~~six-month period. The foreign currency translation adjustments column in the table above includes the impact of foreign currency translation, ~~including~~ foreign currency translation on ~~long-term~~ intercompany notes and the settlements of net investment hedges, net of tax. Of the total ~~$857~~$514 in amounts reclassified from accumulated other comprehensive loss, the ~~$434~~$215 gain on cash flow hedges was reclassified into cost of goods sold, and the ~~$423~~$299 gain on post-retirement plans was reclassified into ~~investment~~“Investment and other ~~income~~income” on the condensed consolidated ~~statement~~statements of income for the ~~nine~~six months ended ~~April 30,~~January 31, 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 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~~six months ended ~~April 30, 2019~~January 31, 2020 and ~~2018:~~2019:



	Three months ended January 31,					Six months ended January 31,
	2020			2019		2020		2019
Income tax (expense) benefit related to items of other comprehensive (loss) income:
Cash flow hedges	$	(5	)	$	61	$	30	$	(38	)
Pension and other post-retirement benefits	93			—		93		—
Other income tax adjustments and currency translation	(130		)	135		46		(224		)
Income tax (expense) benefit related to items of other comprehensive (loss) income	$	(42	)	$	196	$	169	$	(262	)

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 are summarized as follows:~~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.

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 and 675,329 shares of Class A Nonvoting Common Stock for the three months ended April 30, 2019 and 2018, respectively, and 407,477 and 705,843 shares for the nine months ended April 30, 2019 and 2018, respectively, were notThe Company offers extended warranty coverage that is included in the ~~computation of diluted net income per share because the option exercise price was greater than the average market~~sales price of certain products, which it accounts for as service warranties. The Company accounts for the ~~common shares~~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 ~~therefore,~~is recognized on a straight-line basis over the ~~effect would have been anti-dilutive.~~life of the service warranty period.

The balance of contract liabilities associated with service warranty performance obligations was $2,797 and $2,782 as of January 31, 2020 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 included in “Other current liabilities” and “Other liabilities," respectively, on the condensed consolidated balance sheets. The Company recognized revenue of $316 and $631 during the three and six months ended January 31, 2020, respectively, that was included in the contract liability balance at the beginning of the period from the amortization of extended service warranties. Of the contract liability balance outstanding at January 31, 2020, the Company expects to recognize 22% by the end of fiscal 2020, an additional 34% by the end of fiscal 2021, and the remaining balance thereafter.

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, 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~~six months ended ~~April 30,~~January 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended April 30,				Nine months ended April 30,				Three months ended January 31,				Six months ended January 31,
	2019		2018		2019		2018		2020		2019		2020		2019
Net sales:
ID Solutions
Americas	$	143,557	$	139,061	$	427,671	$	412,271	$	137,909	$	138,324	$	287,271	$	284,114
Europe	48,984		51,248		145,094		147,623		45,319		47,282		88,701		96,110
Asia	21,438		21,845		68,518		68,397		22,134		23,599		44,377		47,080
Total	$	213,979	$	212,154	$	641,283	$	628,291	$	205,362	$	209,205	$	420,349	$	427,304
Workplace Safety
Americas	$	25,778	$	28,790	$	74,861	$	81,747	$	23,636	$	24,332	$	47,939	$	49,083
Europe	38,372		44,846		113,816		129,887		37,002		37,788		73,027		75,444
Australia	11,616		12,631		35,407		36,427		10,665		11,101		22,297		23,791
Total	$	75,766	$	86,267	$	224,084	$	248,061	$	71,303	$	73,221	$	143,263	$	148,318
Total Company
Americas	$	169,335	$	167,851	$	502,532	$	494,018	$	161,545	$	162,656	$	335,210	$	333,197
Europe	87,356		96,094		258,910		277,510		82,321		85,070		161,728		171,554
Asia-Pacific	33,054		34,476		103,925		104,824		32,799		34,700		66,674		70,871
Total	$	289,745	$	298,421	$	865,367	$	876,352	$	276,665	$	282,426	$	563,612	$	575,622

Segment profit for the three and ~~nine~~six months ended ~~April 30,~~January 31, 2020 and 2019 ~~and 2018~~ is as follows:



	Three months ended January 31,				Six months ended January 31,
	2020		2019		2020		2019
Segment profit:
ID Solutions	$	40,655	$	37,857	$	83,098	$	79,419
Workplace Safety	5,455		4,661		10,612		10,202
Total Company	$	46,110	$	42,518	$	93,710	$	89,621

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~~six months ended ~~April 30,~~January 31, 2020 and 2019:



	Three months ended January 31,						Six months ended January 31,
	2020			2019			2020			2019
Total profit from reportable segments	$	46,110		$	42,518		$	93,710		$	89,621
Unallocated amounts:
Administrative costs	(4,866		)	(6,488		)	(11,575		)	(12,969		)
Investment and other income	1,760			1,377			3,140			1,360
Interest expense	(647		)	(717		)	(1,348		)	(1,429		)
Income before income taxes	$	42,357		$	36,690		$	83,927		$	76,583

NOTE J — 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 January 31,				Six months ended January 31,
	2020		2019		2020			2019
Numerator (in thousands):
Income (Numerator for basic and diluted income per Class A Nonvoting Common Share)	$	33,553	$	29,227	$	71,051		$	59,864
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	$	33,553	$	29,227	$	70,213		$	59,036
Denominator: (in thousands)
Denominator for basic income per share for both Class A and Class B	53,320		52,532		53,232			52,366
Plus: Effect of dilutive equity awards	507		674		549			716
Denominator for diluted income per share for both Class A and Class B	53,827		53,206		53,781			53,082
Net income per Class A Nonvoting Common Share:
Basic	$	0.63	$	0.56	$	1.33		$	1.14
Diluted	$	0.62	$	0.55	$	1.32		$	1.13
Net income per Class B Voting Common Share:
Basic	$	0.63	$	0.56	$	1.32		$	1.13
Diluted	$	0.62	$	0.55	$	1.31		$	1.11

Stock-based awards to purchase 248,604 and 272,922 shares of Class A Nonvoting Common Stock for the three months ended January 31, 2020 and 2019, respectively, and ~~2018:~~

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
286,161 and 476,412 shares for the six months ended January 31, 2020 and 2019, respectively, were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.

NOTE IK — 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, 2019~~January 31, 2020 and July 31, ~~2018~~,2019, according to the valuation techniques the Company used to determine their fair values.



	January 31, 2020		July 31, 2019		Fair Value Hierarchy
Assets:
Trading securities	$	18,143	$	15,744	Level 1
Foreign exchange contracts	740		474		Level 2
Liabilities:
Foreign exchange contracts	33		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~~six months ended ~~April 30, 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~~.January 31, 2020.

The ~~Company’s financial instruments, other than those presented in the disclosures above, include~~fair values of cash and cash equivalents, accounts receivable, inventories, 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~~current maturities on its long-term debt obligations, at January 31, 2020 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.



	January 31, 2020				July 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Current maturities on long-term debt	$	49,627	$	50,127	$	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 at 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:



	January 31, 2020		July 31, 2019
Designated as cash flow hedges	$	13,046	$	26,013
Non-designated hedges	3,483		3,376
Total foreign exchange contracts	$	16,529	$	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,~~January 31, 2020 and July 31, 2019, ~~and 2018,~~ unrealized gains of ~~$815~~$878 and ~~$65~~$805 have been included in OCI, respectively. Balances are reclassified from OCI to income when 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.

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 January 31, 2020 and July 31, 2019, the cumulative balance recognized in accumulated other comprehensive income were gains of $12,994 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 January 31,					Six months ended January 31,
	2020		2019			2020		2019
Gains (losses) recognized in OCI:
Foreign exchange contracts (cash flow hedges)	$	363	$	537		$	559	$	157
Foreign currency denominated debt (net investment hedges)	531		(598		)	553		1,022
Gains reclassified from OCI into cost of goods sold:
Forward exchange contracts (cash flow hedges)	105		240			486		287

Non-Designated Hedges

The Company recognized losses of $6$20 and ~~$49~~$28 for the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, respectively, and ~~gains~~losses of $9$10 and ~~$29~~$43 for the three and ~~nine~~six months ended ~~April 30, 2018,~~January 31, 2019, respectively, in “Investment and other income” 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:



	January 31, 2020						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)	$	727	—		—		$	472	—		—
Foreign currency denominated debt (net investment hedges)	—		—		49,635		—		—		50,189
Derivatives not designated as hedging instruments:
Foreign exchange contracts	13		33		—		2		5		—
Total derivative instruments	$	740	$	33	$	49,635	$	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 K – Stockholders' Equity~~

~~The following table illustrates the changes in the balances of each component of stockholders' equity 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 LM — Income Taxes

The effective income tax ~~rates~~rate for the three and ~~nine~~six months ended ~~April 30, 2019, were 15.1%~~January 31, 2020, was 20.8% and ~~19.5%~~15.3%, 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~~six months ended ~~April 30, 2019, were~~January 31, 2020, 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~~a domestic income tax audit and ~~domestic~~ tax ~~matters, partially offset by an increase in the valuation allowance against foreign tax credit carryforwards.~~benefits from stock-based compensation.

The effective income tax ~~rates~~rate for the three and ~~nine~~six months ended ~~April 30, 2018, were 29.7%~~January 31, 2019, was 20.3% and ~~47.4%~~21.8%, 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.

NOTE MN — Subsequent Events

On ~~May 21, 2019,~~February 19, 2020, 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 31, 2019,~~April 30, 2020, to shareholders of record at the close of business on ~~July 10, 2019.~~April 9, 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~~investing 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 for the three and ~~nine~~six months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ is as follows:


	Three months ended April 30,								Nine months ended April 30,								Three months ended January 31,								Six months ended January 31,
(Dollars in thousands)	2019		% Sales		2018		% Sales		2019		% Sales		2018		% Sales		2020		% Sales		2019		% Sales		2020		% Sales		2019		% Sales
Net sales	$	289,745			$	298,421			$	865,367			$	876,352			$	276,665			$	282,426			$	563,612			$	575,622
Gross margin	145,749		50.3	%	151,082		50.6	%	432,098		49.9	%	440,839		50.3	%	139,127		50.3	%	139,810		49.5	%	280,532		49.8	%	286,349		49.7	%
Operating expenses:
Research and development	11,437		3.9	%	11,678		3.9	%	33,837		3.9	%	33,512		3.8	%	10,517		3.8	%	11,074		3.9	%	21,484		3.8	%	22,400		3.9	%
Selling, general and administrative	94,691		32.7	%	101,695		34.1	%	281,988		32.6	%	299,411		34.2	%	87,366		31.6	%	92,706		32.8	%	176,913		31.4	%	187,297		32.5	%
Total operating expenses	106,128		36.6	%	113,373		38.0	%	315,825		36.5	%	332,923		38.0	%	97,883		35.4	%	103,780		36.7	%	198,397		35.2	%	209,697		36.4	%
Operating income	$	39,621	13.7	%	$	37,709	12.6	%	$	116,273	13.4	%	$	107,916	12.3	%	$	41,244	14.9	%	$	36,030	12.8	%	$	82,135	14.6	%	$	76,652	13.3	%

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

Sales for the three months ended ~~April 30, 2019,~~January 31, 2020, decreased ~~2.9%~~2.0% to ~~$289.7~~$276.7 million, compared to ~~$298.4~~$282.4 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~~1.2% and a decrease from foreign currency translation of ~~3.8% and a divestiture impact of 1.5%~~0.8%. Organic sales ~~grew 4.0%~~declined 1.3% in the IDS segment and declined ~~1.6%~~1.0% in the WPS segment during the three 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 slight decline in the Healthcare ID product line compared to the prior year. The WPS segment realized a slight decline in sales through the digital channel due to the performance of the business in the Americas. Digital 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 declineJanuary 31, 2020, compared to the same period in the prior year.

Sales for the ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, decreased ~~1.3%~~2.1% to ~~$865.4~~$563.6 million, compared to ~~$876.4~~$575.6 million in the same period of the prior ~~year, which~~year. The decrease consisted of an organic sales ~~growth~~decline of ~~3.1%, that was more than offset by~~0.8% and a decrease from foreign currency translation of ~~2.8% and a divestiture impact of 1.6%~~1.3%. Organic sales ~~grew 4.4%~~declined 0.7% in the IDS segment and declined ~~0.2%~~0.9% in the WPS segment during the ~~nine~~six 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 whenJanuary 31, 2020, compared to the same period in the prior year.

Gross margin decreased ~~3.5%~~0.5% to ~~$145.7~~$139.1 million and decreased 2.0% to $280.5 million for the three and six months ended ~~April 30, 2019, and decreased 2.0% to $432.1 million for the nine months ended April 30, 2019,~~January 31, 2020, respectively, compared to ~~$151.1~~$139.8 million and ~~$440.8~~$286.3 million in the same periods of the prior ~~year, respectively.~~year. As a percentage of net sales, gross margin ~~decreased~~increased to 50.3% and 49.8% for the three and six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to 49.5% and ~~49.9% for the nine months ended April 30, 2019, from 50.6% and 50.3%~~49.7% in the same periods of the prior ~~year, respectively.~~year. The ~~decreases~~increase in gross margin as a percentage of net sales ~~were~~was primarily due to ~~increased input costs such as freight and personnel costs which were 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.~~facilities, which were partially offset by increased input costs such as personnel and freight costs, along with reduced sales volume.

R&D expenses decreased 5.0% to $10.5 million and decreased 4.1% to $21.5 million for the three and six months ended ~~April 30, 2019, decreased 2.1% to $11.4 million,~~January 31, 2020, respectively, compared to ~~$11.7~~$11.1 million and $22.4 million in the same ~~period~~periods of the prior year. As a percentage of sales, R&D expenses remained consistent for the three and six months ended January 31, 2020, compared to the same periods of the prior year. The decrease in R&D spending for both the ~~three-month period~~three and six-month periods 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%~~5.8% to ~~$94.7~~$87.4 million and decreased 5.5% to $176.9 million for the three and six months ended ~~April 30, 2019, and 5.8% to $282.0 million for the nine months ended April 30, 2019,~~January 31, 2020, respectively, compared to ~~$101.7~~$92.7 million and ~~$299.4~~$187.3 million in the same periods of the prior ~~year, respectively.~~year. As a percentage of ~~net~~ sales, SG&A ~~decreased to 32.7%~~was 31.6% and 31.4% for the three and six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to 32.8% and ~~32.6% for the nine months ended April 30, 2019, from 34.1% and 34.2%~~32.5% in the same periods of the prior ~~year, respectively.~~year. Approximately ~~half~~one-fourth of the ~~decreases~~decrease in both the three and ~~nine-month~~six-month periods ~~were~~was due to the impact of foreign currency translation, and the remainder ~~of the decreases were~~was due to ongoing efficiency ~~activities throughout our SG&A functions~~gains and ~~the impact of the sale of a business in the prior year.~~lower compensation expense.

Operating income increased ~~5.1%~~14.5% to ~~$39.6~~$41.2 million for the three months ended ~~April 30, 2019,~~January 31, 2020, and ~~7.7%~~7.2% to ~~$116.3~~$82.1 million for the ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, compared to ~~$37.7~~$36.0 million and ~~$107.9~~$76.7 million in the same periods of the prior year, respectively. The increases in both the three and ~~nine-month~~six-month periods were primarily due to increased ~~organic sales and~~ segment profit within both the IDS ~~business~~and WPS businesses along with reduced ~~SG&A~~corporate administrative expenses.

OPERATING INCOME TO NET INCOME


	Three months ended April 30,										Nine months ended April 30,										Three months ended January 31,										Six months ended January 31,
(Dollars in thousands)	2019			% Sales		2018			% Sales		2019			% Sales		2018			% Sales		2020			% Sales		2019			% Sales		2020			% Sales		2019			% Sales
Operating income	$	39,621		13.7	%	$	37,709		12.6	%	$	116,273		13.4	%	$	107,916		12.3	%	$	41,244		14.9	%	$	36,030		12.8	%	$	82,135		14.6	%	$	76,652		13.3	%
Other income (expense):
Investment and other income	2,065			0.7	%	31			—	%	3,425			0.4	%	1,303			0.1	%	1,760			0.6	%	1,377			0.5	%	3,140			0.6	%	1,360			0.2	%
Interest expense	(708		)	(0.2	)%	(761		)	(0.3	)%	(2,137		)	(0.2	)%	(2,453		)	(0.3	)%	(647		)	(0.2	)%	(717		)	(0.3	)%	(1,348		)	(0.2	)%	(1,429		)	(0.2	)%
Income before income tax	40,978			14.1	%	36,979			12.4	%	117,561			13.6	%	106,766			12.2	%	42,357			15.3	%	36,690			13.0	%	83,927			14.9	%	76,583			13.3	%
Income tax expense	6,197			2.1	%	10,979			3.7	%	22,916			2.6	%	50,657			5.8	%	8,804			3.2	%	7,463			2.6	%	12,876			2.3	%	16,719			2.9	%
Net income	$	34,781		12.0	%	$	26,000		8.7	%	$	94,645		10.9	%	$	56,109		6.4	%	$	33,553		12.1	%	$	29,227		10.3	%	$	71,051		12.6	%	$	59,864		10.4	%

Investment and other income was ~~$2.1~~$1.8 million and ~~$3.4~~$3.1 million for the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to ~~$0.0~~$1.4 million ~~and $1.3 million~~ in each of the same periods of the prior ~~year, respectively.~~year. The increases in both the three and ~~nine-month~~six-month periods were 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 in the prior year.

Interest expense ~~decreased~~remained essentially flat at $0.6 million and $1.3 million for the three and six months ended January 31, 2020, respectively, compared to $0.7 million ~~from $0.8~~and $1.4 million in the same periods of the prior year, as there was minimal change in the Company's principal balance under its outstanding debt agreements.

The Company's income tax rate was 20.8% for the three months ended ~~April 30, 2019, and decreased to $2.1 million from $2.5 million for the nine months ended April 30, 2019,~~January 31, 2020, 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%~~20.3% for the same period in the prior year. The income tax rate was ~~19.5%~~15.3% for the ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, compared to ~~47.4%~~21.8% for the same period ofin the prior year. Refer to Note LM - Income Taxes for additional ~~details regarding~~information on the Company's 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"), 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 operating segments aggregate into the IDS reporting segment, while the WPS reporting segment is comprised solely of the Workplace Safety operating segment. The Company evaluates short-term segment performance based on segment profit and customer sales. Interest expense, investment and other income, income tax expense, and certain corporate administrative expenses are excluded when evaluating segment performance.

The following is a summary of segment information for the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, and ~~2018:~~2019:


	Three months ended April 30,				Nine months ended April 30,				Three months ended January 31,				Six months ended January 31,
	2019		2018		2019		2018		2020		2019		2020		2019
SALES GROWTH INFORMATION
ID Solutions
Organic	4.0	%	3.7	%	4.4	%	3.7	%	(1.3	)%	3.6	%	(0.7	)%	4.6	%
Currency	(3.1	)%	4.1	%	(2.3	)%	3.0	%	(0.5	)%	(2.3	)%	(0.9	)%	(1.9	)%
Total	0.9	%	7.8	%	2.1	%	6.7	%	(1.8	)%	1.3	%	(1.6	)%	2.7	%
Workplace Safety
Organic	(1.6	)%	1.7	%	(0.2	)%	(0.1	)%	(1.0	)%	(0.9	)%	(0.9	)%	0.6	%
Currency	(5.3	)%	7.4	%	(3.7	)%	5.7	%	(1.6	)%	(3.3	)%	(2.5	)%	(2.9	)%
Divestitures	(5.3	)%	—	%	(5.8	)%	—	%	—	%	(5.8	)%	—	%	(6.0	)%
Total	(12.2	)%	9.1	%	(9.7	)%	5.6	%	(2.6	)%	(10.0	)%	(3.4	)%	(8.3	)%
Total Company
Organic	2.4	%	3.2	%	3.1	%	2.7	%	(1.2	)%	2.3	%	(0.8	)%	3.5	%
Currency	(3.8	)%	5.0	%	(2.8	)%	3.6	%	(0.8	)%	(2.6	)%	(1.3	)%	(2.2	)%
Divestitures	(1.5	)%	—	%	(1.6	)%	—	%	—	%	(1.6	)%	—	%	(1.7	)%
Total	(2.9	)%	8.2	%	(1.3	)%	6.3	%	(2.0	)%	(1.9	)%	(2.1	)%	(0.4	)%
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions	18.6	%	17.4	%	18.6	%	17.0	%	19.8	%	18.1	%	19.8	%	18.6	%
Workplace Safety	8.0	%	8.7	%	7.3	%	8.5	%	7.7	%	6.4	%	7.4	%	6.9	%
Total	15.9	%	14.9	%	15.7	%	14.6	%	16.7	%	15.1	%	16.6	%	15.6	%

ID Solutions

IDS net sales ~~increased 0.9% for~~decreased 1.8% in the three months ended ~~April 30, 2019,~~January 31, 2020, compared to the same period in the prior year, which consisted of an organic sales ~~growth~~decline of ~~4.0%~~1.3% and a decrease from foreign currency translation of ~~3.1%,~~0.5%. Organic sales in the three-month period were essentially flat in the Safety and Facility ID and Product ID product lines while the Healthcare ID and Wire ID product lines declined compared to the prior year. IDS net sales decreased 1.6% in the six months ended January 31, 2020, compared to the same period in the prior year, which consisted of an organic sales decline of 0.7% and a decrease from foreign currency translation of 0.9%. Organic sales in the six-month period grew in the Safety and Facility ID product line, remained essentially flat in the Product ID product line, and declined in the Healthcare ID and Wire ID product lines compared to the same period in the prior year.

Organic sales in the Americas decreased slightly in the three months ended January 31, 2020, compared to the same period in the prior year. ~~IDS~~Organic sales ~~increased 2.1% for~~in the ~~nine months ended April 30, 2019, which consisted of organic sales growth of 4.4%~~three-month period were essentially flat in the Safety and ~~a decrease from foreign currency translation of 2.3%,~~Facility ID and Product ID product lines while the Healthcare ID and Wire ID product lines declined compared to the same period in the prior year due to reduced demand in end markets. Organic sales were flat in the United States and declined in the low-single digits in the rest of the Americas in the three-month period. Organic sales in the Americas increased in the low-single digits for the six months ended January 31, 2020, compared to the same period in the prior year. Organic sales in the six-month period grew in the Safety and Facility ID product line, remained essentially flat in the Product ID product line, and declined in the Healthcare ID and Wire ID product lines compared to the same period in the prior year due to reduced demand in end markets. Organic sales grew in the low-single digits in the United States and declined in the low-single digits in the rest of the Americas in the six-month period.

Organic sales in ~~the Americas grew~~Europe decreased in the low-single digits in the three months ended January 31, 2020, compared to the same period in the prior year. Slight organic sales growth in the Safety and Facility ID product line was more than offset by declines in the Product ID and Wire ID product lines in the three-month period. The organic sales decline in the three-month period was driven by certain businesses based in Western Europe due to a decline in economic activity. Organic sales in Europe decreased in the mid-single digits for the six months ended January 31, 2020, compared to the same period in the prior year, which was driven by a decline in all product lines. The organic sales decline in the six-month period was driven by certain businesses based in emerging geographies and in Western Europe due to a decline in economic activity.

Organic sales in Asia decreased in the mid-single digits in both the three and ~~nine~~six months ended ~~April 30, 2019, respectively,~~January 31, 2020, 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~~line was more than 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 growthdeclines in the Safety and Facility ID and Product ID product lines ~~for~~in both the three and ~~nine months ended April 30, 2019, compared to the same periods~~six-month periods. Organic sales within China declined approximately 10% and declined 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~~high-single digits in ~~Asia grew in the low-single digits for both~~ the three and ~~nine months ended April 30, 2019, compared~~six-month periods, respectively, partially due to the ~~same periods in the prior year. The IDS Asia region realized organic sales growth in the Product ID, Safety~~direct and ~~Facility ID,~~indirect impact of tariffs 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.~~overall economic weakness. Organic sales ~~grew in the low-single digits within China for both the three~~were essentially flat and ~~nine-month periods and grew in the low-single and mid-single digits~~declined slightly in the rest of Asia ~~for~~in the three and ~~nine-month~~six-month periods, respectively. ~~Increased printer and consumable sales throughout the region was a primary driver of the organic sales growth.~~

Segment profit increased to ~~$39.9~~$40.7 million and ~~$119.3~~$83.1 million for the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to ~~$37.0~~$37.9 million and ~~$106.9~~$79.4 million for the same periods in the prior year. As a percentage of net sales, segment profit

increased to ~~18.6%~~19.8% for both the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, from ~~17.4%~~18.1% and ~~17.0%~~18.6% for the same periods in the prior year. The ~~increases~~increase in segment profit for both the three and ~~nine-month~~six-month periods ~~were~~was primarily driven by ~~organic sales growth and~~ efficiency gains throughout SG~~&A.~~&A in all regions.

Workplace Safety

WPS net sales decreased ~~12.2% for~~2.6% in the three months ended ~~April 30, 2019,~~January 31, 2020, compared to the same period in the prior year, which consisted of an organic sales decline of ~~1.6%,~~1.0% and a decrease from foreign currency translation of ~~5.3%, and a decrease from a divestiture of 5.3%,~~1.6%. WPS net sales decreased 3.4% in the six months ended January 31, 2020, compared to the same period in the prior year. Sales through the digital channel decreased slightly due to the performance of the Americas business, while sales through the catalog channel decreased in the low-single digits for the three-month period. WPS sales decreased 9.7% for the nine months ended April 30, 2019,year, which consisted of an organic sales ~~declined~~decline of ~~0.2%,~~0.9% and 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.~~2.5%. Sales through the digital channel grew in the ~~low-single~~mid-single digits while sales through the catalog channel 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~~six-month periods.

Organic sales in Europe were effectively flat in the three months and increased modestly in the six months ended ~~April 30, 2019,~~January 31, 2020, compared to the same periods in the prior year. ~~The organic~~Organic sales growth in France was largely offset by a decline in sales in Germany due to reduced demand for industrial products. Sales through the digital channel grew approximately 10% while sales through the catalog channel declined in the low-single digits in both the three and ~~nine-month periods was driven primarily by businesses based~~six-month periods.

Organic sales in ~~France, Belgium, and Germany due to improvements~~the Americas decreased in ~~website functionality, growth~~the low-single digits in ~~new customers, and key account management. WPS Europe experienced nearly 15% growth in digital channel sales, while catalog sales remained essentially flat during~~both the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to the same periods in the prior year.

~~Organic~~ Catalog channel sales declined in the ~~Americas decreased approximately 10% for the three months ended April 30, 2019 and decreased~~low-single digits due to lower response rates to catalog promotions in ~~the high-single digits for the nine months ended April 30, 2019, compared to the same periods in the prior year.~~ ~~WPS Americas continued to experience the negative impact from the digital platform implemented in the prior year and realized a decline in sales for~~ both the three and ~~nine-month~~six-month periods. ~~The~~Digital sales declined in the low-single digits in both the three and six-month periods. This business continued to experience a negative impact on sales from a digital platform that was implemented toward the end of fiscal 2018. In order to address this decline, the business transitioned to a new digital platform ~~toward the end of the three months ended January 31, 2019 to address this decline.~~mid-way through fiscal 2019. The functionality of the new digital platform ishas improved compared to the former digital ~~platform, however,~~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~~were effectively flat in the three months ended January 31, 2020, compared to the same period in the prior year. Digital channel sales increased nearly 12% during the three-month period ended January 31, 2020, which was largely offset by a low-single digit decline in catalog channel sales. Organic sales decreased in the low-single digits in the six months ended January 31, 2020, compared to the same period in the prior year. Low-single digit organic growth in digital sales was offset by a low-single digit decline in catalog sales in the six-month period. We continue to experience reduced demand in primary end markets, which include non-residential construction and ~~mid-single digits~~industrial manufacturing.

Segment profit increased to $5.5 million and $10.6 million for the three and ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to ~~the same periods in the prior year. The organic sales growth for the nine-month period was driven by both the digital sales~~$4.7 million 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 continues to expand into additional target markets such as commercial and industrial construction.

~~Segment profit decreased to $6.1 million from $7.5~~$10.2 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, 2019, compared to~~ the same periods in the prior year. As a percentage of net sales, segment profit ~~decreased~~increased to ~~8.0% from 8.7%~~7.7% and 7.4% for the three and six months ended ~~April 30, 2019,~~January 31, 2020, respectively, compared to 6.4% and ~~to 7.3% from 8.5%~~6.9% for ~~the nine months ended April 30, 2019, compared to~~ the same periods in the prior year. The ~~decreases~~increases in segment profit were due to efficiency gains throughout SG&A, which were partially offset by the decrease in organic sales ~~volumes in the North American business, as well as the divestiture of a business in the prior period~~ and foreign currency translation.

Financial Condition

Cash and cash equivalents ~~increased $57.0~~were $289.8 million ~~and decreased $3.0~~at January 31, 2020, an increase of $10.7 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,						Six months ended January 31,
(Dollars in thousands)	2019			2018			2020			2019
Net cash flow provided by (used in):
Operating activities	$	96,902		$	89,222		$	53,107		$	44,188
Investing activities	(19,338		)	(14,952		)	(16,506		)	(12,579		)
Financing activities	(18,271		)	(77,294		)	(26,049		)	(10,051		)
Effect of exchange rate changes on cash	(2,288		)	(17		)	179			(776		)
Net increase (decrease) in cash and cash equivalents	$	57,005		$	(3,041	)
Net increase in cash and cash equivalents							$	10,731		$	20,782

Net cash provided by operating activities was ~~$96.9~~$53.1 million for the ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, compared to ~~$89.2~~$44.2 million in the same period of the prior year. The ~~change~~increase was primarily driven by an increase in net income adjusted for non-cash items ~~which was partially offset by an increase~~as well as a decrease in cash used for working ~~capital in support of growth when compared to the same period in the prior year.~~capital.

Net cash used in investing activities was ~~$19.3~~$16.5 million for the ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, compared to ~~$15.0~~$12.6 million in the same period of the prior year. The increase in cash used in investing activities was primarily driven by investment purchases to fund deferred compensation plans, and to a lesser extent by an increase in capital expenditures for the purchase of manufacturing equipment and facility ~~upgrades.~~upgrades in Europe, the United States, and Mexico.

Net cash used in financing activities was ~~$18.3~~$26.0 million during the ~~nine~~six months ended ~~April 30, 2019,~~January 31, 2020, compared to ~~$77.3~~$10.1 million 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 six-month period.

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, 2019,~~January 31, 2020, there were no borrowings outstanding on the credit facility, and ~~the maximum~~there was no outstanding ~~balance~~balances during the ~~nine~~six months ended ~~April 30, 2019, was $3.4 million.~~January 31, 2020. The Company ~~also~~ had letters of credit outstanding under the loan agreement of $3.3 million as of ~~April 30, 2019,~~January 31, 2020 and there was ~~$296.7~~$196.7 million available for future borrowing, which can be increased to ~~$446.7~~$396.7 million at the Company's option, subject to certain conditions. The revolving loan agreement has a final maturity date of ~~September 25, 2020. As~~August 1, 2024, as such, ~~the~~any borrowing ~~is included in "Long-term obligations"~~would be classified as long-term on the condensed consolidated balance sheets.

The Company’s debt agreements require it to maintain certain financial covenants, including a ratio of debt to the trailing 12 months EBITDA, as defined in the debt agreements, of not more than a 3.25 to 1.0 ratio (leverage ratio) and the trailing 12 months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of ~~April 30, 2019,~~January 31, 2020, the Company was in compliance with these financial covenants, with the leverage ratio, as defined by the agreements, equal to ~~0.3~~0.0 to 1.0 and the interest expense coverage ratio equal to ~~69.4~~75.7 to 1.0.

The Company's cash balances are generated and held in numerous locations throughout the world. At ~~April 30, 2019,~~January 31, 2020, approximately ~~54%~~47% 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~~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 major public health issues and those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of 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, 2019~~February 20, 2020						/s/ J. MICHAEL NAUMAN
						J. Michael Nauman
						President and Chief Executive Officer
						(Principal Executive Officer)


Date: ~~May 23, 2019~~February 20, 2020						/s/ AARON J. PEARCE
						Aaron J. Pearce
						Chief Financial Officer and Treasurer
						(Principal Financial Officer)

2827




	Page
PART I. Financial Information	3
Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Income	4
Condensed Consolidated Statements of Comprehensive Income	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	24
Item 4. Controls and Procedures	25
PART II. Other Information	26
Item ~~4. Controls and Procedures~~6. Exhibits	26
~~PART II. Other Information~~Signatures	27
~~Item 6. Exhibits~~	27
~~Signatures~~	28



	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	)



	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



	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