UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


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

For the Quarterly Period Ended April 30, ~~2021~~2022


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

For the Transition Period from to

Commission File Number 1-14959

BRADY CORPORATION

(Exact name of registrant as specified in its charter)


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

6555 West Good Hope Road

Milwaukee, Wisconsin 53233

(Address of principal executive offices and zip code)

(414) 358-6600

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ 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). Yes ☑ 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

☑

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 ☐ No ☑

As of May ~~18, 2021,~~24, 2022, there were ~~48,524,455~~46,687,050 outstanding shares of Class A Nonvoting Common Stock and 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which is held by affiliates of the Registrant, is the only voting stock.

Table of Contents

FORM 10-Q

BRADY CORPORATION

INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


		April 30, 2021		July 31, 2020			April 30, 2022		July 31, 2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	321,801	$	217,643	Cash and cash equivalents	$	103,068	$	147,335
Accounts receivable, net of allowances for credit losses of $7,551 and $7,157, respectively		163,381		146,181
Accounts receivable, net of allowances for credit losses of $7,891 and $7,306, respectively						Accounts receivable, net of allowances for credit losses of $7,891 and $7,306, respectively	186,843		170,579
Inventories	Inventories	122,847		135,662		Inventories	177,156		136,107
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13,032		9,962		Prepaid expenses and other current assets	12,550		11,083
Total current assets	Total current assets	621,061		509,448		Total current assets	479,617		465,104
Property, plant and equipment—net	Property, plant and equipment—net	121,126		115,068		Property, plant and equipment—net	125,014		121,741
Goodwill	Goodwill	422,091		416,034		Goodwill	591,780		614,137
Other intangible assets	Other intangible assets	18,528		22,334		Other intangible assets	78,238		92,334
Deferred income taxes	Deferred income taxes	8,334		8,845		Deferred income taxes	14,804		16,343
Operating lease assets	Operating lease assets	37,622		41,899		Operating lease assets	30,466		41,880
Other assets	Other assets	31,415		28,838		Other assets	24,325		26,217
Total	Total	$	1,260,177	$	1,142,466	Total	$	1,344,244	$	1,377,756
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	72,234	$	62,547	Accounts payable	$	79,567	$	82,152
Accrued compensation and benefits	Accrued compensation and benefits	69,621		41,546		Accrued compensation and benefits	70,195		81,173
Taxes, other than income taxes	Taxes, other than income taxes	9,207		8,057		Taxes, other than income taxes	12,910		13,054
Accrued income taxes	Accrued income taxes	2,711		8,652		Accrued income taxes	4,264		3,915
Current operating lease liabilities	Current operating lease liabilities	16,197		15,304		Current operating lease liabilities	15,619		17,667
Other current liabilities	Other current liabilities	51,145		49,782		Other current liabilities	61,215		59,623
Total current liabilities	Total current liabilities	221,115		185,888		Total current liabilities	243,770		257,584
Long-term debt						Long-term debt	77,000		38,000
Long-term operating lease liabilities	Long-term operating lease liabilities	25,841		31,982		Long-term operating lease liabilities	17,591		28,347
Other liabilities	Other liabilities	61,595		61,524		Other liabilities	91,645		90,797
Total liabilities	Total liabilities	308,551		279,394		Total liabilities	430,006		414,728
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,524,455 and 48,456,954 shares, respectively		513		513
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 46,890,714 and 48,528,245 shares, respectively						Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 46,890,714 and 48,528,245 shares, respectively	513		513
Class B voting common stock—Issued and outstanding, 3,538,628 shares	Class B voting common stock—Issued and outstanding, 3,538,628 shares	35		35		Class B voting common stock—Issued and outstanding, 3,538,628 shares	35		35
Additional paid-in capital	Additional paid-in capital	336,957		331,761		Additional paid-in capital	343,854		339,125
Retained earnings	Retained earnings	771,797		704,456		Retained earnings	862,583		788,369
Treasury stock—2,737,032 and 2,804,533 shares, respectively, of Class A nonvoting common stock, at cost		(109,128)		(107,216)
Treasury stock—4,370,773 and 2,733,242 shares, respectively, of Class A nonvoting common stock, at cost						Treasury stock—4,370,773 and 2,733,242 shares, respectively, of Class A nonvoting common stock, at cost	(193,859)		(109,061)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(48,548)		(66,477)		Accumulated other comprehensive loss	(98,888)		(55,953)
Total stockholders’ equity	Total stockholders’ equity	951,626		863,072		Total stockholders’ equity	914,238		963,028
Total	Total	$	1,260,177	$	1,142,466	Total	$	1,344,244	$	1,377,756

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

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 April 30,				Nine months ended April 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net sales	Net sales	$	295,503	$	265,943	$	838,568	$	829,555	Net sales	$	338,551	$	295,503	$	978,081	$	838,568
Cost of goods sold	Cost of goods sold	146,656		136,416		424,771		419,496		Cost of goods sold	174,525		146,656		509,705		424,771
Gross margin	Gross margin	148,847		129,527		413,797		410,059		Gross margin	164,026		148,847		468,376		413,797
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	11,305		9,814		31,384		31,298		Research and development	14,923		11,305		42,795		31,384
Selling, general and administrative	Selling, general and administrative	90,817		83,223		256,088		260,136		Selling, general and administrative	96,214		90,817		285,485		256,088
Impairment charges		0		13,821		0		13,821
Total operating expenses	Total operating expenses	102,122		106,858		287,472		305,255		Total operating expenses	111,137		102,122		328,280		287,472
Operating income	Operating income	46,725		22,669		126,325		104,804		Operating income	52,889		46,725		140,096		126,325
Other income (expense):
Investment and other income		1,181		112		3,372		3,252
Other (expense) income:										Other (expense) income:
Investment and other (expense) income										Investment and other (expense) income	(1,308)		1,181		(1,343)		3,372
Interest expense	Interest expense	(131)		(628)		(288)		(1,976)		Interest expense	(329)		(131)		(763)		(288)
Income before income taxes and losses of unconsolidated affiliate	Income before income taxes and losses of unconsolidated affiliate	47,775		22,153		129,409		106,080		Income before income taxes and losses of unconsolidated affiliate	51,252		47,775		137,990		129,409
Income tax expense	Income tax expense	10,229		8,520		27,017		21,396		Income tax expense	11,198		10,229		29,075		27,017
Income before losses of unconsolidated affiliate	Income before losses of unconsolidated affiliate	37,546		13,633		102,392		84,684		Income before losses of unconsolidated affiliate	40,054		37,546		108,915		102,392
Equity in losses of unconsolidated affiliate	Equity in losses of unconsolidated affiliate	(255)		0		(760)		0		Equity in losses of unconsolidated affiliate	—		(255)		—		(760)
Net income	Net income	$	37,291	$	13,633	$	101,632	$	84,684	Net income	$	40,054	$	37,291	$	108,915	$	101,632
Net income per Class A Nonvoting Common Share:	Net income per Class A Nonvoting Common Share:									Net income per Class A Nonvoting Common Share:
Basic	Basic	$	0.72	$	0.26	$	1.95	$	1.60	Basic	$	0.78	$	0.72	$	2.11	$	1.95
Diluted	Diluted	$	0.71	$	0.26	$	1.94	$	1.58	Diluted	$	0.78	$	0.71	$	2.09	$	1.94
Dividends		$	0.22	$	0.22	$	0.66	$	0.65
Net income per Class B Voting Common Share:	Net income per Class B Voting Common Share:									Net income per Class B Voting Common Share:
Basic	Basic	$	0.72	$	0.26	$	1.94	$	1.58	Basic	$	0.78	$	0.72	$	2.09	$	1.94
Diluted	Diluted	$	0.71	$	0.26	$	1.93	$	1.57	Diluted	$	0.78	$	0.71	$	2.08	$	1.93
Dividends		$	0.22	$	0.22	$	0.64	$	0.64
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	52,050		52,607		52,030		53,023		Basic	51,326		52,050		51,700		52,030
Diluted	Diluted	52,449		52,972		52,341		53,512		Diluted	51,568		52,449		52,055		52,341

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands, Unaudited)

Three months ended April 30, Nine months ended April 30,
2021 2020 2021 2020
Net income $ 37,291 $ 13,633 $ 101,632 $ 84,684
Other comprehensive income (loss):
Foreign currency translation adjustments 2,891 (17,424) 17,773 (18,383)
Cash flow hedges:
Net gain (loss) recognized in other comprehensive income (loss) 118 (1,751) 1,266 (1,192)
Reclassification adjustment for gains included in net income (292) (293) (21) (779)
(174) (2,044) 1,245 (1,971)
Pension and other post-retirement benefits:
Net loss recognized in other comprehensive income (loss) 0 0 (32) (309)
Net actuarial gain amortization (105) (105) (306) (315)
(105) (105) (338) (624)
Other comprehensive income (loss), before tax 2,612 (19,573) 18,680 (20,978)
Income tax benefit (expense) related to items of other comprehensive income (loss) 301 (179) (751) (10)
Other comprehensive income (loss), net of tax 2,913 (19,752) 17,929 (20,988)
Comprehensive income (loss) $ 40,204 $ (6,119) $ 119,561 $ 63,696


	Three months ended April 30,				Nine months ended April 30,
	2022		2021		2022		2021
Net income	$	40,054	$	37,291	$	108,915	$	101,632
Other comprehensive (loss) income:
Foreign currency translation adjustments	(20,180)		2,891		(42,754)		17,773

Cash flow hedges:
Net gain recognized in other comprehensive (loss) income	475		118		674		1,266
Reclassification adjustment for gains included in net income	(44)		(292)		(647)		(21)
	431		(174)		27		1,245
Pension and other post-retirement benefits:
Net loss recognized in other comprehensive (loss) income	—		—		(85)		(32)
Net actuarial gain amortization	(95)		(105)		(275)		(306)
	(95)		(105)		(360)		(338)

Other comprehensive (loss) income, before tax	(19,844)		2,612		(43,087)		18,680
Income tax (expense) benefit related to items of other comprehensive (loss) income	(105)		301		152		(751)
Other comprehensive (loss) income, net of tax	(19,949)		2,913		(42,935)		17,929
Comprehensive income	$	20,105	$	40,204	$	65,980	$	119,561

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Thousands, Unaudited)


	Three months ended April 30, 2022
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at January 31, 2022	$	548	$	341,889	$	833,981	$	(130,911)	$	(78,939)	$	966,568
Net income	—		—		40,054		—		—		40,054
Other comprehensive loss, net of tax	—		—		—		—		(19,949)		(19,949)
Issuance of shares of Class A Common Stock under stock plan	—		(18)		—		262		—		244
Stock-based compensation expense	—		1,983		—		—		—		1,983
Repurchase of shares of Class A Common Stock	—		—		—		(63,210)		—		(63,210)
Cash dividends on Common Stock:
Class A — $0.2250 per share	—		—		(10,655)		—		—		(10,655)
Class B — $0.2250 per share	—		—		(797)		—		—		(797)
Balances at April 30, 2022	$	548	$	343,854	$	862,583	$	(193,859)	$	(98,888)	$	914,238


	Nine months ended April 30, 2022
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at July 31, 2021	$	548	$	339,125	$	788,369	$	(109,061)	$	(55,953)	$	963,028
Net income	—		—		108,915		—		—		108,915
Other comprehensive loss, net of tax	—		—		—		—		(42,935)		(42,935)
Issuance of shares of Class A Common Stock under stock plan	—		(4,539)		—		132		—		(4,407)
Tax benefit and withholdings from deferred compensation distributions	—		115		—		—		—		115
Stock-based compensation expense	—		9,153		—		—		—		9,153
Repurchase of shares of Class A Common Stock	—		—		—		(84,930)		—		(84,930)
Cash dividends on Common Stock:
Class A — $0.6750 per share	—		—		(32,370)		—		—		(32,370)
Class B — $0.6584 per share	—		—		(2,331)		—		—		(2,331)
Balances at April 30, 2022	$	548	$	343,854	$	862,583	$	(193,859)	$	(98,888)	$	914,238

Table of Contents


	Three months ended April 30, 2021
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at January 31, 2021	$	548	$	334,077	$	745,960	$	(109,789)	$	(51,461)	$	919,335
Net income	—		—		37,291		—		—		37,291
Other comprehensive income, net of tax	—		—		—		—		2,913		2,913
Issuance of shares of Class A Common Stock under stock plan	—		348		—		661		—		1,009
Stock-based compensation expense	—		2,532		—		—		—		2,532
Repurchase of shares of Class A Common Stock	—		—		—		—		—		—
Cash dividends on Common Stock:
Class A — $0.2200 per share	—		—		(10,675)		—		—		(10,675)
Class B — $0.2200 per share	—		—		(779)		—		—		(779)
Balances at April 30, 2021	$	548	$	336,957	$	771,797	$	(109,128)	$	(48,548)	$	951,626


	Nine months ended April 30, 2021
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at July 31, 2020	$	548	$	331,761	$	704,456	$	(107,216)	$	(66,477)	$	863,072
Net income	—		—		101,632		—		—		101,632
Other comprehensive income, net of tax	—		—		—		—		17,929		17,929
Issuance of shares of Class A Common Stock under stock plan	—		(2,839)		—		1,681		—		(1,158)
Tax benefit and withholdings from deferred compensation distributions	—		32		—		—		—		32
Stock-based compensation expense	—		8,003		—		—		—		8,003
Repurchase of shares of Class A Common Stock	—		—		—		(3,593)		—		(3,593)
Cash dividends on Common Stock:
Class A — $0.6600 per share	—		—		(32,013)		—		—		(32,013)
Class B — $0.6434 per share	—		—		(2,278)		—		—		(2,278)
Balances at April 30, 2021	$	548	$	336,957	$	771,797	$	(109,128)	$	(48,548)	$	951,626

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


		Nine months ended April 30,					Nine months ended April 30,
		2021		2020			2022		2021
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	101,632	$	84,684	Net income	$	108,915	$	101,632
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	17,240		17,731		Depreciation and amortization	25,448		17,240
Stock-based compensation expense	Stock-based compensation expense	8,003		7,180		Stock-based compensation expense	9,153		8,003
Deferred income taxes	Deferred income taxes	(3,957)		(309)		Deferred income taxes	2,858		(3,957)
Impairment charges		0		13,821
Equity in losses of unconsolidated affiliate	Equity in losses of unconsolidated affiliate	760		0		Equity in losses of unconsolidated affiliate	—		760
Other	Other	(1,186)		1,698		Other	(1,080)		(1,186)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(13,247)		9,019		Accounts receivable	(26,438)		(13,247)
Inventories	Inventories	15,210		(7,439)		Inventories	(47,784)		15,210
Prepaid expenses and other assets	Prepaid expenses and other assets	(2,584)		(5,653)		Prepaid expenses and other assets	(932)		(2,584)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	39,244		(26,609)		Accounts payable and accrued liabilities	(5,584)		39,244
Income taxes	Income taxes	(6,207)		1,790		Income taxes	680		(6,207)
Net cash provided by operating activities	Net cash provided by operating activities	154,908		95,913		Net cash provided by operating activities	65,236		154,908

Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(21,411)		(21,616)		Purchases of property, plant and equipment	(22,130)		(21,411)
Other	Other	2,567		(4,419)		Other	59		2,567
Net cash used in investing activities	Net cash used in investing activities	(18,844)		(26,035)		Net cash used in investing activities	(22,071)		(18,844)

Financing activities:	Financing activities:					Financing activities:
Payment of dividends	Payment of dividends	(34,290)		(34,447)		Payment of dividends	(34,701)		(34,290)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,612		5,212		Proceeds from exercise of stock options	663		1,612
Payments for employee taxes withheld from stock-based awards	Payments for employee taxes withheld from stock-based awards	(2,772)		(7,832)		Payments for employee taxes withheld from stock-based awards	(5,070)		(2,772)
Purchase of treasury stock	Purchase of treasury stock	(3,593)		(64,113)		Purchase of treasury stock	(84,930)		(3,593)
Proceeds from borrowing on credit facilities						Proceeds from borrowing on credit facilities	155,216		19,957
Repayment of borrowing on credit facilities						Repayment of borrowing on credit facilities	(116,216)		(20,220)
Other	Other	(231)		133		Other	3,276		32
Net cash used in financing activities	Net cash used in financing activities	(39,274)		(101,047)		Net cash used in financing activities	(81,762)		(39,274)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	7,368		(9,023)		Effect of exchange rate changes on cash	(5,670)		7,368

Net increase (decrease) in cash and cash equivalents		104,158		(40,192)
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(44,267)		104,158
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	217,643		279,072		Cash and cash equivalents, beginning of period	147,335		217,643

Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	321,801	$	238,880	Cash and cash equivalents, end of period	$	103,068	$	321,801

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended April 30, ~~2021~~2022

(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, ~~2021~~2022 and July 31, ~~2020,~~2021, its results of operations and comprehensive income for the three and nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, and cash flows for the nine months ended April 30, ~~2021~~2022 and ~~2020.~~2021. The condensed consolidated balance sheet as of July 31, ~~2020,~~2021, 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, ~~2020.~~2021.

NOTE B — New Accounting Pronouncements

Adopted Standards

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. Prior guidance required the recognition of credit losses based on an incurred loss impairment methodology that reflected losses once the losses were probable. Under ASU 2016-13, the Company is required to use a current expected credit loss model ("CECL") that immediately recognizes 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 Company adopted ASU 2016-13 effective August 1, 2020, which did not have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, "Goodwill and Other, Simplifying the Test for Goodwill Impairment." The new guidance removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment is now 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 remains largely unchanged. The Company adopted ASC 2017-04 effective August 1, 2020. This guidance only impacts the Company's consolidated financial statements if there is a future impairment of goodwill.

~~Standards not yet adopted~~

In December 2019, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)." ~~The new~~This guidance removes certain exceptions to the general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intraperiod tax allocation and 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 an entity reflect the 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, 2020, and interim periods thereafter. Early adoption is permitted.~~ The Company ~~is currently evaluating the~~adopted ASC 2019-12 effective August 1, 2021, which did not have a material impact ~~that the adoption of this ASU will have~~ on ~~the~~its consolidated financial statements ~~and related~~or disclosures.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." Subject to meeting certain criteria, ~~the new~~this guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected

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phase out of the London Inter-bank Offered Rate ("LIBOR") by the end of 2021. This guidance was effective upon issuance and ~~allows~~allowed application to contract changes as early as January 1, 2020. ~~Some~~The adoption of this update did not have a material impact on the Company's ~~contracts~~consolidated financial statements.

Standards not yet adopted

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with ~~respect~~Customers,” which requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to ~~its borrowing agreements already contain comparable alternative reference rates that would automatically take effect upon~~be recognized and measured by the ~~phasing out of LIBOR.~~acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers.” The guidance is effective for fiscal years beginning after December 15, 2022. The Company does not currently expect a material impact to the financial statements or ~~disclosures.~~disclosures from the adoption of this standard.

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NOTE C — Additional Balance Sheet Information

Inventories

Inventories as of April 30, ~~2021,~~2022, and July 31, ~~2020,~~2021, consisted of the following:


		April 30, 2021		July 31, 2020			April 30, 2022		July 31, 2021
Finished products	Finished products	$	78,484	$	85,547	Finished products	$	103,887	$	87,489
Work-in-process	Work-in-process	20,886		24,044		Work-in-process	27,403		20,189
Raw materials and supplies	Raw materials and supplies	23,477		26,071		Raw materials and supplies	45,866		28,429
Total inventories	Total inventories	$	122,847	$	135,662	Total inventories	$	177,156	$	136,107

Property, plant and equipment

Property, plant and equipment is presented net of accumulated depreciation in the amount of ~~$274,961~~$272,324 and ~~$276,248~~$277,246 as of April 30, ~~2021,~~2022, and July 31, ~~2020,~~2021, respectively.

NOTE D — Other Intangible Assets

Other intangible assets as of April 30, ~~2021~~2022 and July 31, ~~2020,~~2021, consisted of the following:

April 30, 2021 July 31, 2020
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
Definite-lived other intangible assets:
Customer relationships and tradenames 9 $ 45,497 $ (36,783) $ 8,714 9 $ 45,385 $ (32,670) $ 12,715
Indefinite-lived other intangible assets:
Tradenames N/A 9,814 — 9,814 N/A 9,619 — 9,619
Total $ 55,311 $ (36,783) $ 18,528 $ 55,004 $ (32,670) $ 22,334


	April 30, 2022							July 31, 2021
	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:
Tradenames	3	$	1,761	$	(854)	$	907	3	$	1,821	$	(356)	$	1,465
Customer relationships	9	105,867		(45,458)		60,409		9	110,950		(39,069)		71,881
Technology	5	9,208		(1,773)		7,435		5	9,578		(335)		9,243
Unamortized other intangible assets:
Tradenames	N/A	9,487		—		9,487		N/A	9,745		—		9,745
Total		$	126,323	$	(48,085)	$	78,238		$	132,094	$	(39,760)	$	92,334

The change in the gross carrying amount of other intangible assets as of April 30, ~~2021~~2022 compared to July 31, ~~2020~~2021 was primarily due to the effect of currency fluctuations during the nine-month period.

Amortization expense of intangible assets was ~~$1,352~~$3,735 and ~~$1,290~~$1,352 for the three months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$4,056~~$11,291 and ~~$3,872~~$4,056 for the nine months ended April 30, ~~2021 and 2020, respectively. Amortization expense over each of the next three fiscal years is projected to be $5,408, $5,121, and $2,241 for the fiscal years ending July 31, 2021,~~ 2022 and ~~2023. No amortization expense for intangible assets is projected after July 31, 2023.~~2021, respectively.

NOTE E — Leases

The Company leases certain manufacturing facilities, ~~warehouses~~warehouse and office ~~space, computer equipment,~~spaces, and vehicles accounted for as operating leases. Lease terms typically range from one year to ten years. As of April 30, ~~2021,~~2022, the Company did not have any finance leases.

Operating lease expense was ~~$4,714~~$4,346 and ~~$4,219~~$4,714 for the three months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$12,956~~$13,198 and ~~$13,897~~$12,956 for the nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Operating lease expense was recognized in either "Cost of goods sold" or "Selling, general and administrative" expenses in the condensed consolidated statements of income, based on the nature of the lease. Short-term lease expense, variable lease expenses, and sublease income was immaterial to the condensed consolidated statements of income for the three and nine months ended April 30, ~~2021~~2022 and ~~2020.~~2021.

810

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Supplemental cash flow information related to the Company's operating leases for the nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, was as follows:


		Nine months ended April 30,					Nine months ended April 30,
		2021		2020			2022		2021
Operating cash outflows from operating leases	Operating cash outflows from operating leases	$	13,965	$	12,469	Operating cash outflows from operating leases	$	14,582	$	13,965
Operating lease assets obtained in exchange for new operating lease liabilities	Operating lease assets obtained in exchange for new operating lease liabilities	5,832		10,637		Operating lease assets obtained in exchange for new operating lease liabilities	2,553		5,832

NOTE F ~~– Stockholders' Equity~~

~~The following table illustrates the changes in the balances of each component of stockholders' equity for the three months ended April 30, 2021:~~

Common Stock Additional
Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity
Balances at January 31, 2021 $ 548 $ 334,077 $ 745,960 $ (109,789) $ (51,461) $ 919,335
Net income — — 37,291 — — 37,291
Other comprehensive income, net of tax — — — — 2,913 2,913
Issuance of shares of Class A Common Stock under stock plan — 348 — 661 — 1,009
Stock-based compensation expense — 2,532 — — — 2,532
Cash dividends on Common Stock:
Class A — $0.2200 per share — — (10,675) — — (10,675)
Class B — $0.2200 per share — — (779) — — (779)
Balances at April 30, 2021 $ 548 $ 336,957 $ 771,797 $ (109,128) $ (48,548) $ 951,626

~~The following table illustrates the changes in the balances of each component of stockholders' equity for the nine months ended April 30, 2021:~~

Common Stock Additional
Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity
Balances at July 31, 2020 $ 548 $ 331,761 $ 704,456 $ (107,216) $ (66,477) $ 863,072
Net income — — 101,632 — — 101,632
Other comprehensive income, net of tax — — — — 17,929 17,929
Issuance of shares of Class A Common Stock under stock plan — (2,839) — 1,681 — (1,158)
Tax benefit and withholdings from deferred compensation distributions — 32 — — — 32
Stock-based compensation expense — 8,003 — — — 8,003
Repurchase of shares of Class A Common Stock — — — (3,593) — (3,593)
Cash dividends on Common Stock:
Class A — $0.6600 per share — — (32,013) — — (32,013)
Class B — $0.6434 per share — — (2,278) — — (2,278)
Balances at April 30, 2021 $ 548 $ 336,957 $ 771,797 $ (109,128) $ (48,548) $ 951,626

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~~The following table illustrates the changes in the balances of each component of stockholders' equity for the three months ended April 30, 2020:~~

Common Stock Additional
Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity
Balances at January 31, 2020 $ 548 $ 329,263 $ 685,758 $ (43,155) $ (72,490) $ 899,924
Net income — — 13,633 — — 13,633
Other comprehensive loss, net of tax — — — — (19,752) (19,752)
Issuance of shares of Class A Common Stock under stock plan — (91) — 517 — 426
Stock-based compensation expense — 1,796 — — — 1,796
Repurchase of shares of Class A Common Stock — — — (64,113) — (64,113)
Cash dividends on Common Stock:
Class A — $0.2175 per share — — (10,542) — — (10,542)
Class B — $0.2175 per share — — (770) — — (770)
Balances at April 30, 2020 $ 548 $ 330,968 $ 688,079 $ (106,751) $ (92,242) $ 820,602

~~The following table illustrates the changes in the balances of each component of stockholders' equity for the nine months ended April 30, 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 — — 84,684 — — 84,684
Other comprehensive loss, net of tax — — — — (20,988) (20,988)
Issuance of shares of Class A Common Stock under stock plan — (6,314) — 3,694 — (2,620)
Tax benefit and withholdings from deferred compensation distributions — 133 — — — 133
Stock-based compensation expense — 7,180 — — — 7,180
Repurchase of shares of Class A Common Stock — — — (64,113) — (64,113)
Cash dividends on Common Stock:
Class A — $0.6525 per share — — (32,197) — — (32,197)
Class B — $0.6359 per share — — (2,251) — — (2,251)
Balances at April 30, 2020 $ 548 $ 330,968 $ 688,079 $ (106,751) $ (92,242) $ 820,602

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~~NOTE G~~ — Accumulated Other Comprehensive Loss

Other comprehensive loss consists of foreign currency translation adjustments which includes the settlements of net investment hedges, unrealized gains and losses from cash flow 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 months ended April 30, ~~2021:~~2022:


		Unrealized (loss) gain on cash flow hedges		Unamortized gain on post-retirement plans		Foreign currency translation adjustments		Accumulated other comprehensive loss			Unrealized gain on cash flow hedges		Unamortized gain on post-retirement plans		Foreign currency translation adjustments		Accumulated other comprehensive loss
Beginning balance, July 31, 2020		$	(200)	$	2,181	$	(68,458)	$	(66,477)
Beginning balance, July 31, 2021										Beginning balance, July 31, 2021	$	729	$	1,888	$	(58,570)	$	(55,953)
Other comprehensive income (loss) before reclassification	Other comprehensive income (loss) before reclassification	1,189		(23)		16,848		18,014		Other comprehensive income (loss) before reclassification	307		(59)		(42,408)		(42,160)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	(16)		(69)		0		(85)		Amounts reclassified from accumulated other comprehensive loss	(486)		(289)		—		(775)
Ending balance, April 30, 2021		$	973	$	2,089	$	(51,610)	$	(48,548)
Ending balance, April 30, 2022										Ending balance, April 30, 2022	$	550	$	1,540	$	(100,978)	$	(98,888)

The increase in accumulated other comprehensive loss as of April 30, 2022 compared to July 31, 2021, was primarily due to the appreciation of the U.S. dollar against certain other currencies during the nine-month period.

The changes in accumulated other comprehensive loss by component, net of tax, for the nine months ended April 30, 2021, were as follows:


	Unrealized (loss) gain on cash flow hedges		Unamortized gain on post-retirement plans		Foreign currency translation adjustments		Accumulated other comprehensive loss
Beginning balance, July 31, 2020	$	(200)	$	2,181	$	(68,458)	$	(66,477)
Other comprehensive income (loss) before reclassification	1,189		(23)		16,848		18,014
Amounts reclassified from accumulated other comprehensive loss	(16)		(69)		—		(85)
Ending balance, April 30, 2021	$	973	$	2,089	$	(51,610)	$	(48,548)

The decrease in accumulated other comprehensive loss as of April 30, 2021, compared to July 31, 2020, was primarily due to the depreciation of the U.S. dollar against certain other currencies during the nine-month period.

~~The following table illustrates the changes in the balances of each component of accumulated other comprehensive loss, net of tax, for the nine months ended April 30, 2020:~~

Unrealized gain (loss) on cash flow hedges Unamortized gain on post-retirement plans Foreign currency translation adjustments Accumulated other comprehensive loss
Beginning balance, July 31, 2019 $ 707 $ 2,800 $ (74,761) $ (71,254)
Other comprehensive loss before reclassification (1,363) (216) (18,510) (20,089)
Amounts reclassified from accumulated other comprehensive loss (584) (315) 0 (899)
Ending balance, April 30, 2020 $ (1,240) $ 2,269 $ (93,271) $ (92,242)

The increase in accumulated other comprehensive loss as of April 30, 2020, compared to July 31, 2019, was primarily due to the appreciation of the U.S. dollar against certain other currencies during the nine-month period.

Of the amounts reclassified from accumulated other comprehensive loss during the nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, unrealized gains on cash flow hedges were reclassified to "Cost of goods sold" and ~~net~~ unamortized gains on post-retirement plans were reclassified into "Investment and other income" on the condensed consolidated statements of income.

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The following table illustrates the income tax (expense) benefit ~~(expense)~~ on the components of other comprehensive (loss) income ~~(loss)~~ for the three and nine months ended April 30, ~~2021~~2022 and ~~2020:~~2021:


		Three months ended April 30,				Nine months ended April 30,					Three months ended April 30,				Nine months ended April 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Income tax benefit (expense) related to items of other comprehensive income (loss):
Income tax (expense) benefit related to items of other comprehensive (loss) income:										Income tax (expense) benefit related to items of other comprehensive (loss) income:
Cash flow hedges	Cash flow hedges	$	(71)	$	(6)	$	(72)	$	24	Cash flow hedges	$	(15)	$	(71)	$	(206)	$	(72)
Pension and other post-retirement benefits	Pension and other post-retirement benefits	0		0		246		93		Pension and other post-retirement benefits	(3)		—		12		246
Other income tax adjustments and currency translation	Other income tax adjustments and currency translation	372		(173)		(925)		(127)		Other income tax adjustments and currency translation	(87)		372		346		(925)
Income tax benefit (expense) related to items of other comprehensive income (loss)		$	301	$	(179)	$	(751)	$	(10)
Income tax (expense) benefit related to items of other comprehensive (loss) income:										Income tax (expense) benefit related to items of other comprehensive (loss) income:	$	(105)	$	301	$	152	$	(751)

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NOTE HG — Revenue Recognition

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

The Company offers extended warranty coverage that is included in the sales price of certain products, which it accounts for as service warranties. The Company accounts for the deferred revenue associated with extended service warranties as a contract liability. The balance of contract liabilities associated with service warranty performance obligations was ~~$2,567~~$2,687 and ~~$2,559~~$2,519 as of April 30, ~~2021~~2022 and July 31, ~~2020,~~2021, respectively. The current portion and non-current portion of contract liabilities are included in “Other current liabilities” and “Other liabilities," respectively, on the condensed consolidated balance sheets. The Company recognized revenue of ~~$291~~$297 and ~~$317~~$291 during the three months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and $882 ~~and $948~~ during the nine months ended April 30, ~~2021~~2022 and ~~2020, respectively,~~April 30, 2021, that was included in the contract liability balance at the beginning of the respective period from the amortization of extended service warranties. Of the contract liability balance outstanding at April 30, ~~2021,~~2022, the Company expects to recognize 11% by the end of fiscal ~~2021,~~2022, an additional 38% by the end of fiscal ~~2022,~~2023, and the remaining balance thereafter.

NOTE IH — Segment Information

The Company is organized and managed on a global basis within three operating segments, Identification Solutions ("IDS"), Workplace Safety ("WPS"), and People Identification ("PDC"), which aggregate into two reportable segments that are organized around businesses with consistent products and services: IDS and WPS. The IDS and PDC operating segments aggregate into the IDS reporting segment, while the WPS reporting segment is comprised solely of the Workplace Safety operating segment.

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The following is a summary of net sales by segment and geographic region for the three and nine months ended April 30, ~~2021~~2022 and ~~2020:~~2021:


		Three months ended April 30,				Nine months ended April 30,					Three months ended April 30,				Nine months ended April 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net sales:	Net sales:									Net sales:
ID Solutions	ID Solutions									ID Solutions
Americas	Americas	$	143,348	$	131,169	$	401,585	$	418,440	Americas	$	175,648	$	143,348	$	499,557	$	401,585
Europe	Europe	50,416		41,183		137,038		129,884		Europe	63,163		50,416		177,326		137,038
Asia	Asia	24,301		20,817		71,861		65,194		Asia	25,313		24,301		80,844		71,861
Total	Total	$	218,065	$	193,169	$	610,484	$	613,518	Total	$	264,124	$	218,065	$	757,727	$	610,484
Workplace Safety	Workplace Safety									Workplace Safety
Americas	Americas	$	21,425	$	21,456	$	65,656	$	69,395	Americas	$	21,618	$	21,425	$	62,891	$	65,656
Europe	Europe	42,491		37,567		123,922		110,594		Europe	39,646		42,491		119,100		123,922
Australia	Australia	13,522		13,751		38,506		36,048		Australia	13,163		13,522		38,363		38,506
Total	Total	$	77,438	$	72,774	$	228,084	$	216,037	Total	$	74,427	$	77,438	$	220,354	$	228,084
Total Company	Total Company									Total Company
Americas	Americas	$	164,773	$	152,625	$	467,241	$	487,835	Americas	$	197,266	$	164,773	$	562,448	$	467,241
Europe	Europe	92,907		78,750		260,960		240,478		Europe	102,809		92,907		296,426		260,960
Asia-Pacific	Asia-Pacific	37,823		34,568		110,367		101,242		Asia-Pacific	38,476		37,823		119,207		110,367
Total	Total	$	295,503	$	265,943	$	838,568	$	829,555	Total	$	338,551	$	295,503	$	978,081	$	838,568

The following is a summary of segment profit for the three and nine months ended April 30, ~~2021~~2022 and ~~2020:~~2021:

Three months ended April 30, Nine months ended April 30,
2021 2020 2021 2020
Segment profit:
ID Solutions $ 47,539 $ 36,401 $ 126,818 $ 119,499
Workplace Safety 5,656 4,379 17,107 14,991
Total Company $ 53,195 $ 40,780 $ 143,925 $ 134,490

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	Three months ended April 30,				Nine months ended April 30,
	2022		2021		2022		2021
Segment profit:
ID Solutions	$	53,962	$	47,539	$	146,907	$	126,818
Workplace Safety	7,109		5,656		13,917		17,107
Total Company	$	61,071	$	53,195	$	160,824	$	143,925

The following is a reconciliation of segment profit to income before income taxes and losses of unconsolidated affiliate for the three and nine months ended April 30, ~~2021~~2022 and ~~2020:~~2021:


		Three months ended April 30,				Nine months ended April 30,					Three months ended April 30,				Nine months ended April 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Total profit from reportable segments	Total profit from reportable segments	$	53,195	$	40,780	$	143,925	$	134,490	Total profit from reportable segments	$	61,071	$	53,195	$	160,824	$	143,925
Unallocated amounts:	Unallocated amounts:									Unallocated amounts:
Administrative costs	Administrative costs	(6,470)		(4,290)		(17,600)		(15,865)		Administrative costs	(8,182)		(6,470)		(20,728)		(17,600)
Impairment charges		0		(13,821)		0		(13,821)
Investment and other income		1,181		112		3,372		3,252
Investment and other (expense) income										Investment and other (expense) income	(1,308)		1,181		(1,343)		3,372
Interest expense	Interest expense	(131)		(628)		(288)		(1,976)		Interest expense	(329)		(131)		(763)		(288)
Income before income taxes and losses of unconsolidated affiliate	Income before income taxes and losses of unconsolidated affiliate	$	47,775	$	22,153	$	129,409	$	106,080	Income before income taxes and losses of unconsolidated affiliate	$	51,252	$	47,775	$	137,990	$	129,409

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NOTE JI — Net Income per Common Share

~~The following table summarizes~~Reconciliations of the ~~computation~~numerator and denominator of the basic and diluted ~~net income~~ per share computations for the Company’s Class A and Class B common ~~stock:~~stock are summarized as follows:


		Three months ended April 30,				Nine months ended April 30,					Three months ended April 30,				Nine months ended April 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Numerator (in thousands):	Numerator (in thousands):									Numerator (in thousands):
Net Income (Numerator for basic and diluted income per Class A Nonvoting Common Share)	Net Income (Numerator for basic and diluted income per Class A Nonvoting Common Share)	$	37,291	$	13,633	$	101,632	$	84,684	Net Income (Numerator for basic and diluted income per Class A Nonvoting Common Share)	$	40,054	$	37,291	$	108,915	$	101,632
Less:	Less:									Less:
Preferential dividends	Preferential dividends	0		0		(808)		(828)		Preferential dividends	—		—		(803)		(808)
Preferential dividends on dilutive stock options	Preferential dividends on dilutive stock options	0		0		(4)		(10)		Preferential dividends on dilutive stock options	—		—		(8)		(4)
Numerator for basic and diluted income per Class B Voting Common Share	Numerator for basic and diluted income per Class B Voting Common Share	$	37,291	$	13,633	$	100,820	$	83,846	Numerator for basic and diluted income per Class B Voting Common Share	$	40,054	$	37,291	$	108,104	$	100,820
Denominator: (in thousands)	Denominator: (in thousands)									Denominator: (in thousands)
Denominator for basic income per share for both Class A and Class B	Denominator for basic income per share for both Class A and Class B	52,050		52,607		52,030		53,023		Denominator for basic income per share for both Class A and Class B	51,326		52,050		51,700		52,030
Plus: Effect of dilutive equity awards	Plus: Effect of dilutive equity awards	399		365		311		489		Plus: Effect of dilutive equity awards	242		399		355		311
Denominator for diluted income per share for both Class A and Class B	Denominator for diluted income per share for both Class A and Class B	52,449		52,972		52,341		53,512		Denominator for diluted income per share for both Class A and Class B	51,568		52,449		52,055		52,341
Net income per Class A Nonvoting Common Share:	Net income per Class A Nonvoting Common Share:									Net income per Class A Nonvoting Common Share:
Basic	Basic	$	0.72	$	0.26	$	1.95	$	1.60	Basic	$	0.78	$	0.72	$	2.11	$	1.95
Diluted	Diluted	$	0.71	$	0.26	$	1.94	$	1.58	Diluted	$	0.78	$	0.71	$	2.09	$	1.94
Net income per Class B Voting Common Share:	Net income per Class B Voting Common Share:									Net income per Class B Voting Common Share:
Basic	Basic	$	0.72	$	0.26	$	1.94	$	1.58	Basic	$	0.78	$	0.72	$	2.09	$	1.94
Diluted	Diluted	$	0.71	$	0.26	$	1.93	$	1.57	Diluted	$	0.78	$	0.71	$	2.08	$	1.93

Potentially dilutive securities attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted ~~net income~~earnings per share where the combined exercise price and average unamortized fair value were greater than the average market price of ~~Brady's~~the Company's Class A Nonvoting Common Stock because the effect would have been anti-dilutive. The amount of anti-dilutive shares ~~was~~were 526,603 and 239,707 ~~and 488,932~~ for the three months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~603,356~~492,527 and ~~353,752~~603,356 for the nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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NOTE KJ — Fair Value Measurements

In accordance with fair value accounting guidance, the 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 into the following hierarchy:

Level 1 — Unadjusted quoted prices in active markets for identical instruments that are accessible as of the reporting date.

Level 2 — Other significant pricing inputs that are either directly or indirectly observable.

Level 3 — Significant unobservable pricing inputs, which result in the use of management's own assumptions.

The following table summarizes the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis atas of April 30, ~~2021~~2022 and July 31, ~~2020:~~2021:

April 30, 2021

July 31, 2020

Fair Value Hierarchy

April 30, 2022

July 31, 2021

Fair Value Hierarchy

Assets:

Trading securities

20,169

18,606

Level 1

Deferred compensation plan assets

18,529

20,135

Level 1

Foreign exchange contracts

724

594

Level 2

Foreign exchange contracts

433

150

Level 2

Liabilities:

Foreign exchange contracts

252

777

Level 2

Foreign exchange contracts

433

Level 2

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

~~Trading securities:~~Deferred compensation plan assets: The Company’s deferred compensation investments consist of investments in mutual funds, 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 L,K, “Derivatives and Hedging Activities,” for additional information.

The fair values of cash and cash equivalents, accounts receivable, accounts payable, and other liabilities approximated carrying values due to their short-term nature.

NOTE LK — Derivatives and Hedging Activities

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

Main foreign currency exposures are related to transactions denominated in the British Pound, Euro, Canadian dollar, Australian dollar, Mexican Peso, Chinese Yuan, Malaysian Ringgit and 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.

The U.S. dollar equivalent notional amounts of outstanding forward exchange contracts were as follows:

April 30, 2021 July 31, 2020
Designated as cash flow hedges $ 6,150 $ 24,600
Non-designated hedges 3,495 3,107
Total foreign exchange contracts $ 9,645 $ 27,707

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	April 30, 2022		July 31, 2021
Designated as cash flow hedges	$	7,690	$	30,724
Non-designated hedges	20,342		3,580
Total foreign exchange contracts	$	28,032	$	34,304

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 income. As of April 30, ~~2021~~2022 and July 31, ~~2020,~~2021, unrealized gains of ~~$860~~$694 and ~~losses of $385~~$770 have been included in OCI, respectively.

The following table summarizes the amount of pre-tax gains and losses related to foreign exchange contracts designated as cash flow hedging instruments:


		Three months ended April 30,				Nine months ended April 30,					Three months ended April 30,				Nine months ended April 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Gains (losses) recognized in OCI		$	118	$	(1,751)	$	1,266	$	(1,192)
Gains recognized in OCI										Gains recognized in OCI	$	475	$	118	$	674	$	1,266
Gains reclassified from OCI into cost of goods sold	Gains reclassified from OCI into cost of goods sold	292		293		21		779		Gains reclassified from OCI into cost of goods sold	44		292		647		21

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


		April 30, 2021				July 31, 2020					April 30, 2022				July 31, 2021
		Prepaid expenses and other current assets		Other current liabilities		Prepaid expenses and other current assets		Other current liabilities			Prepaid expenses and other current assets		Other current liabilities		Prepaid expenses and other current assets		Other current liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:									Derivatives designated as hedging instruments:
Foreign exchange contracts (cash flow hedges)	Foreign exchange contracts (cash flow hedges)	$	724	$	242	$	588	$	761	Foreign exchange contracts (cash flow hedges)	$	433	$	—	$	150	$	51
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Foreign exchange contracts (non-designated hedges)	Foreign exchange contracts (non-designated hedges)	0		10		6		16		Foreign exchange contracts (non-designated hedges)	—		433		—		—
Total derivative instruments	Total derivative instruments	$	724	$	252	$	594	$	777	Total derivative instruments	$	433	$	433	$	150	$	51

NOTE ML — Income Taxes

The ~~effective~~ income tax rate for the three months ended April 30, 2022 and 2021, was 21.8% and 21.4%, respectively. The income tax rate for the nine months ended April 30, 2022 and 2021, was ~~21.4%~~21.1% and 20.9%, respectively.The Company expects its ongoing annual ~~effective~~ income tax rate to ~~approximate~~be approximately 20% ~~over the long-term~~ based on its current global business mix and based on ~~current~~ tax laws and statutory tax rates currently in effect. ~~However, quarterly tax rates could vary substantially based on the respective facts and circumstances at that point in time.~~

The effective income tax rate for the three and nine months ended April 30, 2020, was 38.5% and 20.2%, respectively. The effective income tax rate for the three months ended April 30, 2020 was higher than the expected income tax rate due to an increase in the valuation allowance against foreign tax credit carryforwards resulting from a decrease in the Company's expectations of future foreign source income.

NOTE NM — Subsequent Events

On May ~~19, 2021,~~24, 2022, the Board of Directors declared a quarterly cash dividend to shareholders of the Company’s Class A and Class B Common Stock of ~~$0.22~~$0.225 per share payable on July ~~30, 2021,~~29, 2022, to shareholders of record at the close of business on July ~~9, 2021.~~8, 2022.

Subsequent to April 30, 2022, the Company has purchased 203,664 shares of its Class A Nonvoting Common Stock under its share repurchase program for an aggregate purchase price of $9.3 million and an average purchase price per share of $45.71, which fully exhausted all shares available for repurchase under the existing repurchase program.

On May ~~19, 2021,~~24, 2022, the ~~results~~Company's Board of Directors authorized an increase in the Company's share repurchase program, authorizing the repurchase of up to $100.0 million of the ~~Company’s cash tender offer~~Company's Class A Nonvoting Common Stock. The share repurchase program may be implemented from time to time on the open market or in privately negotiated transactions and has no expiration date. The repurchased shares will be available for ~~all of~~use in connection with the outstanding, publicly-held shares of Nordic ID Oyj (“Nordic ID”) were finalized. According to the final results of the cash tender offer, the shares of Nordic ID that were validly tendered represent 92.9% of all outstanding sharesCompany's stock-based plans and votes of Nordic ID. The Company intends to complete the cash tender offer on or about May 21, 2021, following which the Company intends to acquire all of the remaining outstanding shares of Nordic ID and cause Nordic ID to apply for delisting of its shares from Nasdaq First North Growth Market Finland. The cash consideration offered for each Nordic ID Share validly tendered in the Tender Offer is EUR 3.30 per share, which equates to a total equity purchase of EUR 8.1 million (USD 9.9 million), plus the assumption of debt of approximately USD 3 million.other corporate purposes.

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

Overview

Brady Corporation is a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The IDS segment is primarily involved in the design, manufacture, and distribution of high-performance and innovative safety, identification and healthcare products. The WPS segment ~~provides workplace safety,~~manufactures a broad range of stock and custom identification products and ~~compliance products, approximately half~~sells a broad range of ~~which are internally manufactured and half of which are externally sourced.~~resale products.

The ability to provide customers with a broad range of proprietary, customized and diverse products for use in various applications across multiple industries and geographies, along with a commitment to quality and service, have made Brady a leader in many of its markets. 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 the efficiency of our global operations, deliver a high level of customer service, develop and market innovative new products, and to advance our digital capabilities. In our IDS business, our strategy for growth includes an increased focus on certain industries and products, a focus on improving the customer buying experience, and the development of technologically advanced, innovative and proprietary products. In our 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 our strategy in fiscal ~~2021:~~2022:

•Investing in organic growth by enhancing our research and development process and utilizing customer feedback to develop innovative new products.

•Investing in acquisitions that enhance our strategic position and accelerate long-term sales growth.

•Providing our customers with the highest level of customer service.

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

•Maintaining profitability through pricing mechanisms to mitigate the impacts of supply chain disruptions and inflationary pressures.

•Driving operational excellence and executing sustainable efficiency gains within our selling, general and administrative ~~structures~~ and ~~within our~~ global operations structures including insourcing of critical products and manufacturing activities.

•Building on our culture of diversity, equity and inclusion to increase employee engagement and enhance recruitment and retention practices.

Impact of the COVID-19 Pandemic and other Global Geopolitical Events on Our Business

~~Brady Corporation is deemed an essential business under~~The Company has experienced, and expects to continue to experience, increased freight and input material cost inflation as a result of increased global demand, disruptions caused by COVID-19 and government-mandated actions in response to COVID-19, the ~~majority of local government orders. Our products support first responders, healthcare workers, food processing companies,~~conflict in the Ukraine, as well as labor shortages. The Company has taken and ~~many other critical industries. During the three and nine months ended April 30, 2021, our facilities were operating globally with enhanced safety protocols designed~~will continue to ~~protect the health and safety of our employees.~~

~~We have taken actions throughout our business to reduce controllable costs, including~~take actions to ~~reduce labor costs, eliminate non-essential travel,~~mitigate inflation issues, but thus far has not fully offset the impact of these trends partially due to advance notice requirements of certain distributors. As a result, these trends have negatively impacted the Company's gross profit margin, and ~~reduce discretionary spend.~~ we expect ongoing inflationary pressures and supply chain issues will continue to negatively impact profitability in the fourth quarter of fiscal 2022.

We believe we have the financial strength to continue to invest in organic sales growth opportunities ~~inorganic~~including sales, ~~opportunities,~~marketing, and research and development ("R&D"), and inorganic sales opportunities including acquisitions, while continuing to drive sustainable efficiencies and automation in our operations and selling, general and administrative ("SG&A") functions. At April 30, ~~2021,~~2022, we had cash of ~~$321.8~~$103.1 million, ~~an undrawn~~as well as a credit facility ~~of $200~~with $121.3 million available for future borrowing, which can be increased up to ~~$400~~$321.3 million at the Company's option and subject to certain conditions, ~~and outstanding letters of credit of $3.6 million,~~ for total available liquidity of approximately ~~$718~~$424.4 million.

We believe that our financial resources and liquidity levels including the remaining undrawn amount of the credit facility and ~~debt-free status~~our ability to increase that credit line as necessary are sufficient to manage the continuing impact of geopolitical events including supply chain disruptions as a result of the conflict in the Ukraine as well as the COVID-19 pandemic, including the spread of variants that could result in additional government actions around the world to contain the virus or prevent further spread which may result in reduced sales, reduced net income, and reduced cash provided by operating activities. Refer to Risk Factors, included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended July 31, ~~2020, along with Risks Factors, included in Part II, Item IA of this Quarterly Report on Form 10-Q for the period ended April 30,~~ 2021, for further discussion of the possible impact of the COVID-19 pandemic on our business.

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Results of Operations

The comparability of the operating results for the three and nine months ended April 30, 2022 to the prior year has been impacted by the following acquisitions:

Acquisitions

Segment

Date Completed

Magicard Holdings Limited ("Magicard")

IDS

May 2021

Nordic ID Oyj ("Nordic ID")

IDS

May 2021

The Code Corporation ("Code")

IDS

June 2021

A comparison of results of operating income for the three and nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, is as follows:


		Three months ended April 30,								Nine months ended April 30,									Three months ended April 30,								Nine months ended April 30,
(Dollars in thousands)	(Dollars in thousands)	2021		% Sales		2020		% Sales		2021		% Sales		2020		% Sales		(Dollars in thousands)	2022		% Sales		2021		% Sales		2022		% Sales		2021		% Sales
Net sales	Net sales	$	295,503			$	265,943			$	838,568			$	829,555			Net sales	$	338,551			$	295,503			$	978,081			$	838,568
Gross margin	Gross margin	148,847		50.4	%	129,527		48.7	%	413,797		49.3	%	410,059		49.4	%	Gross margin	164,026		48.4	%	148,847		50.4	%	468,376		47.9	%	413,797		49.3	%
Operating expenses:	Operating expenses:																	Operating expenses:
Research and development	Research and development	11,305		3.8	%	9,814		3.7	%	31,384		3.7	%	31,298		3.8	%	Research and development	14,923		4.4	%	11,305		3.8	%	42,795		4.4	%	31,384		3.7	%
Selling, general and administrative	Selling, general and administrative	90,817		30.7	%	83,223		31.3	%	256,088		30.5	%	260,136		31.4	%	Selling, general and administrative	96,214		28.4	%	90,817		30.7	%	285,485		29.2	%	256,088		30.5	%
Impairment charges		—		—	%	13,821		5.2	%	—		—	%	13,821		1.7	%
Total operating expenses	Total operating expenses	102,122		34.6	%	106,858		40.2	%	287,472		34.3	%	305,255		36.8	%	Total operating expenses	111,137		32.8	%	102,122		34.6	%	328,280		33.6	%	287,472		34.3	%
Operating income	Operating income	$	46,725	15.8	%	$	22,669	8.5	%	$	126,325	15.1	%	$	104,804	12.6	%	Operating income	$	52,889	15.6	%	$	46,725	15.8	%	$	140,096	14.3	%	$	126,325	15.1	%

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

Net sales for the three months ended April 30, ~~2021,~~2022 increased ~~11.1%~~14.6% to ~~$295.5~~$338.6 million, compared to ~~$265.9~~$295.5 million in the same period ofin the prior year. The increase consisted of an organic sales growth of ~~6.5%~~9.0%, sales growth from acquisitions of 8.6% and a ~~positive~~decrease from foreign currency ~~impact~~translation of ~~4.6% due to the weakening of the U.S. Dollar against certain other currencies as compared to the same period in the prior year.~~3.0%. Organic sales grew ~~9.8%~~11.8% in the IDS segment and ~~declined 2.2%~~0.9% in the WPS segment during the three months ended April 30, ~~2021,~~2022, compared to the same period in the prior year.

~~The most significant impact on organic~~In the first quarter of fiscal 2021, the IDS business began to recover from a decline in sales due to the impacts of the COVID-19 pandemic ~~started in the second half of fiscal 2020 when varied government responses to the pandemic impacted~~on a large demographic of our customers and the overall global ~~economy. The IDS segment realized reduced demand across all major product lines beginning in the third quarter fiscal 2020,~~economy, while the WPS segment realized ~~essentially flat~~strong organic sales ~~in the third quarter in fiscal 2020 primarily~~growth due to increased sales of personal protective equipment and other pandemic-related ~~products which offset decreased demand in other core~~ products. ~~For~~As a result, the ~~three months ended April 30, 2021,~~recovery from the COVID-19 pandemic ~~continued to affect~~had a significant impact on year-to-date organic sales inthrough the third quarter of fiscal 2022, with the impact varying between the IDS and WPS ~~segments, although~~businesses due to ~~a much lesser extent compared to~~sales patterns realized during the ~~same period~~height of the pandemic in ~~the prior year.~~fiscal 2021.

Net sales for the nine months ended April 30, ~~2021,~~2022, increased ~~1.1%~~16.6% to ~~$838.6~~$978.1 million, compared to ~~$829.6~~$838.6 million in the same period ofin the prior year. The increase consisted of an organic sales ~~decline~~growth of ~~1.7%~~9.6%, sales growth from acquisitions of 8.5% and a ~~positive~~decrease from foreign currency ~~impact~~translation of ~~2.8%~~1.5%. Organic sales ~~declined 2.1%~~increased 13.6% in the IDS segment and declined ~~0.5%~~1.1% in the WPS segment during the nine months ended April 30, ~~2021,~~2022, compared to the same period in the prior year. ~~The COVID-19 pandemic had a significant impact on organic sales during the nine months ended April 30, 2021, with the impact varying between the IDS and WPS segments.~~

Gross margin increased ~~14.9%~~10.2% to ~~$148.8~~$164.0 million in the three months ended April 30, ~~2021,~~2022, compared to $129.5 million in the same period in the prior year. As a percentage of net sales, gross margin increased to 50.4% compared to 48.7% in the same period in the prior year. The increase was due to the increase in sales volumes in our IDS business, which was partially offset by a decrease in gross margin in our WPS business due to product mix. Gross margin increased 0.9% to $413.8 million for the nine months ended April 30, 2021, compared to $410.1$148.8 million in the same period in the prior year. As a percentage of net sales, gross margin decreased to ~~49.3%~~48.4% compared to ~~49.4%~~50.4% in the same period in the prior year. Gross margin increased 13.2% to $468.4 million for the nine months ended April 30, 2022, compared to $413.8 million in the same period in the prior year. As a percentage of net sales, gross margin decreased to 47.9% compared to 49.3% in the same period in the prior year. The decrease in gross margin ~~during the nine-month period~~as a percentage of net sales was primarily due to ~~reduced sales volumes~~an increase in ~~both IDS~~the cost of materials, labor and ~~WPS as well as product mix in~~freight, which was partially mitigated by our ~~WPS business.~~ongoing efforts to increase prices streamline manufacturing processes, and drive sustainable operational efficiencies.

R&D expenses increased ~~15.2%~~32.0% to ~~$11.3~~$14.9 million and increased ~~0.3%~~36.4% to ~~$31.4~~$42.8 million for the three and nine months ended April 30, ~~2021,~~2022, respectively, compared to ~~$9.8~~$11.3 million and ~~$31.3~~$31.4 million in the same periods in ~~the prior year. As a percentage of sales, R&D expenses remained essentially flat for both the three and nine months ended April 30, 2021, compared to the same periods of~~ the prior year. The increase in R&D spending for both the three and nine-month periods was primarily due to ~~an increase in incentive-based compensation, which was partially offset by~~the acquisitions of Code and Nordic ID, as these companies operate with a ~~decrease in headcount, improved efficiency, and the timing~~greater amount of ~~expenditures related to ongoing new product development costs~~R&D spend as a percentage of net sales compared to ~~the same periods~~Brady's organic business. In

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addition, R&D headcount increased in the ~~prior year.~~IDS business. The Company remains committed to investing in new product development to increase sales within our IDS and WPS businesses. Investments in new printers, materials, and ~~materials~~the building out of a comprehensive industrial track and trace solution continue to be the primary focus of R&D ~~expenditures.~~

~~Table~~expenditures for the remainder of ~~Contents~~

fiscal 2022.

SG&A expenses include selling and ~~administration~~administrative costs directly attributed to the IDS and WPS segments, as well as certain other ~~corporate~~general and administrative expenses including finance, information technology, human resources, and other administrative expenses. SG&A expenses increased ~~9.1%~~5.9% to ~~$90.8~~$96.2 million in the three months ended April 30, ~~2021,~~2022, compared to ~~$83.2~~$90.8 million in the same period in the prior year. ~~As a percentage of net sales,~~ SG&A ~~decreased~~expenses increased 11.5% to ~~30.7%~~$285.5 million for the nine months ended April 30, 2022, compared to ~~31.3%~~$256.1 million in the same period in the prior year. The increase in SG&A expenses in both the three and nine-month periods was primarily due to ~~increased incentive compensation compared~~the acquisitions of Code, Magicard and Nordic ID, and to ~~the lower than normal incentive compensation~~a lesser extent an increase in sales headcount in the ~~prior year, and~~IDS business, which was partially offset by a decrease due to foreign currency translation. The decrease as a percentage of net sales was due to a reduction in the SG&A cost structure and a reduction in discretionary spend including a decrease in travel for our sales people when compared to the same period in the prior year.

~~SG&A expenses decreased 1.6% to $256.1 million for the nine months ended April 30, 2021, compared to $260.1 million in the same period in the prior year.~~ As a percentage of net sales, SG&A decreased to ~~30.5% from 31.4%~~28.4% compared to 30.7% in the three-month period and decreased to 29.2% compared to 30.5% in the nine-month period ended April 30, 2022, compared to the same ~~period~~periods in the prior year. The decrease in SG&A ~~was due to~~expense as a ~~reduction in the SG&A cost structure and a reduction in discretionary spend including a decrease in travel~~percentage of sales for ~~our sales people when compared to the same period in the prior year, which was partially offset by an increase in incentive compensation and foreign currency translation.~~

~~As a result of the global economic slowdown that began during~~ the three ~~months~~and nine-month periods ended April 30, ~~2020~~2022 was primarily due to the COVID-19 pandemic, management evaluated whether indicators of impairment of intangible assets and other long-lived assets existed. Management concluded that the COVID-19 pandemic resulted in indicators of impairment in certain businesses within the WPS and IDS segments, and performed an interim impairment analysis. As a result of the analysis, impairment charges of $13.8 million related to other intangible and long-lived assets, primarily in the WPS segment, were recorded during the three months ended April 30, 2020.ongoing efficiency activities throughout SG&A.

Operating income increased ~~106.1%~~13.2% to ~~$46.7~~$52.9 million and increased ~~20.5%~~10.9% to ~~$126.3~~$140.1 million for the three and nine months ended April 30, ~~2021,~~2022, respectively, compared to ~~$22.7~~$46.7 million and ~~$104.8~~$126.3 million in the same periods in the prior year. The increase in operating income in both the ~~three~~three- and nine-month periods was primarily due to the increase in segment profit in the IDS segment as a result of organic sales growth, and to a lesser extent an increase in segment profit in the ~~impairment charge recognized during the period ended April 30, 2020.~~WPS segment due to its reduced cost structure.

OPERATING INCOME TO NET INCOME


		Three months ended April 30,								Nine months ended April 30,									Three months ended April 30,								Nine months ended April 30,
(Dollars in thousands)	(Dollars in thousands)	2021		% Sales		2020		% Sales		2021		% Sales		2020		% Sales		(Dollars in thousands)	2022		% Sales		2021		% Sales		2022		% Sales		2021		% Sales
Operating income	Operating income	$	46,725	15.8	%	$	22,669	8.5	%	$	126,325	15.1	%	$	104,804	12.6	%	Operating income	$	52,889	15.6	%	$	46,725	15.8	%	$	140,096	14.3	%	$	126,325	15.1	%
Other income (expense):
Investment and other income		1,181		0.4	%	112		—	%	3,372		0.4	%	3,252		0.4	%
Other (expense) income:																		Other (expense) income:
Investment and other (expense) income																		Investment and other (expense) income	(1,308)		(0.4)	%	1,181		0.4	%	(1,343)		(0.1)	%	3,372		0.4	%
Interest expense	Interest expense	(131)		—	%	(628)		(0.2)	%	(288)		—	%	(1,976)		(0.2)	%	Interest expense	(329)		(0.1)	%	(131)		—	%	(763)		(0.1)	%	(288)		—	%
Income before income tax and losses of unconsolidated affiliate	Income before income tax and losses of unconsolidated affiliate	47,775		16.2	%	22,153		8.3	%	129,409		15.4	%	106,080		12.8	%	Income before income tax and losses of unconsolidated affiliate	51,252		15.1	%	47,775		16.2	%	137,990		14.1	%	129,409		15.4	%
Income tax expense	Income tax expense	10,229		3.5	%	8,520		3.2	%	27,017		3.2	%	21,396		2.6	%	Income tax expense	11,198		3.3	%	10,229		3.5	%	29,075		3.0	%	27,017		3.2	%
Income before losses of unconsolidated affiliate	Income before losses of unconsolidated affiliate	37,546		12.7	%	13,633		5.1	%	102,392		12.2	%	84,684		10.2	%	Income before losses of unconsolidated affiliate	40,054		11.8	%	37,546		12.7	%	108,915		11.1	%	102,392		12.2	%
Equity in losses of unconsolidated affiliate	Equity in losses of unconsolidated affiliate	(255)		(0.1)	%	—		—	%	(760)		(0.1)	%	—		—	%	Equity in losses of unconsolidated affiliate	—		—	%	(255)		(0.1)	%	—		—	%	(760)		(0.1)	%
Net income	Net income	$	37,291	12.6	%	$	13,633	5.1	%	$	101,632	12.1	%	$	84,684	10.2	%	Net income	$	40,054	11.8	%	$	37,291	12.6	%	$	108,915	11.1	%	$	101,632	12.1	%

Investment and other ~~income~~expense was ~~$1.2~~$1.3 million ~~and $0.1 million for~~in both the three and nine months ended April 30, ~~2021~~2022, compared to investment and ~~2020, respectively. The increase~~other income of $1.2 million in the three-month period and $3.4 million in the nine-month period ended April 30, 2021. The decrease in the three and nine-month periods was primarily due to ~~an increase~~a decrease in the market value of securities held in deferred compensation plans, which was partially offset by a decrease in interest income due to the decline in interest rates. Investment and other income was consistent at $3.4 million and $3.3 million for the nine months ended April 30, 2021 and 2020, respectively.plans.

Interest expense ~~decreased~~increased to ~~$0.1~~$0.3 million and ~~$0.3~~$0.8 million for the three and nine months ended April 30, ~~2021,~~2022, respectively, compared to ~~$0.6~~$0.1 million and ~~$2.0~~$0.3 million in the same periods in the prior year. The ~~decrease~~increase in interest expense for both the three and nine-month periods was due to increased borrowing on our credit facility compared to the ~~repayment of~~same periods in the ~~Company's principal balance under its private placement debt agreement during the fourth quarter of fiscal 2020.~~prior year.

The Company's income tax rate was ~~21.4%~~21.8% and ~~38.5%~~21.4% for the three months ended April 30, 2022 and 2021, ~~and 2020,~~respectively, and the income tax rate was ~~20.9%~~21.1% and ~~20.2%~~20.9% for the nine months ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Refer to Note M,L, "Income Taxes" for additional information on the Company's income tax rates.

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Equity in losses of unconsolidated affiliate of $0.3 million and $0.8 million for the three and nine months ended April 30, 2021, respectively, represented the Company's proportionate share of the loss in its equity interest in React Mobile, Inc., an employee safety software and hardware company based in the United States. In the fourth quarter of fiscal 2021, the Company recorded an other-than-temporary impairment charge for the Company's remaining equity interest in React Mobile, Inc.

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Business Segment Operating Results

The Company evaluates short-term segment performance based on segment profit and customer sales. Interest expense, investment and other (expense) income, income tax expense, equity in losses of unconsolidated affiliate, and certain corporate administrative expenses are excluded when evaluating segment performance.

The following is a summary of segment information for the three and nine months ended April 30, ~~2021,~~2022 and ~~2020:~~2021:


		Three months ended April 30,				Nine months ended April 30,					Three months ended April 30,						Nine months ended April 30,
		2021		2020		2021		2020			2022			2021			2022			2021
SALES GROWTH INFORMATION	SALES GROWTH INFORMATION									SALES GROWTH INFORMATION
ID Solutions	ID Solutions									ID Solutions
Organic	Organic	9.8	%	(8.2)	%	(2.1)	%	(3.2)	%	Organic	11.8		%	9.8		%	13.6		%	(2.1)		%
Acquisitions										Acquisitions	11.7		%	—		%	11.8		%	—		%
Currency	Currency	3.1	%	(1.5)	%	1.6	%	(1.1)	%	Currency	(2.4)		%	3.1		%	(1.3)		%	1.6		%
Total	Total	12.9	%	(9.7)	%	(0.5)	%	(4.3)	%	Total	21.1		%	12.9		%	24.1		%	(0.5)		%
Workplace Safety	Workplace Safety									Workplace Safety
Organic	Organic	(2.2)	%	0.2	%	(0.5)	%	(0.5)	%	Organic	0.9		%	(2.2)		%	(1.1)		%	(0.5)		%
Currency	Currency	8.6	%	(4.1)	%	6.1	%	(3.1)	%	Currency	(4.8)		%	8.6		%	(2.3)		%	6.1		%
Total	Total	6.4	%	(3.9)	%	5.6	%	(3.6)	%	Total	(3.9)		%	6.4		%	(3.4)		%	5.6		%
Total Company	Total Company									Total Company
Organic	Organic	6.5	%	(6.0)	%	(1.7)	%	(2.5)	%	Organic	9.0		%	6.5		%	9.6		%	(1.7)		%
Acquisitions										Acquisitions	8.6		%	—		%	8.5		%	—		%
Currency	Currency	4.6	%	(2.2)	%	2.8	%	(1.6)	%	Currency	(3.0)		%	4.6		%	(1.5)		%	2.8		%
Total										Total	14.6		%	11.1		%	16.6		%	1.1		%
SEGMENT PROFIT										SEGMENT PROFIT
ID Solutions										ID Solutions	$	53,962		$	47,539		$	146,907		$	126,818
Workplace Safety										Workplace Safety	7,109			5,656			13,917			17,107
Total	Total	11.1	%	(8.2)	%	1.1	%	(4.1)	%	Total	$	61,071		$	53,195		$	160,824		$	143,925
SEGMENT PROFIT AS A PERCENT OF NET SALES	SEGMENT PROFIT AS A PERCENT OF NET SALES									SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions	ID Solutions	21.8	%	18.8	%	20.8	%	19.5	%	ID Solutions	20.4		%	21.8		%	19.4		%	20.8		%
Workplace Safety	Workplace Safety	7.3	%	6.0	%	7.5	%	6.9	%	Workplace Safety	9.6		%	7.3		%	6.3		%	7.5		%
Total	Total	18.0	%	15.3	%	17.2	%	16.2	%	Total	18.0		%	18.0		%	16.4		%	17.2		%

ID Solutions

IDS net sales increased ~~12.9%~~21.1% to ~~$218.1~~$264.1 million for the three months ended April 30, ~~2021,~~2022, compared to $218.1 million in the same period in the prior year, which consisted of organic sales growth of ~~9.8%~~11.8%, sales growth from acquisitions of 11.7% and ~~an increase~~a decrease from foreign currency translation of ~~3.1%~~2.4%. The economic slowdown caused by the COVID-19 pandemic had a significant impact on organic sales trends in the three months ended April 30, 2021 and 2020. Organic sales recovered in all major product lines with growth in the safety and facility identification, healthcare identification, product identification, and wire identification product lines in the three months ended April 30, 2021. Demand increased in most end markets as economic activity improved following the disruption caused by the COVID-19 pandemic during the second half of fiscal 2020 and the first half of fiscal 2021.

IDS net sales ~~declined 0.5%~~increased 24.1% to ~~$610.5~~$757.7 million for the nine months ended April 30, ~~2021,~~2022, compared to $610.5 million in the same period in the prior year, which consisted of organic sales growth of 13.6%, sales growth from acquisitions of 11.8% and a decrease from foreign currency translation of 1.3%. Organic sales grew in all major product lines with the strongest growth in the safety and facility identification and wire identification product lines in both the three and nine months ended April 30, 2022. Organic sales increased in all three regions as our businesses continue to recover from the economic slowdown caused by the COVID-19 pandemic.

Segment profit increased 13.5% to $54.0 million for the three months ended April 30, 2022, compared to $47.5 million in the same period in the prior year. Segment profit increased 15.8% to $146.9 million for the nine months ended April 30, 2022, compared to $126.8 million in the same period in the prior year. As a percentage of net sales, segment profit decreased to 20.4% from 21.8% for the three-month period, and segment profit decreased to 19.4% from 20.8% for the nine-month period ended April 30, 2022 compared to the same periods in the prior year. The decrease in segment profit as a percentage of net sales was primarily due to gross margin compression resulting from an increase in the cost of materials, labor and freight, as well as incremental amortization expense of $2.4 million and $7.2 million in the three and nine months ended April 30, 2022, respectively, which was partially offset by pricing actions, compared to the same periods in the prior year.

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Workplace Safety

WPS net sales decreased 3.9% to $74.4 million for the three months ended April 30, 2022, compared to $77.4 million in the same period in the prior year, which consisted of organic sales growth of 0.9% and a decrease from foreign currency translation of 4.8%. Digital sales increased in the low-single digits while catalog channel sales were essentially flat in the three-month period ended April 30, 2022.

WPS net sales decreased 3.4% to $220.4 million for the nine months ended April 30, 2022, compared to $228.1 million in the same period in the prior year, which consisted of an organic sales decline of ~~2.1%~~1.1% and ~~an increase~~a decrease from foreign currency translation of 1.6%. Organic sales declined in the nine-month period due to reduced demand during the first half of the fiscal year resulting from the economic slowdown caused by the COVID-19 pandemic. Organic sales declined in the safety and facility identification and healthcare identification product lines, which was partially offset by organic sales growth in the product identification and wire identification product lines.

Organic sales in the Americas increased in the high-single digits for the three months ended April 30, 2021, compared to the same period in the prior year. Organic sales grew in all major product lines with growth in the wire identification, safety and facility identification, product identification, and healthcare identification product lines. Organic sales grew in the high-single digits in the United States and grew approximately 20% in the remainder of the Americas region for the three months ended April 30, 2021.

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Organic sales in the Americas declined in the low-single digits for the nine months ended April 30, 2021, compared to the same period in the prior year. Organic sales declined in the healthcare identification and safety and facility identification product lines due to reduced demand during the first half of the fiscal year resulting from the economic slowdown caused by the COVID-19 pandemic. This was partially offset by organic sales growth in the product identification and wire identification product lines. Organic sales declined in the low-single digits in the United States and grew in the mid-single digits in the remainder of the Americas region for the nine months ended April 30, 2021.

Organic sales in Europe increased in the low-double digits for the three months ended April 30, 2021, compared to the same period in the prior year. Organic sales grew in the safety and facility identification, product identification, and wire identification product lines. Organic sales growth was broad-based throughout both Western Europe and businesses based in emerging geographies primarily due to increased economic activity following the disruption caused by the COVID-19 pandemic.

Organic sales in Europe declined in the low-single digits for the nine months ended April 30, 2021, compared to the same period in the prior year. Organic sales declined in the healthcare identification product line primarily due to reduced demand from the economic slowdown caused by the COVID-19 pandemic, which was partially offset by organic sales growth in the product identification, safety and facility identification, and wire identification product lines. Organic sales declined throughout Western Europe which was partially offset by organic sales growth in emerging geographies during the nine-month period.

Organic sales in Asia increased in the low-double digits for the three months ended April 30, 2021, and increased in the mid-single digits for the nine months ended April 30, 2021, compared to the same periods in the prior year. Organic sales growth in both periods was primarily driven by growth in the product identification product line, and to a lesser extent growth in the wire identification and safety and facility identification product lines due to increased demand for industrial identification products. Organic sales in China grew in the low-single digits in both periods. Organic sales grew nearly 20% throughout the rest of Asia for the three-month period and grew in the high-single digits for the nine-month period ended April 30, 2021.

Segment profit increased 30.6% to $47.5 million for the three months ended April 30, 2021, compared to $36.4 million in the same period in the prior year. Segment profit increased 6.1% to $126.8 million for the nine months ended April 30, 2021, compared to $119.5 million for the same period in the prior year. As a percentage of net sales, segment profit increased to 21.8% from 18.8% for the three-month period, and segment profit increased to 20.8% from 19.5% for the nine-month period ended April 30, 2021 compared to the same periods in the prior year. The increase in segment profitability was due to increased sales volumes and an overall reduction in the cost structure throughout the IDS segment.

~~Workplace Safety~~

WPS net sales increased 6.4% to $77.4 million for the three months ended April 30, 2021, compared to the same period in the prior year, which consisted of an organic sales decline of 2.2% and an increase from foreign currency translation of 8.6%2.3%. The economic effect of the COVID-19 pandemic had a significant impact on organic sales trends during the ~~second half of fiscal 2020.~~prior year. The WPS business ~~refined its~~realized strong organic sales growth through the first quarter of fiscal 2021 due to increased sales of personal protective equipment and other pandemic-related products. As a result, WPS organic sales declined year-to-date in fiscal 2022 primarily due to the decrease in demand for and sales of COVID-19 products. Digital sales were essentially flat and catalog channel sales decreased in the low-single digits organically in the nine-month period ended April 30, 2022.

Organic sales in Europe were essentially flat in both the three and nine months ended April 30, 2022, compared to the same periods in the prior year. Both digital ~~marketing efforts to focus on~~sales and catalog channel sales were essentially flat in both the ~~increase~~three and nine-month periods ended April 30, 2022. Increased demand for core safety and identification products was offset by a decrease in demand for personal protective equipment and other ~~social distancing signage and floor markings resulting from the COVID-19 pandemic. These actions resulted in a significant increase in~~pandemic-related products.

Organic sales in these product categories while sales of core safety and identification products declined due to the economic disruption caused by the pandemic. WPS continues to sell COVID-19 pandemic-related products, but there was reduced demand for these products and sales did not replace the decline in demand for core safety and identification productsNorth America were essentially flat in the three months ended April 30, ~~2021~~2022, compared to the same period in the prior year.

~~WPS net~~ Digital sales increased ~~5.6% to $228.1 million for~~in the low-teens and catalog channel sales were essentially flat in the three months ended April 30, 2022. Organic sales in North America declined in the mid-single digits in the nine months ended April 30, ~~2021,~~2022, compared to the same period in the prior ~~year, which consisted of an organic~~year. Digital sales ~~decline of 0.5%~~were essentially flat and an increase from foreign currency translation of 6.1%. Due to the increased digital marketing efforts around demand for personal protective equipment and other social distancing signage and floor markings resulting from the COVID-19 pandemic, the business realized organiccatalog channel sales ~~growth~~decreased in the first half of fiscal 2021. WPS continues to sell COVID-19 pandemic-related products, but the demand for these products has declined and sales did not replace the decline in demand for core safety and identification productsmid-single digits in the ~~nine months~~nine-month period ended April 30, ~~2021 compared to the same period in the prior year.~~2022.

Organic sales in ~~Europe~~Australia increased in the low-single digits ~~for~~in both the three and nine months ended April 30, ~~2021,~~2022, compared to the same periods in the prior year. Digital sales increased in the ~~mid-single digits in the three months~~low-teens and ~~increased in the high-single digits in the nine months ended April 30, 2021, while sales through the~~ catalog channel ~~increased~~sales were essentially flat in the low-single digits in both periods. Organic sales growth in Europe was led by businesses in France, which was partially offset by a decline in organic sales throughout the remainder of Western Europe.

~~Organic sales in North America declined in the low-single digits for~~ the three months ended April 30, ~~2021,~~2022, compared to the same period in the prior year. ~~Due to the~~Both digital and catalog channel sales increased ~~digital marketing efforts around demand for personal protective~~

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equipment and other social distancing signage and floor markings resulting from the COVID-19 pandemic, the business realized increased sales of these products during the second half of fiscal 2020. Demand for these products declined and COVID-19 pandemic-related product sales did not replace the decline in demand for core safety and identification products in the ~~three~~low-single digits in the nine months ended April 30, ~~2021~~2022, compared to the same period in the prior year. ~~Digital sales increased in the high-single digits and sales through the catalog channel decreased in the low-single digits in the three months ended April 30, 2021.~~

Organic sales in North America declined in the mid-single digits for the nine months ended April 30, 2021, compared to the same period in the prior year. The decline was driven by one of our businesses in the United States that sells primarily to small companies, which resulted in a significant decline in sales at the beginning of the COVID-19 pandemic and has only recently annualized the significant sales declines realized in the prior year. Digital sales increased in the mid-single digits and sales through the catalog channel decreased in the high-single digits in the nine months ended April 30, 2021.

Organic sales in Australia declined in the high-teens for the three months ended April 30, 2021, compared to the same period in the prior year. The WPS Australia business refined its digital marketing efforts to focus on the increase in demand for personal protective equipment and other social distancing signage and floor markings resulting from the COVID-19 pandemic. These actions resulted in significant organic sales growth in Australia in the second half of fiscal 2020 and the first half of fiscal 2021. The business continues to sell COVID-19 pandemic-related products including personal protective equipment, social distancing signage and floor markings, but demand has decreased significantly compared to the organic sales growth of nearly 30% that the business generated in the three months ended April 30, 2020.

Organic sales in Australia declined in the mid-single digits for the nine months ended April 30, 2021, compared to the same period in the prior year. Organic sales growth from COVID-19 pandemic-related products began to slow during the second quarter of fiscal 2021, while demand for core safety and identification products did not replace the decrease in sales of COVID-19 pandemic-related products. Organic sales increased in the high-single digits in the nine months ended April 30, 2020.

Segment profit increased ~~29.2%~~25.7% to ~~$5.7~~$7.1 million from ~~$4.4~~$5.7 million, and as a percentage of net sales, segment profit increased to ~~7.3%~~9.6% from ~~6.0%~~7.3% for the three months ended April 30, 2021, compared to the same period in the prior year. Segment profit increased 14.1% to $17.1 million from $15.0 million and as a percentage of net sales, segment profit increased to 7.5% from 6.9% for the nine months ended April 30, 2021,2022, compared to the same period in the prior year. The increase in segment profit was due to actions taken during the current three-month period to reduce the cost structure, including reductions in ~~both~~headcount and advertising expenses. Segment profit decreased 18.6% to $13.9 million from $17.1 million and as a percentage of net sales, segment profit decreased to 6.3% from 7.5% for the ~~three and~~nine months ended April 30, 2022, compared to the same period in the prior year. The decrease in segment profit in the nine-month ~~periods~~period was primarily due to ~~increased~~the decrease in sales ~~in the current year and the additional costs incurred in the~~volumes as compared to prior ~~year to address our cost structure.~~year.

Liquidity and Capital Resources

The Company's cash balances are generated and held in numerous locations throughout the world. At April 30, ~~2021,~~2022, approximately ~~70%~~94% of the Company's cash and cash equivalents were held outside the United States. The Company's organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, research and development, common stock repurchases, and dividend payments for the next 12 ~~months.~~months and beyond. Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments.

~~Cash Flows~~

~~Cash and cash equivalents were $321.8 million at April 30, 2021, an increase of $104.2 million from July 31, 2020. The significant changes were as follows:~~

Nine months ended April 30,
(Dollars in thousands) 2021 2020
Net cash flow provided by (used in):
Operating activities $ 154,908 $ 95,913
Investing activities (18,844) (26,035)
Financing activities (39,274) (101,047)
Effect of exchange rate changes on cash 7,368 (9,023)
Net increase (decrease) in cash and cash equivalents $ 104,158 $ (40,192)

Net cash provided by operating activities was $154.9 million for the nine months ended April 30, 2021, compared to $95.9 million in the same period of the prior year. The increase was primarily due to an increase in net income and an increase in cash

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~~provided by working capital. Inventory levels~~Cash Flows

Cash and cash equivalents were ~~reduced which resulted in an increase in~~$103.1 million at April 30, 2022, a decrease of $44.3 million from July 31, 2021. The significant changes were as follows:


	Nine months ended April 30,
(Dollars in thousands)	2022		2021
Net cash flow provided by (used in):
Operating activities	$	65,236	$	154,908
Investing activities	(22,071)		(18,844)
Financing activities	(81,762)		(39,274)
Effect of exchange rate changes on cash	(5,670)		7,368
Net (decrease) increase in cash and cash equivalents	$	(44,267)	$	104,158

Net cash provided by operating activities ~~which~~ was due to a planned reduction in inventory following a period of increased inventory levels to reduce the risk of supply chain disruption resulting from the COVID-19 pandemic. In addition, annual incentive compensation payments were lower in the current nine-month period compared to the same period in the prior year. This was partially offset by a decrease in cash provided by accounts receivable due to increased sequential sales during the nine months ended April 30, 2021.

~~Net cash used in investing activities was $18.8~~$65.2 million for the nine months ended April 30, ~~2021,~~2022, compared to ~~$26.0~~$154.9 million in the same period of the prior year. The decrease was primarily due to cash outflows for inventory purchases in ~~net~~order to reduce the risk of supply chain disruption. In addition, annual incentive compensation payments were higher in the current nine-month period than they were in the same period in the prior year.

Net cash used in investing activities ~~relates~~ was ~~primarily due to the proceeds received from the sale of a facility during~~$22.1 million in the nine months ended April 30, ~~2021.~~2022, compared to $18.8 million used in the same period in the prior year, which consisted primarily of capital expenditures in both periods.

Net cash used in financing activities was $39.3 million during the nine months ended April 30, 2021, compared to $101.0 million in the same period of the prior year. The decrease in cash used in financing activities was due to a decrease in cash used for share repurchases from $64.1$81.8 million in the nine months ended April 30, ~~2020 to $3.6~~2022, which consisted of share repurchases of $84.9 million, dividend payments of $34.7 million, and tax withholding from stock-based awards of $5.1 million, partially offset by $39.0 million net borrowing on the credit facility. Net cash used in financing activities in the nine months ended ~~April 30, 2021.~~January 31, 2021 of $39.3 million primarily consisted of dividend payments of $34.3 million and share repurchases of $3.6 million.

Credit Facilities

On August 1, 2019, the Company and certain of its subsidiaries entered into an unsecured $200 million multi-currency revolving loan agreement with a group of 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 Eurocurrency rate loan that bears interest at the LIBOR rate plus a margin based on the Company's consolidated net leverage ratio or a base interest rate (based upon the higher of the federal funds rate plus 0.5%, the prime rate of the Bank of Montreal plus a margin based on the Company’s consolidated net leverage ratio, or the Eurocurrency base rate at the LIBOR rate plus a margin based on the Company’s consolidated net leverage ratio plus 1%).banks. At the Company's option, and subject to certain conditions, the available amount under the revolving loan agreement may be increased from $200 million to $400 million.

On December 21, 2021, the Company and certain of its subsidiaries entered into an amendment to the revolving loan agreement, which amends the revolving loan agreement dated August 1, 2019. The amendment amends the revolving loan agreement to, among other things, (a) change the interest rate under the revolving loan agreement for borrowings (i) denominated in British Pounds from the London Inter-bank Offered Rate ("LIBOR") to a daily simple SONIA-based rate, (ii) denominated in Euro from a LIBOR-based rate to a rate based on the Euro Interbank Offered Rate and (iii) denominated in Japanese Yen from a LIBOR-based rate to a rate based on the Tokyo Interbank Offered Rate, in each of the foregoing cases subject to certain adjustments specified in the revolving loan agreement; and (b) provide mechanics relating to a transition away from U.S. dollar LIBOR (with respect to borrowings denominated in U.S. dollars) and the designated benchmarks for the other eligible currencies as benchmark interest rates and the replacement of any such benchmark by a replacement benchmark rate. The amendment to the revolving loan agreement did not have a material impact on the interest rate or related balances in the Company's consolidated financial statements.

As of April 30, 2022, the outstanding balance on the Company's revolving loan agreement was $77.0 million. The maximum amount outstanding on the ~~Company's revolving loan agreement~~credit facility during the nine months ended April 30, ~~2021~~2022 was ~~$10.6~~$101.0 million. AsThe borrowings bear interest at 1.28% as of April 30, ~~2021, there were no borrowings outstanding on the credit facility.~~2022. The Company had letters of credit outstanding under the loan agreement of ~~$3.6~~$1.7 million as of April 30, ~~2021~~2022, and there was ~~$196.4~~$121.3 million available for future borrowing, which can be increased to ~~$396.4~~$321.3 million at the Company's option, subject to certain conditions. The revolving loan agreement has a final maturity date of August 1, ~~2024, as~~2024. As such, ~~any borrowing would be~~borrowings were classified as long-term on the condensed consolidated balance sheets.

Covenant Compliance

The ~~Company’s~~Company's revolving loan agreement requires it to maintain certain financial covenants, including a ratio of debt to the trailing twelve months EBITDA, as defined in the debt agreements, of not more than a 3.5 to 1.0 ratio (leverage ratio) and the trailing twelve months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense ~~coverage ratio)~~coverage). As of April 30, ~~2021,~~2022, the Company was in compliance with these financial ~~covenants.~~covenants, with a ratio of debt to EBITDA, as defined by the agreements, equal to 0.31 to 1.0 and the interest expense coverage ratio equal to 255.5 to 1.0.

~~Off-Balance Sheet Arrangements~~

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Other Commitments

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 ~~Quarterly Report~~ and ~~its~~ other filings with the Securities and Exchange Commission. However, the following additional information is provided to assist those reviewing the Company’s financial statements.

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

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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:

•Adverse impacts of the novel coronavirus ("COVID-19") pandemic or other pandemics

•Decreased demand for the Company's products

•Ability to compete effectively or to successfully execute its strategy

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

•Ability to develop technologically advanced products that meet customer demands

•~~Raw material~~Ability to identify, integrate, and ~~other cost increases~~grow acquired companies, and to manage contingent liabilities from divested businesses

•Difficulties in protecting websites, networks, and systems against security breaches

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

•Risks associated with the loss of key employees

•~~Divestitures, contingent liabilities from divestitures~~Extensive regulations by U.S. and ~~the failure to identify, integrate,~~non-U.S. governmental and ~~grow acquired companies~~self-regulatory entities

•Litigation, including product liability claims

•Foreign currency fluctuations

•Potential write-offs of goodwill and other intangible assets

•Changes in tax legislation and tax rates

•Differing interests of voting and non-voting shareholders

•Numerous other matters of national, regional and global scale, including major public health crises and government responses thereto and those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section ~~set forth in this report and~~ within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, ~~2020.~~2021.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to the Company’s ~~Annual Report~~annual report on Form 10-K for the year ended July 31, ~~2020.~~2021. There has been no material change in this information since July 31, ~~2020.~~2021.

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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 & 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 changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM ~~1A. RISK FACTORS~~2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’s business, results of operations, financial condition, and cash flows are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” of Brady's Annual Report on Form 10-KCompany has a share repurchase program for the ~~year ended July 31, 2020. Other than as set forth below, there have been no material changes from the risk factors set forth~~Company's Class A Nonvoting Common Stock. The plan may be implemented by purchasing shares in the ~~2020 Form 10-K.~~open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company's stock-based plans and for other corporate purposes. On September 1, 2021, Brady’s Board of Directors authorized an increase in the Company’s share buyback program, bringing the amount of the Company’s Class A Common Stock authorized for repurchase up to a total of two million shares, inclusive of the shares in the existing share buyback program. As of April 30, 2022, 203,664 shares remained authorized for purchase in connection with this share repurchase program. Subsequent to April 30, 2022, the Company has purchased 203,664 shares of its Class A Nonvoting Common Stock under its share repurchase program for an aggregate purchase price of $9.3 million and an average purchase price per share of $45.71, which fully exhausted all shares available for repurchase under the existing repurchase program.

On May 24, 2022, the Company's Board of Directors authorized an increase in the Company's share repurchase program, authorizing the repurchase of up to $100.0 million of the Company's Class A Nonvoting Common Stock. The share repurchase program may be implemented from time to time on the open market or in privately negotiated transactions and has no expiration date. The repurchased shares will be available for use in connection with the Company's stock-based plans and for other corporate purposes.

The ~~COVID-19 pandemic has significantly impacted worldwide economic conditions and could continue to have a material adverse effect on our operations and business.~~

The ongoing COVID-19 pandemic initially impacted our operations in the third quarter of fiscal 2020, and may continue to affect our business, particularly if conditions worsen and government authorities impose new or expanded mandatory closures, work-from-home orders or social distancing protocols, seek voluntary facility closures or impose other restrictions. Such actions could adversely affect our ability to adequately staff and maintain our operations and negatively impact our financial results. The effects of the COVID-19 pandemic also may include restrictions on our employees’ ability to visit customers as well as disruptions or temporary closures of our facilities.

~~In response~~following table provides information with respect to the ~~COVID-19 pandemic, we have enabled remote working arrangements, which may create increased vulnerability to cybersecurity incidents, including breaches~~purchases by the Company of information systems security. Such incidents could damage our reputation and commercial relationships, disrupt operations, increase costs or decrease revenues, and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others.Class A Nonvoting Common Stock during the three months ended April 30, 2022:

While we attempt to maintain sufficient inventory levels in order to meet rapidly shifting customer demand patterns and supplier lead time requirements, we cannot be certain we will be able to accurately predict demand or lead times, which may cause us to be unable to service customer demand or expose us to risks of product shortages, or result in excess inventory, which could lead to additional inventory carrying costs and inventory obsolescence.

The duration and ultimate impact of the COVID-19 pandemic on our business, results of operations and financial condition, including liquidity, capital and financing resources, will depend on numerous evolving factors and future developments. Such factors and developments may include the geographic spread, severity and duration of the COVID-19 pandemic, including whether there are periods of increased COVID-19 cases or other variants, disruption to our operations resulting from employee illnesses, the availability and administration of effective treatment or vaccines, as well as vaccination rates, the extent and duration of the impact on the U.S. and global economy, including the pace and extent of recovery as the pandemic subsides, and the actions that have been or may be taken by various governmental authorities in response to the outbreak, including current and future health and safety measures, such as mandatory facility closures of non-essential businesses, stay-at-home orders or similar restrictions, social distancing mandates and travel bans, and import and export restrictions, which could disrupt our relationship with customers. If we are unable to respond to and manage the impact of these events, our business and results of operations may be adversely affected.

Although our accounting estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. As a result, our accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangible assets, long-lived assets, incremental credit losses on accounts receivable, excess and obsolete inventory, or a decrease in the carrying amount of our deferred tax assets. Any of these events could amplify the other risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2020 and could have an adverse effect on our business and financial results.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares That May Yet Be Purchased Under the Plans
February 1, 2022 - February 28, 2022	311,234	$	48.29	311,234	1,258,010
March 1, 2022 - March 31, 2022	467,660	45.79		467,660	790,350
April 1, 2022 - April 30, 2022	586,686	45.63		586,686	203,664
Total	1,365,580	$	46.29	1,365,580	203,664

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ITEM 6. EXHIBITS


Exhibit No.						Exhibit Description

~~2.1~~10.1						~~Combination~~Complete and Permanent Release and Retirement Agreement between the Company and Mr. Nauman dated as of March 10, 2022 (incorporated by reference to Registrant's Current report on Form 8-K filed March 16, 2022).*

10.2						Employment Offer Letter between the Company and Mr. Shaller dated as of March 11, 2022 (incorporated by reference to Registrant's Current report on Form 8-K filed March 16, 2022).*

10.3						Restricted Stock Unit Agreement between the Company and Mr. Shaller dated as of April ~~15, 2021, by~~1, 2022.*

10.4						Change of Control Agreement between the Company and ~~among Brady Corporation and Nordic ID Ovi~~Mr. Shaller dated as of April 1, 2022 (incorporated by reference to ~~Exhibit 2.1 to the Company's~~Registrant's Current ~~Report~~report on Form 8-K filed March 16, 2022).*

10.5						Complete and Permanent Release and Resignation Agreement between the Company and Ms. Nelligan dated as of April ~~15, 2021)~~5, 2022 (incorporated by reference to Registrant's Current report on Form 8-K filed April 7, 2022).*

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

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

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

32.2						Section 1350 Certification of Aaron J. Pearce

101.INS						XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.)

101.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)


*			Management contract or compensatory plan or arrangement

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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 ~~20, 2021~~26, 2022

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

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

President and Chief Executive Officer

(Principal Executive Officer)

Date: May ~~20, 2021~~26, 2022

/s/ AARON J. PEARCE

Aaron J. Pearce

Chief Financial Officer and Treasurer

(Principal Financial Officer)

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			Page
PART I. Financial Information			3
Item 1. F ~~inancial~~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 Stockholders' Equity			6
Condensed Consolidated Statements of Cash Flows			68
Notes to Condensed Consolidated Financial Statements			79
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~and Financial Condition~~			1617
Item 3.Quantitative and Qualitative Disclosures About Market Risk			23
Item 4.Controls and Procedures			2324
PART II. Other Information			2425
Item ~~1A. Risk Factors~~			24
~~Item 6.Exhibits~~2. Unregistered Sale of Equity Securities and Use of Proceeds			25
Item 6. Exhibits			26
Signatures			2627