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 January 31, ~~2022~~2023


☐			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~~53223

(Address of principal executive offices and zip code)

(414) 358-6600

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 (§232.405 of this chapter) 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, a 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 February ~~15, 2022,~~22, 2023, there were ~~48,065,965~~46,121,200 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)


		January 31, 2022		July 31, 2021			January 31, 2023		July 31, 2022
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	147,407	$	147,335	Cash and cash equivalents	$	108,210	$	114,069
Accounts receivable, net of allowances for credit losses of $7,868 and $7,306, respectively		172,471		170,579
Accounts receivable, net of allowance for credit losses of $8,097 and $7,355, respectively						Accounts receivable, net of allowance for credit losses of $8,097 and $7,355, respectively	186,852		183,233
Inventories	Inventories	167,456		136,107		Inventories	195,167		190,023
Prepaid expenses and other current assets	Prepaid expenses and other current assets	12,681		11,083		Prepaid expenses and other current assets	13,986		10,743
Total current assets	Total current assets	500,015		465,104		Total current assets	504,215		498,068
Property, plant and equipment—net	Property, plant and equipment—net	126,551		121,741		Property, plant and equipment—net	140,784		139,511
Goodwill	Goodwill	601,681		614,137		Goodwill	590,776		586,832
Other intangible assets	Other intangible assets	83,608		92,334		Other intangible assets	67,513		74,028
Deferred income taxes	Deferred income taxes	15,234		16,343		Deferred income taxes	15,826		15,881
Operating lease assets	Operating lease assets	33,710		41,880		Operating lease assets	31,411		31,293
Other assets	Other assets	26,264		26,217		Other assets	21,748		21,719
Total	Total	$	1,387,063	$	1,377,756	Total	$	1,372,273	$	1,367,332
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	80,611	$	82,152	Accounts payable	$	75,876	$	81,116
Accrued compensation and benefits	Accrued compensation and benefits	56,510		81,173		Accrued compensation and benefits	53,213		76,764
Taxes, other than income taxes	Taxes, other than income taxes	12,141		13,054		Taxes, other than income taxes	12,799		12,539
Accrued income taxes	Accrued income taxes	4,783		3,915		Accrued income taxes	6,794		8,294
Current operating lease liabilities	Current operating lease liabilities	16,601		17,667		Current operating lease liabilities	15,402		15,003
Other current liabilities	Other current liabilities	56,850		59,623		Other current liabilities	65,765		61,458
Total current liabilities	Total current liabilities	227,496		257,584		Total current liabilities	229,849		255,174
Long-term debt	Long-term debt	83,000		38,000		Long-term debt	77,281		95,000
Long-term operating lease liabilities	Long-term operating lease liabilities	20,341		28,347		Long-term operating lease liabilities	17,822		19,143
Other liabilities	Other liabilities	89,658		90,797		Other liabilities	79,917		86,717
Total liabilities	Total liabilities	420,495		414,728		Total liabilities	404,869		456,034
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,243,347 and 48,528,245 shares, respectively		513		513
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 46,115,760 and 46,370,708 shares, respectively						Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 46,115,760 and 46,370,708 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	341,889		339,125		Additional paid-in capital	348,513		345,266
Retained earnings	Retained earnings	833,981		788,369		Retained earnings	947,051		892,417
Treasury stock—3,018,140 and 2,733,242 shares, respectively, of Class A nonvoting common stock, at cost		(130,911)		(109,061)
Treasury stock—5,145,727 and 4,890,779 shares, respectively, of Class A nonvoting common stock, at cost						Treasury stock—5,145,727 and 4,890,779 shares, respectively, of Class A nonvoting common stock, at cost	(233,338)		(217,856)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(78,939)		(55,953)		Accumulated other comprehensive loss	(95,370)		(109,077)
Total stockholders’ equity	Total stockholders’ equity	966,568		963,028		Total stockholders’ equity	967,404		911,298
Total	Total	$	1,387,063	$	1,377,756	Total	$	1,372,273	$	1,367,332

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 January 31,				Six months ended January 31,					Three months ended January 31,				Six months ended January 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales	Net sales	$	318,055	$	265,838	$	639,530	$	543,065	Net sales	$	326,249	$	318,055	$	648,818	$	639,530
Cost of goods sold	Cost of goods sold	168,693		136,316		335,180		278,115		Cost of goods sold	169,809		168,693		337,114		335,180
Gross margin	Gross margin	149,362		129,522		304,350		264,950		Gross margin	156,440		149,362		311,704		304,350
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	13,965		9,876		27,872		20,079		Research and development	15,377		13,965		29,310		27,872
Selling, general and administrative	Selling, general and administrative	92,525		82,234		189,271		165,271		Selling, general and administrative	92,282		92,525		182,227		189,271
Total operating expenses	Total operating expenses	106,490		92,110		217,143		185,350		Total operating expenses	107,659		106,490		211,537		217,143
Operating income	Operating income	42,872		37,412		87,207		79,600		Operating income	48,781		42,872		100,167		87,207
Other (expense) income:
Investment and other (expense) income		(578)		2,036		(35)		2,191
Other income (expense):										Other income (expense):
Investment and other income (expense)										Investment and other income (expense)	968		(578)		811		(35)
Interest expense	Interest expense	(252)		(51)		(434)		(157)		Interest expense	(1,239)		(252)		(2,133)		(434)
Income before income taxes and losses of unconsolidated affiliate		42,042		39,397		86,738		81,634
Income before income taxes										Income before income taxes	48,510		42,042		98,845		86,738
Income tax expense	Income tax expense	8,227		8,206		17,877		16,788		Income tax expense	10,524		8,227		21,418		17,877
Income before losses of unconsolidated affiliate		33,815		31,191		68,861		64,846
Equity in losses of unconsolidated affiliate		—		(331)		—		(505)
Net income	Net income	$	33,815	$	30,860	$	68,861	$	64,341	Net income	$	37,986	$	33,815	$	77,427	$	68,861
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	$	0.65	$	0.59	$	1.33	$	1.24	Basic	$	0.76	$	0.65	$	1.55	$	1.33
Diluted	Diluted	$	0.65	$	0.59	$	1.32	$	1.23	Diluted	$	0.76	$	0.65	$	1.55	$	1.32
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	$	0.65	$	0.59	$	1.31	$	1.22	Basic	$	0.76	$	0.65	$	1.54	$	1.31
Diluted	Diluted	$	0.65	$	0.59	$	1.30	$	1.21	Diluted	$	0.76	$	0.65	$	1.53	$	1.30
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	51,800		52,018		51,887		52,020		Basic	49,745		51,800		49,806		51,887
Diluted	Diluted	52,162		52,282		52,299		52,288		Diluted	50,009		52,162		50,049		52,299

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 January 31, Six months ended January 31,
2022 2021 2022 2021
Net income $ 33,815 $ 30,860 $ 68,861 $ 64,341
Other comprehensive (loss) income:
Foreign currency translation adjustments (18,656) 19,074 (22,574) 14,882
Cash flow hedges:
Net gain recognized in other comprehensive (loss) income 225 451 199 1,148
Reclassification adjustment for (gains) losses included in net income (35) 60 (603) 271
190 511 (404) 1,419
Pension and other post-retirement benefits:
Net loss recognized in other comprehensive (loss) income (85) (32) (85) (32)
Net actuarial gain amortization (73) (95) (180) (201)
(158) (127) (265) (233)
Other comprehensive (loss) income, before tax (18,624) 19,458 (23,243) 16,068
Income tax benefit (expense) related to items of other comprehensive (loss) income 356 (1,251) 257 (1,052)
Other comprehensive (loss) income, net of tax (18,268) 18,207 (22,986) 15,016
Comprehensive income $ 15,547 $ 49,067 $ 45,875 $ 79,357


	Three months ended January 31,				Six months ended January 31,
	2023		2022		2023		2022
Net income	$	37,986	$	33,815	$	77,427	$	68,861
Other comprehensive income (loss):
Foreign currency translation adjustments	30,562		(18,656)		12,890		(22,574)

Cash flow hedges:
Net gain recognized in other comprehensive income (loss)	776		225		1,669		199
Reclassification adjustment for gains included in net income	(217)		(35)		(798)		(603)
	559		190		871		(404)
Pension and other post-retirement benefits:
Net loss recognized in other comprehensive income (loss)	—		(85)		—		(85)
Net actuarial loss (gain) amortization	27		(73)		(116)		(180)
	27		(158)		(116)		(265)

Other comprehensive income (loss), before tax	31,148		(18,624)		13,645		(23,243)
Income tax (expense) benefit related to items of other comprehensive income (loss)	(4)		356		62		257
Other comprehensive income (loss), net of tax	31,144		(18,268)		13,707		(22,986)
Comprehensive income	$	69,130	$	15,547	$	91,134	$	45,875

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Thousands, Unaudited)


		Three months ended January 31, 2022													Three months ended January 31, 2023
		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity			Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at October 31, 2021		$	548	$	340,182	$	811,820	$	(127,986)	$	(60,671)	$	963,893
Balances at October 31, 2022														Balances at October 31, 2022	$	548	$	346,064	$	920,482	$	(228,855)	$	(126,514)	$	911,725
Net income	Net income	—		—		33,815		—		—		33,815		Net income	—		—		37,986		—		—		37,986
Other comprehensive loss, net of tax		—		—		—		—		(18,268)		(18,268)
Other comprehensive income, net of tax														Other comprehensive income, net of tax	—		—		—		—		31,144		31,144
Issuance of shares of Class A Common Stock under stock plan	Issuance of shares of Class A Common Stock under stock plan	—		(1,334)		—		(129)		—		(1,463)		Issuance of shares of Class A Common Stock under stock plan	—		1,026		—		1,308		—		2,334
Stock-based compensation expense	Stock-based compensation expense	—		3,041		—		—		—		3,041		Stock-based compensation expense	—		1,423		—		—		—		1,423
Repurchase of shares of Class A Common Stock	Repurchase of shares of Class A Common Stock	—		—		—		(2,796)		—		(2,796)		Repurchase of shares of Class A Common Stock	—		—		—		(5,791)		—		(5,791)
Cash dividends on Common Stock:	Cash dividends on Common Stock:													Cash dividends on Common Stock:
Class A — $0.2250 per share		—		—		(10,857)		—		—		(10,857)
Class B — $0.2250 per share		—		—		(797)		—		—		(797)
Balances at January 31, 2022		$	548	$	341,889	$	833,981	$	(130,911)	$	(78,939)	$	966,568
Class A — $0.2300 per share														Class A — $0.2300 per share	—		—		(10,603)		—		—		(10,603)
Class B — $0.2300 per share														Class B — $0.2300 per share	—		—		(814)		—		—		(814)
Balances at January 31, 2023														Balances at January 31, 2023	$	548	$	348,513	$	947,051	$	(233,338)	$	(95,370)	$	967,404


		Six months ended January 31, 2022													Six months ended January 31, 2023
		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity			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
Balances at July 31, 2022														Balances at July 31, 2022	$	548	$	345,266	$	892,417	$	(217,856)	$	(109,077)	$	911,298
Net income	Net income	—		—		68,861		—		—		68,861		Net income	—		—		77,427		—		—		77,427
Other comprehensive loss, net of tax		—		—		—		—		(22,986)		(22,986)
Other comprehensive income, net of tax														Other comprehensive income, net of tax	—		—		—		—		13,707		13,707
Issuance of shares of Class A Common Stock under stock plan	Issuance of shares of Class A Common Stock under stock plan	—		(4,521)		—		(130)		—		(4,651)		Issuance of shares of Class A Common Stock under stock plan	—		(1,200)		—		2,379		—		1,179
Tax benefit and withholdings from deferred compensation distributions	Tax benefit and withholdings from deferred compensation distributions	—		115		—		—		—		115		Tax benefit and withholdings from deferred compensation distributions	—		66		—		—		—		66
Stock-based compensation expense	Stock-based compensation expense	—		7,170		—		—		—		7,170		Stock-based compensation expense	—		4,381		—		—		—		4,381
Repurchase of shares of Class A Common Stock	Repurchase of shares of Class A Common Stock	—		—		—		(21,720)		—		(21,720)		Repurchase of shares of Class A Common Stock	—		—		—		(17,861)		—		(17,861)
Cash dividends on Common Stock:	Cash dividends on Common Stock:													Cash dividends on Common Stock:
Class A — $0.4500 per share		—		—		(21,715)		—		—		(21,715)
Class B — $0.4334 per share		—		—		(1,534)		—		—		(1,534)
Balances at January 31, 2022		$	548	$	341,889	$	833,981	$	(130,911)	$	(78,939)	$	966,568
Class A — $0.4600 per share														Class A — $0.4600 per share	—		—		(21,224)		—		—		(21,224)
Class B — $0.4434 per share														Class B — $0.4434 per share	—		—		(1,569)		—		—		(1,569)
Balances at January 31, 2023														Balances at January 31, 2023	$	548	$	348,513	$	947,051	$	(233,338)	$	(95,370)	$	967,404

Table of Contents


		Three months ended January 31, 2021													Three months ended January 31, 2022
		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity			Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at October 31, 2020		$	548	$	332,121	$	726,546	$	(109,146)	$	(69,668)	$	880,401
Balances at October 31, 2021														Balances at October 31, 2021	$	548	$	340,182	$	811,820	$	(127,986)	$	(60,671)	$	963,893
Net income	Net income	—		—		30,860		—		—		30,860		Net income	—		—		$	33,815	—		—		33,815
Other comprehensive income, net of tax		—		—		—		—		18,207		18,207
Other comprehensive loss, net of tax														Other comprehensive loss, net of tax	—		—		—		—		(18,268)		(18,268)
Issuance of shares of Class A Common Stock under stock plan	Issuance of shares of Class A Common Stock under stock plan	—		59		—		230		—		289		Issuance of shares of Class A Common Stock under stock plan	—		(1,334)		—		(129)		—		(1,463)
Stock-based compensation expense	Stock-based compensation expense	—		1,897		—		—		—		1,897		Stock-based compensation expense	—		3,041		—		—		—		3,041
Repurchase of shares of Class A Common Stock	Repurchase of shares of Class A Common Stock	—		—		—		(873)		—		(873)		Repurchase of shares of Class A Common Stock	—		—		—		(2,796)		—		(2,796)
Cash dividends on Common Stock:	Cash dividends on Common Stock:													Cash dividends on Common Stock:
Class A — $0.2200 per share		—		—		(10,667)		—		—		(10,667)
Class B — $0.2200 per share		—		—		(779)		—		—		(779)
Balances at January 31, 2021		$	548	$	334,077	$	745,960	$	(109,789)	$	(51,461)	$	919,335
Class A — $0.2250 per share														Class A — $0.2250 per share	—		—		(10,857)		—		—		(10,857)
Class B — $0.2250 per share														Class B — $0.2250 per share	—		—		(797)		—		—		(797)
Balances at January 31, 2022														Balances at January 31, 2022	$	548	$	341,889	$	833,981	$	(130,911)	$	(78,939)	$	966,568


		Six months ended January 31, 2021													Six months ended January 31, 2022
		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity			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
Balances at July 31, 2021														Balances at July 31, 2021	$	548	$	339,125	$	788,369	$	(109,061)	$	(55,953)	$	963,028
Net income	Net income	—		—		64,341		—		—		64,341		Net income	—		—		68,861		—		—		68,861
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		—		—		15,016		15,016		Other comprehensive income, net of tax	—		—		—		—		(22,986)		(22,986)
Issuance of shares of Class A Common Stock under stock plan	Issuance of shares of Class A Common Stock under stock plan	—		(3,187)		—		1,020		—		(2,167)		Issuance of shares of Class A Common Stock under stock plan	—		(4,521)		—		(130)		—		(4,651)
Tax benefit and withholdings from deferred compensation distributions	Tax benefit and withholdings from deferred compensation distributions	—		32		—		—		—		32		Tax benefit and withholdings from deferred compensation distributions	—		115		—		—		—		115
Stock-based compensation expense	Stock-based compensation expense	—		5,471		—		—		—		5,471		Stock-based compensation expense	—		7,170		—		—		—		7,170
Repurchase of shares of Class A Common Stock	Repurchase of shares of Class A Common Stock	—		—		—		(3,593)		—		(3,593)		Repurchase of shares of Class A Common Stock	—		—		—		(21,720)		—		(21,720)
Cash dividends on Common Stock:	Cash dividends on Common Stock:													Cash dividends on Common Stock:
Class A — $0.4400 per share		—		—		(21,338)		—		—		(21,338)
Class B — $0.4234 per share		—		—		(1,499)		—		—		(1,499)
Balances at January 31, 2021		$	548	$	334,077	$	745,960	$	(109,789)	$	(51,461)	$	919,335
Class A — $0.4500 per share														Class A — $0.4500 per share	—		—		(21,715)		—		—		(21,715)
Class B — $0.4334 per share														Class B — $0.4334 per share	—		—		(1,534)		—		—		(1,534)
Balances at January 31, 2022														Balances at January 31, 2022	$	548	$	341,889	$	833,981	$	(130,911)	$	(78,939)	$	966,568

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BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


		Six months ended January 31,					Six months ended January 31,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	68,861	$	64,341	Net income	$	77,427	$	68,861
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	16,996		11,421		Depreciation and amortization	17,117		16,996
Stock-based compensation expense	Stock-based compensation expense	7,170		5,471		Stock-based compensation expense	4,381		7,170
Deferred income taxes	Deferred income taxes	(788)		(3,866)		Deferred income taxes	(5,234)		(788)
Equity in losses of unconsolidated affiliate		—		505
Other	Other	(812)		121		Other	(908)		(812)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(7,216)		(4,157)		Accounts receivable	280		(7,216)
Inventories	Inventories	(34,360)		15,018		Inventories	(1,287)		(34,360)
Prepaid expenses and other assets	Prepaid expenses and other assets	(1,148)		(2,436)		Prepaid expenses and other assets	(3,502)		(1,148)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(25,357)		11,990		Accounts payable and accrued liabilities	(29,156)		(25,357)
Income taxes	Income taxes	982		481		Income taxes	(1,734)		982
Net cash provided by operating activities	Net cash provided by operating activities	24,328		98,889		Net cash provided by operating activities	57,384		24,328

Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(16,440)		(14,511)		Purchases of property, plant and equipment	(8,167)		(16,440)
Other	Other	59		(1,881)		Other	11		59
Net cash used in investing activities	Net cash used in investing activities	(16,381)		(16,392)		Net cash used in investing activities	(8,156)		(16,381)

Financing activities:	Financing activities:					Financing activities:
Payment of dividends	Payment of dividends	(23,249)		(22,837)		Payment of dividends	(22,793)		(23,249)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	374		471		Proceeds from exercise of stock options	2,688		374
Payments for employee taxes withheld from stock-based awards	Payments for employee taxes withheld from stock-based awards	(5,025)		(2,638)		Payments for employee taxes withheld from stock-based awards	(1,509)		(5,025)
Purchase of treasury stock	Purchase of treasury stock	(21,720)		(3,593)		Purchase of treasury stock	(17,861)		(21,720)
Proceeds from borrowing on credit facilities		131,216		19,957
Repayment of borrowing on credit facilities		(86,216)		(20,220)
Proceeds from borrowing on credit agreement						Proceeds from borrowing on credit agreement	71,036		131,216
Repayment of borrowing on credit agreement						Repayment of borrowing on credit agreement	(88,755)		(86,216)
Other	Other	115		32		Other	66		115
Net cash used in financing activities	Net cash used in financing activities	(4,505)		(28,828)		Net cash used in financing activities	(57,128)		(4,505)

Effect of exchange rate changes on cash		(3,370)		6,276
Effect of exchange rate changes on cash and cash equivalents						Effect of exchange rate changes on cash and cash equivalents	2,041		(3,370)

Net increase in cash and cash equivalents		72		59,945
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(5,859)		72
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	147,335		217,643		Cash and cash equivalents, beginning of period	114,069		147,335

Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	147,407	$	277,588	Cash and cash equivalents, end of period	$	108,210	$	147,407

See Notes to Condensed Consolidated Financial Statements.

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BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended January 31, ~~2022~~2023

(Unaudited)

(In thousands, except share and per share amounts)

NOTE A — Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Brady Corporation and subsidiaries (the "Company," "Brady," "we," or "our") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing statements contain all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of the Company as of January 31, ~~2022~~2023 and July 31, ~~2021,~~2022, its results of operations and comprehensive income for the three and six months ended January 31, ~~2022~~2023 and ~~2021,~~2022, and cash flows for the six months ended January 31, ~~2022~~2023 and ~~2021.~~2022. The condensed consolidated balance sheet as of July 31, ~~2021,~~2022, 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, ~~2021.~~2022.

NOTE B — New Accounting Pronouncements

Adopted Standards

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)." 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. The Company adopted ASC 2019-12 effective August 1,October 2021, ~~which did not have a material impact on its consolidated financial statements or disclosures.~~

~~In March 2020,~~ the FASB issued ASU ~~2020-04, "Reference Rate Reform~~No. 2021-08, “Business Combinations (Topic ~~848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." Subject~~805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to ~~meeting certain criteria, this guidance provides optional expedients~~be recognized and ~~exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Inter-bank Offered Rate ("LIBOR")~~measured by the ~~end of 2021. This~~acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers” as if the acquirer had originated the contracts. The guidance ~~was~~is applied prospectively to acquisitions occurring on or after the effective ~~upon issuance and allowed application to contract changes as~~date. The Company early ~~as January 1, 2020.~~adopted ASU No. 2021-08 during the quarter ended October 31, 2022. The adoption of ~~this update did not~~the new standard will only have ~~a material~~an impact on the Company's condensed consolidated financial ~~statements.~~statements in the event of future acquisitions.

NOTE C — Additional Balance Sheet Information

Inventories

Inventories as of January 31, ~~2022,~~2023, and July 31, ~~2021,~~2022, consisted of the following:

January 31, 2022 July 31, 2021
Finished products $ 102,115 $ 87,489
Work-in-process 25,211 20,189
Raw materials and supplies 40,130 28,429
Total inventories $ 167,456 $ 136,107

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	January 31, 2023		July 31, 2022
Finished products	$	109,617	$	112,323
Work-in-process	30,572		29,272
Raw materials and supplies	54,978		48,428
Total inventories	$	195,167	$	190,023

Property, plant and equipment

Property, plant and equipment is presented net of accumulated depreciation in the amount of ~~$282,808~~$284,186 and ~~$277,246~~$272,376 as of January 31, ~~2022,~~2023, and July 31, ~~2021,~~2022, respectively.

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NOTE D — Other Intangible Assets

Other intangible assets as of January 31, ~~2022~~2023 and July 31, ~~2021,~~2022, consisted of the following:


		January 31, 2022							July 31, 2021								January 31, 2023							July 31, 2022
		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value			Weighted Average Amortization Period (Years)	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:	Amortized other intangible assets:															Amortized other intangible assets:
Tradenames	Tradenames	3	$	1,799	$	(699)	$	1,100	3	$	1,821	$	(356)	$	1,465	Tradenames	3	$	1,757	$	(1,353)	$	404	3	$	1,749	$	(1,014)	$	735
Customer relationships	Customer relationships	9	109,830		(45,076)		64,754		9	110,950		(39,069)		71,881		Customer relationships	9	105,842		(54,149)		51,693		9	105,404		(48,428)		56,976
Technology	Technology	5	9,430		(1,318)		8,112		5	9,578		(335)		9,243		Technology	5	9,204		(3,221)		5,983		5	9,136		(2,241)		6,895
Unamortized other intangible assets:	Unamortized other intangible assets:															Unamortized other intangible assets:
Tradenames	Tradenames	N/A	9,642		—		9,642		N/A	9,745		—		9,745		Tradenames	N/A	9,433		—		9,433		N/A	9,422		—		9,422
Total	Total		$	130,701	$	(47,093)	$	83,608		$	132,094	$	(39,760)	$	92,334	Total		$	126,236	$	(58,723)	$	67,513		$	125,711	$	(51,683)	$	74,028

The change in the gross carrying amount of other intangible assets as of January 31, ~~2022~~2023 compared to July 31, ~~2021~~2022 was due to the effect of currency fluctuations during the six-month period.

Amortization expense of intangible assets was ~~$3,749~~$3,258 and ~~$1,353~~$3,749 for the three months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$7,556~~$6,889 and ~~$2,704~~$7,556 for the six months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

NOTE E — Leases

The Company leases certain manufacturing facilities, warehouse and office spaces, and vehicles accounted for as operating leases. Lease terms typically range from one year to ten years. As of January 31, ~~2022,~~2023, the Company did not have any finance leases.

Operating lease expense was ~~$4,087~~$3,868 and ~~$4,169~~$4,087 for the three months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$8,852~~$7,648 and ~~$8,242~~$8,852 for the six months ended January 31, 2023 and 2022, ~~and 2021, respectively. Operating lease expense~~respectively, which was recognized in either "Cost of goods sold" or "Selling, general and administrative" expenses in the condensed consolidated statements of income, based on the nature of the lease. Short-term lease expense, variable lease expenses, and sublease income was immaterial to the condensed consolidated statements of income for the three and six months ended January 31, ~~2022~~2023 and ~~2021.~~2022.

Supplemental cash flow information related to the Company's operating leases for the six months ended January 31, ~~2022~~2023 and ~~2021,~~2022, was as follows:


		Six months ended January 31,					Six months ended January 31,
		2022		2021			2023		2022
Operating cash outflows from operating leases	Operating cash outflows from operating leases	$	9,805	$	8,762	Operating cash outflows from operating leases	$	8,766	$	9,805
Operating lease assets obtained in exchange for new operating lease liabilities(1)	Operating lease assets obtained in exchange for new operating lease liabilities(1)	952		3,297		Operating lease assets obtained in exchange for new operating lease liabilities(1)	6,545		952

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

NOTE F — 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.

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The following table illustrates the changes in the balances of each component of accumulated other comprehensive loss, net of tax, for the six months ended January 31, ~~2022:~~2023:


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

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

The changes in accumulated other comprehensive loss by component, net of tax, for the six months ended January 31, 2022 were as follows:


	Unrealized gain on cash flow hedges		Unamortized gain on post-retirement plans		Foreign currency translation adjustments		Accumulated other comprehensive loss
Beginning balance, July 31, 2021	$	729	$	1,888	$	(58,570)	$	(55,953)
Other comprehensive loss before reclassification	(142)		(60)		(22,141)		(22,343)
Amounts reclassified from accumulated other comprehensive loss	(453)		(190)		—		(643)
Ending balance, January 31, 2022	$	134	$	1,638	$	(80,711)	$	(78,939)

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

~~The changes in accumulated other comprehensive loss by component, net of tax, for the six months ended January 31, 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 1,215 (23) 13,585 14,777
Amounts reclassified from accumulated other comprehensive loss 203 36 — 239
Ending balance, January 31, 2021 $ 1,218 $ 2,194 $ (54,873) $ (51,461)

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

Of the amounts reclassified from accumulated other comprehensive loss during the six months ended January 31, 2023 and 2022, ~~and 2021,~~ unrealized ~~(gains) losses~~gains on cash flow hedges were reclassified to "Cost of goods sold" and unamortized ~~(gains) losses~~gains on post-retirement plans were reclassified into "Investment and other income" on the condensed consolidated statements of income.

The following table illustrates the income tax benefit (expense) on the components of other comprehensive income (loss) ~~income~~ for the three and six months ended January 31, ~~2022~~2023 and ~~2021:~~2022:


		Three months ended January 31,				Six months ended January 31,					Three months ended January 31,				Six months ended January 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Income tax benefit (expense) related to items of other comprehensive (loss) income:
Income tax (expense) benefit related to items of other comprehensive income (loss):										Income tax (expense) benefit related to items of other comprehensive income (loss):
Cash flow hedges	Cash flow hedges	$	(87)	$	47	$	(191)	$	(1)	Cash flow hedges	$	58	$	(87)	$	124	$	(191)
Pension and other post-retirement benefits	Pension and other post-retirement benefits	15		6		15		246		Pension and other post-retirement benefits	(62)		15		(62)		15
Other income tax adjustments and currency translation	Other income tax adjustments and currency translation	428		(1,304)		433		(1,297)		Other income tax adjustments and currency translation	—		428		—		433
Income tax benefit (expense) related to items of other comprehensive (loss) income		$	356	$	(1,251)	$	257	$	(1,052)
Income tax (expense) benefit related to items of other comprehensive income (loss):										Income tax (expense) benefit related to items of other comprehensive income (loss):	$	(4)	$	356	$	62	$	257

NOTE G — Revenue Recognition

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

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The Company offers extended warranty coverage that is included in the sales price of certain products, which it accounts for as service warranties. The Company accounts for the deferred revenue associated with extended service warranties as a contract liability. The balance of contract liabilities associated with service warranty performance obligations was ~~$2,610~~$2,728 and ~~$2,519~~$2,675 as of January 31, ~~2022~~2023 and July 31, ~~2021,~~2022, 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 ~~$296~~$311 and ~~$294~~$296 during the three months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$585~~$617 and ~~$591~~$585 during the six months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively, that was included in the contract liability balance at the beginning of the respective period from the amortization of extended service warranties. Of the contract liability balance outstanding at January 31, ~~2022,~~2023, the Company expects to recognize 22% by the end of fiscal ~~2022,~~2023, an additional ~~35%~~34% by the end of fiscal ~~2023,~~2024, and the remaining balance thereafter.

NOTE H — 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.

The following is a summary of net sales by segment and geographic region for the three and six months ended January 31, ~~2022~~2023 and ~~2021:~~2022:


		Three months ended January 31,				Six months ended January 31,					Three months ended January 31,				Six months ended January 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales:	Net sales:									Net sales:
ID Solutions
IDS										IDS
Americas	Americas	$	158,999	$	124,970	$	323,909	$	258,237	Americas	$	176,893	$	158,999	$	350,242	$	323,909
Europe	Europe	57,274		44,040		114,163		86,622		Europe	54,797		57,274		111,440		114,163
Asia	Asia	28,713		25,217		55,531		47,560		Asia	23,993		28,713		50,357		55,531
Total	Total	$	244,986	$	194,227	$	493,603	$	392,419	Total	$	255,683	$	244,986	$	512,039	$	493,603
Workplace Safety
WPS										WPS
Americas	Americas	$	20,131	$	20,200	$	41,273	$	44,231	Americas	$	19,182	$	20,131	$	37,964	$	41,273
Europe	Europe	41,432		40,165		79,454		81,431		Europe	38,962		41,432		72,511		79,454
Australia	Australia	11,506		11,246		25,200		24,984		Australia	12,422		11,506		26,304		25,200
Total	Total	$	73,069	$	71,611	$	145,927	$	150,646	Total	$	70,566	$	73,069	$	136,779	$	145,927
Total Company	Total Company									Total Company
Americas	Americas	$	179,130	$	145,170	$	365,182	$	302,468	Americas	$	196,075	$	179,130	$	388,206	$	365,182
Europe	Europe	98,706		84,205		193,617		168,053		Europe	93,759		98,706		183,951		193,617
Asia-Pacific	Asia-Pacific	40,219		36,463		80,731		72,544		Asia-Pacific	36,415		40,219		76,661		80,731
Total	Total	$	318,055	$	265,838	$	639,530	$	543,065	Total	$	326,249	$	318,055	$	648,818	$	639,530

The following is a summary of segment profit for the three and six months ended January 31, ~~2022~~2023 and ~~2021:~~2022:


		Three months ended January 31,				Six months ended January 31,					Three months ended January 31,				Six months ended January 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Segment profit:	Segment profit:									Segment profit:
ID Solutions		$	44,129	$	39,000	$	92,945	$	79,279
Workplace Safety		4,515		3,463		6,808		11,451
IDS										IDS	$	47,384	$	44,129	$	98,909	$	92,945
WPS										WPS	6,249		4,515		12,627		6,808
Total Company	Total Company	$	48,644	$	42,463	$	99,753	$	90,730	Total Company	$	53,633	$	48,644	$	111,536	$	99,753

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The following is a reconciliation of segment profit to income before income taxes ~~and losses of unconsolidated affiliate~~ for the three and six months ended January 31, ~~2022~~2023 and ~~2021:~~2022:


		Three months ended January 31,				Six months ended January 31,					Three months ended January 31,				Six months ended January 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Total profit from reportable segments	Total profit from reportable segments	$	48,644	$	42,463	$	99,753	$	90,730	Total profit from reportable segments	$	53,633	$	48,644	$	111,536	$	99,753
Unallocated amounts:	Unallocated amounts:									Unallocated amounts:
Administrative costs	Administrative costs	(5,772)		(5,051)		(12,546)		(11,130)		Administrative costs	(4,852)		(5,772)		(11,369)		(12,546)
Investment and other (expense) income		(578)		2,036		(35)		2,191
Investment and other income (expense)										Investment and other income (expense)	968		(578)		811		(35)
Interest expense	Interest expense	(252)		(51)		(434)		(157)		Interest expense	(1,239)		(252)		(2,133)		(434)
Income before income taxes and losses of unconsolidated affiliate		$	42,042	$	39,397	$	86,738	$	81,634
Income before income taxes										Income before income taxes	$	48,510	$	42,042	$	98,845	$	86,738

NOTE I — Net Income per Common Share

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


		Three months ended January 31,				Six months ended January 31,					Three months ended January 31,				Six months ended January 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Numerator (in thousands):	Numerator (in thousands):									Numerator (in thousands):
Net Income (Numerator for basic and diluted income per Class A Nonvoting Common Share)		$	33,815	$	30,860	$	68,861	$	64,341
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)	$	37,986	$	33,815	$	77,427	$	68,861
Less:	Less:									Less:
Preferential dividends	Preferential dividends	—		—		(803)		(808)		Preferential dividends	—		—		(769)		(803)
Preferential dividends on dilutive stock options	Preferential dividends on dilutive stock options	—		—		(8)		(4)		Preferential dividends on dilutive stock options	—		—		(4)		(8)
Numerator for basic and diluted income per Class B Voting Common Share	Numerator for basic and diluted income per Class B Voting Common Share	$	33,815	$	30,860	$	68,050	$	63,529	Numerator for basic and diluted income per Class B Voting Common Share	$	37,986	$	33,815	$	76,654	$	68,050
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	51,800		52,018		51,887		52,020		Denominator for basic income per share for both Class A and Class B	49,745		51,800		49,806		51,887
Plus: Effect of dilutive equity awards	Plus: Effect of dilutive equity awards	362		264		412		268		Plus: Effect of dilutive equity awards	264		362		243		412
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	52,162		52,282		52,299		52,288		Denominator for diluted income per share for both Class A and Class B	50,009		52,162		50,049		52,299
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	$	0.65	$	0.59	$	1.33	$	1.24	Basic	$	0.76	$	0.65	$	1.55	$	1.33
Diluted	Diluted	$	0.65	$	0.59	$	1.32	$	1.23	Diluted	$	0.76	$	0.65	$	1.55	$	1.32
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	$	0.65	$	0.59	$	1.31	$	1.22	Basic	$	0.76	$	0.65	$	1.54	$	1.31
Diluted	Diluted	$	0.65	$	0.59	$	1.30	$	1.21	Diluted	$	0.76	$	0.65	$	1.53	$	1.30

Potentially dilutive securities attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted earnings per share where the combined exercise price and average unamortized fair value were greater than the average market price of the Company's Class A Nonvoting Common Stock because the effect would have been anti-dilutive. The amount of anti-dilutive shares were ~~471,377~~634,999 and ~~829,617~~471,377 for the three months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~475,489~~609,266 and ~~785,181~~475,489 for the six months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

NOTE J — 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.

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The following table summarizes the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of January 31, ~~2022~~2023 and July 31, ~~2021:~~2022:

January 31, 2022

July 31, 2021

Fair Value Hierarchy

January 31, 2023

July 31, 2022

Fair Value Hierarchy

Assets:

Deferred compensation plan assets

20,097

20,135

Level 1

Deferred compensation plan assets

17,558

18,037

Level 1

Foreign exchange contracts

372

150

Level 2

Foreign exchange contracts

1,591

489

Level 2

Liabilities:

Foreign exchange contracts

165

Level 2

Foreign exchange contracts

(116)

Level 2

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

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 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 K — 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 on 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:


		January 31, 2022		July 31, 2021			January 31, 2023		July 31, 2022
Designated as cash flow hedges	Designated as cash flow hedges	$	15,374	$	30,724	Designated as cash flow hedges	$	12,651	$	25,276
Non-designated hedges	Non-designated hedges	3,455		3,580		Non-designated hedges	4,456		4,057
Total foreign exchange contracts	Total foreign exchange contracts	$	18,829	$	34,304	Total foreign exchange contracts	$	17,107	$	29,333

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 January 31, ~~2022~~2023 and July 31, ~~2021,~~2022, unrealized gains of ~~$263~~$1,911 and ~~$770~~$1,040 have been included in OCI, respectively.

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Net Investment Hedges

The Company has designated certain third party foreign currency denominated debt borrowed under its credit agreement as net investment hedges. These debt obligations, denominated in Euros and British Pounds, were designated as net investment hedges to hedge portions of the Company's net investment in its European operations. The Company’s foreign currency denominated debt obligations are valued under a market approach using publicized spot prices, and the net gains or losses attributable to the changes in spot prices are recorded as cumulative translation within AOCI and are included in the foreign currency translation adjustments section of the condensed consolidated statements of comprehensive income. As of January 31, 2023 and July 31, 2022, the cumulative balance recognized in accumulated other comprehensive income were losses of $841 and $0, respectively, on any outstanding foreign currency denominated debt obligations.

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

Three months ended January 31, Six months ended January 31,
2022 2021 2022 2021
Gains recognized in OCI $ 225 $ 451 $ 199 $ 1,148
Gains (losses) reclassified from OCI into cost of goods sold 36 (60) 604 (271)


	Three months ended January 31,				Six months ended January 31,
	2023		2022		2023		2022
Gains (losses) recognized in OCI:
Forward exchange contracts (cash flow hedges)	$	776	$	225	$	1,669	$	199
Foreign currency denominated debt (net investment hedges)	(841)		—		(841)		—
Gains reclassified from OCI into cost of goods sold
Forward exchange contracts (cash flow hedges)	217		36		798		604

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


		January 31, 2022				July 31, 2021					January 31, 2023				July 31, 2022
		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	Long-term obligations	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)	$	372	$	153	$	150	$	51	Foreign exchange contracts (cash flow hedges)	$	1,564	(116)	—	$	489	$	30
Foreign currency denominated debt (net investment hedges)										Foreign currency denominated debt (net investment hedges)	—		—	(38,981)	—		—
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)	—		12		—		—		Foreign exchange contracts (non-designated hedges)	27		—	—	—		2
Total derivative instruments	Total derivative instruments	$	372	$	165	$	150	$	51	Total derivative instruments	$	1,591	(116)	(38,981)	$	489	$	32

NOTE L — Income Taxes

The income tax rate for the three months ended January 31, 2023 and 2022, was 21.7% and 19.6%, respectively. The income tax rate for the six months ended January 31, 2023 and 2022, was ~~19.6%~~21.7% and 20.6%, respectively. The Company expects its ongoing annual income tax rate to be abetween~~pproximately~~ 20% and 21% based on its current global business mix and based on tax laws and statutory tax rates currently in effect.

~~The income tax rate for the three and six months ended January 31, 2021, was 20.8% and 20.6%, respectively.~~

NOTE M — Subsequent Events

Effective February 1, 2023, the Company announced a modification of its organizational structure under new regional operating segments. Beginning in the third quarter of fiscal 2023, the Company will report sales and segment profit based on the following two operating segments: Americas & Asia and Europe & Australia.

On February ~~15, 2022,~~21, 2023, the Board of Directors declared a quarterly cash dividend to shareholders of the Company’s Class A and Class B Common Stock of ~~$0.225~~$0.23 per share payable on April ~~29, 2022,~~28, 2023, to shareholders of record at the close of business on April ~~8, 2022.~~10, 2023.

Subsequent to January 31, 2022, the Company has purchased 181,514 shares of its Class A Nonvoting Common Stock under its share repurchase program for an aggregate purchase price of $9.0 million and an average purchase price per share of $49.71. As of February 16, 2022, 1,387,730 shares remained authorized to purchase in connection with this share repurchase program.

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

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 manufactures a broad range of stock and custom identification products and sells a broad range of 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~~Brady's long-term sales growth and profitability ~~of our segments~~ will depend not only on ~~improved demand in end markets and~~ the overall economic environment and our ability to successfully navigate changes in the macro environment, but also on our ability to develop and market innovative new products, deliver a high level of customer service, advance our digital capabilities, and 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.~~operations. 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~~streamlining our product offerings, enhancing our compliance ~~expertise,~~and customization expertise, improving our price competitiveness, and improving our digital capabilities.

The following are key initiatives supporting our strategy in fiscal ~~2022:~~2023:

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

•~~Investing in acquisitions~~products that ~~enhance our strategic position~~solve customer needs and ~~accelerate long-term sales growth.~~improve environmental sustainability.

•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 ongoing supply chain disruptions and inflationary ~~pressures.~~pressures while ensuring prices are market competitive.

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

•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.~~activities while reducing our environmental footprint and managing working capital.

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

~~Impact of the COVID-19 Pandemic on Our Business~~•Executing our reorganization to a regional operating structure to support continued growth in key geographies, facilitate new product development in our recent acquisitions, and simplify and further integrate our businesses.

Macroeconomic Conditions and Trends

The Company has experienced, and expects to continue to experience, ~~increased freight~~inflationary pressures; labor shortages in certain geographies; supply chain and ~~input material cost inflation~~other business disruptions as a result of ~~increased global demand,~~the conflict in Ukraine; as well as disruptions caused by COVID-19 and government-mandated actions in response to COVID-19, ~~and labor shortages.~~particularly in China. The Company has taken and will continue to take actions to mitigate inflation issues ~~but thus far has not fully offset~~through pricing actions and the ~~impact~~execution of these trends. As a result, these trends have negatively impacted the Company's gross profit margin, and we expect ongoing inflationary pressures and supply chain issues will continue to negatively impact profitability in the second half of fiscal 2022.sustainable efficiency gains.

We believe we have the financial strength to continue to invest in organic sales growth opportunities ~~inorganic~~including sales, ~~opportunities including acquisitions, sales and~~ marketing, and research and development ("R&D"), and inorganic sales opportunities including acquisitions, while continuing to drive sustainable ~~efficiencies~~efficiency gains and automation in our operations and selling, general and administrative ("SG&A") functions. At January 31, ~~2022,~~2023, we had cash of ~~$147.4~~$108.2 million, as well as a credit ~~facility~~agreement with ~~$115.3~~$221.1 million available for future borrowing, which can be increased up to ~~$315.3~~$981.1 million at the Company's option and subject to certain conditions, for total available liquidity of ~~approximately $462.7~~$1,089.3 million.

We believe that our financial resources and liquidity levels, including the remaining undrawn amount of ~~the~~our credit ~~facility~~agreement and our ability to increase ~~that~~our credit line as necessary, are sufficient to manage the ~~continuing~~ impact of ~~the COVID-19 pandemic, including the spread of variants that could result in additional government actions around the world to contain the virus~~economic or ~~prevent further spread~~geopolitical events 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, ~~2021,~~2022, for further discussion of the ~~possible~~potential impact of global economic or geopolitical events or the COVID-19 pandemic on our business.

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Results of Operations

~~The comparability of the operating results for the three and six months ended January 31, 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 six months ended January 31, ~~2022~~2023 and ~~2021,~~2022, is as follows:


		Three months ended January 31,								Six months ended January 31,									Three months ended January 31,								Six months ended January 31,
(Dollars in thousands)	(Dollars in thousands)	2022		% Sales		2021		% Sales		2022		% Sales		2021		% Sales		(Dollars in thousands)	2023		% Sales		2022		% Sales		2023		% Sales		2022		% Sales
Net sales	Net sales	$	318,055			$	265,838			$	639,530			$	543,065			Net sales	$	326,249			$	318,055			$	648,818			$	639,530
Gross margin	Gross margin	149,362		47.0	%	129,522		48.7	%	304,350		47.6	%	264,950		48.8	%	Gross margin	156,440		48.0	%	149,362		47.0	%	311,704		48.0	%	304,350		47.6	%
Operating expenses:	Operating expenses:																	Operating expenses:
Research and development	Research and development	13,965		4.4	%	9,876		3.7	%	27,872		4.4	%	20,079		3.7	%	Research and development	15,377		4.7	%	13,965		4.4	%	29,310		4.5	%	27,872		4.4	%
Selling, general and administrative	Selling, general and administrative	92,525		29.1	%	82,234		30.9	%	189,271		29.6	%	165,271		30.4	%	Selling, general and administrative	92,282		28.3	%	92,525		29.1	%	182,227		28.1	%	189,271		29.6	%
Total operating expenses	Total operating expenses	106,490		33.5	%	92,110		34.6	%	217,143		34.0	%	185,350		34.1	%	Total operating expenses	107,659		33.0	%	106,490		33.5	%	211,537		32.6	%	217,143		34.0	%
Operating income	Operating income	$	42,872	13.5	%	$	37,412	14.1	%	$	87,207	13.6	%	$	79,600	14.7	%	Operating income	$	48,781	15.0	%	$	42,872	13.5	%	$	100,167	15.4	%	$	87,207	13.6	%

References in this Form 10-Q to “organic sales” refer to sales calculated in accordance with GAAP, excluding the impact of foreign currency 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.~~acquisition. 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 January 31, ~~2022,~~2023 increased ~~19.6%~~2.6% to ~~$318.1~~$326.2 million, compared to ~~$265.8~~$318.1 million in the same period in the prior year. The increase consisted of organic sales growth of ~~13.1%~~6.3%, ~~sales growth from acquisitions of 8.6% and~~which was partially offset by a decrease from foreign currency translation of ~~2.1%~~3.7%. Organic sales grew ~~16.0%~~7.4% in the IDS segment and ~~5.2%~~2.8% in the WPS segment during the three months ended January 31, ~~2022,~~2023 compared to the same period in the prior year.

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 on a large demographic of our customers and the overall global economy, while the WPS segment realized strong organic sales growth due to increased sales of personal protective equipment and other pandemic-related products. As a result, the recovery from the COVID-19 pandemic had a significant impact on year-to-date organic sales through the second quarter of fiscal 2022, with the impact varying between the IDS and WPS businesses due to sales patterns realized during the height of the pandemic in fiscal 2021.

Net sales for the six months ended January 31, ~~2022,~~2023 increased ~~17.8%~~1.5% to ~~$639.5~~$648.8 million, compared to ~~$543.1~~$639.5 million in the same period in the prior year. The increase consisted of organic sales growth of ~~10.0%~~6.6%, ~~sales growth from acquisitions of 8.5% and~~which was partially offset by a decrease from foreign currency translation of ~~0.7%~~5.1%. Organic sales increased ~~14.6%~~8.0% in the IDS segment and ~~declined~~ 2.0% in the WPS segment during the six months ended January 31, ~~2022,~~2023 compared to the same period in the prior year.

Gross margin increased ~~15.3%~~4.7% to ~~$149.4~~$156.4 million in the three months ended January 31, ~~2022,~~2023 compared to ~~$129.5~~$149.4 million in the same period in the prior year. As a percentage of net sales, gross margin ~~decreased~~increased to 48.0% from 47.0% ~~compared to 48.7%~~ in the ~~same period in the prior year.~~three-month period. Gross margin increased ~~14.9%~~2.4% to ~~$304.4~~$311.7 million for the six months ended January 31, ~~2022,~~2023 compared to ~~$265.0~~$304.4 million in the same period in the prior year. As a percentage of net sales, gross margin ~~decreased~~increased to 48.0% from 47.6% ~~compared to 48.8%~~ in the ~~same period in the prior year.~~six-month period. The ~~decrease~~increase in gross margin as a percentage of net sales was primarily due to our ongoing efforts to streamline manufacturing processes to drive sustainable operating efficiencies as well as price increases, which were partially offset by an increase in the cost of materials ~~labor~~ and ~~freight, which was partially mitigated by our ongoing efforts to streamline manufacturing processes, drive sustainable operational efficiencies and increase prices.~~labor.

R&D expenses increased ~~41.4%~~10.1% to $15.4 million in the three months ended January 31, 2023 compared to $14.0 million ~~and~~in the same period in the prior year. As a percentage of net sales, R&D expenses increased ~~38.8%~~ to ~~$27.9~~4.7% from 4.4% in the three-month period. R&D expenses increased 5.2% to $29.3 million ~~for~~in the ~~three and~~ six months ended January 31, ~~2022, respectively,~~2023 compared to ~~$9.9 million and $20.1~~$27.9 million in the same ~~periods~~period in the prior year. ~~The increase in R&D spending for both the three and six-month periods was primarily due to the acquisitions of Code and Nordic ID, as these companies operate with a greater amount of R&D spend as~~As a percentage of net sales, ~~compared~~R&D expenses increased slightly to ~~Brady's organic~~

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~~business. In addition, R&D headcount increased~~4.5% from 4.4% in the ~~IDS business.~~six-month period. 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 the ~~building~~build out of ~~a comprehensive~~ industrial track and trace ~~solution continue to be~~solutions remain the primary focus of R&D expenditures for the remainder of fiscal ~~2022.~~2023.

SG&A expenses include selling and administrative costs directly attributed to the IDS and WPS segments, as well as certain other ~~general and~~corporate administrative expenses including finance, information technology, human resources, and other administrative expenses. SG&A expenses ~~increased 12.5%~~decreased 0.3% to ~~$92.5~~$92.3 million in the three months ended January 31, ~~2022,~~2023 compared to ~~$82.2~~$92.5 million in the same period in the prior year. As a percentage of net sales, SG&A decreased to 28.3% from 29.1% ~~compared to 30.9%~~ in the ~~same period in the prior year. The increase in~~three-month period. SG&A expenses ~~was primarily due~~decreased 3.7% to ~~the acquisitions of Code, Magicard and Nordic ID, and to a lesser extent an increase in sales and marketing personnel in the IDS business and increased personnel costs in the WPS business.~~

~~SG&A expenses increased 14.5% to $189.3~~$182.2 million for the six months ended January 31, ~~2022,~~2023 compared to ~~$165.3~~$189.3 million in the same period in the prior year. As a percentage of net sales, SG&A ~~expense~~ decreased to ~~29.6%~~28.1% from ~~30.4%~~29.6% in the ~~same period in the prior year.~~six-month period. The ~~increase~~decrease in SG&A ~~expense~~expenses for the three and six-month periods ended January 31, 2023 was primarily due to ~~the acquisitions of Code, Magicard and Nordic ID,~~foreign currency translation and, to a lesser extent, ~~an increase~~reductions in ~~personnel costs and~~catalog advertising ~~costs in both~~expenses within the ~~IDS and~~ WPS ~~businesses. The decrease in SG&A expense as a percentage of sales for the three and six month periods ended January 31, 2022, was primarily due to ongoing efficiency activities throughout SG&A.~~segment.

Operating income increased ~~14.6%~~13.8% to ~~$42.9~~$48.8 million and increased ~~9.6%~~14.9% to ~~$87.2~~$100.2 million for the three and six months ended January 31, ~~2022,~~2023, respectively, compared to ~~$37.4~~$42.9 million and ~~$79.6~~$87.2 million in the same periods in the prior year. The

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increase in operating income in both the three and six-month periods was primarily due to the increase in segment profit in the IDS segment as a result of organic sales ~~growth.~~growth, and an increase in segment profit in the WPS segment due to its reduced cost structure.

OPERATING INCOME TO NET INCOME


		Three months ended January 31,								Six months ended January 31,									Three months ended January 31,								Six months ended January 31,
(Dollars in thousands)	(Dollars in thousands)	2022		% Sales		2021		% Sales		2022		% Sales		2021		% Sales		(Dollars in thousands)	2023		% Sales		2022		% Sales		2023		% Sales		2022		% Sales
Operating income	Operating income	$	42,872	13.5	%	$	37,412	14.1	%	$	87,207	13.6	%	$	79,600	14.7	%	Operating income	$	48,781	15.0	%	$	42,872	13.5	%	$	100,167	15.4	%	$	87,207	13.6	%
Other (expense) income:
Investment and other (expense) income		(578)		(0.2)	%	2,036		0.8	%	(35)		—	%	2,191		0.4	%
Other income (expense):																		Other income (expense):
Investment and other income (expense)																		Investment and other income (expense)	968		0.3	%	(578)		(0.2)	%	811		0.1	%	(35)		(0.0)	%
Interest expense	Interest expense	(252)		(0.1)	%	(51)		—	%	(434)		(0.1)	%	(157)		—	%	Interest expense	(1,239)		(0.4)	%	(252)		(0.1)	%	(2,133)		(0.3)	%	(434)		(0.1)	%
Income before income tax and losses of unconsolidated affiliate		42,042		13.2	%	39,397		14.8	%	86,738		13.6	%	81,634		15.0	%
Income before income taxes																		Income before income taxes	48,510		14.9	%	42,042		13.2	%	98,845		15.2	%	86,738		13.6	%
Income tax expense	Income tax expense	8,227		2.6	%	8,206		3.1	%	17,877		2.8	%	16,788		3.1	%	Income tax expense	10,524		3.2	%	8,227		2.6	%	21,418		3.3	%	17,877		2.8	%
Income before losses of unconsolidated affiliate		33,815		10.6	%	31,191		11.7	%	68,861		10.8	%	64,846		11.9	%
Equity in losses of unconsolidated affiliate		—		—	%	(331)		(0.1)	%	—		—	%	(505)		(0.1)	%
Net income	Net income	$	33,815	10.6	%	$	30,860	11.6	%	$	68,861	10.8	%	$	64,341	11.8	%	Net income	$	37,986	11.6	%	$	33,815	10.6	%	$	77,427	11.9	%	$	68,861	10.8	%

Investment and other ~~(expense)~~ income was ~~a net~~$1.0 million and $0.8 million for the three and six months ended January 31, 2023, respectively, compared to investment and other expense of $0.6 million and ~~investment and other (expense)~~$0.0 million in the same periods in the prior year. The increase in income ~~was a net income of $2.0 million for~~during the three months ended January 31, 2022 and 2021, respectively. Investment and other (expense) income was a net expense of $0.0 million and a net income of $2.2 million for the six months ended January 31, 2022 and 2021, respectively. The decrease in the three-month and six-month ~~period~~periods was primarily due to ~~a decrease~~an increase in the market value of securities held in deferred compensation ~~plans.~~plans and to a lesser extent an increase in interest income.

Interest expense increased to ~~$0.3~~$1.2 million and ~~$0.4~~$2.1 million for the three and six months ended January 31, ~~2022,~~2023, respectively, compared to ~~$0.1~~$0.3 million and ~~$0.2~~$0.4 million in the same periods in the prior year. The increase in interest expense ~~for both the three and six-month periods~~ was primarily due to ~~increased borrowing on our credit facility~~an increase in benchmark interest rates compared to the same ~~period~~periods in the prior year.

The Company's income tax rate was ~~19.6%~~21.7% and ~~20.8%~~19.6% for the three months ended January 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and the income tax rate was 21.7% and 20.6% for ~~both of~~ the six months ended January 31, 2023 and 2022, ~~and 2021.~~respectively. Refer to Note L, "Income Taxes" for additional information on the Company's income tax rates.

Equity in losses of unconsolidated affiliate of $0.3 million and $0.5 million for the three and six months ended January 31, 2021, respectively, represented the Company's proportionate share of the loss in its equity interest in React Mobile, Inc., an

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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.

Business Segment Operating Results

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

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The following is a summary of segment information for the three and six months ended January 31, ~~2022~~2023 and ~~2021:~~2022:


		Three months ended January 31,						Six months ended January 31,							Three months ended January 31,						Six months ended January 31,
		2022			2021			2022			2021				2023			2022			2023			2022
SALES GROWTH INFORMATION	SALES GROWTH INFORMATION													SALES GROWTH INFORMATION
ID Solutions
IDS														IDS
Organic	Organic	16.0		%	(6.9)		%	14.6		%	(7.6)		%	Organic	7.4		%	16.0		%	8.0		%	14.6		%
Currency														Currency	(3.0)		%	(1.7)		%	(4.3)		%	(0.5)		%
Acquisitions	Acquisitions	11.8		%	—		%	11.7		%	—		%	Acquisitions	—		%	11.8		%	—		%	11.7		%
Currency		(1.7)		%	1.5		%	(0.5)		%	1.0		%
Total	Total	26.1		%	(5.4)		%	25.8		%	(6.6)		%	Total	4.4		%	26.1		%	3.7		%	25.8		%
Workplace Safety
WPS														WPS
Organic	Organic	5.2		%	(4.8)		%	(2.0)		%	0.4		%	Organic	2.8		%	5.2		%	2.0		%	(2.0)		%
Currency	Currency	(3.2)		%	5.2		%	(1.1)		%	4.8		%	Currency	(6.2)		%	(3.2)		%	(8.3)		%	(1.1)		%
Total	Total	2.0		%	0.4		%	(3.1)		%	5.2		%	Total	(3.4)		%	2.0		%	(6.3)		%	(3.1)		%
Total Company	Total Company													Total Company
Organic	Organic	13.1		%	(6.3)		%	10.0		%	(5.6)		%	Organic	6.3		%	13.1		%	6.6		%	10.0		%
Currency														Currency	(3.7)		%	(2.1)		%	(5.1)		%	(0.7)		%
Acquisitions	Acquisitions	8.6		%	—		%	8.5		%	—		%	Acquisitions	—		%	8.6		%	—		%	8.5		%
Currency		(2.1)		%	2.4		%	(0.7)		%	2.0		%
Total	Total	19.6		%	(3.9)		%	17.8		%	(3.6)		%	Total	2.6		%	19.6		%	1.5		%	17.8		%
SEGMENT PROFIT	SEGMENT PROFIT													SEGMENT PROFIT
ID Solutions		$	44,129		$	39,000		$	92,945		$	79,279
Workplace Safety		4,515			3,463			6,808			11,451
IDS														IDS	$	47,384		$	44,129		$	98,909		$	92,945
WPS														WPS	6,249			4,515			12,627			6,808
Total	Total	$	48,644		$	42,463		$	99,753		$	90,730		Total	$	53,633		$	48,644		$	111,536		$	99,753
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		18.0		%	20.1		%	18.8		%	20.2		%
Workplace Safety		6.2		%	4.8		%	4.7		%	7.6		%
IDS														IDS	18.5		%	18.0		%	19.3		%	18.8		%
WPS														WPS	8.9		%	6.2		%	9.2		%	4.7		%
Total	Total	15.3		%	16.0		%	15.6		%	16.7		%	Total	16.4		%	15.3		%	17.2		%	15.6		%

~~ID Solutions~~IDS

IDS net sales increased ~~26.1%~~4.4% to ~~$245.0~~$255.7 million for the three months ended January 31, ~~2022,~~2023 compared to ~~$194.2~~$245.0 million in the same period in the prior year, which consisted of organic sales growth of ~~16.0%, sales growth from acquisitions of 11.8%~~7.4% and a decrease from foreign currency translation of ~~1.7%~~3.0%. IDS net sales increased ~~25.8%~~3.7% to ~~$493.6~~$512.0 million for the six months ended January 31, ~~2022,~~2023 compared to ~~$392.4~~$493.6 million in the same period in the prior year, which consisted of organic sales growth of ~~14.6%, sales growth from acquisitions of 11.7%~~8.0% and a decrease from foreign currency translation of ~~0.5%~~4.3%. Organic sales grew in all major product lines with the strongest growth in the safety and facility identification and wire identification product lines, followed by growth in healthcare identification and ~~healthcare~~product identification ~~in the six months ended January 31, 2022. Organic sales increased in the mid-teens in all three regions of the IDS business~~ in both the three and six months ended January 31, ~~2022,~~2023.

Organic sales in the Americas increased approximately 11% in the three months ended January 31, 2023 and increased in the high-single digits in the six months ended January 31, 2023 compared to the same periods in the prior year. Organic sales grew in all major product lines in the Americas with the strongest growth in the safety and facility identification and product identification product lines.

Organic sales in Europe increased in the mid-single digits in the three months ended January 31, 2023 and increased approximately 12% in the six months ended January 31, 2023 compared to the same periods in the prior year. Organic sales grew in all ~~geographies as our businesses continue~~major product lines in Europe in both the three and six-month periods with the strongest growth in the product identification product line followed by growth in the safety and facility identification and wire identification product lines.

Organic sales in Asia declined in the high-single digits in the three months ended January 31, 2023 and declined in the low-single digits in the six months ended January 31, 2023 compared to ~~recover from~~ the ~~economic slowdown caused~~same periods in the prior year. The organic sales decline was primarily driven by decreased sales in China due to the spread of COVID-19 ~~pandemic.~~during the three-month period. The organic sales declines in China were partially offset by strong sales growth in India and Japan during both the three and six-month periods.

Segment profit increased ~~13.2%~~7.4% to ~~$44.1~~$47.4 million for the three months ended January 31, ~~2022,~~2023 compared to ~~$39.0~~$44.1 million in the same period in the prior year. Segment profit increased ~~17.2%~~6.4% to ~~$92.9~~$98.9 million for the six months ended January 31, ~~2022,~~2023 compared to ~~$79.3~~$92.9 million in the same period in the prior year. As a percentage of net sales, segment profit ~~decreased~~increased to ~~18.0%~~18.5% from ~~20.1%~~18.0% for the three-month period, and segment profit ~~decreased~~increased to ~~18.8%~~19.3% from ~~20.2%~~18.8% for the six-month period ended

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January 31, ~~2022~~2023 compared to the same periods in the prior year. The ~~decrease~~increase in segment profit as a percentage of net sales was primarily due to ~~gross margin compression resulting from~~ongoing efforts to streamline processes to drive operational efficiencies as well as price increases, which were partially offset by an increase in the cost of materials, labor and freight, as well as incremental amortization expense of $2.4 million and $4.9 million in the three and six months ended January 31, 2022, respectively, which was partially offset by pricing actions, comparedcosts due to ~~the same periods in the prior year.~~inflationary pressures.

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~~Workplace Safety~~WPS

WPS net sales ~~increased 2.0%~~declined 3.4% to ~~$73.1~~$70.6 million for the three months ended January 31, ~~2022,~~2023 compared to ~~$71.6~~$73.1 million in the same period in the prior year, which consisted of organic sales growth of ~~5.2%~~2.8% and a decrease from foreign currency translation of ~~3.2%~~6.2%. ~~Both~~Organic digital sales ~~and catalog channel~~increased approximately 12% while organic sales ~~increased in the mid-single digits organically in~~from all other channels, including catalogs, were flat during the three-month period ended January 31, ~~2022.~~2023.

WPS net sales ~~decreased 3.1%~~declined 6.3% to ~~$145.9~~$136.8 million for the six months ended January 31, ~~2022,~~2023 compared to ~~$150.6~~$145.9 million in the same period in the prior year, which consisted of an organic sales ~~decline~~growth of 2.0% and a decrease from foreign currency translation of ~~1.1%~~8.3%. ~~The economic effect of the COVID-19 pandemic had a significant impact on~~Organic digital sales increased by approximately 13% while organic sales ~~trends during the prior year. The WPS business realized strong organic sales growth through the first quarter of fiscal 2021 due to increased sales of personal protective equipment and~~from all 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. Both digital and catalog channel saleschannels, including catalogs, decreased in the low-single digits ~~organically~~ in the six-month period ended January 31, ~~2022.~~2023.

Organic sales in Europe increased in the ~~high-single~~low-single digits in both the three and six months ended January 31, ~~2022,~~2023 compared to the same ~~period~~periods in the prior year. Organic digital sales ~~in Europe~~increased approximately 12% while organic sales from all other channels, including catalogs, were essentially flat in both the ~~six months~~three and six-month periods ended January 31, 2022, compared to the same period in prior year. Digital sales increased in the mid-single digits and catalog channel sales increased in the high-single digits in the three-month period, and both digital sales and catalog channel sales were essentially flat in the six-month period ended January 31, 2022.2023.

Organic sales in North America were essentially flat in the three months ended January 31, 2022, compared to the same period in the prior year. Digital sales increased in the mid-single digits, and sales through the catalog channel decreased in the low-single digits in the three months ended January 31, 2022. Organic sales in North America declined in the mid-single digits in the ~~six~~three months ended January 31, ~~2022,~~2023 compared to the same period in the prior year. ~~Digital~~Organic digital sales ~~decreased~~increased approximately 13% while organic sales from all other channels, including catalogs, declined nearly 20% during the three months ended January 31, 2023. Organic sales in ~~the mid-single digits and catalog channel sales decreased~~North America declined in the high-single digits in the ~~six-month period ended January 31, 2022.~~

~~Organic sales in Australia increased in the mid-single digits in the three~~six months ended January 31, ~~2022 and increased in the low-single digits in the six-month period ended January 31, 2022,~~2023 compared to the same period in the prior year. ~~Digital~~Organic digital sales increased nearly 20% which was more than offset by a decline of nearly 20% in organic sales from all other channels, including catalogs, in the six-month period ended January 31, 2023.

Organic sales in Australia increased in the ~~high-single digits~~mid-teens in both the three and ~~catalog channel sales increased in the mid-single digits in the three~~six months ended January 31, ~~2022,~~2023 compared to the same ~~period~~periods in the prior year. ~~Digital~~Organic sales were ~~essentially flat~~driven by consistent growth in both digital and ~~catalog channel~~ sales ~~increased~~from all other channels, including catalogs, in both the ~~low-single digits in~~three and six-month periods, which was primarily the result of price increases implemented throughout the six months ended January 31, ~~2022, compared to the same period in the prior year.~~2023.

Segment profit increased ~~30.4%~~38.4% to ~~$4.5~~$6.2 million from ~~$3.5~~$4.5 million, and as a percentage of net sales, segment profit increased to ~~6.2%~~8.9% from ~~4.8%~~6.2% for the three months ended January 31, ~~2022,~~2023 compared to the same period in the prior year. Segment profit increased 85.5% to $12.6 million from $6.8 million and as a percentage of net sales, segment profit increased to 9.2% from 4.7% for the six months ended January 31, 2023 compared to the same period in the prior year. The increase in segment profit ~~in the three-month period~~for both periods was primarily due to actions taken during fiscal 2022 to reduce the increase in sales volumes as compared to the prior year. Segment profit decreased 40.5% to $6.8 million from $11.5 million and as a percentage of net sales, segment profit decreased to 4.7% from 7.6% for the six months ended January 31, 2022, compared to the same period in the prior year. The decrease in segment profit in the six-month period was due to the decrease in sales volumes as compared to prior yearcost structure as well as ~~gross margin compression due to an increase~~ongoing reductions in ~~the cost of materials, labor and freight.~~catalog advertising expenses.

Liquidity and Capital Resources

The Company's cash balances are generated and held in numerous locations throughout the world. At January 31, ~~2022,~~2023, approximately ~~93%~~99% 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 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.

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Cash Flows

Cash and cash equivalents were ~~$147.4~~$108.2 million at January 31, ~~2022, an increase~~2023, a decrease of ~~$0.1~~$5.9 million from July 31, ~~2021.~~2022. The significant changes were as follows:


		Six months ended January 31,					Six months ended January 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		(Dollars in thousands)	2023		2022
Net cash flow provided by (used in):	Net cash flow provided by (used in):					Net cash flow provided by (used in):
Operating activities	Operating activities	$	24,328	$	98,889	Operating activities	$	57,384	$	24,328
Investing activities	Investing activities	(16,381)		(16,392)		Investing activities	(8,156)		(16,381)
Financing activities	Financing activities	(4,505)		(28,828)		Financing activities	(57,128)		(4,505)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(3,370)		6,276		Effect of exchange rate changes on cash	2,041		(3,370)
Net increase in cash and cash equivalents		$	72	$	59,945
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	$	(5,859)	$	72

Net cash provided by operating activities was ~~$24.3~~$57.4 million for the six months ended January 31, ~~2022,~~2023 compared to ~~$98.9~~$24.3 million in the same period of the prior year. The ~~decrease~~increase in cash provided by operating activities was primarily due to ~~cash outflows for~~reduced inventory purchases compared to increased inventory purchases in the prior year in order to reduce the risk of supply chain disruption. ~~In addition, annual incentive compensation payments were higher in the current six-month period than they were the same period in the prior year.~~

Net cash used in investing activities was ~~$16.4~~$8.2 million in ~~both~~ the six months ended January 31, ~~2022 and 2021,~~2023 compared to $16.4 million in the same period of the prior year, which consisted primarily of capital expenditures in both periods. Prior year capital expenditures were elevated due to the purchase of two facilities that were previously leased.

Net cash used in financing activities was ~~$4.5~~$57.1 million in the six months ended January 31, ~~2022, which consisted~~2023 compared to $4.5 million in the same period of ~~dividend payments~~the prior year. The increase in cash used by financing activities was primarily due to $17.7 million of ~~$23.2 million, share repurchases of $21.7 million, and tax withholding from stock-based awards of $5.0 million, partially offset by $45.0 million~~ net ~~borrowing~~repayments on the credit ~~facility. Net cash used in financing activities~~agreement in the six months ended January 31, ~~2021~~2023 compared to $45.0 million of ~~$28.8 million primarily consisted~~net borrowings on the credit agreement in the same period of ~~dividend payments~~the prior year, which was due to the increase in net cash provided by operating activities in the current six-month period.

Material Cash Requirements

Our material cash requirements for known contractual obligations include capital expenditures, borrowings on our credit agreement and lease obligations. We believe that net cash provided by operating activities will continue to be adequate to meet our liquidity and capital needs for these items over the next 12 months and in the long-term beyond the next 12 months. We also have cash requirements for purchase orders and contracts for the purchase of ~~$22.8 million~~inventory and ~~share repurchases~~other goods and services, which are based on current and anticipated customer needs and are fulfilled by our suppliers within short time horizons. We do not have significant agreements for the purchase of ~~$3.6 million.~~inventory or other goods or services specifying minimum order quantities. In addition, we may have liabilities for uncertain tax positions, but we do not believe that the cash requirements to meet any of these liabilities will be material.

Credit ~~Facilities~~Agreement

On August 1, 2019, the Company and certain of its subsidiaries entered into an unsecured $200 million multi-currency ~~revolving loan~~credit agreement with a group of five 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~~credit agreement ~~which amends the revolving loan agreement~~ dated ~~as of~~ August 1, 2019. The amendment ~~amends~~modified the ~~revolving loan~~credit agreement to, among other things, (a) change the interest rate under the ~~revolving loan~~credit 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~~credit 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~~credit agreement did not have a material impact on the interest rate or related balances in the Company's consolidated financial statements.

On November 14, 2022, the Company and certain of its subsidiaries entered into a Second Amendment to Credit Agreement (“Amendment No. 2”) with a group of six banks, which amended the original credit agreement dated August 1, 2019. Amendment No. 2 amended the credit agreement to, among other items, (a) increase the lending commitments by $100 million for total lending commitments of $300 million, (b) extend the final maturity date to November 14, 2027, (c) increase the

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interest rate on certain borrowings by 0.125%, and (d) increase the available amount under the credit agreement, at the Company's option and subject to certain conditions, from $300 million up to (i) an amount equal to the incremental borrowing necessary to bring the Company's consolidated net debt-to-EBITDA ratio as defined in the credit agreement to 2.5 to 1.0 plus (ii) $200 million. Borrowings under Amendment No. 2 are unsecured and are guaranteed by certain of the Company's domestic subsidiaries.

As of January 31, ~~2022,~~2023, the outstanding balance on the Company's ~~revolving loan~~credit agreement was ~~$83.0~~$77.3 million. The maximum amount outstanding on the credit ~~facility~~agreement during the six months ended January 31, ~~2022~~2023 was ~~$93.4~~$103.0 million. ~~The~~As of January 31, 2023, the U.S. dollar-denominated borrowings of $38.3 million bear interest at ~~0.86% as~~5.6%; the Euro-denominated borrowings of ~~January 31, 2022.~~€20.0 million bear interest at 2.9%; and the British Pound-denominated borrowings of £17.3 million bear interest at 4.3% for a weighted average interest rate of 4.5%. The Company had letters of credit outstanding under the ~~loan~~credit agreement of ~~$1.7~~$1.6 million as of January 31, ~~2022,~~2023, and there was ~~$115.3~~$221.1 million available for future borrowing, which can be increased to ~~$315.3~~$981.1 million at the Company's option, subject to certain conditions. The ~~revolving loan~~credit agreement has a final maturity date of ~~August 1, 2024.~~November 14, 2027. As such, borrowings were classified as long-term on the condensed consolidated balance sheets.

Covenant Compliance

The Company's ~~revolving loan~~credit 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,~~credit agreement, of not more than a 3.5 to 1.0 ratio (leverage ratio) and the trailing twelve months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of

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January 31, ~~2022,~~2023, the Company was in compliance with these financial covenants, with a ratio of debt to EBITDA, as defined by the ~~agreements,~~agreement, equal to ~~0.33~~0.31 to 1.0 and the interest expense coverage ratio equal to ~~322.7~~85.9 to 1.0.

~~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 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~~Increased cost of ~~the novel coronavirus ("COVID-19") pandemic or other pandemics~~raw materials, labor and freight as well as raw material shortages and supply chain disruptions

•Decreased demand for the Company's products

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

•~~Increased cost of raw materials, labor and freight as well as raw material shortages~~

•Ability to develop technologically advanced products that meet customer demands

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

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

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

•Risks associated with the loss of key employees

•Extensive regulations by U.S. and non-U.S. governmental and 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 within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, ~~2021.~~2022.

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.

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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, ~~2021.~~2022. There has been no material change in this information since July 31, ~~2021.~~2022.

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

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 Company’s Annual Report on Form 10-K for the year ended July 31, 2022. There have been no material changes from the risk factors set forth in the 2022 Form 10-K.

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

The Company has a share repurchase program for the Company's Class A Nonvoting Common Stock. The ~~plan~~repurchase program may be implemented by purchasing shares in the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company's stock-based plans and for other corporate purposes. On ~~September 1, 2021, Brady’s~~May 24, 2022, the Company'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. The currentCompany's share repurchase program, ~~has no expiration date.~~authorizing the repurchase of up to $100.0 million of the Company's Class A Nonvoting Common Stock. As of January 31, ~~2022, 1,569,244~~2023, there were $67.1 million worth of shares ~~remained~~ authorized to purchase ~~in connection with this~~remaining pursuant to the existing share repurchase program.

The following table provides information with respect to the purchases by the Company of Class A Nonvoting Common Stock during the three months ended January 31, ~~2022:~~2023:

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
November 1, 2021 - November 30, 2021 43,277 $ 49.90 43,277 1,581,723
December 1, 2021 - December 31, 2021 — — — 1,581,723
January 1, 2022 - January 31, 2022 12,479 50.98 12,479 1,569,244
Total 55,756 $ 50.14 55,756 1,569,244


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (Dollars in Thousands)
November 1, 2022 - November 30, 2022	—	$	—	—	$	72,939
December 1, 2022 - December 31, 2022	123,321	46.92		123,321	67,153
January 1, 2023 - January 31, 2023	100	45.99		100	67,148
Total	123,421	$	46.92	123,421	$	67,148

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ITEM 6. EXHIBITS


Exhibit No.						Exhibit Description

10.1						~~First Amendment to Credit Agreement, dated as of December 21, 2021, by~~Original Employment Contract between the Company and ~~among Brady Corporation and certain of its subsidiaries, the lenders listed therein and BMO Harris Bank, N.A., as administrative agent~~Brett Wilms effective June 1, 2018 (incorporated by reference to Registrant's Current ~~report~~Report on Form 8-K filed ~~December 22, 2021)~~February 1, 2023).*

10.2						Employment Contract Addendum between the Company and Brett Wilms effective February 1, 2023 (incorporated by reference to Registrant's Current Report on Form 8-K filed February 1, 2023).*

10.3						Change of Control Agreement between the Company and Brett Wilms dated as of January 10, 2023 (incorporated by reference to Registrant's Current Report on Form 8-K filed February 1, 2023).*

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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SIGNATURES

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

~~SIGNATURES~~

BRADY CORPORATION

Date: February ~~17, 2022~~24, 2023

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

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

President and Chief Executive Officer

(Principal Executive Officer)

Date: February ~~17, 2022~~24, 2023

/s/ AARON J. PEARCE

Aaron J. Pearce

Chief Financial Officer and Treasurer

(Principal Financial Officer)



			Page
PART I. Financial Information			3
Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Income			4
Condensed Consolidated Statements of Comprehensive Income			5
C ~~ondensed~~ C ~~onsolidated~~ S ~~tatements~~Condensed Consolidated Statements of S ~~tockholders'~~ E ~~quity~~ Stockholders' Equity			6
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			23
PART II. Other Information			24
Item 1A. Risk Factors			24
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds			24
Item 6. Exhibits			25
Signatures			26