brc-20240131

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, 2024


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

For the Transition Period from to

Commission File Number 1-14959

BRADY CORPORATION

(Exact name of registrant as specified in its charter)


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

6555 West Good Hope Road

Milwaukee, Wisconsin 53223

(Address of principal executive offices and zip code)

(414) 358-6600

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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, 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 20, 2024, there were 44,792,961 outstanding shares of Class A Nonvoting Common Stock and 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which is held by affiliates of the Registrant, is the only voting stock.

Table of Contents

INDEX



			Page
PART I. Financial Information			3
Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Income			4
Condensed Consolidated Statements of Comprehensive Income			5
Condensed Consolidated Statements of 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			22
Item 4. Controls and Procedures			22
PART II. Other Information			23
Item 1A. Risk Factors			23
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds			23
Item 5. Other Information			23
Item 6. Exhibits			24
Signatures			25

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


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

See Notes to Condensed Consolidated Financial Statements.

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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,
	2024		2023		2024		2023
Net sales	$	322,624	$	326,249	$	654,607	$	648,818
Cost of goods sold	160,541		169,809		320,805		337,114
Gross margin	162,083		156,440		333,802		311,704
Operating expenses:
Research and development	16,832		15,377		32,534		29,310
Selling, general and administrative	91,325		92,282		187,612		182,227
Total operating expenses	108,157		107,659		220,146		211,537
Operating income	53,926		48,781		113,656		100,167
Other income (expense):
Investment and other income	2,684		968		3,122		811
Interest expense	(790)		(1,239)		(1,556)		(2,133)
Income before income taxes	55,820		48,510		115,222		98,845
Income tax expense	12,192		10,524		24,353		21,418
Net income	$	43,628	$	37,986	$	90,869	$	77,427
Net income per Class A Nonvoting Common Share:
Basic	$	0.90	$	0.76	$	1.88	$	1.55
Diluted	$	0.90	$	0.76	$	1.86	$	1.55
Net income per Class B Voting Common Share:
Basic	$	0.90	$	0.76	$	1.86	$	1.54
Diluted	$	0.90	$	0.76	$	1.85	$	1.53
Weighted average common shares outstanding:
Basic	48,374		49,745		48,440		49,806
Diluted	48,725		50,009		48,768		50,049

See Notes to Condensed Consolidated Financial Statements.

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BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands, Unaudited)


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

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

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

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

See Notes to Condensed Consolidated Financial Statements.

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BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Thousands, Unaudited)


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


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

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


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

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BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


	Six months ended January 31,
	2024		2023
Operating activities:
Net income	$	90,869	$	77,427
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,008		17,117
Stock-based compensation expense	5,263		4,381
Deferred income taxes	(3,640)		(5,234)
Other	947		(908)
Changes in operating assets and liabilities:
Accounts receivable	(5,030)		280
Inventories	10,078		(1,287)
Prepaid expenses and other assets	(1,187)		(3,502)
Accounts payable and accrued liabilities	(9,754)		(29,156)
Income taxes	(4,203)		(1,734)
Net cash provided by operating activities	98,351		57,384

Investing activities:
Purchases of property, plant and equipment	(60,832)		(8,167)
Other	—		11
Net cash used in investing activities	(60,832)		(8,156)

Financing activities:
Payment of dividends	(22,694)		(22,793)
Proceeds from exercise of stock options	5,366		2,688
Payments for employee taxes withheld from stock-based awards	(2,362)		(1,509)
Purchase of treasury stock	(21,797)		(17,861)
Proceeds from borrowing on credit agreement	69,145		71,036
Repayment of borrowing on credit agreement	(70,771)		(88,755)
Other	149		66
Net cash used in financing activities	(42,964)		(57,128)

Effect of exchange rate changes on cash and cash equivalents	(2,227)		2,041

Net decrease in cash and cash equivalents	(7,672)		(5,859)
Cash and cash equivalents, beginning of period	151,532		114,069

Cash and cash equivalents, end of period	$	143,860	$	108,210

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, 2024

(Unaudited)

(In thousands, except share and per share amounts)

NOTE A — Basis of Presentation

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

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

NOTE B — New Accounting Pronouncements

Standards not yet adopted

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

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

NOTE C — Additional Balance Sheet Information

Inventories

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


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

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Property, plant and equipment

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

NOTE D — Other Intangible Assets

Other intangible assets as of January 31, 2024 and July 31, 2023 consisted of the following:


	January 31, 2024							July 31, 2023
	Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized other intangible assets:
Tradenames	3	$	600	$	(533)	$	67	3	$	1,114	$	(947)	$	167
Customer relationships	9	64,261		(19,547)		44,714		9	64,513		(15,947)		48,566
Technology	5	9,274		(5,192)		4,082		5	9,313		(4,235)		5,078
Unamortized other intangible assets:
Tradenames	N/A	8,245		—		8,245		N/A	8,285		—		8,285
Total		$	82,380	$	(25,272)	$	57,108		$	83,225	$	(21,129)	$	62,096

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

Amortization expense of intangible assets was $2,364 and $3,258 for the three months ended January 31, 2024 and 2023, respectively, and $4,719 and $6,889 for the six months ended January 31, 2024 and 2023, 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, 2024, the Company did not have any finance leases.

Operating lease expense was $3,804 and $3,868 for the three months ended January 31, 2024 and 2023, respectively, and $7,869 and $7,648 for the six months ended January 31, 2024 and 2023, respectively, which was recognized in either "Cost of goods sold" or "Selling, general and administrative" expenses in the condensed consolidated statements of income, based on the nature of the 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, 2024 and 2023.

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


	Six months ended January 31,
	2024		2023
Operating cash outflows from operating leases	$	8,585	$	8,766

SEC Form 10-Q filed by Brady Corporation