brc-20240430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


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

For the Quarterly Period Ended April 30, 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 May 20, 2024, there were 43,941,713 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.

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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 1. Legal Proceedings			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)


	April 30, 2024		July 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	160,458	$	151,532
Accounts receivable, net of allowance for credit losses of $6,690 and $8,467, respectively	195,099		184,420
Inventories	153,272		177,078
Prepaid expenses and other current assets	12,443		11,790
Total current assets	521,272		524,820
Property, plant and equipment—net	194,732		142,149
Goodwill	588,095		592,646
Other intangible assets	53,893		62,096
Deferred income taxes	14,881		15,716
Operating lease assets	27,438		29,688
Other assets	23,785		22,142
Total	$	1,424,096	$	1,389,257
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	79,965	$	79,855
Accrued compensation and benefits	73,697		71,470
Taxes, other than income taxes	14,462		13,575
Accrued income taxes	7,945		12,582
Current operating lease liabilities	12,230		14,726
Other current liabilities	64,850		65,828
Total current liabilities	253,149		258,036
Long-term debt	63,774		49,716
Long-term operating lease liabilities	15,552		16,217
Other liabilities	69,519		74,369
Total liabilities	401,994		398,338
Stockholders’ equity:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 43,941,713 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	354,432		351,771
Retained earnings	1,129,739		1,021,870
Treasury stock—7,319,774 and 6,252,763 shares, respectively, of Class A nonvoting common stock, at cost	(356,210)		(290,209)
Accumulated other comprehensive loss	(106,407)		(93,061)
Total stockholders’ equity	1,022,102		990,919
Total	$	1,424,096	$	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 April 30,				Nine months ended April 30,
	2024		2023		2024		2023
Net sales	$	343,384	$	337,116	$	997,991	$	985,934
Cost of goods sold	166,357		167,425		487,162		504,539
Gross margin	177,027		169,691		510,829		481,395
Operating expenses:
Research and development	17,681		15,715		50,215		45,025
Selling, general and administrative	95,803		90,975		283,415		273,202
Total operating expenses	113,484		106,690		333,630		318,227
Operating income	63,543		63,001		177,199		163,168
Other income (expense):
Investment and other income	1,596		785		4,718		1,596
Interest expense	(728)		(753)		(2,284)		(2,886)
Income before income taxes	64,411		63,033		179,633		161,878
Income tax expense	13,521		14,981		37,874		36,399
Net income	$	50,890	$	48,052	$	141,759	$	125,479
Net income per Class A Nonvoting Common Share:
Basic	$	1.06	$	0.97	$	2.94	$	2.52
Diluted	$	1.05	$	0.96	$	2.91	$	2.51
Net income per Class B Voting Common Share:
Basic	$	1.06	$	0.97	$	2.92	$	2.51
Diluted	$	1.05	$	0.96	$	2.90	$	2.49
Weighted average common shares outstanding:
Basic	48,004		49,653		48,294		49,755
Diluted	48,386		50,001		48,640		50,033

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 April 30,				Nine months ended April 30,
	2024		2023		2024		2023
Net income	$	50,890	$	48,052	$	141,759	$	125,479
Other comprehensive (loss) income:
Foreign currency translation adjustments	(6,537)		95		(12,310)		12,985

Cash flow hedges:
Net gain recognized in other comprehensive (loss) income	447		496		1,236		2,165
Reclassification adjustment for gains included in net income	(173)		(463)		(1,712)		(1,261)
	274		33		(476)		904

Pension and other post-retirement benefits actuarial gain amortization	(152)		(151)		(454)		(267)

Other comprehensive (loss) income, before tax	(6,415)		(23)		(13,240)		13,622
Income tax (expense) benefit related to items of other comprehensive (loss) income	(51)		(8)		(106)		54
Other comprehensive (loss) income, net of tax	(6,466)		(31)		(13,346)		13,676
Comprehensive income	$	44,424	$	48,021	$	128,413	$	139,155

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 April 30, 2024
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at January 31, 2024	$	548	$	353,794	$	1,090,045	$	(305,714)	$	(99,941)	$	1,038,732
Net income	—		—		50,890		—		—		50,890
Other comprehensive loss, net of tax	—		—		—		—		(6,466)		(6,466)
Issuance of shares of Class A Common Stock under stock plan	—		(521)		—		436		—		(85)
Stock-based compensation expense	—		1,159		—		—		—		1,159
Repurchase of shares of Class A Common Stock, including excise taxes	—		—		—		(50,932)		—		(50,932)
Cash dividends on Common Stock:
Class A — $0.2350 per share	—		—		(10,364)		—		—		(10,364)
Class B — $0.2350 per share	—		—		(832)		—		—		(832)
Balances at April 30, 2024	$	548	$	354,432	$	1,129,739	$	(356,210)	$	(106,407)	$	1,022,102


	Nine months ended April 30, 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	—		—		141,759		—		—		141,759
Other comprehensive loss, net of tax	—		—		—		—		(13,346)		(13,346)
Issuance of shares of Class A Common Stock under stock plan	—		(3,910)		—		6,829		—		2,919
Tax benefit and withholdings from deferred compensation distributions	—		149		—		—		—		149
Stock-based compensation expense	—		6,422		—		—		—		6,422
Repurchase of shares of Class A Common Stock, including excise taxes	—		—		—		(72,830)		—		(72,830)
Cash dividends on Common Stock:
Class A — $0.7050 per share	—		—		(31,454)		—		—		(31,454)
Class B — $0.6884 per share	—		—		(2,436)		—		—		(2,436)
Balances at April 30, 2024	$	548	$	354,432	$	1,129,739	$	(356,210)	$	(106,407)	$	1,022,102

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	Three months ended April 30, 2023
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at January 31, 2023	$	548	$	348,513	$	947,051	$	(233,338)	$	(95,370)	$	967,404
Net income	—		—		$	48,052	—		—		48,052
Other comprehensive loss, net of tax	—		—		—		—		(31)		(31)
Issuance of shares of Class A Common Stock under stock plan	—		199		—		748		—		947
Stock-based compensation expense	—		2,046		—		—		—		2,046
Repurchase of shares of Class A Common Stock	—		—		—		(11,913)		—		(11,913)
Cash dividends on Common Stock:
Class A — $0.2300 per share	—		—		(10,595)		—		—		(10,595)
Class B — $0.2300 per share	—		—		(814)		—		—		(814)
Balances at April 30, 2023	$	548	$	350,758	$	983,694	$	(244,503)	$	(95,401)	$	995,096


	Nine months ended April 30, 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	—		—		125,479		—		—		125,479
Other comprehensive income, net of tax	—		—		—		—		13,676		13,676
Issuance of shares of Class A Common Stock under stock plan	—		(1,001)		—		3,127		—		2,126
Tax benefit and withholdings from deferred compensation distributions	—		66		—		—		—		66
Stock-based compensation expense	—		6,427		—		—		—		6,427
Repurchase of shares of Class A Common Stock	—		—		—		(29,774)		—		(29,774)
Cash dividends on Common Stock:
Class A — $0.6900 per share	—		—		(31,819)		—		—		(31,819)
Class B — $0.6734 per share	—		—		(2,383)		—		—		(2,383)
Balances at April 30, 2023	$	548	$	350,758	$	983,694	$	(244,503)	$	(95,401)	$	995,096

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BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


	Nine months ended April 30,
	2024		2023
Operating activities:
Net income	$	141,759	$	125,479
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,406		24,522
Stock-based compensation expense	6,422		6,427
Gain on sale of business	—		(3,770)
Deferred income taxes	(6,902)		(5,947)
Other	1,358		(1,336)
Changes in operating assets and liabilities:
Accounts receivable	(15,915)		1,744
Inventories	20,861		9,279
Prepaid expenses and other assets	(1,849)		(3,429)
Accounts payable and accrued liabilities	7,347		(19,704)
Income taxes	(4,393)		(3,404)
Net cash provided by operating activities	171,094		129,861

Investing activities:
Purchases of property, plant and equipment	(69,157)		(12,912)
Sale of business	—		8,000
Other	(1,174)		11
Net cash used in investing activities	(70,331)		(4,901)

Financing activities:
Payment of dividends	(33,890)		(34,202)
Proceeds from exercise of stock options	5,583		4,091
Payments for employee taxes withheld from stock-based awards	(2,664)		(1,965)
Purchase of treasury stock	(72,225)		(29,774)
Proceeds from borrowing on credit agreement	111,790		102,916
Repayment of borrowing on credit agreement	(97,732)		(147,067)
Other	149		66
Net cash used in financing activities	(88,989)		(105,935)

Effect of exchange rate changes on cash and cash equivalents	(2,848)		1,953

Net increase in cash and cash equivalents	8,926		20,978
Cash and cash equivalents, beginning of period	151,532		114,069

Cash and cash equivalents, end of period	$	160,458	$	135,047

See Notes to Condensed Consolidated Financial Statements.

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BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended April 30, 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 April 30, 2024 and July 31, 2023, its results of operations and comprehensive income for the three and nine months ended April 30, 2024 and 2023, and cash flows for the nine months ended April 30, 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 April 30, 2024 and July 31, 2023:


	April 30, 2024		July 31, 2023
Finished products	$	89,054	$	103,350
Work-in-process	24,663		26,884
Raw materials and supplies	39,555		46,844
Total inventories	$	153,272	$	177,078

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Property, plant and equipment

Property, plant and equipment is presented net of accumulated depreciation in the amount of $302,424 and $292,680 as of April 30, 2024 and July 31, 2023, respectively.

NOTE D — Other Intangible Assets

Other intangible assets as of April 30, 2024 and July 31, 2023 consisted of the following:


	April 30, 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	$	(583)	$	17	3	$	1,114	$	(947)	$	167
Customer relationships	9	64,048		(21,304)		42,744		9	64,513		(15,947)		48,566
Technology	5	9,240		(5,660)		3,580		5	9,313		(4,235)		5,078
Unamortized other intangible assets:
Tradenames	N/A	7,552		—		7,552		N/A	8,285		—		8,285
Total		$	81,440	$	(

SEC Form 10-Q filed by Brady Corporation