BRADY CORP [BRC] Filings

10-Q 1 brc-20220131.htm 10-Q brc-20220131

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


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

For the Transition Period from to

Commission File Number 1-14959

BRADY CORPORATION

(Exact name of registrant as specified in its charter)


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

6555 West Good Hope Road

Milwaukee, Wisconsin 53233

(Address of principal executive offices and zip code)

(414) 358-6600

(Registrant’s telephone number, including area code)

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of February 15, 2022, there were 48,065,965 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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FORM 10-Q

BRADY CORPORATION

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
C ondensed C onsolidated S tatements of S toc kholders' E quity			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 2. Unregistered Sale of Equity Securities and Use of Proceeds			24
Item 6. Exhibits			25
Signatures			26

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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, 2022		July 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	147,407	$	147,335
Accounts receivable, net of allowances for credit losses of $7,868 and $7,306, respectively	172,471		170,579
Inventories	167,456		136,107
Prepaid expenses and other current assets	12,681		11,083
Total current assets	500,015		465,104
Property, plant and equipment—net	126,551		121,741
Goodwill	601,681		614,137
Other intangible assets	83,608		92,334
Deferred income taxes	15,234		16,343
Operating lease assets	33,710		41,880
Other assets	26,264		26,217
Total	$	1,387,063	$	1,377,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	80,611	$	82,152
Accrued compensation and benefits	56,510		81,173
Taxes, other than income taxes	12,141		13,054
Accrued income taxes	4,783		3,915
Current operating lease liabilities	16,601		17,667
Other current liabilities	56,850		59,623
Total current liabilities	227,496		257,584
Long-term debt	83,000		38,000
Long-term operating lease liabilities	20,341		28,347
Other liabilities	89,658		90,797
Total liabilities	420,495		414,728
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 B voting common stock—Issued and outstanding, 3,538,628 shares	35		35
Additional paid-in capital	341,889		339,125
Retained earnings	833,981		788,369
Treasury stock—3,018,140 and 2,733,242 shares, respectively, of Class A nonvoting common stock, at cost	(130,911)		(109,061)
Accumulated other comprehensive loss	(78,939)		(55,953)
Total stockholders’ equity	966,568		963,028
Total	$	1,387,063	$	1,377,756

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,
	2022		2021		2022		2021
Net sales	$	318,055	$	265,838	$	639,530	$	543,065
Cost of goods sold	168,693		136,316		335,180		278,115
Gross margin	149,362		129,522		304,350		264,950
Operating expenses:
Research and development	13,965		9,876		27,872		20,079
Selling, general and administrative	92,525		82,234		189,271		165,271
Total operating expenses	106,490		92,110		217,143		185,350
Operating income	42,872		37,412		87,207		79,600
Other (expense) income:
Investment and other (expense) income	(578)		2,036		(35)		2,191
Interest expense	(252)		(51)		(434)		(157)
Income before income taxes and losses of unconsolidated affiliate	42,042		39,397		86,738		81,634
Income tax expense	8,227		8,206		17,877		16,788
Income before losses of unconsolidated affiliate	33,815		31,191		68,861		64,846
Equity in losses of unconsolidated affiliate	—		(331)		—		(505)
Net income	$	33,815	$	30,860	$	68,861	$	64,341
Net income per Class A Nonvoting Common Share:
Basic	$	0.65	$	0.59	$	1.33	$	1.24
Diluted	$	0.65	$	0.59	$	1.32	$	1.23
Net income per Class B Voting Common Share:
Basic	$	0.65	$	0.59	$	1.31	$	1.22
Diluted	$	0.65	$	0.59	$	1.30	$	1.21
Weighted average common shares outstanding:
Basic	51,800		52,018		51,887		52,020
Diluted	52,162		52,282		52,299		52,288

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,
	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

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, 2022
	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
Net income	—		—		33,815		—		—		33,815
Other comprehensive loss, net of tax	—		—		—		—		(18,268)		(18,268)
Issuance of shares of Class A Common Stock under stock plan	—		(1,334)		—		(129)		—		(1,463)
Stock-based compensation expense	—		3,041		—		—		—		3,041
Repurchase of shares of Class A Common Stock	—		—		—		(2,796)		—		(2,796)
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


	Six months ended January 31, 2022
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at July 31, 2021	$	548	$	339,125	$	788,369	$	(109,061)	$	(55,953)	$	963,028
Net income	—		—		68,861		—		—		68,861
Other comprehensive loss, net of tax	—		—		—		—		(22,986)		(22,986)
Issuance of shares of Class A Common Stock under stock plan	—		(4,521)		—		(130)		—		(4,651)
Tax benefit and withholdings from deferred compensation distributions	—		115		—		—		—		115
Stock-based compensation expense	—		7,170		—		—		—		7,170
Repurchase of shares of Class A Common Stock	—		—		—		(21,720)		—		(21,720)
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

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	Three months ended January 31, 2021
	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
Net income	—		—		30,860		—		—		30,860
Other comprehensive income, net of tax	—		—		—		—		18,207		18,207
Issuance of shares of Class A Common Stock under stock plan	—		59		—		230		—		289
Stock-based compensation expense	—		1,897		—		—		—		1,897
Repurchase of shares of Class A Common Stock	—		—		—		(873)		—		(873)
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


	Six months ended January 31, 2021
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balances at July 31, 2020	$	548	$	331,761	$	704,456	$	(107,216)	$	(66,477)	$	863,072
Net income	—		—		64,341		—		—		64,341
Other comprehensive income, net of tax	—		—		—		—		15,016		15,016
Issuance of shares of Class A Common Stock under stock plan	—		(3,187)		—		1,020		—		(2,167)
Tax benefit and withholdings from deferred compensation distributions	—		32		—		—		—		32
Stock-based compensation expense	—		5,471		—		—		—		5,471
Repurchase of shares of Class A Common Stock	—		—		—		(3,593)		—		(3,593)
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

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BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Unaudited)


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

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

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

Effect of exchange rate changes on cash	(3,370)		6,276

Net increase in cash and cash equivalents	72		59,945
Cash and cash equivalents, beginning of period	147,335		217,643

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

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

(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 and July 31, 2021, its results of operations and comprehensive income for the three and six months ended January 31, 2022 and 2021, and cash flows for the six months ended January 31, 2022 and 2021. The condensed consolidated balance sheet as of July 31, 2021, has been derived from the audited consolidated financial statements as of that date. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from the estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statement presentation. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.

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, 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 (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." Subject to meeting certain criteria, this guidance provides optional expedients 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") by the end of 2021. This guidance was effective upon issuance and allowed application to contract changes as early as January 1, 2020. The adoption of this update did not have a material impact on the Company's consolidated financial statements.

NOTE C — Additional Balance Sheet Information

Inventories

Inventories as of January 31, 2022, and July 31, 2021, 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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Property, plant and equipment

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

NOTE D — Other Intangible Assets

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


	January 31, 2022							July 31, 2021
	Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized other intangible assets:
Tradenames	3	$	1,799	$	(699)	$	1,100	3	$	1,821	$	(356)	$	1,465
Customer relationships	9	109,830		(45,076)		64,754		9	110,950		(39,069)		71,881
Technology	5	9,430		(1,318)		8,112		5	9,578		(335)		9,243
Unamortized other intangible assets:
Tradenames	N/A	9,642		—		9,642		N/A	9,745		—		9,745
Total		$	130,701	$	(47,093)	$	83,608		$	132,094	$	(39,760)	$	92,334

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

Amortization expense of intangible assets was $3,749 and $1,353 for the three months ended January 31, 2022 and 2021, respectively, and $7,556 and $2,704 for the six months ended January 31, 2022 and 2021, 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, the Company did not have any finance leases.

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

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


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

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:


	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, 2022 and 2021, unrealized (gains) losses on cash flow hedges were reclassified to "Cost of goods sold" and unamortized (gains) losses 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 (loss) income for the three and six months ended January 31, 2022 and 2021:


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

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 and $2,519 as of January 31, 2022 and July 31, 2021, respectively. The current portion and non-current portion of contract liabilities are included in “Other current liabilities” and “Other liabilities," respectively, on the condensed consolidated balance sheets. The Company recognized revenue of $296 and $294 during the three months ended January 31, 2022 and 2021, respectively, and $585 and $591 during the six months ended January 31, 2022 and 2021, 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, the Company expects to recognize 22% by the end of fiscal 2022, an additional 35% by the end of fiscal 2023, 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 and 2021:


	Three months ended January 31,				Six months ended January 31,
	2022		2021		2022		2021
Net sales:
ID Solutions
Americas	$	158,999	$	124,970	$	323,909	$	258,237
Europe	57,274		44,040		114,163		86,622
Asia	28,713		25,217		55,531		47,560
Total	$	244,986	$	194,227	$	493,603	$	392,419
Workplace Safety
Americas	$	20,131	$	20,200	$	41,273	$	44,231
Europe	41,432		40,165		79,454		81,431
Australia	11,506		11,246		25,200		24,984
Total	$	73,069	$	71,611	$	145,927	$	150,646
Total Company
Americas	$	179,130	$	145,170	$	365,182	$	302,468
Europe	98,706		84,205		193,617		168,053
Asia-Pacific	40,219		36,463		80,731		72,544
Total	$	318,055	$	265,838	$	639,530	$	543,065

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


	Three months ended January 31,				Six months ended January 31,
	2022		2021		2022		2021
Segment profit:
ID Solutions	$	44,129	$	39,000	$	92,945	$	79,279
Workplace Safety	4,515		3,463		6,808		11,451
Total Company	$	48,644	$	42,463	$	99,753	$	90,730

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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 and 2021:


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

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,
	2022		2021		2022		2021
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
Less:
Preferential dividends	—		—		(803)		(808)
Preferential dividends on dilutive stock options	—		—		(8)		(4)
Numerator for basic and diluted income per Class B Voting Common Share	$	33,815	$	30,860	$	68,050	$	63,529
Denominator: (in thousands)
Denominator for basic income per share for both Class A and Class B	51,800		52,018		51,887		52,020
Plus: Effect of dilutive equity awards	362		264		412		268
Denominator for diluted income per share for both Class A and Class B	52,162		52,282		52,299		52,288
Net income per Class A Nonvoting Common Share:
Basic	$	0.65	$	0.59	$	1.33	$	1.24
Diluted	$	0.65	$	0.59	$	1.32	$	1.23
Net income per Class B Voting Common Share:
Basic	$	0.65	$	0.59	$	1.31	$	1.22
Diluted	$	0.65	$	0.59	$	1.30	$	1.21

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 and 829,617 for the three months ended January 31, 2022 and 2021, respectively, and 475,489 and 785,181 for the six months ended January 31, 2022 and 2021, 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 and July 31, 2021:


	January 31, 2022		July 31, 2021		Fair Value Hierarchy
Assets:
Deferred compensation plan assets	$	20,097	$	20,135	Level 1
Foreign exchange contracts	372		150		Level 2
Liabilities:
Foreign exchange contracts	165		51		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
Designated as cash flow hedges	$	15,374	$	30,724
Non-designated hedges	3,455