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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
OR
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 classTrading SymbolName of each exchange on which registered
Class A Nonvoting Common Stock, par value $0.01 per shareBRCNew 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.


FORM 10-Q
BRADY CORPORATION
INDEX
 
2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

January 31, 2022July 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 
Inventories167,456 136,107 
Prepaid expenses and other current assets12,681 11,083 
Total current assets500,015 465,104 
Property, plant and equipment—net126,551 121,741 
Goodwill601,681 614,137 
Other intangible assets83,608 92,334 
Deferred income taxes15,234 16,343 
Operating lease assets33,710 41,880 
Other assets26,264 26,217 
Total$1,387,063 $1,377,756 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$80,611 $82,152 
Accrued compensation and benefits56,510 81,173 
Taxes, other than income taxes12,141 13,054 
Accrued income taxes4,783 3,915 
Current operating lease liabilities16,601 17,667 
Other current liabilities56,850 59,623 
Total current liabilities227,496 257,584 
Long-term debt83,000 38,000 
Long-term operating lease liabilities20,341 28,347 
Other liabilities89,658 90,797 
Total liabilities420,495 414,728 
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 capital341,889 339,125 
Retained earnings833,981 788,369 
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’ equity966,568 963,028 
Total$1,387,063 $1,377,756 

See Notes to Condensed Consolidated Financial Statements.
3

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,
 2022202120222021
Net sales$318,055 $265,838 $639,530 $543,065 
Cost of goods sold168,693 136,316 335,180 278,115 
Gross margin149,362 129,522 304,350 264,950 
Operating expenses:
Research and development13,965 9,876 27,872 20,079 
Selling, general and administrative92,525 82,234 189,271 165,271 
Total operating expenses106,490 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 affiliate42,042 39,397 86,738 81,634 
Income tax expense8,227 8,206 17,877 16,788 
Income before losses of unconsolidated affiliate33,815 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:
Basic51,800 52,018 51,887 52,020 
Diluted52,162 52,282 52,299 52,288 

See Notes to Condensed Consolidated Financial Statements.
4

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands, Unaudited)

Three months ended January 31,Six months ended January 31,
 2022202120222021
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) income225 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) income356 (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.
5

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands, Unaudited)
Three months ended January 31, 2022
Common StockAdditional
 Paid-In Capital
Retained EarningsTreasury StockAccumulated Other Comprehensive LossTotal 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 StockAdditional
 Paid-In Capital
Retained EarningsTreasury StockAccumulated Other Comprehensive LossTotal 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 

6


Three months ended January 31, 2021
Common StockAdditional
 Paid-In Capital
Retained EarningsTreasury StockAccumulated Other Comprehensive LossTotal 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 StockAdditional
 Paid-In Capital
Retained EarningsTreasury StockAccumulated Other Comprehensive LossTotal 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 

7

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, Unaudited)

Six months ended January 31,
 20222021
Operating activities:
Net income$68,861 $64,341 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization16,996 11,421 
Stock-based compensation expense7,170 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 taxes982 481 
Net cash provided by operating activities24,328 98,889 
Investing activities:
Purchases of property, plant and equipment(16,440)(14,511)
Other59 (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 options374 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 facilities131,216 19,957 
Repayment of borrowing on credit facilities(86,216)(20,220)
Other115 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 period147,335 217,643 
Cash and cash equivalents, end of period$147,407 $277,588 

See Notes to Condensed Consolidated Financial Statements.
8

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, 2022July 31, 2021
Finished products$102,115 $87,489 
Work-in-process25,211 20,189 
Raw materials and supplies40,130 28,429 
Total inventories$167,456 $136,107 
9

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, 2022July 31, 2021
Weighted Average Amortization Period (Years)Gross Carrying AmountAccumulated AmortizationNet Book ValueWeighted Average Amortization Period (Years)Gross Carrying AmountAccumulated AmortizationNet Book Value
Amortized other intangible assets:
Tradenames3$1,799 $(699)$1,100 3$1,821 $(356)$1,465 
Customer relationships9109,830 (45,076)64,754 9110,950 (39,069)71,881 
Technology59,430 (1,318)8,112 59,578 (335)9,243 
Unamortized other intangible assets:
TradenamesN/A9,642 — 9,642 N/A9,745 — 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,
20222021
Operating cash outflows from operating leases$9,805 $8,762 
Operating lease assets obtained in exchange for new operating lease liabilities952 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.
10

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 hedgesUnamortized gain on post-retirement plansForeign currency translation adjustmentsAccumulated 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 hedgesUnamortized gain on post-retirement plansForeign currency translation adjustmentsAccumulated other comprehensive loss
Beginning balance, July 31, 2020$(200)$2,181 $(68,458)$(66,477)
Other comprehensive income (loss) before reclassification1,215 (23)13,585 14,777 
Amounts reclassified from accumulated other comprehensive loss203 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,
2022202120222021
Income tax benefit (expense) related to items of other comprehensive (loss) income:
Cash flow hedges$(87)$47 $(191)$(1)
Pension and other post-retirement benefits15 6 15 246 
Other income tax adjustments and currency translation428 (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.
11

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,
2022202120222021
Net sales:
ID Solutions
Americas$158,999 $124,970 $323,909 $258,237 
Europe57,274 44,040 114,163 86,622 
Asia28,713 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 
Europe41,432 40,165 79,454 81,431 
Australia11,506 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 
Europe98,706 84,205 193,617 168,053 
Asia-Pacific40,219 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,
 2022202120222021
Segment profit:
ID Solutions$44,129 $39,000 $92,945 $79,279 
Workplace Safety4,515 3,463 6,808 11,451 
Total Company$48,644 $42,463 $99,753 $90,730 
12

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,
 2022202120222021
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,
 2022202120222021
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 B51,800 52,018 51,887 52,020 
Plus: Effect of dilutive equity awards362 264 412 268 
Denominator for diluted income per share for both Class A and Class B52,162 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.
13

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, 2022July 31, 2021Fair Value Hierarchy
Assets:
Deferred compensation plan assets$20,097 $20,135 Level 1
Foreign exchange contracts372 150 Level 2
Liabilities:
Foreign exchange contracts165 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, 2022July 31, 2021
Designated as cash flow hedges$15,374 $30,724 
Non-designated hedges3,455