Brady Corp (BRC) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the fourth-quarter 2010 Brady Corporation earnings conference call. My name is Lacey, and I will be your coordinator for today.

At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Aaron Pearce, Vice President, Treasurer, and Director of Investor Relations. Please proceed.

Good morning everyone. This is Aaron Pearce, Director of Investor Relations at Brady Corporation. Welcome to our fiscal 2010 fourth-quarter conference call. We are very pleased you could join us.

During the call this morning, you will hear from Frank Jaehnert, CEO, Tom Felmer, CFO, who will review Brady's fourth-quarter financial results, provide a recap of fiscal 2010 and also provide some commentary on our guidance for fiscal 2011.

Also joining us this morning are our three regional presidents, Matt Williamson, President of the Americas region, Peter Sephton, President of Europe, and Al Klotsche, President of the Asia-Pacific region, who will all provide their respective regional reports. As usual, after brief presentations by the team, we will open up the floor to questions.

We encourage you to follow along with the slides located on the Internet, as we will be referring to respective slides throughout the presentation. These slides can be found on our website at www.investor.bradycorp.com. We will start on Slide 3. You'll have a few moments to get to those slides while we go through our usual introductory information and our Safe Harbor statement.

Please note that, during this call, we may make comments about forward-looking information. Words such as expects, believe, and anticipate are a few examples of words identifying a forward-looking statement. It's important to note that the forward-looking information is subject to various risk factors and uncertainties which could significantly impact expected results. Risk factors were noted in our news release this morning and in Brady's last Form 10-K filed with the SEC in September of 2009.

Also, please note that this teleconference is copyrighted by Brady Corporation and there may be no rebroadcast of this call without the expressed written consent of Brady. We will be recording this call and broadcasting it on the Internet. Your participation in the question-and-answer session will constitute your consent to being recorded. Thank you.

Now, I will turn the call over to Frank Jaehnert.

Thanks, Aaron. Good morning and thank you for joining us.

I'm pleased to report that our fiscal 2010 fourth-quarter sales grew 12.4% versus the same period in the prior year, to finish at $323 million. This includes 10.7% organic sales growth, marking the third quarter in a row of positive organic sales growth. Excluding the after-tax impact of restructuring charges, our net income in the fourth quarter was up 15.9% to $26.2 million.

Earnings per diluted share were up 14% to $0.49, both solid improvement over the same period last year, where our net income and diluted EPS before restructuring were $22.6 million and $0.43 respectively.

We are pleased to see continued sales growth in all regions and an improvement in our profitability in the fourth quarter. Our ongoing process improvement and lean activities continue to have a positive impact as our gross margins in the quarter increased 180 basis points to 49.2% from 47.4% in the same quarter last year.

We remain highly focused on driving our [base] in increasing efficiencies through the Brady business performance system, and we are increasingly focused on streamlining our SG&A functions as well.

During our third-quarter call, we mentioned that we had hired consultants to help identify opportunities and build concrete action plans to drive down our SG&A costs to increase the scalability of our SG&A functions. We are currently finalizing certain of these plans while we are already well into the implementation of some others. We are quite excited about the opportunities to streamline our SG&A function. This will allow us to better serve our customers while reducing our overall SG&A as a percentage of sales.

Overall, we are pleased with our financial result in the fourth quarter, and we are optimistic as we look ahead to fiscal 2011.

I will be back later in the call to outline our strategies for growth and improved probability. But first, I'd like to turn the call over to Tom Felmer, our Chief Financial Officer, to talk about our fourth-quarter earnings and a recap of fiscal 2010. Tom?

Thanks, Frank. Before reporting on the fourth-quarter results, I'd like to give some commentary on our fiscal 2010 full-year results which are summarized on Slide 3. The challenging economic environment that began in fiscal 2009 started to show improvements midway through our fiscal 2010 when we saw a return to organic growth in all of our regions.

Our sales for the full year reached approximately $1.3 billion, up 4.2% from fiscal 2009. Benefits from the Brady Business Performance system were seen in our fiscal 2010 results as we were able to increase our full-year gross profit margin by 170 basis points, finishing the year with a gross profit margin of 49.5%, which is quite remarkable considering organic growth of only 0.2% in our fiscal 2010. We are confident that we can continue to generate more savings and better serve our customers through the continued use of BBPS.

Investment in the development of differentiated proprietary solutions is one of our key strategies for generating organic growth and increasing gross profit margins. We remain committed to smart investment in R&D, and during fiscal 2010 we increased our R&D spend to $42.6 million, up 24.7% over fiscal 2009.

Our SG&A was up in both actual dollars and as a percentage of sales. SG&A increased by 9.8% in fiscal 2010 to finish at $435.9 million. SG&A was up primarily due to the return of incentive compensation in fiscal 2010 and, as Frank mentioned, we have identified and are currently working on implementing opportunities to improve SG&A as a percent of sales.

Net income, excluding restructuring charges, was up 3.4% for the full fiscal year ended July 31, 2010. It is worth noting that we had a difficult comp in the first quarter where net income was down 37% versus the prior year while net income growth over the next three quarters was up 33%.

Lastly, during fiscal 2010, we continued to focus heavily on cash flow generation, resulting in free cash flow of $138.9 million, which equates to 169% of net income or approximately 11% of sales.

Moving on to Slide 4, is a summary of our fourth-quarter results. As Frank mentioned, our fourth-quarter financial performance included organic sales growth of 10.7%, a 180 basis point improvement in our gross margin and a 15.9% increase in net income, exclusive of after-tax restructuring charges.

We generated free cash flow of $41.6 million in the quarter which equates to approximately 193% of net income and 12.9% of sales. We continue to deliver strong cash flow generation and have $314.8 million of cash on hand at July 31. We still believe that we have more opportunities to further streamline our processes and reduce our working capital.

Yesterday, we announced an increase in our annual dividend from $0.70 per share to $0.72 per share. This increase is historic for Brady and its shareholders as it marks a quarter century of consecutive dividend increases.

Lastly, on this slide, we outline our guidance for fiscal 2011, which is earnings per diluted share exclusive of restructuring charges of $1.95 to $2.15. We will go into more detail on our guidance in a few slides as we share our outlook for fiscal 2011.

On Slide 5 is our full fourth-quarter income statement compared with prior-year fourth quarter. Most of the slide has already been covered, so let's move on to Slide 6.

Here we see our quarter-over-quarter sales growth. During the fourth quarter, we had organic sales growth of 10.7%, and as Frank pointed out, all three regions had positive organic growth for the second quarter in a row.

Our acquisitions of Stickolor, Securimed and Welco added a total of 2.7% to sales for the quarter and currency provided a 1% headwind. Again, you can see on this slide that we had a difficult comp in the first quarter where sales were down 16% versus the prior year. This was followed by organic growth of 3%, 9% and 11% over the final three quarters of the year.

Slide 7 is a summary of our gross profit margins. Overall, our gross profit margins have improved as we return to growth following last year's economic downturn. This quarter's gross margin expansion of 180 basis points to 49.2% compared to 47.4% in the fourth quarter of last year is a continuation of the trend that we've been seeing as we continue to drive process improvements and manufacturing through lean in the Brady business performance system. For the full year, our gross profit margin increased 170 basis points when compared to fiscal 2009 to finish at 49.5% of sales.

On Slide 8, you can see a $3.9 million decrease in our SG&A from the third quarter to the fourth quarter of fiscal 2010, which is primarily due to foreign currency translation and also reductions in certain employee benefit costs in the fourth quarter. When comparing against the prior-year, SG&A was up $12.9 million in absolute dollars and up slightly as a percent of sales to 33.2%. As previously mentioned, the year-on-year increase in SG&A was primarily due to return of incentive compensation in the year's financial results.

Excluding restructuring charges, operating income was $39.8 million in the quarter, up from $32.9 million in the prior year. Both our gross margin and operating margins in the quarter were helped by cost savings generated from restructuring and our ongoing process improvement initiatives.

Slide 9, our GAAP net income for the quarter was $21.6 million, resulting in diluted EPS of $0.41 per share. After adjusting for after-tax restructuring charges of $4.6 million, we generated net income of $26.2 million and $0.49 per diluted share. This represents a 14% increase in diluted EPS, before restructuring, when compared to the same quarter in the prior year. The improvement in net income and diluted EPS is due to our increased global sales volume as well as results from continuous improvement initiatives.

On Slide 10, we summarize our cash flow for the fourth quarter and the full fiscal year of 2010. As you can see, we continue to generate strong cash flow from operating activities and strong free cash flow in excess of net income. Free cash flow for the fourth quarter was $41.6 million, and free cash flow for the full fiscal year was $138.9 million.

On the cash balance walk for the fourth quarter, we generated $47 million of cash from operating activities, invested $5.4 million in capital expenditures, paid $9.2 million in dividends to our shareholders, and made principal payments of $18.8 million to reduce our debt.

In addition, we received proceeds of $94.9 million from the 4.1% euro denominated debt offering completed in the quarter. The impacts of currency on our cash balance were approximately $4.1 million, resulting in an ending cash balance on July 31 of $314.8 million.

On Slide 11, our gross debt is $444 million and our net debt is approximately $129 million at the end of the year. As you can see, our net debt to EBITDA continues to decline, finishing at a 0.7 to 1 ratio at July 31. We believe that, with our current cash balance, our untapped $200 million line of credit, and conservative leverage, that we have adequate flexibility to support future growth.

Moving on to Slide 12, our fourth quarter yielded several significant product launches and capped off the most productive year of new product launches in Brady's history. We believe our continued investments on R&D going into and through the recession have positioned Brady ahead of our competition.

New products launched in the fourth quarter included ToughStripe floor marking tapes and signs for the manufacturing workplace, InspectNTrack, our first web-based software as a service product, Transtherm thermal gap filling materials for the electronics applications, and further launching of our successful new BMP 21 portable printer into Russia, China, Korea and Japan.

Finally, on Slide 13, we break out our restructuring charges for the fourth quarter and the full year for both fiscal 2010 and fiscal 2009. The after-tax impact of this quarter's restructuring charges was $4.6 million, or $0.08 per diluted share. For the full year, our after-tax restructuring charges were approximately $11.5 million or $0.21 per diluted share.

Our restructuring charges in fiscal 2010 consisted mostly of costs related to search and facility consolidations and the associated costs that go along with these actions, including employee separation costs, lease terminations and other related expenses in each of our three geographic regions.

To give you a bit of flavor to some of the larger projects that we completed in fiscal 2010, we consolidated our facilities in Dongguan and Shenzhen in southern China into a single state-of-the-art facility in Shenzhen. We consolidated multiple facilities in Sydney, Australia. We consolidated certain facilities in the UK into a much leaner facility, and we consolidated certain manufacturing facilities in our US direct marketing businesses into an existing facility, thus reducing our footprint and our fixed cost structure.

In addition, we also consolidated several other smaller facilities, resulting in long-term sustainable fixed cost reductions. As we have shared previously, we believe that these actions will result in annual pretax savings of approximately $15 million.

As we look ahead to fiscal 2011, we expect to have an additional $12 million to $15 million of pretax restructuring charges, primarily related to further facility consolidations as well as the implementation of certain actions to reduce SG&A as a percent of sales. We expect that these charges will be more heavily weighted to the first half of the fiscal year and will provide ongoing annual benefits at least equal to the charges incurred. We expect to start seeing the savings from these restructuring actions in the second half of our fiscal 2011.

Globally, our employee headcount was down 2.9% from 6800 employees at the July 31, 2009 to 6600 employees at July 31, 2010. Although our global employee headcount is down slightly, during the last year, we had numerous strategic hires primarily in our sales and marketing and R&D teams. These are generally employees focused squarely on growth opportunities.

Additionally, we continue to invest in key personnel in Asia to focus on growing our MRO business in what we perceive is a significant opportunity for growth in the Company. Including temporary labor, our headcount is actually up slightly compared to prior year, as we are using more temporary labor than we have historically used.

With that, I would like to now turn the call over to Matt Williamson for an update on the Americas business. Matt?

Thank you, Tom. Good morning everyone.

Please refer to Slide 14. Americas sales in the fourth quarter were $148.9 million, up 19.3% compared to the prior year. Organic sales -- the organic sales increase of 14.7% accounted for the majority of the sales growth, along with a positive impact from currency of 1.4% and 3.2% growth from the acquisition of Stickolor in Brazil. The year-over-year growth in sales in the fourth quarter continues to be driven largely by strong performance by our Brady brand business throughout the region.

In the Brady US business, our MRO sales showed strong growth over the prior year, reflecting some improvement in the economy, but also strong results in initiatives and new products to drive results in our cable and wire ID, industrial identification, and safety and facility identification products.

Additionally, we had incremental sales in the quarter of our sorbent products used to help clean up the Gulf oil spill. We continue to enjoy success with our strategic marketing initiatives and new products launched this year.

In our OEM markets, high-performance labels grew at a nice pace with stronger growth of those for brand protection applications. Other areas of focus for ID products, such as lean, compliance, aerospace and e-business, continue to drive positive sales growth in the US.

Outside of the US, we continued to see growth in Canada, Mexico and Brazil, driven by growing economies and strong results with OEMs, particularly in Brazil and Mexico.

Additionally, our Stickolor acquisition in Sao Paulo, Brazil continues to perform very well as our sales of product identification labels are exceeding our expectations and surpassing previous business highs.

Our direct marketing business showed year-over-year growth in the fourth quarter as efforts to acquire new customers to build back our customer files in the wake of the recession began to yield results.

As mentioned over the last two quarters, this business was negatively impacted by employment losses at US companies, causing its recovery to lag behind the Brady brand businesses. Going forward, these businesses remain focused on new customer acquisition, e-business initiatives, new product introductions, and improving the customer experience to drive sales growth.

In addition, sales in our People ID business were also positive in the quarter.

Segment profit for the Americas increased 23.5% to $35 million in the quarter. As a percent of sales, segment profit increased to 23.5% compared to 22.7% in the prior year. We are benefiting from our strategy to improve gross margin, which is unchanged.

As mentioned throughout the year, we had -- we continue to drive productivity improvements with lean in manufacturing and front-end applications, strategic sourcing initiatives in addition to numerous facility consolidations concluded or in-process, as well as other operational improvements.

Going forward, we expect our organic growth to continue, particularly in Brazil and Mexico, while we remain cautious with the strength of the US recovery. Otherwise, our investment in new customer acquisition, new products, e-business, sales productivity, and the execution of other strategic initiatives will drive profitable sales growth.

Peter Sephton will now report on the European results. Peter?

We're going to continue now on Slide 15.

Sales in Europe were $91 million for the quarter, up 5.1% versus the prior year. Organic sales were up 9.6%. Acquisitions added another 4.5%, but adverse currency movements pulled down growth by about 9%.

In general, our business was supported by a recovering economy, but disparities between countries were evident. The growth of business activity in the core euro zone nations of Germany and France were solid, while Italy and Spain saw very modest growth in their recovery, as their recovery was sluggish.

Undoubtedly, our biggest concern in Europe is the UK, where we saw a year-on-year reduction in organic sales of about 2% in the fourth quarter. This coincided with post-election government cutbacks and was felt predominantly by our UK direct marketing brands as public spending was canceled or put on hold.

Looking at the whole of the region of Europe by business trend, the Brady brand posted on robust performance, growing at double-digit rates versus the prior year. The key factor here was the pickup in export sales volumes from markets such as Germany and France.

As reported last quarter, our business in Eastern Europe and some newer markets such as Turkey and the Middle East continued to grow double-digit rates, while Scandinavia and the UK posted more modest growth.

We realized success in our printer sales through targeted marketing campaigns, recovering demand, and a boost from the success of the recently launched BMP 21 entry model which sold well across all geographies.

As well as this, our continuing focus on strategic markets such as the process industries proved to be a winning strategy, and we continue to strengthen our position in the laboratory and data communications markets.

Our involvement in some major infrastructure projects, such as our large data center project in the Middle East, diversifies our geographical spread as well as our industry coverage.

In our direct marketing business, we also increased the pace of sales growth, but it remained at single-digit growth levels with the exception of Germany and Central Europe. It should be noted that these businesses, with their strong MRO focus, declined proportionally less during the last six quarters than the rest of our Brady business, which have a mixed MRO and OEM focus. Therefore, the direct marketing part of the business is less prone to post double-digit growth figures under normal market circumstances.

The Welco business in the UK, acquired in the second quarter, and Securimed in France acquired in the third quarter of the current fiscal year, both contributed to this good result as the businesses are improving their margins faster than we planned.

Europe's second profit in the fourth quarter was $25 million, which is 13.7% above the same quarter of last year. We're pleased also that our earnings of center sales was 27.5% versus 25.4% in the same period last year.

Realizing core growth sales of 9.6% in the fourth quarter is very encouraging as Europe exits recession somewhat slowly. For some markets, however, we need to see more concrete signs of a sustainable recovery.

We expect public spending will be scaled back, and therefore we are focusing more effort on the private sector. We are particularly concerned about the reduction in public spending in the UK and the broader continuing concern over the health of public finances in various European countries.

Throughout the recession, we have successfully combated this with reallocation of resources, a focus on more profitable market segments, and strong cost and margins management. We will continue to drive positive results through this but we maintain a level of caution in our optimism for the next quarter.

I'll now hand over to Al Klotsche who will report on Asia-Pacific. Over to you, Al.

Thanks, Peter. I'm continuing on Slide 16.

Asia-Pacific sales for the fourth quarter were $82.9 million, up 9.4% from the prior year. Organic sales increased 5.2% while currency had a positive impact of 4.2%. As we closed our fiscal year, we were pleased with our ability to shift our product mix towards higher end solutions and continue growing our MRO business, which resulted in a significant increase in profitability.

While pleased with our overall performance for the year, we did expect to see a larger increase in our fourth-quarter sales which did not materialize at the pace that we had expected.

There were a number of market forces which have had a noticeable impact on our sales. In the computer and storage markets, we typically would see some softness during the middle of our fourth quarter based on our customers in this space closing their fiscal years and tightening down on their own inventory levels.

During our fourth quarter, customers in the computer and storage markets began communicating excess levels of inventory, and we have clearly seen a slowdown in their ordering patterns. Almost all customers that we talk to predict that this excess inventory situation will be used up by the end of the calendar year, and calendar 2011 will return to healthy growth levels.

In the mobile electronics sector, the race for market share around smartphones continues to be fiercely competitive. While we do enjoy a strong market share position with most of the OEMs, we're beginning to see differences in the value per phone of Brady type solutions that are used. In prior years, OEMs would design dozens of models of phones with the expectation that a much smaller number would achieve commercial success.

Now, when you look at the offering of smartphones, you see OEMs focusing on one or perhaps two primary designs, which are mostly a glass surface backed with a lot of application software. Fortunately, these relatively simple-looking devices still contain a lot of technology, which need many of the new Brady solutions.

Interestingly, the convergence of mobile devices to be mostly displays is giving us nice leverage into the larger-format display market for devices such as flat-panel TVs and computer monitors. Solutions that we have developed for smaller displays are now becoming more prevalent in the larger displays and vice versa.

Our success in both the mobile electronics and computer and storage markets was heavily driven by successful new product launches and innovative engineering. This quarter, new product sales were highlighted by the launch of our Transtherm Tsoft Gap Filler. This is a soft material formulated to conduct heat away from uneven surfaces in electronics applications.

For the full year, sales of new products were 100% higher than they were last year, which was also a record year for new products in Brady Asia. We really have assembled a talented team of engineers and scientists who have delivered solutions to meet some of the most demanding applications these industries have to offer.

The products that we have successfully introduced are often characterized by combining multiple products into one solution. This would include things such as thermal management solutions and electrical grounding pads, or value-added assembly of multiple Brady components combined with customer-supplied components.

Our innovation in new product launches are not limited to just our OEM business. We have also continued to grow our presence across the MRO markets in Asia with newly launched portable and benchtop printers. Our innovation in this space has accelerated our efforts in recruiting top-tier distribution partners in support of our MRO business growth.

Operationally, we continue to push our agenda of lean manufacturing across all of our facilities to help us drive out any parcels of waste which might detract from our profits and performance. With constant pricing pressures from customers and suppliers, this is a critical capability for our business.

I was very pleased this morning to wake up and receive an e-mail that our facility in Thailand was awarded by the Thai government the top lean facility among over 500 competing manufacturers. In a region filled with world-class manufacturing, this was quite an accomplishment by our team.

Segment profit in the region was $13.5 million, up 49% from last year's segment profit of $9.1 million in the same fourth quarter. As a percent of sales, segment profit was 16.3% versus 12% in the prior year. The combination of healthy economies across much of Asia and a robust new product pipeline gives us confidence in our fiscal 2011 plan, but the short-term trends around market share shifts and excess inventory levels give us some caution for the remainder of calendar 2010.

I will now turn the call back to Frank.

Before Tom walks through our guidance for fiscal 2011, I would like to take this opportunity to share with you some of the initiatives that we're working on that we believe will help drive future growth and profitability improvement. These initiatives are on Slide 17.

First, from a topline growth perspective, we are committed to continue our investment in new product development, and we firmly believe that the development of high value-added proprietary products that are unique to the marketplace will continue to drive growth and enable us to take market share. We are excited about the successes of our recent product launches and the robustness of our new product pipeline.

We also continue to focus on e-business and multi-channel marketing. During fiscal 2010, we launched several new websites and have seen considerable increases in website traffic and sales over the Internet. As we have discussed in the past, we see the continuous shifting of purchasing to online buying as a sizable opportunity.

As Tom mentioned earlier, we hired several sales and marketing professionals that have been focusing on more strategic opportunities for market and customer segmentation. This will result in us better aligning our sales, marketing, and new development resources with the [market] in customer segment with the largest opportunities.

Also, we are not comfortable sharing all of our focus areas. Assembling of these areas of future growth will include the China MRO opportunities that Al referred to, brand protection applications, laboratory applications, as well as the aerospace, defense and mass transit markets.

We also remain committed to growth through acquisitions. Although we only completed three smaller acquisitions last year, we have a robust acquisition pipeline. Recently, we've seen an increase in the willingness in business owners to consider selling. We are currently exploring acquisitions squarely in our core space, as well as in [near and] adjacencies were there we are confident that they have a high likelihood of success.

We believe that we have the financial and management disciplines and bench strength, as well as the balance sheet strength necessary, to execute this acquisition strategy.

Switching to our strategies to improve profitability, the Brady Business Performance System continues to be the cornerstone to our activities and is representative of Brady's high-performance culture. It is focused on the highest level of customer service, as well as lean and continuous improvement.

BBPS has yielded a very nice result in our shop floor as evidenced by our gross margin expansion in the current year. They have recently expanded these [principals to the carpet], and we expect to see improvement in SG&A as a percent of sales later this year.

We have recently developed a global strategic sourcing function. We believe that by centrally coordinating our purchasing strategies, we will enjoy a reduced cost and better vendor performance, which will allow us to better serve our customers by offering affordable high-performance products with the highest level of service that our customers have come to expect from Brady.

We also are focusing on improving the efficiency of our sales and marketing functions to ensure that our teams are focused on the right opportunities and that we're serving each customer in an optimal manner. At the same time, we are working to reduce redundant activities in our sales and marketing organization. Thus enabling us to free up valuable [saves in] marketing resources to focus on larger growth opportunities.

In addition to improving the efficiency of the [saves in] marketing function, we continue to focus on standardizing and automating our back-office G&A functions, such as IT and (inaudible) wherever feasible, including centralizing services in selected shared service (inaudible) throughout the world.

We believe that through initiatives -- through the initiatives I just mentioned, as well as numerous others, that we can make meaningful improvements in our bottom line, even with only modest economic growth in fiscal 2011.

However, to return to the profitability levels that we enjoyed pre-recession, we will need to see continued organic revenue growth. More importantly, the actions we're taking to build an even stronger foundation will enable us to achieve nice income statement leverage and move into the period of sustained economic growth.

I now would like to turn the call over to Tom Felmer who will provide a summary of our fiscal 2011 guidance.

Slide 18 summarizes our guidance for fiscal 2011. As you heard from Al, Peter, and Matt, we ended fiscal 2010 with nice organic growth and strong momentum from BBPS.

However, we also have certain pockets of economic weakness, namely in the UK, and also in various segments of the electronics industry which is served by our Asia business. We therefore remain somewhat cautious with respect to the first half of fiscal 2011.

Overall, we believe that the global economy will continue to improve slowly and we will experience mid single-digit organic sales growth in fiscal 2011.

Even with the only moderate organic sales growth forecast, we anticipate profitability improvements in the latter half of fiscal 2011 from the initiatives Frank just mentioned.

We believe that diluted EPS will range from $1.95 to $2.15, excluding an estimated $12 million to $15 million of pretax restructuring charges. Our guidance reflects the additional cost savings from these restructuring charges and the benefits to be derived from the BBPS and other productivity initiatives throughout the year. Our guidance also reflects a full-year income tax rate of about 26%, a diluted weighted average common share outstanding count consistent with that as of July 31, and foreign currency exchange rates consistent with those as of today.

We expect capital expenditures of approximately $25 million to $30 million, and depreciation and amortization of approximately $50 million.

As Frank mentioned, we remain optimistic about the momentum that we have built, but at the same time we see what we believe to be short-term economic headwinds in the UK and the Asian electronics business that somewhat dampens our enthusiasm for the first half of fiscal 2011.

We thank you for your interest in Brady. We will now start the Q&A. Operator, can you please provide instructions for our listeners?

(Operator Instructions). Jason Ursaner, CJS Securities.

Good morning. Actually, this is Fred Buonocore calling in for Jason. Thank you for taking my question.

The first question just relates to the guidance for revenue for next year. You touched a little bit on expectations for some weakness in Asia as well as continued headwinds in the UK. Could you just again review by region how you build up to that sort of mid single-digit year-over-year revenue growth? Thank you.

Fred, just as you look at how we are exiting fiscal 2010, you can see we're finishing the year with some fairly strong -- I would say some nice organic growth. We expect that to taper off as the comparables begin to improve throughout the year.

So I think you would see continued -- the relative growth between the regions to be the same, but slowing down as the comparables become tougher as the year goes on. So we haven't provided any more detail beyond that, but that's what we used to come up with the mid single-digit growth rates for the year.

That's helpful. Then my follow-up relates to SG&A where clearly you have a number of initiatives underway. Do you have a target level for SG&A? Kind of can you give us a sense for, based on the work that you're doing now with the consultants, what could be the primary drivers for achieving that target?

Okay, if you look at historical levels, we have been in the low 30% range in terms of SG&A, and we certainly aspire to get back to those levels. When you look at all of the initiatives that we have going on, we're levering things in multiple areas.

I think we've talked publicly about a finance transformation that's been underway over the past year. A lot of the themes are very similar in that, as we've built the business coming from a very strong SBU independent business unit structure, we are trying to find more and more ways that, A, we can consolidate footprints of like facilities, and we highlighted that in earlier in the call. All that has a bigger impact probably on the gross margin. There is still admin associated with those facilities.

But the other part is consolidating like functions, like the finance organization on sales and marketing where perhaps we have examples of printing catalogs in multiple countries in one region. Maybe we can work more closely with those units and come down to a single unit or a shared summary of excellence for that function within the region.

So again, there's a lot of parts within our company that have been built up over time. We just see opportunities where we can leverage across multiple units within the region, or in some cases globally, to drive some of those synergies that we believe can help bring our SG&A back down to some levels we've had historically.

Thank you very much. That's helpful.

Charlie Brady, BMO Capital Markets.

Thanks. Good morning. I just wanted to go back to the guidance question on the comps. Clearly, Q1, you've still got a negative comp you're going against. So it's not bad there, and then it starts getting a little tougher starting in Q2.

But if we look at first half of fiscal 2011 comparing to second half of fiscal 2011, it's fair to say second-half greater growth than first half, correct -- even though the first quarter has an easier comp than the rest of the year?

If you're talking sequentially, yes.

I guess the first -- on a year-over-year basis, first half of fiscal 2011 should have lower year-on-year growth than the second half of 2011, second half versus second half of 2010. The growth is more weighted to second half, correct?

Let me try to answer it a different way, because I don't want to compare to a prior year and take it into consideration as well. We just believe that the economy is going to improve as we go through the year. So that's one thing from a topline point of view. Whatever this does to our comparables, it is just a mathematical thing. But we assume that the economy is going to continue to be the slower growth mode for the first half of our fiscal year, and then it's going to pick up. That's basically in sync with what we hear from economists.

The second thing is, from a profitability point of view, we certainly have carryover from some of the restructure activities and some of the other measurements we have taken to increase productivity and efficiency.

But we have also, as you can see, we give guidance that we are going to have additional restructuring in the first half-year, primarily. Of course, as you can imagine, we aren't going to see benefits of this in the first half of the year; we're going to see it in the second half.

So I think you have two components -- improved optimism in sales growth in the second half of our fiscal year, plus additional cost savings in addition to the carryover which we had from prior activities in second half of the year. I think that's what we try to say.

Then looking at the SG&A, so I understand a little better your comments you just made on the prior question. In the fourth quarter, you had a benefit from a couple of different items, FX and some other benefits. So I understand longer-term you guys see it coming back down but near-term, over the next two to four quarters, should we expect, on a percentage of revenues, to that -- to creep back up a little bit, or are we going to stabilize around the current level?

We would expect it to be more along the stabilizing levels. As we said in the commentary, we have initiatives that we're starting to see some benefits of. But just like we did with BBPS initially, there is -- you have to invest some to get some of these initiatives into place.

So we think that they should moderate throughout the year, much like we saw in BBPS. It took I think in our third year now of BBPS and that's where we're starting to see maybe bigger movements in the income statement.

Obviously, we are pushing that as fast as we can to accelerate it, but that's the history that we have to look at.

If we could just -- if we look at the Asia-Pacific region for a minute, when did you start hearing from customers about excess inventory in the channel? Beginning, middle quarter?

I would say, yes, right around the middle part of the quarter. This was, again, in the customers, in the computer and storage industries.

Okay. So clearly the first half, as we get through calendar, is going to be a little slower in that space given the order drop off.

But is it -- it is not to such a magnitude that, if I look at the Asia-Pacific segment as a whole, that that segment would see -- would not experience growth on a year-over-year basis in the first half. Is that correct?

No it shouldn't; it shouldn't impact us to that degree of magnitude. But it will definitely have some impact. We don't know. Their advice to us is that the next quarter or so is going to be a little bumpy and 2011 will be back to normality.

Okay. On the Americas, the oil spill, the sorbent products -- any quantification as to how much of an impact -- was it a meaningful impact on the quarter in terms of the Americas performance? Because obviously it's going away.

Yes, the sales specific to the spill itself really accounted for about 4% of our total growth of the 19.5%

Thanks, I'll hop back in the queue. That's helpful.

Allison Poliniak, Wells Fargo.

Good morning. Tom, you talked about some SG&A I guess restructuring initiatives and the charges. As this study is finalized as we go forward, could we expect even more charges related to that study with respect to SG&A, or was that sort of encompassing the bigger projects?

I think that would be related to the bigger projects. I think what you've seen over time with Brady is that we view -- we have a philosophy of continuous improvement. We would expect that, once we get through this initial larger phase mostly in the first half of the year, that things will just go into a normal course of business. And continuous improvements, they may not be even noted in calls or in our results.

Great. Frank, you talked about an active acquisition pipeline. Could you give us any color, maybe regionally or product, if we are targeting more MRO or OEM electronics kind of market at this point?

Yes, I can give you more color. Our strategy has caused us to grow through acquisition in all geographies. And so there is no -- not necessarily a differentiation between geographies.

However, we've also said that we would like to see us make more acquisitions in MRO. Because Asia is predominantly OEM, I would assume that there's more large opportunities outside of Asia. Of course, we have a strategy also to grow through acquisitions in MRO in Asia, but the targets there just tend to be smaller.

So I would say Asia is probably going to be the one with the least opportunity because of MRO. And America and Europe, it's kind of a timing thing. You might have something more in Europe now and maybe something more in America's later or vice versa. It's not indicative of a strategy to grow more or less, through acquisitions, one of those regions.

Paul Mammola, Sidoti & Co.

Good morning, everyone. If you could buck it out, gross margin expansion compared to last year into price of materials, restructuring benefits and BBPS, can you give us a round sense of how each is affecting gross margin?

We haven't called that out, and we haven't broken it up that way. One of the elements that actually ends up being challenged is there are so many initiatives going on that -- with all of the units and all of the dispute that we have, it's tough to break it out for you.

Obviously, all of them have contributed some, but we've not called it out before. So I don't know that I would want to put anything else out there right now.

Fair enough. If you look at the businesses within North America and Europe, I would assume facility ID drove most of the sales growth. But can you comment on people, wire and high-performance ID and how those categories did relative to facility ID? I guess up or down? Am I getting too granular?

It's pretty granular, I would say. Yes, so I'll give you a couple of thoughts here. First of all, you are incorrect in saying all facility ID grew more than the others. The areas that we really benefited from were in the wire and cable ID that I mentioned.

It was really driven by two things -- product introductions, really good products there where we are taking share, and then also a couple of different markets that we're focused on where we are taking share. So that's the situation with wire ID.

People ID also grew nicely, better than some of the other core products. The reason for that is we are making improvements in some of the areas of service that fell down from previous integration of the business. So we were getting some nice growth in the core People ID business that was I would say higher.

The last area is in the labeling piece of our business, most of the focus is on the labeling for brand protection within the OEM markets. Those are the primary areas, I would say.

Paul, I would echo that for Europe. We've seen a more rapid, more robust rebound in the OEM markets in Europe, a relatively small proportion of our sales overall.

So that proportion of our sales that goes to wire ID and high-performance labeling have seen the strongest growth over and above facility ID. Facility ID is very much more geared towards MRO and it's benefited from our particular focus and the segmentation of certain industries. In terms of economic recovery, certainly some of those OEM markets have responded well or better.

Okay, thanks for that. It's always good to understand how the product lines are doing. Tom, have you put out an R&D spend expectation for next year?

We didn't -- we did not call that out specifically, no.

Okay. Then finally on capital spending --.

I can, however, if I can just chime in here, I can however, give you a generic answer and this is in line with what we've said over the years. We believe that R&D as a percent of sales could go up over the years. We feel that cost of goods sold as a percent of sales should go down and, SG&A as a percent of sales should go down. However, because of everything what we want to do in organic growth and launching proprietary product, I would not be surprised if our R&D as a percent of sales would go up. That's the only area besides profit I've said historically which I would like to see go up as a percent of sales.

Understood. Then finally, where does your capital spend this upcoming year go? Is there any expansion plan in any of the regional segments, or is it more maintenance type spend?

It's mostly maintenance.

[That's] productivity enhancing, quality improving, efficiency and so forth. So we see a lot of our -- we have enough capacity, I would say, across the Company from a machinery and equipment point of view.

Most capital expenditure requests we are signing off if somebody found a more productive, more efficient way to produce product in higher-quality and of course, once in a while maintenance. And you can say that maintenance, right, maintaining your product line and taking it a higher level is -- maintenance almost doesn't exist anymore when you maintain and at the same time upgrade.

But I think upgrading is a lot of this investment. Plus of course obviously you have software expenditures, which gets --- it hits the capital expenditure line as well.

Okay, thanks for your time.

Robert McCarthy, Robert W. Baird.

Good morning, everybody. I have a handful of small questions involving numbers which you may or not be able to provide. First off, the question on public spending of course raised particularly in the UK.

Can you give us an idea of how much of your sales you believe are determined by the public sector?

Well, specifically in UK, or you're talking about across the whole of Europe?

No, I am talking about -- no, I wasn't talking about the UK specifically, I was talking about the entire company. The follow-up question then is, does that vary significantly by region?

I can talk about Europe. It's a significant but it's not the major proportion of our sales. Most of our sales thankfully go to the private sector.

But in the UK, there is a slice of our customers that is dependent, either directly or indirectly, on government spending and post-election, all business in the UK, and it coincided with just post-election and it probably won't -- you won't get any clarity until October, until the government has gone through its spending review.

So it means that most public spending is actually just being completely frozen. That hasn't gone away, but it's been completely frozen. So we'll get some more clarity. So it's a significant part of our UK direct marketing business but it's not the major part.

Well, as long as we're talking about the UK, isn't the broad expectation that the major reductions in public spending that have been proposed by the new administration really don't take effect until the coming year?

No, that's not true. Until, as I said, our core spending review in October, so most government departments are actually holding back their budgets to wait the outcome of that. But it's true that the full impact, the certainty will come post-October, but at the moment, most government departments are just holding onto their budgets.

Okay. The broader question, Frank? Tom?

I'll try it here. Public spending is not a big portion of our business for Brady in general. We have pockets where public spending is stronger, like our Varitronics business, where we deal with schools, with public schools.

That I would say heavily dependent on public spending. So -- defense, some of it is defense, yes, but I don't think -- I wouldn't say public spending is a huge portion of our business, Matt, in the Americas.

A small portion within the Americas.

Can we put some kind of a limiter on this, Frank? Below 10%?

Yes.

I think that will help.

It's below 10%. The other place internally that we've had dialogue on it is the UK. It seems to be an anomaly.

With regard to the next step in restructuring, which of course you guys had already previewed, when we talk about the $12 million to $15 million, does that include the cost of the consultants that are developing the plans with you?

No, their work I would say is materially done. We said that that would be primarily taken on in the fourth quarter.

So that's already been -- we've seen that in SG&A in the quarter?

We did not call it out as restructuring. This was just regular expense and SG&A captured primarily in the fourth quarter. That's not (inaudible). Whatever is left is not material.

But don't tell them that.

Don't worry.

As you think about the plans that you have to try and address this, do you have any concern that there might be some negative impact on topline? Is that one reason to be a little conservative with your forward-looking outlook, or do you think you can isolate this from any affect on the day-to-day business?

That's always a concern. We have those discussions. Especially when you have the margins that we generate, it doesn't take much of a slippage on the topline to offset any savings that you generate in the SG&A line. That's something that we've always been very cognizant of.

I know Peter has led parts of this project, and that's a top priority for all of us, to make sure that does not slip. But we do consider that and I would say that it is factored into what we project for next year.

That's fine. Do you have -- can you give us some kind of an estimate of how much revenue you did not see in the second half of the fourth quarter in predominantly Asia because of the developing inventory issue there? Are we talking about a couple of points of growth, or --?

Yes, I don't know that we've quantified -- that's probably a fair assessment.

So noticeable but not a huge big deal. So as we go to this question about thinking about how growth rates unfold next year -- and I understand your discomfort with getting into quarterly projections.

I personally can't see a big reason why the organic growth rates would vary a lot during the course of the year. In other words, I guess I would argue that there isn't a real strong case for a definitive trend. Do you know what I mean? Like, we will have our strongest growth in the first quarter and our weakest in the fourth or something like that. Is that the way you see it, or can you identify a trend that we should see in the year?

As you know, the last three years have been fairly erratic and irregular. I would suspect that fiscal 2011 will be, probably for the first time and sometimes we go back to a historic -- just the normal cyclicality of our annual -- our fiscal year.

Okay. Thank you. That sort of makes sense to me. In relation to the pricing question, do you believe that pricing was a, on a total company basis, do you believe that pricing was a positive or a negative factor in the year that was just concluded?

Can we go by region, Americas?

Sure.

It was neutral for the year. We did not experienced any big price increases at all in the last year due to the overall economy.

How about Europe?

Absolutely neutral. We worked hard, and I think it was good pricing management. They held onto our prices and margins and still continue to sell at reasonable prices.

I think you know the answer for Asia.

Yes, I do. Is it maybe reasonable to expect it that, if your baseline economic outlook comes true, a softer first half until we get through the calendar year, maybe a bit stronger second half.

Doesn't that imply the possibility for finally, after many quarters of struggling, to be able to maintain pricing in the Americas and Europe, that you might start making some progress there? Or is it just too early to think that way?

I would say that, in the Americas, that's the direction we're going. (multiple speakers)

Matt is -- when you look at our catalog businesses and things like that, we are implementing price increases again. If that's what you're looking for.

Yes.

We certainly will try, the corrections will it stick.

Exactly.

We are attempting where we could become much more scientific in our pricing, testing different price points. We've used some tools the consultants provided us as well that will give us greater visibility on our ability to gain volume over price, and also avoid some discounting, so there's a lot of science there.

But in terms of general price increase and sticking in the marketplace, my own opinion is we need some greater visibility, because I think this recession has taught all of us the meaning of value. It's yet to be seen whether this is a permanent shift in some buying behavior and people will shop value. So we've got to be able to respond to that. We've put a lot of work into getting businesses across the globe now into getting really quite scientific about our pricing policies.

Very good. Allan, without promising changing the pricing dynamic in Asia, are you prepared to say that you think the pricing environment overall might be a little better than it has been, simply because of the changes that you are engineering in the business, your ability to see more Smartphone business where performance characteristics become more important?

I would say that it's very dependent upon the areas that we focus. So the pressures are going to be as intense as ever on the low and mid end of the markets. We are choosing to focus in different areas.

Those areas where we have been able to differentiate ourselves, the solutions that we're bringing to the marketplace, there's either a much smaller base of competitors that can do it, or no one in the world that can do what we can do in some cases.

When that's the case, I think that we will be able to hold prices better than we have historically the last couple of years.

So difficult to predict but you expect somewhat improving mix. That would be a fair statement?

Yes.

I'm sorry to go on, but one last one for you, Frank.

Your tone on the acquisition environment, I'd say, is noticeably more optimistic. It sounds like you could be talking to more than one or two potential targets. When you start thinking about a longer horizon, six months or -- which, if it's true, forestalls my giving you more grief about not buying back stock.

Am I reading your body language the right way?

You know we always -- we never had buying back stock as our number one priority. We always felt the number one use for our cash would be for internal purposes such as R&D. It would be -- dividends I think rank higher also than stock repurchase has historically. We just, for 25 years, have increased our dividend. Our shareholders are used to this; some shareholders even might (inaudible) because of this. So that's certainly higher as well.

And of course acquisitions have always ranked higher on our scale than -- so I don't think there is necessarily a change in trend, but you have picked up correctly. There is more activity right now in the acquisition area.

I think it is combination of a couple of things. First of all, we put much more effort into finding maybe acquisitions in adjacent spaces. When I say adjacent, I'm not talking about far out closing adjacencies.

Actually December 2008, we launched a project together with the consulting firm as well. It looks like all of a sudden, we use a lot of consultants. But we just felt we need some help to identify attractive spaces, spaces where we can leverage our core competencies into spaces supported by megatrend.

This started in December 2008 and as a result of this, we have now methodology to continuously look at spaces. We have come up with a couple of opportunities in those spaces as well that mean that they can execute [on] many things which go into that. That's one area.

Another area is also that we see a more willingness of sellers to consider selling at a price which is not outrageous. I think maybe the expectations have come down a little bit. But we also see, on the other hand, that good targets are pricey and companies which are not really performing is almost like nobody wants to buy them.

But in general, the climate has improved, and I think our pipeline is larger than it was a couple of months ago. Of course, as you know also, we kind of stopped making acquisitions when this recession started because we didn't know how bad it would get. We just bought a couple of smaller ones.

So overall, I am much more optimistic about our chances of making some acquisitions going forward.

(Operator Instructions). Anthony Kure, KeyBanc.

The SG&A, the leveling off comment, Tom, or I guess the cadence or sequential cadence, can you just go through that again? I don't think I caught exactly what you said as far as what the expectations are from current levels, from fourth-quarter levels I should say.

When you're looking at -- the comment was more designed to address the initiatives and what are the timing of the initiatives.

I was trying to draw a parallel between what we did with BBPS and when we saw I would say material changes in our gross margin compared to when we kicked off the initiatives.

We started our BBPS initiatives in 2008, and in 2010 we started seeing material -- we saw the impact on the income statement. When you start these initiatives, there's a lot of training and understanding of what projects are.

Then actually when you are -- get pulling teams together and working on initiatives, there's actually some built-in expense as you staff the initiatives. Sometimes those people are backfilled and that offsets some of the savings in the early [parts of] initiatives. And then after a year or two, you start seeing the impact.

So my comments were relative to what we expected to see from the initiatives that we started working on in the fourth quarter.

Okay, so there will be -- then I guess if we ex out the one-time positive impacts from the fourth quarter on SG&A, maybe earlier on in 2011, SG&A expense looks more like the third quarter of 2010?

Probably. Again, in the fourth quarter, you have -- just looking at sequentially, there was a positive impact from currency that helped us.

If you go back to third quarter, you are probably looking at that as being more in line with what the trend would look like.

Then it starts dropping off in the second quarter in dollars?

Or the second half.

Or the second half? Okay. Then just looking at the restructuring, I think the comment was that you expect the savings to about match the actual expense, and that would start yielding benefits in the second half of 2011.

Is it fair to say that about -- that it would be sort of linear? In other words, about half the savings will be realized in the second half of 2011 and then maybe the second half get realized in the first half of 2012? Is that the way to think about that?

I would say roughly, yes. That's the way that it historically has worked.

Then a question on Europe -- just maybe you can comment on the cadence of demand through the quarter. Was there any meaningful -- or meaningful trends through the three months of the quarter?

Yes. With the exception of the UK, it was picking up quite nicely, and then towards the close of the quarter, we saw it sort of taper down.

Towards the end of the quarter you saw it taper down a little bit? Is that --?

Just in the UK.

So throughout -- for the segment overall, or I guess for the region overall, it actually was increasing month over month.

Yes, just -- there wasn't a great escalation, but there was a marginal escalation there.

Finally on Asia, obviously you talked about what happened with the inventory issues. But was there also an impact of walking away from business? I mean you talk about how you're increasingly focused on the high-end phones.

Did you make a more concerted effort to actually walk away from some business during the quarter that impacted volumes? And should we expect maybe that kind of dynamic to play out next year where maybe you don't grow as fast but profitability is a little bit more -- a little bit better?

Yes, I think that's a very fair statement. I would not expect Brady's share, specifically in the mobile electronics area, to grow -- I wouldn't peg it to the growth rates of the market because we are very focused around profitable growth, not just pure dollar growth.

I guess looking forward, the profile of Asia should change because we should maybe be a lower growing but more profitable segment. And then if you -- maybe you mix in the MRO piece of it being faster growing, that's -- is it fair to say that is higher profit than the OEMs? That's a pretty good -- pretty safe assumption, right?

Yes. Although I would say that we hold out hope that if you can hit a homerun with a new product, we could see some very significant growth rates as a result of that.

In the past, we've been working on sort of incremental technology things. We aspire -- Frank talked about our investments in R&D and we aspire to continue to solve big solutions for our customers.

So it's real hard to peg it to industry growth rates, depending on how valuable your solution is to the total product.

I guess with -- just to wrap up on Asia, what was the MRO OEM mix in general, and maybe how has that trend given what's been going on there -- is your initiative there?

I would say it's not materially different than we've had in the past. Someone asked a question before, and I think we said a couple of quarters ago something in the 60/40 range. That's about where it is.

We expect the MRO business to keep growing, but it's still pretty small. So even fast growth rates with MRO isn't going to swing that mix substantially in the next quarter or two.

Okay, thank you.

Robert McCarthy, Robert W. Baird.

Okay, I'll bite. Homerun solutions in the handheld electronics industry? I don't believe that is something that we've heard you talk about before.

Is there anything that you can talk to us about in terms of types of problems that some of your customers are seeing that might create the opportunity for a major proprietary solution, or is this just getting too competitively sensitive?

I think it is. We have a history of not talking about future R&D. We rather would like to deliver and then talk about it because it's -- there's always a risk if things don't work out or there's an opportunity.

I also do not want you to walk away with the impression that we have something - we want to indicate there is something huge out there with a high probability of success. I think the point we wanted to make is that we have switched our R&D efforts more towards more proprietary, maybe larger opportunities than in the past.

We hope that some of these might come to fruition. But don't take this as oh yes, Al is working on something big together with Bob Tatterson and just stay tuned; it's just a question of time.

Let's get them on the stick then, huh? Frank, the way I am taking it is this is -- it sounds to me like a fairly important statement that the Company is in a more significant way than it has or maybe it's a question of building momentum, shifting more towards offense in that business than defense.

Yes, it's just that you want to talk about it once who have some wins behind us. Before -- and of course we are spending a lot of money on R&D. We increased R&D spending by almost 25% last year. You should expect to see some improvement.

The trend is just more proprietary product, which is maybe new to the market. You know, (inaudible) we talk about ToughStripes, this floor marking tape. I think it is pretty cool tape, and some of it is just more scientific, more based on customer feedback, on identifying unmet needs and the same is going on in the mobile phone and hard disk drive industry.

It is certainly a desire of ours. It's also because we want to increase the profitability of our OEM segment. You cannot do this by launching me-too product. You have to have something proprietary where you can charge a premium price. I think that's our trend.

And of course, once you spend all this money and all the time, you rather would like to spend it on some potentially larger opportunities than smaller. I think that's all what we're trying to say here.

I think investors are eager to hear about your progress, that's all, Frank. Thank you.

Ladies and gentlemen, this concludes our question-and-answer portion of the call. I would now like to turn the call back over to Mr. Aaron Pearce for any closing comments.

We thank you for your participation today. And would like to remind you that the audio and slides from this call today are also available on our website at www.investor.bradycorp.com. The replay of this conference call will available by the phone beginning at 12:30 Central time today. The phone number to access the call is 1-888-286-8010, or for international callers, it's 617-801-6888. The passcode is 20997034. The replay will be available until September 20.

As always, if you have questions, please contact us. Thank you for your interest in Brady, and have a great day.

Operator, can you please disconnect the call?

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day, everyone.