Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Brady Corporation Earnings Conference Call. My name is Regina, and I will be your conference operator for today. [Operator Instructions] Today's event is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Aaron Pearce, Treasurer and Director of Investor Relations. Please go ahead.

Thank you, Regina. Good morning, and welcome to the Brady Corporation's Fiscal 2012 Third Quarter Conference Call. During the call this morning, you'll hear from Frank Jaehnert, Brady's CEO; and Tom Felmer, Brady's CFO; as well as our 3 regional Presidents, Stephen Millar, President of the Asia Pacific region; Peter Sephton, EMEA President; and Matt Williamson, President of the Americas region. After the prepared remarks by the team, we'll open up the call to questions. The slides for this morning's call are located on our website at www.bradycorp.com. Please note that during this call, we may make comments about forward-looking information, words such as expect, believe, forecast and anticipate are a few examples of words identifying a forward-looking statement. It's important to note that 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 latest Form 10-K, which was filed with the SEC in September of 2011. Also, please note that this teleconference is copyrighted by Brady Corporation and may not be broadcast without the consent of Brady. We will be recording this call and broadcasting it on the Internet. Your participation in the Q&A session will constitute your consent to being recorded. Thank you, and I'll now turn the call over to Frank Jaehnert. Frank?

Good morning, and thank you for joining us. Our third quarter net income decreased 3.3% to $27.7 million. If you exclude the after-tax impact of restructuring charges, net income increased 3% and diluted EPS grew 3.6% in the third quarter. Revenues were down 1.9% to $331.6 million in the third quarter, while organic revenues were down 0.5% in total. Our organic revenues were up 1.9% in the Americas, while organic revenues were down 1.2% in the Asia Pacific region and 3.3% in Europe. Business in Europe and in Asia was weaker than we expected. Despite these weaknesses, we were able to grow earnings, exclusive of restructuring charges, due to disciplined cost control, reduced incentive compensation and strength in the Americas regions, more specifically, strength in the U.S. Brady business. Looking broadly, the U.S. economy appears to be recovering, but Europe's economy is getting weaker and lacks any sort of positive catalyst to drive economic expansion. As I mentioned last quarter, to create growth, we are focused on the following initiatives. First, expanding our business in emerging geographies; second, expanding globally in certain focus markets; third, new product development; fourth, aggressive customer conversion; and fifth, the expansion of our digital capabilities. We allocated resources to drive safe improvements through these major categories. We recently announced the completion of 3 bolt-on acquisitions as well, which Peter will expand upon. We have a strong balance sheet and are now in a net cash position. We remain committed to putting our cash to work and by leveraging our balance sheet. We believe that acquisitions at the right price and investing in organic growth opportunities are the best uses of our cash balance. Lastly, we will continue to return funds to our shareholders through dividends, which have increased for the last 26 years. Now I would like to turn the call over to Tom Felmer for our third quarter financial review. Tom?

Thanks, Frank, and good morning, everyone. On Slide 3, you'll see a summary of our third quarter financial results. As Frank just mentioned, net income excluding the $2.7 million of after-tax restructuring charges related to cost reductions in our die-cut businesses and other costs related to the streamlining of our global operations was up 3% to $30.3 million in the third quarter of fiscal 2012. Diluted EPS excluding these restructuring charges was up 3.6% compared with the prior year to finish at $0.57 per share in the third quarter. Total sales were down 1.9% in the quarter as a result of declines in the U.S. dollar compared to prior year and weakness in Europe and Asia as organic sales were down 0.5%. FX was a headwind in the quarter, decreasing revenues by 1.6%. Our third quarter gross profit margin finished at 48.3%. However, raw materials and freight costs were higher than they were this time last year. The biggest driver for the decline in gross profit margin continues to be our Asia segment, where competition in the die-cut space has been significant. Coupling this heightened competition with the declines in sales to one of our largest mobile handset customers has led to margin compression. During the third quarter, incentive compensation was $5.9 million below the prior year, partially offsetting the impacts of the softer sales volume and gross profit margins. Lastly on this slide, I'd like to point out that our cash balance remains strong at $374 million as of April 30, even after $42 million in debt reduction in the quarter. As Frank mentioned, we are committed to deploying our cash and leveraging our balance sheet to take advantage of both organic growth opportunities, as well as making strategic acquisitions. On Slide 4, to summarize our guidance for fiscal 2012, we have tightened our guidance range, $2.15 to $2.25 per share. This is down from our previous guidance range of $2.20 to $2.40 per share. Our EPS guidance excludes the after-tax impact of a one-time acquisition and restructuring charges and excludes the one-time noncash goodwill impairment charge that we took last quarter. Our sales forecast for the balances of the year have come down slightly. We still anticipate low-single digit organic growth in the Americas region. We expect our fourth quarter sales in the EMEA region will be flat to slightly down as our initiatives are not fully able to offset the macroeconomic weaknesses throughout Western Europe. We also expect Asia sales to be below prior year in the fourth quarter. Our guidance reflects the full year income tax rate in the mid-20% range and is based on the current foreign exchange -- foreign currency exchange rates, which should provide a headwind in Q4. We expect that capital expenditures will be less than $25 million, depreciation and amortization will be between $40 million and $45 million and free cash flow will approximate 100% to 120% of net income before any impacts of noncash goodwill impairment. The restructuring actions that we took in the third quarter were a first step to address our cost structure in response to our weaker sales forecast and our weak operating results in our die-cut business in Asia. We continue to look for more productivity improvements and opportunities to align costs with current business conditions. Let's move to Slide 5, which is a summary of our current quarterly sales trends. Our fiscal 2012 third quarter sales were $331.6 million. From a comparability perspective, the only item of note was that Chinese New Year fell in the third quarter of F '11 and it fell in the second quarter of this year, thus providing a boost of approximately $5 million when comparing Q3 of this year to Q3 of last year. Organic sales were down 0.5% in the quarter, acquisitions increased sales by 0.2% in the quarter, and the impact of foreign currency exchange rates decreased sales by 1.6% when compared with the third quarter of fiscal 2011. Moving on to Slide #6, you can see the trending of our gross profit margins. We continue to focus on driving gross profit margins through our BBPS lean and strategic sourcing. However, our Asia business continues to be challenged by significant competition in the mobile handset die-cut space, which is a major driver for our gross profit margin, running behind prior year levels. Turning to SG&A, in the third quarter, SG&A as a percent of sales was 32.2% compared to 34% in the third quarter last year. As we've discussed in previous calls, we remain focused on driving down SG&A expense as a percent of sales through increasing the effectiveness of our selling efforts, as well as reducing general and administrative expenses. This is balanced against investments needed for growth initiatives. Historically, our third quarter is our highest SG&A quarter as we ramp up mailing campaigns and other growth initiatives that require funding. This quarter, incentive compensation was lower than in fiscal 2011. If incentive compensation was incurred at the prior year level, SG&A as a percent of sales would have been 34%, consistent with the prior year. On Slide #7, net income excluding after-tax restructuring charges was up 2.7% over the prior year to finish at $30.3 million in the third quarter of fiscal 2012. Diluted EPS, excluding restructuring charges was up 3.6% to $0.57 per share compared to $0.55 last year. On Slide 8, we summarize our cash position and cash generation. On the cash balance walk, the key items to point out during the quarter are that we generated $57.3 million of cash from operating activities, which is more than 200% of net income. We invested $3.4 million in capital expenditures, repaid $42.5 million of debt, spent $3 million on the acquisition of Grafo in South Africa and returned $9.7 million to our shareholders in the form of dividends, all restructuring -- all resulting in an end cash balance on April 30 of $374 million. On Slide 9, you can see that our balance sheet is strong and continues to get stronger every quarter as we are now in a net cash position as our cash balance is $32 million higher than our debt balance. Having such a strong balance sheet and a core business that generates such significant amounts of cash puts us in a strong position as we fully intend to put our cash balance to work and leverage our balance sheet in the future through investments in organic growth opportunities and acquisitions. Moving on to Slide 10, our R&D investments continue to deliver a stream of innovations focused on solving the challenges of our customers and key markets. In the high-performance product identification market in Asia Pacific, we launched a new printing system, the BBP 16. Globally, we launched a new line of durable fire-resistant labeling materials to serve the commercial aerospace and mass transit markets. We are seeing nice growth in this market space as we continue to deliver materials, printers and software-based solutions. During the third quarter, we also launched a unique product design and associated manufacturing capability to provide electric grounding solutions for electronics manufacturers. This is one example of how we are leveraging our process capabilities and customer intimacy in Asia to regain margins with proprietary solutions. We see a continued steady stream of new product launches over the foreseeable future as we have numerous projects in progress. I'd now like to turn the call over to Matt Williamson to start our regional views. Matt?

Thanks, Tom, and good morning, everyone. Please turn to Slide 11 for the Americas review. Sales in the Americas in the third quarter were $150.6 million. Organic sales increased 1.9% and foreign currency translation decreased revenues by 0.9% compared to the third quarter of fiscal 2011. Brady Brand business in the U.S. was our strongest performer as we grew nicely with mid- to high-single digit organic growth rates in the quarter. Our relentless pursuit of improving our customers' buying experience, delivering the highest level of customer service combined with the continual launch of proprietary new products and an excellent sales and distribution team enabled us to take market share. A good example of this is the launch of the new durable fire-resistant labeling material, part of our strategy toward offering the most complete product line of high-performance labeling solutions for the aerospace and mass transit markets. Additionally, the BMP 51 printer, a new proprietary printer for both the electrical and data communication applications, launched at the beginning of the quarter and has been well accepted by our customers and continues to provide increasing demand for the printer and its related consumables. Sales growth in our core Brady business was partially offset by a sales decline in our business focused on the education market, which is suffering from tight school budgets. Our Brady businesses in Brazil also grew in the quarter as there continues to be ongoing demand for our custom OEM labeling products even as the pace of economic growth in Brazil slows. This business was offset by declining die-cut sales in Brazil. Likewise, our Brady business in Mexico and Canada also grew in the quarter, albeit not at the same pace as the growth in the U.S. due to declining business from a key OEM customer in these countries. In our Direct Marketing businesses, we are focused on a multichannel sales model. In addition to our direct mail and telesales campaigns, we are focusing our efforts on increasing traffic and sales over the Internet. During the third quarter, our total Americas Direct Marketing sales were down slightly as sales to the construction and manufacturing markets were soft. In addition, we continue to see a migration of customer buying habits from mail to the Web as more than 20% of our Direct Marketing business is now conducted over the Internet. Our strategy is focused on growing our customer files and improving every aspect of our customers' online Internet experience with us, leading to improved customer conversion and loyalty. Overall, our strategy to improve our Internet traffic and sales continues to yield positive results across our businesses, as we are experiencing double-digit e-business sales growth in both our Direct Marketing and Brady businesses. Segment profit in the Americas increased 1.6% to $38.9 million in the quarter. As a percent of sales, segment profit was 25.8% compared to 25.7% in last year's third quarter. Profitability is being driven by a combination of an improved gross profit margin in the region due to selected price increases that went into effect at the beginning of this year, along with the results of ongoing benefits from lean and strategic sourcing, plus actions taken to improve our selling expense structure. Today, our focus on selling expenses relates to improving the productivity and processes of inside sales, field sales, inquiry management, optimizing our Internet results and improving the use of customer segmentation in all our businesses. These activities are having a meaningful impact on improving the overall customer buying experience and helping build customer loyalty. During the fourth quarter, we are focused on converting organic sales growth opportunities in our best customer segments in the high-growth markets, continuing to improve the experience of customers doing business with us, launching new and differentiated products with a strong value proposition for our customers, and then improving Internet and telemarketing efforts across all our businesses. Although the global macroeconomic picture may be uncertain, it appears the U.S. economy has stabilized and is in a modest pace of recovery. When you combine this with our numerous initiatives, we anticipate the trend of low-single digit organic sales growth to continue in the fourth quarter. Now I'll turn the time to Peter Sephton, who'll report on the EMEA results. Peter?

Thanks, Matt. And turn your attention now to Slide #12. Sales in EMEA were down 7.5% to $97.9 million in the third quarter. The sales reduction is a combination of reduced organic sales of 3.3% and a negative impact of 4.7% from foreign currency translation. Acquisitions added 0.5%. This quarter compares unfavorably against quarter 3 of last year, where we had some stability in the European economy compared to this year, where we have a Eurozone crisis. Although this modest sales decline was noticeable in most countries of the EU-27, there continues to be differences in performance between the respective countries in EMEA. For instance, our U.K. business was down in the quarter as England has formally slipped back into recession, and our Spanish and Italian businesses although small, also showed significant sales declines against -- again, driven by difficult economic circumstances. Our business in Germany also showed negative organic sales growth as the uncertainties bubbling out of Southern Europe are having a negative impact on buying patterns throughout the Eurozone, although the underlying trends in Germany are good for both the economy and our businesses in this country. On the other hand, our businesses in the Scandinavian countries continued to show resilience, and our businesses in Central Europe and the Middle East continue their strong fiscal 2012 performance by posting strong revenue and earnings growth. Taking a look at our businesses by business stream, our Direct Marketing business saw core sales decline of 3.8%, driven mainly by its exposure to mature economies in the Eurozone. This decline was relatively broad based due to the macro economy. In order to mitigate this, we reallocated investments away from Southern Europe and the U.K. and invested in building our customer files in Germany and capitalized on leveraging cross-selling opportunities at our Securimed business, a first-aid business that we acquired in 2010, where not only sales continue to grow nicely, but we're also unlocking a new market segment for the medical products. Our commitment to e-commerce as an opportunity to win new customers and service existing customers better continues to ramp up as we roll out our investment both in customer-facing and transactional processing software. We are seeing the benefits in the growth of sales through this channel. Moving on now to our business streams. Our Brady business -- Brady Brand performed somewhat better, but here also, there were some small sales declines. Our efforts to increase exposure in emerging geographies and tailor our product offer to vertical market segments that are growing helped moderate the sales decline in Western Europe somewhat. However, as the majority of our business is driven by the EU-27, it couldn't quite compensate for this. Against this economic malaise, we still see opportunities for market share growth and we continue to drive our installed base of printers in EMEA. And we are aggressively launching new differentiated products throughout our more mature economies, including the launch of the BMP 51 and the BBP 33 printers this quarter. We believe that we have the best range available on the market and are actively seeking new channel partners across EMEA to help drive and share our success. We've also made a concerted effort to acquire in markets and geographies that help us rebalance our business away from the more mature economies in Europe. In March, we closed the acquisition of Grafo in South Africa. Grafo is a supplier of wire marking products in South Africa. Although a small acquisition for us, a solid company such as Grafo gives us a nice beachhead into Sub-Saharan Africa, which is one of our focus markets for geographic expansion. On May 2, we also completed 2 additional acquisitions. First, we acquired Runelandhs, which is a direct marketer of industrial and office equipment located in Sweden, with annual sales of approximately $19 million. And we also closed the acquisition of Pervaco on May 2. Pervaco is a direct marketer of facility identification products based in Norway, with annual sales of approximately $60 million dollars. Runelandhs and Pervaco give us a much expanded presence in the Scandinavian region, which historically has been an area of under penetration for our direct marketing business stream. All of these acquisitions were driven by a robust and planned business rationale to, firstly, expand our sales in both emerging high-growth economies and economies that have a more stable basis for growth by reallocating resources. Secondly, focus on companies that operate in product areas that link well to our own and where we can leverage product synergies. And thirdly, focus on bolt-on acquisitions in our core business streams, including direct marketing and workplace safety and efficiency products and product identification. Segment profit declined 11.6% to $25.6 million in the quarter. With the underlying strength of our gross margins, we were able to keep segment profit high at 26.1%, down slightly from 27.3% in the third quarter of 2011. As I mentioned, we are investing in numerous growth areas and reallocating resources to high-growth opportunities, but we need to be realistic. And in the near term, it will be challenging to generate organic sales growth given the macroeconomic challenges that we face. As such, looking forward to the fourth quarter, we anticipate organic sales to be approximately flat to slightly down when compared to the prior year. Consistent with Frank's comments, we are highly focused on organic sales growth opportunities, driving Internet sales across all our businesses, driving new product sales, expanding our geographic reach deeper into Eastern Europe and Africa, as well as our ongoing focus on deeper penetration into selected vertical markets. We believe that these actions, along with the continued spending control, should significantly mitigate the negative macroeconomic forces throughout the Eurozone in the median term. I'll now hand the call over to the Asia Pacific region with Stephen Millar. Over to you, Stephen.

Thanks, Peter. Continuing on Slide 13, sales in the Asia Pacific region in the third quarter were $83.1 million, up 0.3% from the prior year. Organic sales were down 1.2% and currency had a positive impact of 1.5%. Organic sales were helped by the timing of Chinese New Year falling in quarter 2 this year compared to falling in quarter 3 last year. The net impact of the timing of Chinese New Year was to increase organic growth by 6% in the third quarter. Our sales performance in the third quarter was lower than we had anticipated for the reasons that I'll address in a moment. Our focus on Asia continues to be twofold. Firstly, we are highly focused on improving profitability in our die-cut business. And secondly, we are expanding our presence in our other MRO and identification portfolios of workplace safety and compliance, wire and cable identification and product identification. Let me take a moment to further explain the status of the organizational changes we announced last quarter in our Asian business. We are making nice progress splitting our Asian business into 2 main streams as our leadership teams are now in place. We have a dedicated die-cut team focused exclusively on driving die-cut sales and increasing profitability. Our die-cut business represents approximately 1/2 of our total Asia Pacific sales but a much smaller percentage of our overall segment profit. Switching to our MRO and identification offerings, we now have teams dedicated to expanding these businesses. Our MRO business is largely our portfolio of products which help customers with workplace safety and compliance, and our identification businesses include our traditional label and wire identification product lines. All in, our identification and MRO business in Asia represents about 1/4 of our overall APAC sales today, but we see this as a nice growth platform for the future. Key markets, such as China, are maturing rapidly and our strategy of strengthening and expanding our distribution network will provide increased channels to market for a full portfolio of unique differentiated products. We are focusing on products and industries that are relevant in these markets, where much of our customer spend is more on infrastructure compared with our mature markets in North America and Western Europe, where the significant spend is on true maintenance repair and operation. As we work to fulfill the different solutions needed across our region and around the world, we are developing specialized new product solutions, a recent example being the new BBP 16 printing system. As Tom mentioned, this printing system features extremely high print resolution and the capability to handle very small Brady labels, both an increasing need for the product identification businesses in the Asia Pacific region. Addressing our die-cut mobile handset business, we have launched a unique product design and associated manufacturing capability to provide electrical grounding solutions for electronics manufacturers. This is one example of how we are leveraging our process capabilities and customer intimacy in Asia to regain margins with proprietary solutions. The last piece of our APAC business is Australia, representing approximately 25% of our total Asia Pacific business. Our Australian business has similar characteristics to our businesses in the U.S. and Western Europe and is performing well. Turning to our current quarter's financial results, our sales were lower than anticipated, and we anticipate this trend to continue into the fourth quarter. Our sales and profitability are down primarily due to weaknesses in our die-cut business. Sales to one of our largest customers has declined significantly, and the improvements that we were anticipating in sales volumes have not materialized. This has had a significant impact not only in our top line, but also on our segment profit as we have been unable to replace this business with revenues of similar gross margins. Our die-cut business serving the mobile handset industry is our toughest business as there is significant Chinese-based competition and we've experienced significant changes in the customer landscape with more than 30% of the global mobile handset units sold coming from white box manufacturers in China and elsewhere in Asia. As we've discussed in previous calls, our strategy to expand our customer base outside of the mobile handset industry has been working, but it has not been significant enough to offset the declines we've seen with our mobile handset customers. In our hard-disk drive business in Thailand, we have not yet fully recovered from the flooding. However, our sales volumes have now returned to the point where the impact of the flood is no longer material to the company. The Thai floods have also delayed the sale of some new products which were undergoing qualification by our customers as these products cannot be approved while we are operating in a temporary facility. We anticipate that these new product delays will extend another several quarters until we are in a new permanent facility. Segment profit was $6.6 million, down $3.4 million compared to last year's third quarter. I anticipate our fourth quarter segment profit percentage to be slightly lower than our third quarter percentage, and we will then start to see improvements next year after our profitability and these improvements take hold. I also anticipate that our organic revenues will be down in the fourth quarter due to the weaknesses in our die-cut business that I just mentioned. Although our short-term outlook is not strong, I am confident that we're headed in the right direction and I am pleased with our progress in realigning our business. We remain committed to driving profitability improvements across all of our businesses, and I am optimistic that we will be able to drive improvements next year. I'll now turn the call back to Frank.

Thanks, Stephen. Before turning the call over to questions, let me just share my concluding thoughts. First, on the backs of strong U.S. business and continued cost containment efforts, we were able to increase earnings per share, excluding restructuring charges this quarter. This increase was in the face of a challenging macro economy in Europe and the challenges in our Asian die-cut business. We are working on the right items to drive organic growth, including acceleration of our e-business initiatives and launching some of the best new products in the history of our company. On the acquisition front, we just completed 3 acquisitions. Although these acquisitions are relatively small, they are on areas we have been focusing on for strategic growth, and we have a strong pipeline of additional acquisition candidates. As Peter, Stephen and Matt articulated, we continue to aggressively focus on driving organic growth. However, we will not sit still on the cost front as we are continually looking for ways to streamline our business to keep our teams focused on serving our customers and increasing efficiencies wherever possible. We thank you for your interest in Brady and we will now start the Q&A. Regina, can you please provide instructions for our listeners?

[Operator Instructions] And your first question today comes from the line of Jason Ursaner with CJS Securities.

Looking at Europe -- Peter mentioned a number of different puts and takes, but this question is actually for Frank. I think last quarter, you talked about the correlation to just the general economy and that it would be difficult to create your own growth story. So I guess first, do you still see that as the case and just what are your general expectations for the region in the next 6 to 12 months, maybe with a break between the core countries and those more on the periphery?

Yes, I think Europe is going to be a stagnant economy in the next couple of months, not sure how long. And I said earlier, we need to create our own growth story and that's what we're going to focus on. And I think what you have seen in the growth through acquisitions is a result of this, like we see growth in South Africa and the acquisition, albeit small in South Africa, is going to give us an opportunity to grow faster organically than the European or the EMEA region would grow in general. We also see in Scandinavia, where we just made 2 acquisitions, we also see a more stable economy than in some of the other more central European or more core European countries. So that's just an example. But beyond this, we talked about moving into more digital, focusing on certain markets, certain vertical markets, for instance, Aerospace, Defense and mass transit where we are taking share right now. That's the kind of activities we are undertaking in order to beat the economy in Europe.

Okay. And staying with acquisitions, you continue to find opportunities, you made the 3 small tuck-ins. Is this a representative gauge in terms of size and are you seeing larger deals out there, and are sellers' expectations just very different as you begin to move up the size curve?

We are looking at all kinds of sizes. I would say these acquisitions we've just made around the lower end of what we are looking at, at the moment. Prices are, I would say, not as cheap as they used to be, but they're still in the range where we can add shareholder value.

Okay. And lastly, on Asia. I missed a little bit of Stephen's commentary, but just from an internal perspective, how much worse did the situation on the OEM side with the existing product offerings get relative to what you'd been expecting?

I don't know that I can quantify that, Jason, but it was worse. As we said, we saw a drop-off from our largest customer that we hadn't expected. I just couldn't put a number to it, but it was -- that was pretty well where the shortage was.

Okay. But it was more of a short-term -- something that, I guess, had -- because you had anniversary-ed everything from last year?

Yes. The customers continued to decline more than we'd anticipated. So the question of the short term is -- part of the question is when they reach the bottom of their cycle.

May I just maybe add some additional comments there, Jason. The customer you're talking about, their sales was down 29%; not all sales to them but their sales in the marketplace. That's taken and we said this used to be our largest customer. Obviously, our sales are, in total, again, are down by -- in that range, actually they are pretty flat. So this just shows you that we have been successful in getting business from other customers. However, what we are seeing is we see much more mix, shorter runs in our net efficiencies and in our system. So I think we saw more of an impact on the bottom line than we saw on the top line as mix shifts from a long-run business with high volumes from one customer to many, many customers with shorter runs, but more on the bottom line, I think where we saw the impact than the top line.

Okay. And was there any revenue catch-up from the delays last quarter on the hard-disk drive market? And was revenue -- did it benefit at all from the delays last quarter?

Yes, go ahead, Stephen.

I wouldn't say it benefited from the delays. I mean, we continue to see improvements, an increase in revenues at -- we are largely at the capacity we can reach now with our temporary facility, where, as I said, where the impact is no longer material to the Brady Corporation results. But I wouldn't say we saw a catch-up attributable from quarter-to-quarter. I think we just saw an ongoing improvement.

Your next question comes from the line of Charlie Brady with BMO Capital Markets.

When you guys -- on the Asia Pacific discussion on the separation of those 2 businesses, you gave the sales breakout, I wonder if you could give us some more granularity on the contribution, the operating profit across those businesses? I mean, you said the die-cast is a smaller piece, but I'm just -- can you quantify that a little bit?

Yes, it's significantly smaller.

Okay. And is die-cast for the company, in general, still around 30%, or has it shrunk meaningfully below that?

Excuse me, can you repeat the question?

Yes, if I look at the die-cast business, right, it's been running for a while around 30% of the total Brady revenue, so I'm just wondering kind of given some of the down-tick in that business over the past couple of quarters, where that percentage sits today roughly.

For the total company, I think -- I mean, it's much less than 30%. And I can't remember that it ever was 30%. Maybe -- Tom?

Does it say in our investor presentation, if you have a recent one, it's probably just -- I think historically, it ran just under 20% and it is down from that. Maybe it's down 4 or 5 points from that.

Okay. And I guess just philosophically, when you look at that business longer term, and you look at the price competition that's probably unlikely to abate meaningfully anytime soon, does it make sense, given your focus on where you've taken the company the past few years to still be in that business?

That's a kind of question I cannot answer like this, but I can give you a generic answer. First of all, if you look at all our businesses, our businesses are -- which are not performing and our businesses which are performing very well and looking at our total portfolio, and say, "You know what, what makes sense for us to be in, and what makes sense for us not to be in?" But again, also said that we are -- certainly, we want to increase profitability of our die-cut business. We are in die-cut. And since we are in die-cut, we have to do everything we can to grow sales and profit and by separating the operations facilities and responsibilities, leadership for die-cut and the other businesses, I think we have positioned this business much better to increase profitability because it's just more focused on it.

Okay. And if you look at the R&D expense, it was down as a percent of sales and down in dollar terms. I'm just wondering, is that a temporary blip, or should we expect that to come back to a little more normalized level going forward.

Part of the explanation is due to incentive compensation, so if you look at the actual number of people and resources, it's actually been fairly flat compared to prior year.

Your next question is from the line of Anthony Kure with KeyBanc.

This is Karl Ackerman on behalf of Anthony. Just regarding the acquisitions, you made 3 small acquisitions the quarter closed. You had indicated that in 2012, these should be kind of neutral to EPS. But I guess for modeling purposes, how should we think about the margin profile of these businesses? Are they on par with the European segment? Or is there some work to be done on the expense structure or some cross-selling opportunities to get the borrowing leverage you needed to bring those up to segment profitability?

I'll answer the first question regarding the profitability and Peter will tell you a little bit about our cross-selling opportunities in those businesses. Yes, the margin profile is profitably the same as the rest of Europe.

Let me come on to you. You asked the question, Karl, about product synergies. There are product synergies across all 3 of them. We looked at Runelandhs and Pervaco as giving us a real foothold in that market. They've got a raft of customers that we can access with our typical product line that we couldn't have accessed before, so there's immediate product synergy there. And in South Africa, likewise, that's primarily wire ID businesses, great reference accounts. And actually, it gives us a platform not only to extend our wire ID offer but also to launch into that customer base. And from that beachhead, with workplace safety and compliance products, so all 3 of them, as Frank said, have got similar margin profiles to ours, all 3 of them have significant opportunities for us to put our products through their channel. And in some cases, in the case of Runelandhs, to take some of their products through our customers in the rest of Western Europe as well.

So the synergies is all in sales, cross-selling each other's products, our products to their channels -- to their customers and vice versa. We don't see an associate on the cost side. Some of them are in Scandinavia where we don't have a big presence, and the other one in South Africa where we didn't have a presence at all. So it's all sales-related upside.

Okay, that's helpful. And then just, I guess on the use of cash, you didn't, with these acquisitions, you had some debt paydown in the most recent -- in this quarter. You do have an under-leveraged balance sheet on a debt-to-EBITDA basis, a little over $7 per share in cash, just shy of 1.8 million shares remaining on the current share authorization program, I guess how should we think about cash deployment going forward here? What's the best use in your mind?

Well, our #1 priority for cash is to invest in organic growth, followed by making acquisitions. And as you have seen, we have made 3 now small ones didn't make it then in our cash balance. We are looking actively in acquisitions. We do not want to sit with a lot of cash on our balance sheet. We'd like to put this cash to work and we would have no problems leveraging our balance sheet by tapping into our revolver or taking on new debt. And we are really working on this. But on the other hand, we're not just going to make an acquisition to make an acquisition in order to take cash, which, right now, returns less than 1%, until [indiscernible], we have to create shareholder value and what we use is cost of capital which we need to beat and so we are looking at it very prudently. We do not feel under a short-term pressure to execute, but we are working very, very hard on finding acquisitions. Yes, I'll just leave it at this.

Okay, and I'll just -- if I may sneak one more in. Within the Americas segment, it sounded like the Brady Branded business performed pretty well during the quarter. But could you talk about some of the other businesses, such as People ID, I think it had a slower start to the year last quarter, any improvement there? And then also any improvement in the digital sales on a sequential basis?

Okay. So the People ID business was pretty much flat. The digital business on a sequential basis is definitely up. But as I indicated, that's offset by some lower performance in our mail results, so it's netting pretty much flat performance in the Direct Marketing business, the core Seton and EMED business.

I would say, one of the issues we had, and Matt pointed it on his conference call, is the education markets, schools and so forth, don't have a lot of budget. So it's a business which is suffering much more than our other businesses, so as People ID is concerned, that's not really a big portion of our company, and that's not performing as well as the U.S. but it's kind of, okay, it's fluctuating a little bit from quarter-to-quarter. I would say there's nothing where we're taking on a trend one way or the other.

[Operator Instructions] Your next question comes from the line of Rob McCarthy with Robert W. Baird.

This is Mig Dobre, sitting in for Rob McCarthy. I guess my question is for Stephen or maybe Frank. I'm wondering, can you provide us any color on the performance of the MRO and ID businesses, as well as the Australia, a portion of the Asia segment. I mean, we know that die-cut has been challenged, but I'm wondering how these other businesses are doing.

Sure. Well, as I said in the commentary, the Australian business is doing very well. It's performing on par with our core Brady business in the U.S. I know it's a mature economy, but the machine is working well to get good growth and good returns there. Our MRO and identification businesses in Asia proper are not as mature. The markets are still developing, they're developing in different ways, at different rates. And with the reorganization we talked about and implemented in February, we now have a leadership focusing on those markets and we've just been realigning our sales organizations as well. So we're at a very early stage there. We've had some reasonable growth in the last few years, and we're trying to reignite that to another level of growth now as these markets continue to mature. So we see big opportunities there in the future. Our identification businesses are currently stronger than our MRO businesses in those regions because that's -- we've been in identification products longer than we've been in MRO. So they're small, solid and still we're expecting, obviously, growth rates higher than we've seen in our mature economies, simply on the basis of the rapidly growing nature of the emerging economies.

And how would you characterize order progression or demand through the quarter in these businesses in Asia?

It's still quite lumpy. I said in the prepared comments that these businesses outside of Australia are still more focused on infrastructure and a capital nature of spend as opposed to what we would see in the mature businesses in the Americas or Western Europe, where it really is a maintenance, repair and operations spend, where people are buying things more for use in established facilities or established operations. You look at China, particularly, a lot of the spend is still on new facilities being built or whatever the nature of those facilities. So it's a lot lumpier, so we don't see a typical trend from quarter to quarter. You'd have a quarter that's very strong where there's a big project coming through, then a quarter that's not so strong. So I think we see consistency in the sense that underlying demand patterns, we can see emerging consistently, but in terms of the actual sales flow, it's not easy to put a quarterly trend on it.

I see. And one last one, if I may. I guess as I'm looking at the split of the 2 Asia teams with the separate die-cut team, I'm wondering, Frank, do you see at some time in the future to where you have a global die-cut team looking at some of the other geographies as well. Or is this an Asia-specific initiative?

The die-cut business has maybe been the only business in Brady which we have always run globally because there's so much cooperation and so much coordination between customers. Those customers are global multinational accounts, like in Apple or Samsung or Nokia and so forth. And they always require global coordination. So whether we manufacture in Brazil or in Germany or in China, they need to be globally coordinated. So while the business is -- the majority of the business is in Asia, they work very, very closely together.

Your next question is from the line of Benjamin Wong with Bank of America Merrill Lynch.

Can you elaborate on the long-term potential of Asia-Pac margins? I mean if you're assuming you can execute on your strategy and grow the MRO business and improve the die-cut business, what would the margin profile look like?

There's 2 very separate margins, the margin mix here so the profile will -- it'll be interesting how it evolves. The MRO business and our margins have been high MRO and identification margins close to what we would see in North America and Europe. We would anticipate in the outlying years, there may be some slight downward movement in those margins as those markets get more competitive, but still being significantly above where our blended APAC margin is today. With the margin improvements programs that we have in place for the die-cut business, we obviously expect to see margin lift there. So without putting a number on where it would be, over time, we expect the weighting of our businesses to be more towards the MRO and HPI, and so that would have a pretty significant lift in the overall margins. But this is -- that's not in the next quarter, but certainly, as we move forward, that's the way we would see it trending.

Your next question is a follow-up question from the line of Charlie Brady.

Just on the Asia Pacific and the fourth quarter guidance, you said you expect it down year-on-year. Are you expecting it to be down sequentially from fiscal Q3?

Yes, it will be down sequentially.

And gentlemen, there are no further questions in the queue at this time. Would you like to make some closing remarks?

Sure. Thank you for your participation today. And as a reminder, the audio and slides from this morning's call are also available on our website at www.investor.bradycorp.com. The replay of this call will be available via the phone beginning at 12:30 Central Time today, May 16. The phone number to access the call is 1 (888) 286-8010 or (617) 801-6888 and the passcode is 87652245, and a phone replay will be available until May 23. And as always, if you have questions, please contact us. Thanks, have a nice day and, Regina, can you please disconnect the call?

Certainly. Ladies and gentlemen, thank you so much for your participation today. This does conclude the presentation, and you may now disconnect. Have a great day.