Aaron James Pearce - Vice President Thomas J. Felmer - Interim Chief Executive Officer, Interim President and Chief Financial Officer Matthew O. Williamson - President of Identification Solutions and Vice President

Jason Ursaner - CJS Securities, Inc. Charles D. Brady - BMO Capital Markets U.S. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division Joseph Mondillo - Sidoti & Company, LLC

Good day, ladies and gentlemen, and welcome to the Second Quarter Brady Corporation's Earnings Conference Call. My name is Britney, and I'll be the operator for today. [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, Director of Investor Relations, Aaron Pearce. Please proceed, sir.

Thank you, Britney. Good morning, and welcome to the Brady Corporation's Fiscal 2014 Second Quarter Earnings Conference Call. During the call this morning, you'll hear from Tom Felmer, Brady's CFO and Interim CEO and President. You will also hear from Matt Williamson, President of Identification Solutions. After Matt's And Tom's prepared remarks, we'll open up the call to questions. The slides for this morning's call are located on our website at www.bradycorp.com. The prepared remarks will begin on Slide #3. 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 form -- fiscal 2013 Form 10-K, which was filed with the SEC in September 2013. Also, please note that this teleconference is copyrighted by Brady Corporation and may not be rebroadcast without the consent of Brady. We will be recording this call and broadcasting it on the Internet. As such, your participation in the Q&A session will constitute your consent to being recorded. Thank you. I'll now turn the call over to Tom Felmer. Tom? Thomas J. Felmer: Good morning, and thank you for joining us. Our second quarter financial results from continuing operations did not meet our internal expectations as organic sales declined 1.1%, driven by a decline of 6.8% in Workplace Safety. EPS, excluding restructuring charges, finished at $0.25 per share. Although I'm not happy with our financial results this quarter, we are making progress with initiatives that are aimed at setting Brady up for long-term success. Specifically, we are focused on 5 key initiatives. First, we are focused on returning our Workplace Safety business to organic growth. We are expanding our multichannel Direct Marketing model by providing a broader set of identification of Workplace Safety products with an increased focus on e-business. We are making significant investments in this business, which are negatively impact to profit segments this year. However, we are laying the groundwork for scalable business models that we believe will return this business to organic sales growth with a solid profit margin. In Q2, we saw an increase in the absolute number of orders placed, and we also saw an increase in new-to-file customers, which are both positive signals that our strategies to return to growth are starting to take hold. Second, we are focused on growing our Identification Solutions business, primarily through sales force and geographic expansion. Year-to-date, organic sales are up 2.9%, and we see a path to accelerate this growth. Specifically, we are increasing our sales force in the U.S. and Western Europe and expanding our focus on strategic accounts and focused industries, including health care. We also remain focused on providing the most innovative products into both established geographies as well as faster-growing geographies such a Central Europe, the Middle East, Africa and selected countries in Asia. Third, we are engaged in the process to divest our Die-Cut business. The divestiture process is going well and we hope to provide more comments on our progress in the third quarter. Once our Die-Cut business is sold, we will be left with an ID Solutions business in Asia that is 100% focused on customers requiring our high-quality Identification Solutions. Fourth, we are focused on reducing our cost structure through the consolidation of selected manufacturing facilities. We are consolidating facilities in Tijuana, Mexico, the U.S. and throughout Europe. We do not expect any financial gain from these activities this year as we are currently incurring additional costs such as duplicate labor and moving costs. However, we do expect to start seeing savings at the start of fiscal 2015. As you will see in our guidance, we have reduced our forecast for F '14 restructuring charges from $30 million to approximately $22 million. This reduction is because we have slowed down in certain consolidation activities to ensure the highest level of quality and delivery throughout the transition. And finally, we continue to focus the organization on delivering what has differentiated Brady for nearly 100 years: a continuous stream of the most innovative and differentiated products in our markets, a better customer experience than all of our competitors and relentless focus on providing Identification Solutions that help our salespeople win every day. I'm confident that the actions we are taking, along with the renewed focus on executing the fundamentals of our business will accelerate future sales and profitability growth. Looking at our second quarter results. Our Identification Solutions business continued to show positive results as organic sales were up 2.5% and segment profit increased from $34.6 million last year to $37.5 million this year. PDC, which is included in the ID Solutions segment, had earnings in line with our expectations, contributing $0.04 to EPS this quarter. EBITDA revenues at PDC were down versus the prior year. Our Workplace Safety business experienced an organic sales decline of 6.8% in the second quarter. Again, we are starting to see some positive signs that this business is improving as our new customer files and the absolute number of orders is growing again. This indicates an improvement in the fundamental health of this business as our investments are generating positive signs in both Europe and the Americas. Our third global business platform is Die-Cut. As I mentioned, we are working to divest this business. The process continues to move forward, and we hope to have more comments on our process in the third quarter. The Die-Cut business platform is included in our financial statements as discontinued operations. Earnings from discontinued operations, net of tax, increased from $2 million in last year's second quarter to $5.9 million in the second quarter of fiscal 2014. This improvement was primarily caused by the removal of depreciation and amortization expense in the second quarter of fiscal 2014 as the assets held for sale are no longer subject to depreciation or amortization, as well as some favorable tax settlements. Let me turn it back to Aaron to walk through the financial slides.

Thanks, Tom. Let's turn to Slide #4 for more detail on our second quarter financial results. Overall, sales from continuing operations were up 6.8% to $291.2 million in the quarter. This is made up of a 1.1% organic sales decline. Sales from the PDC acquisition added an incremental 8.5% and foreign currency translation decreased sales by 0.6%. Our second quarter gross profit margin finished at 48.9%, down from the 52.0% gross profit margin in last year's second quarter. SG&A expense was 38.3% of sales in the second quarter compared to 40.3% of sales in last year's second quarter. And EPS from continuing operations, excluding restructuring charges, was $0.25 in the current second quarter compared to non-GAAP EPS of $0.38 in the second quarter of last year. The tax rate on continuing operations, net of restructuring, was approximately 30% in the second quarter compared to 25% in last year's second quarter. As we mentioned in last quarter's conference call, we were expecting a higher tax rate in both the first and second quarters of this year, and we expect a lower tax rate in the second half of this year, with the full year income tax rate still finishing in the mid-20% range. Slide #5 is our updated full year guidance for fiscal 2014. Our full year EPS from continuing operations guidance is $1.55 to $1.75, exclusive of restructuring charges. Our previous guidance was for full year fiscal 2014 EPS to range from $1.80 to $2 per share. This reduction in our EPS guidance is primarily caused by our WPS business, where organic sales have been less than we had originally anticipated and profitability has also been below what we had previously anticipated. Also, to a lesser extent, in our IDS business our facility consolidation actions have resulted in increased costs and a conscious decision to delay certain facility consolidations to ensure high-quality service and delivery has resulted in delayed benefits, both of which have negatively impacted our view on the remainder of fiscal 2014. We anticipate organic sales from continuing operations to range from a slight contraction to low single-digit growth for the full year ending July 31, 2014. This guidance is based on current exchange rates and unchanged estimates of depreciation and amortization of approximately $45 million to $50 million. We are also reducing our fiscal 2014 guidance for restructuring charges from our previous estimate of approximately $30 million to our current estimate of approximately $22 million. The reason for the reduced restructuring charges is purely timing related to certain of our facility consolidation activities, which will not be at a point where we will be recognizing the restructuring charges until the first half of fiscal 2015. Lastly, our guidance also includes capital expenditures of approximately $40 million. Moving to Slide #6, it's a summary of our quarterly sales trends. In the second quarter, revenues finished at $291.2 million, again, up 6.8% from the prior year's second quarter. Moving to Slide #7. You can see the trending of our gross profit margins. Our second quarter gross profit margin was 48.9%. If we exclude the impact from PDC, our second quarter gross profit margin would have been 50.5%. We continue to focus on driving gross profit margin improvements, including the facility consolidation actions that I just mentioned. However, the declines in WPS sales volumes, price adjustments and the costs incurred related to the facility consolidation activities in both WPS and IDS in the quarter have resulted in a reduced gross profit margin when compared to the 52% incurred in last year's second quarter. On the right-hand side of this slide, you can see the trending of SG&A expense. SG&A expense was up from $109.9 million in Q2 of last year to $111.4 million in Q2 of fiscal 2014. Excluding the SG&A coming from PDC, SG&A expense would have been down slightly at $99.9 million in Q2 of F '14 compared to $101.1 million in Q2 of F '13. Moving on to Slide 8. You can see that our diluted EPS from continuing operations, excluding restructuring charges, was $0.25, which compares to our non-GAAP EPS from continuing operations of $0.38 generated in the second quarter of last year. As mentioned, this change in EPS was primarily due to the $9 million decline in segment profit in our WPS business and a bit higher tax rate, partially offset by the benefits from PDC. We summarized our cash generation on Slide #9. During the quarter, we generated $16.2 million of cash from operating activities. We also returned $10.3 million to our shareholders in the form of dividends. We paid $2.8 million of debt and invested $8.5 million in capital expenditures, all resulting in an ending cash balance of $79.1 million at January 31, 2014. Our EBITDA trending is on Slide #10. Our balance sheet remains strong. Our net debt-to-EBITDA is approximately 1.2 to 1 at the end of the quarter. Our total net debt position at January 31, 2014, was $209 million compared to net debt of $297 million at January 31, 2013. The second half of the fiscal year is typically our strongest period of cash generation, and we anticipate free cash flow to continue to approximate our historical levels and finish fiscal 2014 in the range of 110% to 120% of net earnings. We continue to have a strong balance sheet and a strong cash generating business, which puts us in a solid financial position to capitalize on future growth opportunities. I'd now like to turn the call over to Matt Williamson for a review of ID Solutions. Matt? Matthew O. Williamson: Thanks, Aaron, and good morning, everyone. I'd like to start by sharing a few of the new products that we've launched in the second quarter, and these are captured on Slide 11. We launched enhancements to several important software and system products in addition to expanding our line of proprietary ToughWash sign and label materials for the food and beverage market and other harsh environment applications. Next quarter, we begin shipping our new BMP21-plus handheld printer, our next-generation portable printer for the wire identification market, which we started to introduce to our distributors last month. We're very excited about this new product, which is a significant improvement to our popular BMP21 printer. Now let's turn to Slide 12 for the ID Solutions financial review. Sales increased 15.8% to $194.7 million in the second quarter. The acquisition of PDC contributed 13.8% to sales. Foreign currency translation decreased revenues by 0.5% and organic sales increased by 2.5%. Looking deeper into our second quarter results, our Brady Brand business in the U.S. experienced slightly positive organic sales when compared to the prior year as we experienced a slowdown in order patterns from our distributors in January. U.S. grew for a 10th consecutive quarter, albeit by a slower rate with growth coming from all major product lines. We saw particular strength from the product ID labels sales to our OEM customers, a theme common to other Brady regions. We also feel positive about our increased volume from our wire marking printer systems, which is offset by slower-than-anticipated sales in some other products. Mexico is a highlight, with double-digit growth, while Canada was slower-than-expected this quarter but still reporting modest growth for the fiscal year. Our business in Brazil is approximately flat this quarter when compared to the second quarter of the prior year. As mentioned last quarter, our Brazilian business is demonstrating signs of improvement with certain OEM customers. And our ongoing growth with our MRO business is demonstrated in January. Signs of improvement are seen in our customer service, product quality and overall business development. We're encouraged by our improvements but remain cautious about the near-term growth due to the economic headwinds in Brazil. Our business in EMEA continued its trend of delivering mid-single digit organic sales growth this quarter, which was slightly better than we anticipated coming into the quarter. This growth was driven by our business in the established Western European economies, as well as Central Europe where the economies appear to be on the mend. We saw growth from all product categories, notably product identification sales to OEMs and increased volume from some of our Safety and Wire ID products. We remain optimistic about the rate of growth and we expect to see low-single-digit organic sales growth in EMEA for the remainder of the year. Our Asian ID Solutions business saw double-digit growth this quarter, also driven by sales of product identification to OEM customers, particularly in China. We also saw a positive but less robust growth to our -- in our MRO business. We are investing in the growth potential of this region by expanding our production capacity and capabilities to continue meeting the needs of our customers. To build our share in Asia we are focused on building partnerships with key strategic customers and distributors, while taking share with our high-quality niche products. PDC, which is predominantly focused on the health care industry, had sales of $39.2 million in the second quarter, which was down approximately 5.6% from the same period in the prior year. PDC's health care business correlates with U.S. hospital admission rates, which we believe were down approximately 3% year-over-year in the second quarter. We are seeing steady improvement in our products tied to electronic medical records, offset by products tied to older medical systems. Looking forward, we do not anticipate a near-term rebound in U.S. hospital admission rates, thus any growth in health care will come from taking share with new and innovative products, sales programs and expanding the type of health care facilities we serve. Also, we continue leveraging sales synergies across the U.S. and Western Europe, primarily with our existing People ID products. In addition to our expansion in industries such as health care and focused geographies such as China and Central Europe, we expanded our sales force in the U.S. and Western Europe in addition to recent expansions of our team of sales professionals focused on strategic accounts. We believe we're on the front-end of these resources, beginning to generate results. Additionally, the keys to success in ID Solutions hinge on consistently exceeding the expectations of our customers, providing an unrivaled customer experience, supported by strong industry expertise, strong relationships with our distributor partners, and as previously mentioned, introducing a steady stream of innovative new products -- our new handheld printer being a great example. Segment profit increased 8.3% to $37.5 million in the quarter compared to $34.6 million in last year's second quarter. PDC was a driver of our increased segment profit, incrementally adding approximately $4.3 million in the quarter when compared to last year's second quarter. As a percent of sales, segment profit was 19.3% this quarter compared to 20.6% in last year's second quarter. PDC was dilutive to our segment profit percentage. Without PDC, our second quarter segment profit would have been 20.6% of sales this year, 21.8% last year. Segment profit was lower-than-anticipated due to a higher-than-expected facility-consolidation-related costs which include inventory write-downs, as well as some additional costs associated with our sales expansion. We expect similar costs in the second half of this year as well. As we look to the remainder of fiscal 2014, we anticipate that the trends of low-single-digit organic sales growth to continue, with growth coming from our Brady business in the United States, Europe and Asia Pacific regions. The risk to this low-single-digit organic sales growth guidance would be our U.S. business, where we saw a decline in order intake in the last several weeks of January, which is increasing our caution as we look to the remainder of fiscal 2014. Now I'll turn the time to Tom Felmer, who will report on Workplace Safety and provide his closing comments. Tom? Thomas J. Felmer: Thanks, Matt. Please turn to Slide 13 as I will comment on the Workplace Safety financial results. Sales decreased 7.7% to $96.5 million in the second quarter. Foreign currency translation reduced revenues by 9/10 of 1% and organic sales declined 6.8%. Looking deeper at our results, our Australian business experienced an 8% organic decline in the second quarter. While our Australian business serves many diverse industries, we have a higher concentration of manufacturing, non-residential construction and most importantly, mining, all of which struggled in the quarter. We have taken actions to reduce our cost structure in Australia and focus our sales efforts on taking share in this challenging but slowly improving economy. The WPS business in the Americas experienced an approximate 9% organic sales decline in the second quarter, while our EMEA business, which is primarily in the established Western European country economies, experienced an organic sales decline of approximately 5% this quarter. We continue to test all elements of our promotional plans and value proposition. We are seeing improvements in new customer creation in order volumes and will work to continue these trends. We will also build on what we have learned in first half of the year and adjust our focus on investments in order to provide the best value and experience for our customers, which we believe will lead to long-term profitable growth in our business. We reiterate that we have refined our strategy by focusing on and investing in the key items outlined in Slide 14. In addition to improving our business fundamentals across all geographies, our strategy involves 5 main focus areas. First, we are expanding our focus in e-commerce. We've accelerated our investments in digital capabilities as customers are increasingly buying over the web. The first half of the year, we've set the foundation for growth, staffing our dedicated digital team, while increasing our digital marketing investments and moving forward with our global platform deployment. We are currently seeing mid-single-digit growth in our digital platform and expect this to double by the end of the year. Second, we are expanding our offering of Workplace Safety products. By expanding the scope of products offered, we can leverage our broad customer reach and compliance knowledge to provide greater opportunities for organic growth around the world. As of the end of our second quarter, we have added approximately 5,000 Workplace Safety SKUs to our offering. While a broader offering is important to our customers, we will also continue to focus on adding more unique and customized identification products that make up the core of our product offering. Third, we will continue to focus on the segments of our markets where we can add the most value to our customers and build our industry expertise in order to capture greater share of these customers. Fourth, we will continue to elevate and optimize our pricing value proposition. Our business has been built on the foundation of providing expertise in the areas of facility safety compliance and a broad range of unique and customized Identification Solutions. We will continue to build on this foundation of delivering high-value service and a broad offering of unique and customizable products in a range of prices that are attractive to our customers. And fifth, we have increased our catalog investments in all geographies to regain more of the high-value customers that have historically made up this business. We have commented on previous calls that we'd reduce catalog investments in order to fund investments on the Internet. This effort is to restore catalog investments to historic levels in the second half of this year. The above strategies are delivering a number of positive signs, new customers continue to increase, which is a positive signal for the long-term health of our business. And our digital traffic and digital revenues are growing. However, counteracting these positive signs are declines in our average order value, which we are looking to address in the second half of the year. Segment profit and Workplace Safety global platform was $14.7 million in the quarter compared to $23.6 million in last year's second quarter. As a percent of sales, segment profit was 15.2% this quarter compared to 22.6% in last year's second quarter. We are seeing a larger-than-anticipated degradation in our segment profit margins due to competitive pressures, changes in our mix and strategic investments we have been making to return this business to growth. As we look to the remainder of the year, we are increasing mailing and e-business [ph] activities to continue expanding our new customer base. We will also be increasing our focus on promoting to our most different -- promoting our most differentiated and valued products in order to improve our profitability. In addition to executing our core strategies, we are focusing our efforts on increasing customer retention and average value within our core business to ensure our growing customer files and order trends deliver sales improvements through the balance of the year. Coming into the year, we had guided to a segment profit decline of approximately 300 basis points in fiscal '14 compared to fiscal '13. Because we have not changed our sales trajectory as much as we anticipated and we'd experienced a deeper erosion in gross margin than anticipated, we believe our segment profit will decline 600 to 700 basis points this year. We are taking actions to improve this for fiscal '15, in connection with increased sales and adjustments to our value proposition. Before moving to questions, let me summarize the key points from today's call. First, our Workplace Safety business. This business experienced a 6.8% organic sales decline in the quarter, but there were a number of positive signs emerging, including increased orders, increased new-to-file customers and we're making progress in our e-commerce initiatives. Though I'm not happy with our organic sales decline, we are seeing some signs of improvements and there are actions we can take to improve this business as we move through the balance of this year. Second, our IDS business. This business continues to deliver consistent organic growth. We are increasing sales resources in the United States and Western Europe. We're also focusing on expansion in faster-growing geographies such as China. Third, We are actively driving the process to divest our Die-Cut business. And fourth, we are aggressively consolidating our manufacturing facilities. As I mentioned, we have slowed down a few of these facility moves. However, we are committed to finish these as fast as possible so we can get our teams back to focusing on delivering the best possible experience for our customers and improving our productivity. As I mentioned in my opening comments, we are not happy with our results this quarter. We are taking actions to address them. I still believe the fundamentals that have helped Brady thrive for nearly 100 years are valued by our customers, and we have refocused our efforts to strengthen this foundation and formula for success. We will continue delivering a broad range of innovative and differentiated identification products, providing a better customer experience than all of our competitors and having all 7,000 Brady associates focused on helping our salespeople deliver value to our customers and win every day. With that, I'd like to move on to the Q&A. Operator, can you please provide instructions for our listeners?

[Operator Instructions] And your first question comes from the line of Jason Ursaner with CJS Securities. Jason Ursaner - CJS Securities, Inc.: Just for the strategic focus initiatives, sort of walking down the list on the first 3. For the WPS segment returning to organic growth. Tom, you mentioned a couple of the leading indicators, such as customer files. Just wondering if you could expand on any other factors you see that provide confidence in the second half or later in this year, returning organic growth? And would that growth be more of a short-term boost from the traditional catalog because of increased investment there or is it from the e-business initiatives? Thomas J. Felmer: Jason, it's a little bit of all of those. From the actions that we took in the first half of this year, we've commented that we're seeing an increase in new customers and orders, which is positive. And we will be increasing the investment in -- really, in the online advertising portion of our e-business strategy. We'll be adding -- increasing our catalog spend to near historic levels, which is above what we have done in the first half of the year. And then the other part that I commented on is we've increased our focus on our highest-value products. In the first half of the year some of our focus was on the new products, some of which were to expand our offering and were resale [ph] items. And what I want to do is I want to see the focus back on the highest-value products, which I think, should also help our business. Jason Ursaner - CJS Securities, Inc.: Okay. And in Europe for Direct Marketing, in years past, I think you've benefited occasionally from weather bundles. I know weather here has been pretty wild, don't keep up as much as it's -- in terms of over there. But was there any impact, one way or the other, in the quarter from that area of product, or would you expect any impact, maybe in Q3? Thomas J. Felmer: Actually, the snow fell in the wrong region of the world. So we did not experience any snow or any harsh weather in Europe this winter. So we're seeing less sales of weather-related products this year compared to last year. Jason Ursaner - CJS Securities, Inc.: Okay. And in the ID segment, I guess, just focusing on the PDC portion. You guys provided the first year effect of revenue for $23 million of the acquisition. What was the full quarter? Or that was...?

Jason, this is Aaron. The full quarter -- you're talking for PDC? Jason Ursaner - CJS Securities, Inc.: Yes.

Yes, the full quarter was, I believe, $39.3 million for PDC. Jason Ursaner - CJS Securities, Inc.: Okay. And now that you're past the 1-year mark, internally, how are you kind of evaluating the acquisition, returns on capital and the outlook for flat growth in admissions? As an outsider it appears somewhat disappointing in the short term. So just wondering, longer term, how you're looking at the success of the acquisition? Matthew O. Williamson: Well, the number one thing is growth of the business and meeting the profit expectations. And right now, the growth is going to drive the profit. We've gotten good cost out of the business. We're going to get some more out as we consolidate the facilities in Tijuana. And so the main thing that we're focused on right now is driving growth, and that will get the profit for us. Thomas J. Felmer: And just another comment on that, Jason. Right now, in the short term, we do not see admissions returning in the hospital segment. But there are still other segments of health care that we feel positive about, the alternative health care facilities. And then there are a number of other take-share initiatives that they're focusing on to try and drive growth to offset the reduction in admissions. Jason Ursaner - CJS Securities, Inc.: Okay. And then just last, Asia Die-Cut, looks like another good quarter. Is this giving it momentum into a sale, or is there maybe some more fundamental change underlying the business that could impact positively what people might be willing to pay for it? Thomas J. Felmer: I mean, actually, the results were in line with what we had expected as we've gone through the process. So we still feel very good about the process. It's a very engaged process. And we said, we hope to have more comments on it in the third quarter.

And your next question comes from the line of Charley Brady with BMO Capital Markets. Charles D. Brady - BMO Capital Markets U.S.: So on the Workplace Safety business, you talked about new orders and customers. And I guess I'm just trying to get to the profitability level that you're seeing being generated by those new customers and those new orders. And along with that, the comment that on the e-commerce business, I guess -- I think you said it was up single digits and that you expected that to double by the end of fiscal '14. What gives you the confidence you're going to see that kind of rapid growth in that part of the business? Thomas J. Felmer: Yes. As we look at the first half of the year, most of the investments had really been on infrastructure. And right now we're just in a position where we can increase the investments that customers would see that would drive the growth. And we're able to do testing, and we've done some, I guess, focus work on some segments. And we're seeing positive results, and it's those early results that give us confidence that the increased investment in the advertising portion of what we're doing is going to have an impact in the second half of the year. Charles D. Brady - BMO Capital Markets U.S.: Okay. And then just on the ID Solutions business. You commented in the U.S., I think you said you saw some declines in the last few weeks of January. Has that -- is that turned around at all in the first couple of weeks of February? Matthew O. Williamson: Yes. We basically see a similar trend in the month of February. Charles D. Brady - BMO Capital Markets U.S.: All right. One more, and I'll hop back in the queue. Just on SG&A expense in raw dollar terms. Can you give us -- and I'm sorry if I missed this if you already mentioned it -- a sense of what second half SG&A spend looks like? Is it kind of on a normalized run rate we've been seeing $111 million, $112 million, or do you see that ticking up or down back half of the year?

Yes, Charley, we would actually see that ticking up a little bit. During our first quarter call, we had commented that we would expect about $113 million per quarter. We obviously came in a bit below that this quarter, but we certainly would expect that it would tick back up in Q3 and Q4.

And your next question comes from the line of Mig Dobre with Robert Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: If I recall, your initial fiscal '14 guidance included a $0.20-plus headwind from incentive comp. Does this new guidance include the same headwind, or has there been an adjustment there? Thomas J. Felmer: There's still incentive comp included in the forecast that we have given you. It's not at the same level, but there's -- it still includes some incentive comp in the forecast.

Yes. It has come down a bit. And actually, if you look at our second quarter as well, our incentive compensation was effectively in line with last year, so it's not a comparability issue in Q2. But It did come down a bit for Q3 and Q4. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then, can we sort of go back to ID Solutions. I know you provided some commentary on the margin there, but maybe you can provide us a little more color as to exactly what's driving the margin contraction, excluding PDC, and how we should be thinking about that going forward. Matthew O. Williamson: Yes. Well, the main factors were around a number of expenses associated with facility consolidation. That was roughly around $2 million in the first half of the year here and some additional costs associated with the sales team that I brought up. It was close to $0.5 million in the quarter. So -- and we would expect those to continue at that rate the rest of the year. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: No impact from pricing or anything like that then? Matthew O. Williamson: No. I mean, we had some price increases in the business. But I would say, relative to the rest of our products, there's not anything material. We've had some price increases, we've had some price decreases in selected products, but nothing from a pricing standpoint other than that. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then my last question on Workplace Safety... Matthew O. Williamson: One -- just one other comment that I'll just touch on. When you look at our mix of products, a very positive thing was that our most popular products are -- in terms of systems -- are our portable products. And the volume increase in these is very encouraging. And the printer sales were always out in front of the consumable sales, and that's something else that contributed to the margin. But we feel very good about that because these are essentially putting little salespeople in the field by creating printers that people are going to use and generate higher profit as they're used. So that was a contributor, but it'll be a long-term benefit for us. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay. Thanks for the color there. Last question is Workplace Safety, the margin outlook there. I appreciate the comment for this year. But I guess I'm wondering, we're hearing more and more about additional investment, whether it's catalog, whether it's online. We all see what the volume challenges are. I wonder, as you look beyond the next couple of quarters, at what point should we expect margin to stabilize here given the fact that you continue to invest in expenses, continue to build it that segment? Thomas J. Felmer: I would say, the incremental spend is mostly set for this year, and then it should it stabilize. We may look at pulling back some of the e-spend as a lot of it is being put into the infrastructure. We don't have that quantified for -- or we haven't talked about quantifying that yet for next year. I would see that as a possibility. The positive thing about the increased catalog expense is that we believe that, that will actually have a positive impact on our profitability as we go through the year. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: So is next year a reasonable sort of time frame to expect some stabilization in margins? Or is that too optimistic at this point? Thomas J. Felmer: We would look for it to be next year.

And your next question comes from the line of George Staphos with Bank of America Merrill Lynch. Thomas J. Felmer: Operator, can we move to the next caller?

And your next question comes from the line of Joe Mondillo with Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: A couple of questions. I first wanted to ask though, the restructuring costs, are those included in the segment profitability that you provide? Thomas J. Felmer: Yes, it's there. Joseph Mondillo - Sidoti & Company, LLC: Can you distribute -- can you clarify how those are distributed in the first and second quarter, if you have that? Thomas J. Felmer: Yes, could you repeat the question again, Joe? Joseph Mondillo - Sidoti & Company, LLC: The restructuring cost, I was just wondering if that's included in the segment profitability numbers that you provide?

Yes, sorry Joe, we misunderstood. There's -- the restructuring amount that you see on our income statement are not included in the segment profit numbers. However, there are some facility consolidation costs that don't go into the restructuring line that are included in the segment profit numbers. So basically, the $2 million that Matt just mentioned, those would be in the segment profit numbers. But if you're looking purely at our P&L at the restructuring charges of $4.3 million this quarter, those are not in the segments. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then, so the $2 million is only in the IDS then?

The $2 million that Matt referred to is only in IDS. Now there are some facility consolidation costs in Workplace Safety, but, frankly, they're not at the same level of IDS, which is why we didn't give that number. It's a much smaller number. Joseph Mondillo - Sidoti & Company, LLC: Okay. And just lastly, related to this. Was there anything in IDS that maybe should be looked to be excluded in the first quarter? Thomas J. Felmer: I don't think so.

Joe, when you say excluded, do you mean facility consolidation costs? Joseph Mondillo - Sidoti & Company, LLC: Yes, yes. Such as that. Maybe looked at as onetime?

Yes. Not at the same level as we saw in Q2, which is why we didn't have much discussion in Q1. Joseph Mondillo - Sidoti & Company, LLC: Okay. So I guess, one of the things that I wanted to ask is about the Workplace Safety then. You provided some information on why we're seeing such large contractions in a margin, but I was wondering if you can maybe provide just a little more color given that -- is this just you saw, I guess, increased costs related to e-commerce and other such things that created the margin to be so far down compared to just the first quarter with a similar sales base? Or if you could provide more color on why we're seeing such large reductions just from the first quarter alone -- let alone, year-over-year. Thomas J. Felmer: Yes, there are a number of elements. We've seen a mix in our product shift where we launched a lot of products that had lower margins and that was the focuses of some of the promotions, so we had a mix issue there. We did have -- and we talked about making some price changes where we reduced prices in an effort to raise volumes. And we saw, I guess, a more negative impact from those prices than was anticipated. So that's something that we're looking to address in the second half of the year. We may not able to address them in the catalogs until the fourth quarter but that's clearly an element of it. And then there are a couple of one-time items that had some contribution to the reduced margins. But I think those are the primary contributors. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then -- so in terms of pricing, that's something that you sort of indicated that you felt like was sort of set in place in the first quarter, and it seems like that's maybe not necessarily the case at least through the second quarter. We're continuing to see sort of headwinds there. I know also that you're trying to implement a pricing sort of, I guess, software system to be a little more accurate in terms of setting pricing. Could you just talk about just overall pricing and how confident are you that we don't see further price reductions in the second half? Thomas J. Felmer: The price reductions in many of the businesses were going into place in the first quarter of the year as we said, and we did see some of the impact in Q1. We saw a more full impact in Q2. And as we read the results from the volume changes, and I guess the whole mix from the value proposition, we look to make adjustments and corrections right in the catalog in the second half of the year. As far as using the software tool that you referenced, that's just being tested right now and that's primarily in our call centers for quoting purposes and customers that we're dealing with on the phones. And we expect to see that really just be piloted in the third quarter and not be rolled out anywhere until the fourth quarter and into next year. Joseph Mondillo - Sidoti & Company, LLC: Okay. So, I guess, one of my biggest overall questions is regarding the guidance. And considering where we fell in the second quarter at WPC [ph] at 15% or so. I guess, looking for a modest improvement in the back half of the year there and then, I guess, maybe sort of flat to slightly up margins at IDS for the back half of the year. It seems like the midpoint of the guidance -- I'm just having a tough time sort of deciphering that. So if -- maybe if you could provide some color on sort of your assumptions on the guidance. Thomas J. Felmer: You captured many of the primary elements. We do see -- we still see a challenging WPS, perhaps, in the third quarter, but improving as we go into the fourth quarter. And we do expect to see improvements in the IDS business as we go throughout the year. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then I guess, just -- I was just going to say, lastly, my last question, I guess, is regarding WP -- Workplace Safety, the average order volume you mentioned is declining. And you mentioned there's ways that you can maybe try to fix that. Could you talk about that and exactly how you're able to do that? Thomas J. Felmer: Yes. There are 2 main parts are adjusting price, again more likely in the fourth quarter, and then the other one is really what we focus on -- as far as what products we focused on. So our promotions are going to focus more heavily on products that we manufacture, products that are differentiated. Through the first half of the year, we had a fair amount of attention on the new products, which did have lower margins in an attempt to increase volumes within the business. And as we're looking at our results, I think it's just spending more time in our catalogs and increasing the investment in a traditional advertising methodologies. We think all of those are going to contribute to higher average order values. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then just lastly, administrative cost, are you expecting any significant changes there going forward, or is it sort of a $30 million quarterly run rate, is that fair?

You're referring to our segment table at the $30 million? Well, we've commented on SG&A in the aggregate, that we would anticipate it to tick up a bit from the $111 million this quarter. But we haven't given any specific guidance on just the G&A line.

And your next question comes from the line of Charley Brady with BMO Capital Markets. Charles D. Brady - BMO Capital Markets U.S.: On Workplace Safety, in terms of the revenue guidance -- in Q3, I know you're saying it's negative organic growth. But are you expecting it to be, on a revenue basis, up sequentially from Q2? Or does the actual number decline again sequentially? Thomas J. Felmer: Sequentially, we're looking for an improvement. Charles D. Brady - BMO Capital Markets U.S.: Okay. And then I want to go back -- on the IDS [ph] , just so I understand, the low-single-digit organic revenue growth guidance. If PDC is seeing a low- to mid-single digit top line decline, that sort of implies that other part of the business are doing better than low single-digits. And can you just give us some granularity on which businesses might be up in the mid- to possibly high-single digits? Matthew O. Williamson: Yes. Going back to my comments and when you look at the rest of the world, we're getting that sort of performance out of Europe, okay, in terms of positive mid-single digits and better than that in Asia, where we've had double-digit growth. So -- particularly in China, it has been very positive for us. And we expect that sort of performance to continue and then offset where we have the decline in PDC. Charles D. Brady - BMO Capital Markets U.S.: Okay. And on the restructuring expenses, that $8 million that's slipping into '15, is there -- can you give us a sense of -- is that going to be all first half? Is that ratably across 1Q and 2Q? And beyond that incremental that slid to the right, the $8 million, is there -- do you expect incremental additional restructuring spends in '15 and can you give a sense of what magnitude that might be? Thomas J. Felmer: We haven't given guidance to F '15 yet, but we'd expect that simply to slide forward and most of that to take place in the first half of the year.

Your last question comes from the line of Jason Ursaner with CJS Securities. Jason Ursaner - CJS Securities, Inc.: Just a follow-up to the last question on the ID Solutions segment. The new products there, maybe, what's growing faster than some others. One thing you didn't mention is the cloud-based software with AssetGuard. I guess I'm just wondering, is this the first cloud-based product that you've had from a software offering perspective? Matthew O. Williamson: Yes -- no, that isn't. That's actually a product that was launched in Workplace Safety. One of the major products that they have in Workplace Safety are our asset tags. So this is a product that's used to essentially bring that into their system versus a manual system. And so it's their first cloud-based product for that specific application. Jason Ursaner - CJS Securities, Inc.: Okay. And would it compare with an offering from Hart Systems? I mean, would you guys consider that a contender? Or is it measuring data on different assets in a facility? Matthew O. Williamson: Yes, that's a good question. I'm not familiar with that. I would actually be somewhat similar to a product that we're selling in Workplace Safety, which is about inspection and tracking and asset tracking. So we have a similar product, but I'm not sure about the company you're bringing up.

And I will now turn the call over to Aaron Pearce for further remarks.

Thank you for your participation today. As a reminder, the audio and slides from this morning's call are also available on our website at www.bradycorp.com. The replay of this conference call will also be available via the phone beginning at 11:30 a.m. Central Time today, February 20. The phone number to access the call is 1 (888) 286-8010 and the passcode is 96735259. As always, if you have questions, please contact us. Thanks. Have a great day. Britney, can you please disconnect the call?

Ladies and gentlemen, that concludes the presentation for today's conference. You may now all disconnect and have a wonderful day.