Ann Thornton - Director of Investor Relations J. Michael Nauman - President, Chief Executive Officer & Director Aaron James Pearce - Senior Vice President and Chief Financial Officer

Mig Dobre - Robert W. Baird & Co., Inc. (Broker) Jason M. Ursaner - CJS Securities, Inc. Charles D. Brady - BMO Capital Markets (United States) Joe L. Mondillo - Sidoti & Co. LLC Keith Michael Housum - Northcoast Research Partners LLC Alex Wong - Bank of America

Good day, ladies and gentlemen, and welcome to the Q2 2015 Brady Corporation's Earnings Conference Call. My name is Whitley, and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Ann Thornton, Director of Investor Relations. Please proceed. Ann Thornton - Director of Investor Relations: Thank you, Whitley. Good morning and welcome to the Brady Corporation's fiscal 2015 second quarter earnings conference call. The slides for this morning's call are located on our website at www.bradycorp.com. We'll begin our prepared remarks on slide number three. Please note that during this call, we may make comments about forward-looking information. Words such as expect, believe, forecast, and anticipate are just 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 fiscal 2014 Form 10-K, which was filed with the SEC in September of 2014. 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 Brady's President and Chief Executive Officer, Michael Nauman. Michael? J. Michael Nauman - President, Chief Executive Officer & Director: Thank you, Ann. Good morning, and thank you all for joining us today. I'm pleased to report that both of Brady segment's generated organic sales growth during the second quarter. This represents the fourth quarter in a row of organic growth and the third quarter in which our IDS and WPS businesses generated organic growth. I believe we are well positioned to continue the trend of organic sales growth for the remainder of this fiscal year. I'm also pleased to report that even with the challenges at duplicate costs and inefficacies from our facility consolidation activity, we also returned to growth and profitability this quarter with non-GAAP EPS growing 16% to $0.29. When I started at Brady a little over six month ago, I pledged to visit all of Brady sites and meet 90% of Brady's people. As a result, I traveled extensively. I continue to be impressed with Brady's strong dedicated team and their relentless focus on customer service everywhere I visited throughout the globe. Our entire team is dedicated to accelerating our positive revenue and profit growth. We've been working hard to focus the Brady organization around a set of critical activities and ensuring that these activities get executed in the highest quality manner, all while continuing to provide the best possible customer experience. My team has focused on the following six key areas. First, we're focused on completing the facility consolidation. We're progressing through the consolidation of selected manufacturing facilities in North America, South America and Europe and we'll complete these by the end of fiscal 2015. Our goal in reducing the number of manufacturing sites is not simply to save cost but to create a scale and consistent processes that will enable us to better serve our customers and further differentiate us from our competitors. We continue to incur incremental cost in our second quarter such as additional labor, outsourcing cost, increased supplies and moving cost. But these additional costs are moderating. We expect these costs to continue throughout the balance of the fiscal year although to further subside each quarter. As a result, we'll begin to realize operational savings late this fiscal year and on into fiscal 2016. Our second focus area is operational excellence. We don't define operational excellence in the narrow sense of a highly efficient manufacturing operation. Although that is very important, we look at operational excellence in a broader sense. We look at operational excellence as improving our ability to deliver an unrivaled customer experience in every customer interaction from the moment we quote for the customer to the final collection of cash. Our team is rallying around this focus area. Every person, every business around the globe has an impact on our customers' experience and as such, I'm seeing a lot of activity to improve these interactions from ensuring that a customer's order is high quality, gets delivered on time, and only requires one interaction with Brady, thus making it a smooth buying process. The fact that the teams are working so hard on this focus area is a testament to Brady's longstanding culture of providing great customer service while at the same time realizing that our service must improve as we move forward. The third area we're working on is driving an innovative new product pipeline and a more rigorous product refresh cycle. We've achieved this through investments in R&D and by identifying emerging technologies and aligning them with opportunities within our target markets. The new focus on disruptive technologies is already clear within our organization. Further, we're developing an enhanced innovation development process, which result in more efficient method to prioritize and allocate resources towards a high value, high impact products, and solutions and to accelerate the timeframe from product inception to product launch. Although Brady has a 100-year track record of innovation and success in launching high-value products, this is an area where recently we've not done as well as we should've nor have we had the proper focus. We can and we must do better. We've already made progress in changing the mindset of the organization, which was critical and I'm confident that the structural changes will be rolled out later this fiscal year and will help us to achieve our goals of increasing the effectiveness of our R&D spend by launching higher impact products in a more timely manner. The fifth area of focus is a focused market sales strategy. Our sales and marketing teams are driving comprehensive efforts to create and implement plans in high opportunity markets such as food and beverage, healthcare, aerospace, and mass transit. These plans are tied directly to our new product and emerging technology efforts in order to launch innovative new products with more speed and a higher success rate. It is critical that our marketing and product development teams collaborate to drive our efforts in this area. The final area of focus is our One Digital Platform strategy. We've dedicated significant resources towards the creation of a standardized product content management system across all of Brady's digital platforms. We expect this will enhance our overall customer experience through improved customer facing websites and a better mobile experience. Ultimately, getting to One Digital Platform is a very ambitious goal but it's a goal we're committed to as we believe that a single data platform is critical to improving our customer experience and to our long-term efficiency. Where we have made changes to date, they have already helped with our online traffic to improve and we're working to improve customer conversion rates as well. Overall, we're confident that our focus on fewer priorities tied to the core of our business will improve our execution and drive growth in future sales, profitability and cash flow. Let me now turn the call over to Aaron to discuss the second quarter financial results. Aaron? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Thanks, Michael. Please turn to slide number four for the highlights of our second quarter financial results. Organic sales growth for the quarter was 1.4%. The substantial strengthening of the U.S. dollar resulted in foreign currency translation negatively impacting sales by 4.3% when compared to the prior year. Overall, including this headwind from foreign currency, revenues were down 2.9% to $282.6 million. Our second quarter gross profit margin finished at 48.9%, which is a 50 basis point improvement over the first quarter and is consistent with last year's second quarter. SG&A expense finished at $107.6 million or 38.1% of sales in the second quarter. This compares to $111.4 million or 38.3% of sales in last year's second quarter. Non-GAAP EPS from continuing operations was up 16% to $0.29 in the second quarter compared to non-GAAP EPS of $0.25 in the second quarter of last year. Impacting our second quarter financial results were the lower than normal tax rate of 17.4% due to the extension of the U.S. R&D tax credit, and certain other tax provisions that were passed by Congress late in December. If we would've had a tax rate consistent with last year's second quarter, our EPS would have been $0.26 per share, which is an increase of 4% over the prior year. Slide #5 summarizes our non-GAAP EPS from continuing operations guidance for fiscal 2015. As it relates to organic revenues, we continue to anticipate low single-digit organic sales growth, in both the Identification Solutions platform and the Workplace Safety platform, for the full year ending July 31, 2015. We also expect a full-year income tax rate in the mid to upper 20% range, approximately $15 million of restructuring charges, and capital expenditures of approximately $35 million in fiscal 2015. Since the beginning of this fiscal year, we've seen a significant strengthening of the U.S. dollar against most of the major currencies, in which we do business. The most impactful change coming from the euro, which has dropped from approximately – which has dropped approximately 15% from the $1.35 at the beginning of this year to $1.14 or so, that it's at today. The strengthening of the U.S. dollar is anticipated to reduce our full year fiscal 2015 non-GAAP EPS by approximately $0.10 to $0.15 and although some of this currency impacted the first half of this year, most of this impact will be felt in the second half of this fiscal year. Because of this significant depreciation of the U.S. dollar, we now expect our full year non-GAAP earnings from continuing operations for diluted Class A common share to be at the lower end of our original guidance range of $1.50 to $1.70. Slide number six, is a summary of our quarterly sales trend. In the second quarter, revenues finished at $282.6 million, and as Michael mentioned, this marks our fourth consecutive quarter of organic growth. We experienced organic growth in both our IDS and WPS segments, and we expect both businesses to post low single-digit organic growth in fiscal 2015. Moving to slide number seven, you can see the trending of our gross profit margins. Our second quarter gross profit margin was 48.9%, which is in line with the second quarter of last year, but as I mentioned, is an improvement over the 48.4% gross profit margin we experienced in the first quarter of this year. On our last call, we stated that we would see cost from facility consolidations continuing as our commitment to maintaining the highest level of service and quality to our customers has resulted in additional operating costs. However, we are now seeing these incremental costs start to subside, and we will begin to realize operational savings late this fiscal year and into fiscal 2016. On the right-hand side of this slide, you can see the trending of SG&A expense. SG&A expense was down from $111.4 million in Q2 of last year to $107.6 million in Q2 of this year. This decline was driven mostly by reduced administrative expenses, a reduction in amortization expense and the impact of foreign currency translation. Reducing our G&A spend to enable us to fund other sales generating activities is a fundamental piece of our profitability improvement plan. Selling and related expenses were up slightly versus the prior year and reflect the increased investment in sales personnel in our ID Solutions business, and increased spending in both online advertising as well as traditional catalog advertising in our Workplace Safety business. Moving onto slide number 8, you can see that our non-GAAP EPS from continuing operations was $0.29, which is a 16% improvement over the $0.25 generated in the second quarter of last year. Profitability in our second quarter was up from the prior year as we combined our continuing organic sales growth with a stabilizing gross profit margin, reduced G&A and a lower tax rate. We've summarized our cash generation on slide number 9. During the quarter, we generated $5.3 million of cash from operating activities compared to $16.2 million in last year's second quarter. This decline in cash flow from operating activities was primarily driven by the timing of the payment of certain liabilities and an increase in inventory levels, which was necessary as part of our facility consolidation efforts. The prior year cash flow from operating activities also included $5.9 million of earnings from discontinued operations. We expect the inventories to begin to decline in the second half of this fiscal year, but we do not expect inventory levels to get back to the fiscal 2014 levels in the near term, as it will take us longer to bleed down inventories than it took us to build up the inventories. Overall, we expect cash flow from operating activities to improve in the second half of the year, as we work through the initiatives that Michael described and complete our facility move. We also spent $6.4 million in capital expenditures in the quarter. The majority of our capital spend was either directly related to our sales expansion efforts, facility consolidations, or was part of our digital focus area. Once we complete these facility consolidation actions, we expect our cash outlays for capital expenditures to moderate back to our historical norms of approximately 2% of sales. I'd like to reiterate our prioritized approach to capital allocation. Our first priority is to invest in organic growth opportunities, which includes funding the incremental investments in R&D, the incremental selling resources to drive growth in selected vertical markets, as well as completing our facility consolidation projects, and delivering on operational improvements to execute our key business fundamental. Our second priority for capital deployment is to return cash to our shareholders in the form of dividends, as we have increased our dividends for 29 consecutive years. Third, we view share buybacks as a way to further enhance shareholder return and we plan to approach this in an opportunistic manner. We take a nimble approach to share buybacks whereby we only repurchase shares when we believe we are trading at a sizable discount, we have balance sheet capacity and we do not have higher priority competing uses for our capital such as the recent period of elevated core business cash outlays. Our fourth and final use of cash would be for acquisition. However, we do not anticipate acquisitions to be a significant use of cash in the near-term as we are currently focused on driving the key initiatives that Michael outlined. We believe that we have significant opportunities to drive shareholder value by improving our organic business and exercising a nimble, yet disciplined capital allocation approach. Our EBITDA trending and net debt trending are on slide number 10. Our balance sheet is strong, giving us flexibility to fund future growth opportunities or return funds to our shareholders. Our net debt to EBITDA was approximately 1.2 to 1 at the end of the quarter. Our total net debt position has been trending down since December 2012, and at January 31, 2015 our net debt position was down to $184 million compared to net debt of $209 million at the same time last year. Let me now turn the call back to Michael to cover our platform results and provide some closing comments before turning over to Q&A. Michael? J. Michael Nauman - President, Chief Executive Officer & Director: Thank you, Aaron. Let's turn to slide 11 for a summary of the second quarter Identification Solutions financial results. Our organic sales were up 1.9% while foreign currency translation decreased sales by 3.3%. In total sales were down 1.4% to $192.1 million in the second quarter. As I mentioned, one of our focus areas is to expand our IDS business in selected industries where Brady products can provide significant value. We've been expanding our focus in industries such as chemical, oil and gas, food and beverage, laboratories, industrial OEMs, and healthcare, and are starting to see some success. The recent sharp declines in crude prices have put a few sales opportunities on hold in the United States and in Canada. However, overall, we anticipate reduced petroleum cost will ultimately have a positive impact on the macro economy, which will be good for Brady. Looking at our gross margins, we have not yet seen any sort of material impact on our financial results from the drop in crude prices. Although some of our input costs are petroleum based, our diverse product portfolio limits the impact that any one commodity such as oil will have. As such, we do not expect to see a materially positive or negative impact from raw material costs on our gross margins. During the quarter, the areas of greatest growth were in our Wire ID and select product lines in our safety and facility and product ID offerings. We grew slightly in healthcare ID as well. This business is tied to U.S. hospital admission rates, which we believe improved this quarter. Segment profit decreased 4.8% to $35.7 million in the quarter compared to $37.5 million in the last year's second quarter. As a percentage of sales, segment profit was 18.6% this quarter compared to 19.3% in last year's second quarter. The decline in segment profit percentage was due to the higher facility consolidated related cost as previously mentioned as well as product mix and the impact of foreign currency. We anticipate the trend of low single digit organic sales growth to continue throughout the remainder of fiscal 2015, with organic continuing to come from our global Brady brand business. Overall prospect of organic sales growth throughout our business are very positive. Although some economies including Western Europe may not be growing at a robust rate, our sales force expansion and our investments in organic sales initiatives are expected to help drive future revenue increases in the near term. Looking at future profitability trends, we expect our fiscal 2015 segment profit to be comparable with our run rate as we exited fiscal 2014, which was approximately 20% of sales. We've invested in sales generation activities in focus industries such as healthcare and we are increasing our R&D investments to continue to stay ahead of our competition due to the development of proprietary new products which are beginning to show returns. These sales growth initiatives along with the stability that should follow upon completion of our facility consolidations should provide a catalyst or continued organic sales growth as well as improved profitability over the mid to longer term range. Let's now turn to slide 12 for Workspace Safety review. Organic sales grew 0.6% this quarter, while foreign currency decreased sales by 6.7%. Overall, WPS sales decreased by a total of 6.1% to $90.6 million in the second quarter. Approximately half of the WPS business is in Western Europe and another 15% of this business is in Australia. As such, the strengthening of the U.S. dollar versus the euro and the Australian dollar has a much larger impact on WPS than it did on our IDS business. We're encouraged by our sales growth as we've realized organic growth for three consecutive quarters in WPS. We're pleased that our strategy and focus on execution are showing positive results in stabilizing the business and creating a foundation for continued future growth. We're focused on improving business fundamentals, and our WPS team is dedicated to five main improvement areas that are the catalyst for improving financial results. First, we're expanding our e-commerce platforms and driving towards One Digital Platform. Our investment in digital capabilities is ongoing as we build upon the foundation of our digital team that was formed last year. We've been building momentum this year and we will be in a position to launch improved web interfaces for businesses in the U.S. and Australia in the second half of this fiscal year. We're working to delicately balance our activities between actions that generate cash now and those that set up our platforms for longer term success. Second, we've expanded offering at ID Workplace Safety products that are differentiated and customized. These products make up the core of our product offering and allow us to leverage our broad customer reach and compliance knowledge, great opportunity for organic growth globally. The team is improving the custom online ordering experience and adding custom capability. Third, we're driving the segments of our business where we can add the most value that are continuously enhancing our industry experience to further differentiate and create value for our customers. These segments include business in Workplace Safety, critical industries such as construction and mining where the environment is harsh and employee safety is critical. Fourth, we're continuously evaluating optimizing our value proposition. Our business has been built on a foundation of providing expertise in the area of facility, safety, compliance, and a broad range of unique and customized Identification Solutions. We'll continue to build on this foundation of high service levels and a broad product offering of unique and customizable products that are attractive to our customers. Lastly, we continue to invest in our catalog, which serve high value customers that are at the core of this business. The primary data elements of our One Digital Platform will help us to create catalogs faster in a more (23:42). Our catalog marketing strategy is well established, but we will utilize our enhanced digital platform to gain efficiency in our catalog spending. Catalogs will continue to be an important component of our multi-channel strategy for many years to come. Our continued focus and investments in these areas are the drivers behind the modest organic growth in the quarter and are expected to continue to drive value over the longer term through new customers and increasing digital traffic and digital revenues. Segment profit in the Workplace Safety global platform was $12.8 million in the quarter compared to $14.7 million in last year's second quarter. As a percentage of sales, segment profit was 14.1% this quarter, compared to 15.2% in the last year's second quarter. Our segment profitability is still not where we would like it to be due to the investments growth that I just described. However, our fiscal second quarter is typically our weakest profitability quarter of the year within this business. We expect segment profit percentage to improve in the second half of the year, and by the end of the year return to levels consistent with what we saw exiting fiscal 2014. We've returned the business to organic sales growth and have a positive outlook for the future. Before turning the call over to the Q&A session, I'd like to provide a few brief concluding comments. As our second quarter results indicate, it is clear that we are seeing signs of improvement throughout our businesses in both organic sales being up and profitability improving. However, as Aaron mentioned, foreign currency is providing a substantial headwind at the moment. Additionally, facility consolidations continue to result in operation and profitability challenges for our businesses. And all the magnitude of these challenges is subsiding, we do expect them to continue in the near term. We plan to fully complete these activities by the end of this fiscal year and we expect these cost challenges to be behind us as we exit this fiscal year. In order to set ourselves up for long-term success, we remain focused on the key items that I have mentioned at the start of our prepared remarks. I would like to reiterate these. First, we are focused on finalizing the facility consolidation. Second, our team throughout the globe is focused on delivering operational excellence every time we interact with our customers. We are actively developing a robust new products pipeline as well as a defined product refresh cycle. We're executing a process whereby we allocate a product development resource to the highest value, highest impact products and accelerate the timeframe from product conception to launch. The team is driving our One Digital Platform strategy. We are expanding sales opportunities in our focused vertical markets. And lastly, the key element that will allow us to succeed in both the short term and long term is the development of our people, enabling them to pursue excellence in everything that they do. I'd now like to start the Q&A. Operator, would you please provide instructions to our listeners?

Your first question comes from the line of Mig Dobre with Robert Baird. Please proceed. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Good morning, everyone. J. Michael Nauman - President, Chief Executive Officer & Director: Good morning. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Good morning. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Michael, a question for you and I must apologize for even having to ask this, but I've seen the releases over the last few days talking about mysterious Sirkin's appointment to the board of directors, he is coming from – he has a BCG. He's got a very impressive resume. But my understanding is that, he was part of the team which provided strategic advice to the company following which Mr. Jaehnert and his management team have largely been replaced and results have been what they've been. So, I'm trying to understand exactly what Mr. Sirkin's role is going to be within the board? And as I'm thinking about Brady as a turnaround story with new management, new strategy, again, my interpretation based on what I know thus far is that Mr. Sirkin's appointment would sort of lead to a continuation of prior strategies. If I'm mistaken, please, I'd appreciate some clarification? J. Michael Nauman - President, Chief Executive Officer & Director: Absolutely. First of all, I would like everybody to know how excited I am to have Hal join our board. His track record, his history within the industry is very, very strong. There are a couple of factors though that you should be aware of that as a result of his being on our board, we will specifically not be working with BCG in the future. That is an important element. Secondly, as you've seen, our strategy is changing dramatically from the strategy that had been deployed previously. I cannot comment on my predecessor, the strategy, or the interaction with BCG specifically. But I can tell you that our new focus is based on the areas that I personally have been working on and developing within the organization. At the same time, I am more than pleased to have Hal is somebody who can be a continued sounding board as part of our overall board and provide insights and making sure that the directions we're heading are being vetted by our entire board organization. Thanks for the question. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): And I appreciate that color. And then, sort of sticking with management, again, we've seen the announcement on Mr. Williamson's retirement. And I'm wondering can you provide us with a little more detail on what's happening with the management team a little more broadly and maybe some business unit level leaders where there might be some changes? How do you manage maybe the rejuvenation process of the management team with outside talent while making sure that there is some business continuity here and you continue to execute? J. Michael Nauman - President, Chief Executive Officer & Director: Absolutely. Well, to start, I'd like to thank Matt for almost it'll be exactly 36 years when he retires. He wanted to time his retirement around his anniversary and I think that is a wonderful statement to his loyalty to the Brady organization and his contributions over the years. And I absolutely wish him the very best. I also use these as opportunities to look for new talent and bringing new talent into the organization. I think that is a major responsibility of mine and of our entire management team. You mentioned the combination of key talent and bringing in talent, I often describe it as a lake where you need to have some water coming in and some water going out, but the base needs to be your foundational people. Brady has an incredibly strong base, long longevity within our workforce and our management teams, people continue to be very, very focused. But at the same time, I am excited to bring in a few key people who challenge us on our thinking to make us better and stronger. We're certainly going to do that as we look to replace Matt, something I've been working on since we began talking about his retirement, and I'm very excited to say I think that we will be providing a different, but yet very, very positive managerial perspective there. As we go throughout our organization, we look for the same thing. We want to match people's strengths with their jobs, we want to be able to challenge them with new opportunities that help them to grow, but we want to make sure that we don't put them outside of areas that they have great strength. So you'll see as part of our focal points, that is one of the key areas that I believe we haven't done as good of job in most areas as we could have in the past. And the team is creating a system of training, job opportunities, accelerating both the very introductory level organizational opportunities, midstream, and even the later development capabilities throughout the company. So another great question, I really appreciate it. Thank you very much. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): All right. Great. And then maybe turning to the quarter and then I'll jump back in the queue. One question on your ID Solutions margin guidance. You mentioned that some of the costs associated with facility consolidations are starting to slowly ratchet down, although your guidance as I read it does not really imply a whole lot of margin expansion in the back half. That being the case, as we look into 2016, the absence of these costs in your view should provide what kind of tailwind from a margin standpoint? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Mig, this is Aaron. We're actually not at a point where we want to give any guidance on FY 2016 at this point. Previously we had talked about a $10 million benefit once everything is 100% complete, but then we had backed off of that amount. If you remember, we backed off about six months ago. So we're not at a point where we can give you any sort of, I'll say, real good clarity on what that number is at this point in time. Clearly, there will be benefit. Clearly, we will be articulating what that benefit will be. We're just not at that point yet. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): But can't you quantify the cost per se in terms of total dollars or however you want to do it? Forget about the benefit, just the cost. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah. We certainly can and have quantified the amount of cost that we've incurred this year, but frankly a biggest chunk of our benefit will be not so much of the cost that go away, but the operational efficiency, which you'll be able to get once you have all these facilities completely consolidated and up and running. J. Michael Nauman - President, Chief Executive Officer & Director: And I will tell you that improvement will not just end August 1 of this year. If you take a look at the new factories and the new ability to lean these out, when you take a look at Six Sigma and all of the different Kaizen events that you could employ and deploy, those processes will continue to provide positive cost dividends for the next couple of years for certain. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): All right. Thanks. I'll jump back in the queue. J. Michael Nauman - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Jason Ursaner with CJS Securities. Please proceed. Jason M. Ursaner - CJS Securities, Inc.: Good morning. J. Michael Nauman - President, Chief Executive Officer & Director: Good morning, Jason. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Good morning. Jason M. Ursaner - CJS Securities, Inc.: Just first question from me is on the outlook for low single-digit organic growth continuing for the full year. Just at a high level, you've occasionally talked about more qualitative factors and figures that you don't routinely report on like growth and customer accounts, et cetera. So just wondering when you look below the surface, are there any trends you'd point to for either segments that maybe are giving you additional confidence in that outlook for stabilizing growth that maybe wouldn't be obvious to outsiders, just looking at the numbers alone? J. Michael Nauman - President, Chief Executive Officer & Director: I think probably the most counterintuitive situation right now is our strength in Europe. If you actually take a look at the European economy, I don't think it's any surprise that there are challenges there. So the fact that we are doing so well speaks to the ability of our sales growth teams, deploying of new resources, and really the capabilities of Brady in difficult times to show value to our customers that exceed the value of our competitors, allowing us to capture clearly more share of that market. So I think that would be a particular trend that we'd highlight today. Jason M. Ursaner - CJS Securities, Inc.: Okay. And Aaron, in your prepared remarks, you mentioned an improvement in free cash flow in the second half due to some working capital reversal. Just besides the higher capital expenditures year-to-date, anything specific you'd point to operationally from a trade working capital perspective that may have drove the anomaly in Q2 or is it more just timing at this point? Aaron James Pearce - Senior Vice President and Chief Financial Officer: I'm sorry, is it more just what at this point? Jason M. Ursaner - CJS Securities, Inc.: Is it just timing that's driving that? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Well, the biggest piece frankly was our inventory build. So we've built up inventories as a result of these facility consolidations. So, is that timing? Yes, but it's going to take quite a period of time to drive down that inventory build. Then, in addition to that, as you look at our cash flow statement, you see a pretty big cash outlay related to accounts payable and accrued liabilities. That is effectively timing. So we feel pretty confident that a big chunk of that is going to come back. But the inventory is going to take a bit of time to come back. And then the other piece I would comment on as it relates to cash flows, capital expenditures. Our CapEx, of course, has been elevated now for the second year in a row. We would anticipate once our facilities are fully consolidated that that CapEx will begin to moderate actually quite substantially and get back to the, call it, 2% of sales level that we've historically been at. Jason M. Ursaner - CJS Securities, Inc.: Okay. And with the improvement in the second half, would you expect it to cover the full year dividend? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yes. Jason M. Ursaner - CJS Securities, Inc.: Okay. And just from a cash conversion perspective, historically the company has had very high conversion relative to net income. Obviously, a part of this was the non-cash expenses coming through the P&L, some of those are out with the impairment last year and the divestiture of die-cut. Just wondering how you see conversion going forward. Aaron James Pearce - Senior Vice President and Chief Financial Officer: When you say free cash conversion, as I look into – I'll say FY 2016 and beyond and again I'll talk very general. We still have very significant depreciation and amortization, call it, $40 million this year. We expect that that would continue to run above CapEx once we get into next year and beyond. So we would anticipate our free cash conversion to be pretty strong. And frankly, the timing issues that you're seeing in the working capital items, obviously over the long term those will subside. Jason M. Ursaner - CJS Securities, Inc.: Okay. Great. Appreciate the details. Thanks, guys.

Your next question comes from the line of Charlie Brady with BMO Capital Markets. Please proceed. Charles D. Brady - BMO Capital Markets (United States): Good morning, guys. J. Michael Nauman - President, Chief Executive Officer & Director: Good morning, Charlie. How are you, sir? Charles D. Brady - BMO Capital Markets (United States): Not bad. Thanks. Not bad. Thanks. Could you give us a geographic sales – organic sales breakdown between the two segments, so how much was Europe up for both of those and et cetera? J. Michael Nauman - President, Chief Executive Officer & Director: Charlie, we don't break out sales geographically. I'm sorry for that. But it's not something that we do, and so we're going to continue with that policy. Charles D. Brady - BMO Capital Markets (United States): Okay. Okay then. If I've got $8 million left on the $15 million of restructuring, should we assume that's spread out evenly or it sounds like it could maybe more third quarter than fourth quarter allocation for that? J. Michael Nauman - President, Chief Executive Officer & Director: Go ahead, Aaron. Aaron James Pearce - Senior Vice President and Chief Financial Officer: That is a very good assumption, Charlie. Charles D. Brady - BMO Capital Markets (United States): Okay. And, I guess, as you look to ID Solutions, given your guidance of coming up basically at about 20%-ish profit margin, are you expecting Q3 to be up year-over-year, get there or not? I mean, it sounds like Q3 still had some costs in it, so you're still going to be down and you pop back up to even with last year in Q4. J. Michael Nauman - President, Chief Executive Officer & Director: I think that's a pretty good summation. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah. And the other thing to think about too, Charlie, is, of course, FX is going to provide some headwinds, it doesn't impact the percentages, of course. But it certainly will impact the actual results – the actual segment profit dollars. Charles D. Brady - BMO Capital Markets (United States): Okay. And, I guess, similar question on Workplace Safety. I'm just trying to square up getting back to an 18% profit level by Q4 given – and I get that you've had some – you extra costs in the first half. But you've seen some pretty strong year-over-year margin declines, not all of that's going away; it's lessening. But I mean, can you give us a sense of – are you getting any operational improvements in Workplace Safety or is it just all a function of reduction in some of the additional expense that you've been incurring in that business? J. Michael Nauman - President, Chief Executive Officer & Director: No, actually you're correct. We have been seeing operational improvements in our – although not as significant as IDS. The WPS business had similar consolidation costs and we are starting to see efficiency gains that were the driving factor in doing the consolidation. So you're absolutely right. There is a combination there of cost reductions from no longer – as the consolidation effort ramps down and efficiency improvements that will certainly drive better margins. Charles D. Brady - BMO Capital Markets (United States): Okay. One more and then... J. Michael Nauman - President, Chief Executive Officer & Director: Wait, wait, Aaron has... Aaron James Pearce - Senior Vice President and Chief Financial Officer: I was going to add one piece of color to that as well, Charlie. And that is, when you look at our top line in Workplace Safety, Q2 is typically our lowest. And as you know, this business has very nice gross profit margins, drops a lot to the bottom line. So as the top line kicks back up, it has a very nice impact on our segment profit percentages. J. Michael Nauman - President, Chief Executive Officer & Director: Correct. Good point. Charles D. Brady - BMO Capital Markets (United States): That's a good segue into my next question, because I was going to ask you about the top line growth in Workplace Safety. Obviously, it's positive organically, but ticked down sequentially. Is that's the function of seasonality and should expect stronger top line growth going into Q3? J. Michael Nauman - President, Chief Executive Officer & Director: Yes, the comment Aaron made, you can look back to the history and this quarter is a softer quarter... Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yes, definitely. J. Michael Nauman - President, Chief Executive Officer & Director: ...historically and continues to be. So you will see that seasonality impact disappear. Charles D. Brady - BMO Capital Markets (United States): Okay. But, I guess, on a year-over-year basis, it's seasonality versus seasonality and it did – are you expecting, I guess, you're expecting stronger year-over-year growth in Q3, Q4? J. Michael Nauman - President, Chief Executive Officer & Director: Yes. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yes. But keep in mind we're still anticipating very low single-digits. Charles D. Brady - BMO Capital Markets (United States): Got it. Okay. Thanks. Aaron James Pearce - Senior Vice President and Chief Financial Officer: It is effectively what we had in Q1 and Q2. J. Michael Nauman - President, Chief Executive Officer & Director: And we have a lot of effort yet to go on our digital platform and we do believe when that program, at least the major thrust this year is completed, you will see more improvements, because our digital sales are increasing at a faster rate than our overall sales. And so I think you'll see that continue to accelerate as that program opportunity winds up this year. Charles D. Brady - BMO Capital Markets (United States): Thanks. J. Michael Nauman - President, Chief Executive Officer & Director: Thank you. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Thank you.

Your next question comes from the line of Joe Mondillo with Sidoti & Company. Please proceed. Joe L. Mondillo - Sidoti & Co. LLC: Hi. Good morning, everyone. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Good morning. Joe L. Mondillo - Sidoti & Co. LLC: My first question related to your sort of the restructuring and the movement of the administration costs that you see, you can push around from one side of the business to the other. You've already brought it down from, I guess, you could say, annualized from $120 million to $107 million on an annualized basis. But from what you've said in the past, there's a lot more to go. I'm just wondering I know you've said earlier on one of the other questions that you don't want to quantify, but I'm wondering what the timing is for when you get to sort of a normalized administrative level and also to the point when we get a better idea of maybe some of the costs that you may not necessarily move to another location of the business, but possibly eliminate, when is that timing that we get a sense of that? J. Michael Nauman - President, Chief Executive Officer & Director: Joe, I'll let Aaron answer your specific question, but first and foremost I want to talk about this subject. If we take a look at our overall cost, it's been Aaron and my belief that we've had too much of our costs in a corporate situation. And we are not looking for a specific number in reducing those costs as we drive those into the businesses. We do believe fundamentally once we move those costs into the businesses, as I've seen previously in my career and know from reality, those businesses will put a spotlight on the efficiency effectiveness of what is happening and either transfer those resources into something more effective or eliminate those resources if they can't do that. So we do think it'll be a two-stage effort in that regard. Then with the remaining corporate resources once we've lowered the water, so to speak, we will be able to put a much better focus on making sure that the resources that are left are also being applied reasonably. But the first priority, making sure that we are working on the things we really need to work on. And then the second priority being, if we don't need to work on them taking those costs out of the organization. So Aaron, do you want to answer specifically some timing around that? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Well, definitely. Well, first of all, I just want to make it crystal clear. We have not had any changes. There have been no allocation changes. Everything that you see presented in our results are apples-to-apples, so there have been no changes. Now, as we look at – I'll call it SG&A in total. Clearly, our SG&A was down in the quarter, even though the selling piece of SG&A was actually up in spend and, of course, that's very intentional because we have been investing and selling the resources in digital and effectively funding that through more efficient use of our G&A structure. So, in the past, we've talked about a guidance somewhere in the range of, call it $112 million for SG&A on a go forward basis. You combine some of the actions that we've taken along with, frankly, the FX impact and we're now looking closer to the $109 million to $111 million range on a go forward basis for SG&A. So clearly this is an area that we're focusing on. Now, to your specific question, when will we make a change? That's a great question. We have not – like I said, we've not made any changes yet. We continue to work through what's the best way to drive down – further drive down the G&A cost. But at this point in time, frankly, we don't know when we will make a change in our segment. Joe L. Mondillo - Sidoti & Co. LLC: So, I guess, my follow-up would be, it sounds like you definitely are going to make a change, just maybe the timing is unsure, can we say within the next four to six quarters that we'll hear something or maybe in the next quarter or two? I am just trying to get – or do you not know at all? I am just trying to get ballpark estimation of? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah. Great question, Joe. Four to six quarters definitely. Within the next one to two quarters, probably not. Joe L. Mondillo - Sidoti & Co. LLC: Okay. The other thing related to costs. So you guys quantify sort of the restructuring costs, which are the costs that I guess you can actually quantify and you highlight that. And then you also point to some of these additional temporary costs that you've been seeing that are, I guess, probably very hard to quantify. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah. Joe L. Mondillo - Sidoti & Co. LLC: You know that are there. One, could you just give us an idea of what you think that maybe in terms of – is it as big as the restructuring cost or much lower than the restructuring cost that you highlight? And also where are we – I mean, was 2Q sort of the peak of these temporary cost and then they bleed down or have they have been bleeding down the last few quarters or? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah. Actually the amount of incremental costs we've incurred, that would just run through our cost of goods sold line, is not even close to what we incurred in restructuring costs. And Q1 actually would have been our peak, not Q2. The incremental cost – and you're right, they're very hard to quantify. But we believe that they're about half in Q2 of what they were in Q1. So clearly they're coming down from the peak. Joe L. Mondillo - Sidoti & Co. LLC: Okay. And then my last question just related to cash flow. It sounds like there's a lot of opportunity with the efficiencies and inventory management, are you anticipating, I guess, working capital to be a source of cash over the next, call it, two years? Is it going to be that extensive over that time period or is it just sort of this year? And do you have any idea of what you can get your inventory turns to? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah, I can tell you this, we do not have a specific target at the moment for inventory turns. Frankly, what we're focused on right now is minimizing the disruption to our customers and as a result of that frankly, inventories have built up. Now, as we look out over the next couple of years, I guess, I'd be speculating if I could give you a real number that we could drive inventories down to, but I can tell you this. As we look at the business, we clearly believe that we have opportunities in inventory, it's not going to come down overnight, but clearly there will be – inventories and working capital in general will continue to be a focus area from now until forever frankly, but the amount of reductions I really can't comment on. Joe L. Mondillo - Sidoti & Co. LLC: Okay. But just going back to one of the other questions, working capital, D&A, lower CapEx, it sounds like your conversion to cash is going to be pretty good over the next year or two at least? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Well, we certainly anticipate it to improve, I mean just the CapEx alone will be a pretty significant benefit for us. Joe L. Mondillo - Sidoti & Co. LLC: Okay. J. Michael Nauman - President, Chief Executive Officer & Director: And the inventory will come down, and you are correct. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Yeah. Good point. Joe L. Mondillo - Sidoti & Co. LLC: Okay, great. Thanks a lot. J. Michael Nauman - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Keith Housum with Northcoast Research. Please proceed. Keith Michael Housum - Northcoast Research Partners LLC: Good morning, gentlemen. Question for you... J. Michael Nauman - President, Chief Executive Officer & Director: Good morning, Keith. Keith Michael Housum - Northcoast Research Partners LLC: Question for you on the FX environment. Assuming we might here a new normal, I mean, obviously tough for any of us to say. Does the current FX rates change the market dynamics for you guys? I know the competition for you is very fragmented. But does that give you an advantage or a disadvantage in any certain geographies or as you think about the overall business? J. Michael Nauman - President, Chief Executive Officer & Director: We have so many local options that it really doesn't – we are naturally diversified in that regard, so that's a big positive, I'd say for Brady, but that FX issue is not going to change that dynamic. What it does impact though is when you convert it (51:22) back for our results into U.S. dollar, it has clearly had a dramatic impact. Keith Michael Housum - Northcoast Research Partners LLC: Okay. J. Michael Nauman - President, Chief Executive Officer & Director: And if this is a new normal and that was your statement, not mine, I'm not speculating, then that would have a continued impact. Keith Michael Housum - Northcoast Research Partners LLC: At least the next three quarters, correct? J. Michael Nauman - President, Chief Executive Officer & Director: Correct. Keith Michael Housum - Northcoast Research Partners LLC: Okay. Got it. as you think about the big market change over the past few quarters was obviously the drop in the crude oil prices, I think what I heard you say is that, you saw some demand drop off because of the drop in the crude oil, is there any other dynamics there? I mean, you expect that to be a temporary basis, or is that – what are your thoughts and what are you seeing from your customers in that market? J. Michael Nauman - President, Chief Executive Officer & Director: Sure. The greatest – first of all, that's directly related to oil and gas projects in Canada and the U.S. and you can imagine those have slowed down, but that is a marketplace that has dynamic swings and so we would certainly anticipate with the amount of resources available in North America that it would swing back over time obviously, that they are going to exploit those resources. Keith Michael Housum - Northcoast Research Partners LLC: Okay. And the final question for you. What we saw in the last two quarters was R&D was elevated and in your conversations with yourself and the rest of the team, it sounds like R&D is obviously a focus for you guys. This quarter R&D actually dropped sequentially, is there anything that we should think of in this quarter in terms of the expense compared to say the next few quarters? J. Michael Nauman - President, Chief Executive Officer & Director: No, that's just a timing issue. Our focus remains in R&D, I believe that in the last few years, we've taken our eye off that ball, and we shouldn't have, and we have put it back on. But more important than putting our eye on the R&D ball, we are being much more selective in what we work on and why work on it. The prioritization program that we are putting in place, I already am seeing results of the beginning of that pipeline. Now, it takes a while to get to that pipeline, for you to see them on your end, but internally, we can already see a much better clarity of focus on what we're working on and why. And a high expectation of accountability for results at the other end, which is a significant change from what the company had experienced previously. Keith Michael Housum - Northcoast Research Partners LLC: Okay. Should we say it's a matter of timing? Will you say this quarter is little bit lower than what you'd expect it to be going forward? J. Michael Nauman - President, Chief Executive Officer & Director: Yes. Keith Michael Housum - Northcoast Research Partners LLC: Okay. All right. Thank you, guys. I appreciate it. J. Michael Nauman - President, Chief Executive Officer & Director: Thank you, sir.

Your next question comes from the line of George Staphos with Bank of America. Please proceed. Alex Wong - Bank of America: Hi. It's actually Alex Wong sitting in for George. Good morning. J. Michael Nauman - President, Chief Executive Officer & Director: Good morning, Alex. Alex Wong - Bank of America: Just going back to a question asked earlier on the expectation for a low single-digit organic growth for the remaining of fiscal 2015. Can you comment as to how February has been trending thus far recognizing we're only a few weeks into it? J. Michael Nauman - President, Chief Executive Officer & Director: Yeah, the trend for February is positive, and we are happy so far with the results. I don't want to speculate further than that, because you will know how the month ends is a key determiner of how the month has gone. Alex Wong - Bank of America: Thanks for that, Michael. And then, on switching over to Workplace Safety, I think in the slide deck there were some reference around some selective price increases, can you provide some context around that? Is it related to FX or something else? J. Michael Nauman - President, Chief Executive Officer & Director: No, we've had a strategic price increase that is sticking, and that is very positive news. As you know, some of these initiatives at times by companies either stick or don't stick. We've seen great traction on the price increases. Alex Wong - Bank of America: I appreciate that. And then again, returning to kind of the margin target on the WPS side, I think you referenced earlier just the expected flow through with the operational efficiencies. Is that really the primary driver that gives you confidence in that target, or is there other items that you would point to? J. Michael Nauman - President, Chief Executive Officer & Director: No, I think Aaron has also spoke to you about – because of our margins, because of our fixed operating costs, when we increased our revenue, we see tremendous flow through at the bottom line that raises our margin percentages fairly effectively. So, we have a couple of levers there that will help us make sure that we can hit the expectations that we have. Alex Wong - Bank of America: I appreciate that. And then, just our last question around the product content management system and the digital efforts, I appreciate all the color earlier. Can you just give us update on the progress? There was some significant spending in fiscal 2014. Are there any incremental investments needed related to this efforts and any additional color you could provide? J. Michael Nauman - President, Chief Executive Officer & Director: Sure, absolutely. We've already given guidance that we have continued to add resources there. It is an area that is changing rapidly. The good news is that we've been focused now for a while on a mobile strategy as the primary driver from which to enhance all of our platforms. But the key once again is by creating a consistent structured database at the bottom and moving it up to the top. It doesn't matter whether the medium is physical catalogs, the actual web-based applications or mobile, we're going to be gaining big benefits. So yes, we do anticipate continuing to invest in this area in the near to mid-term future because we see paybacks due to a higher percentage of revenue increase than otherwise. Alex Wong - Bank of America: Thanks very much. Good luck in the quarter. J. Michael Nauman - President, Chief Executive Officer & Director: Thank you. Thank you very much.

Your next question comes from the line of Mig Dobre with Robert W. Baird. Please proceed. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Hey, thanks for taking my follow-up here. Just a couple of other items. Going back to Workplace Safety, Aaron, you know when I'm looking at the two-year stack comps, you pretty much had flattish comps, if you would, for the first half of the year, and we kind of saw organic growth flow from 2.4% to roughly 0.5 percentage point there. And your guidance going forward is for slight growth, but I am – what I perceive to be much harder, much more difficult comps. So is there something that you have seen throughout the quarter to give you the confidence that this business can structurally accelerate in the near-term here? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Actually I'm going to come back to the seasonality because you're right, if you look at the stack charts in the PowerPoint, it says, okay revenues haven't moved up and down that much, but frankly Q4, Q3 is always better than Q2, Q4 is generally better than Q3. So what you saw last year was a trend of that may look flat, but the reality is it should have been up last year because of seasonality. So I actually looked at our comps, and I think they're actually slightly easier in the second half of this year. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Okay. Well, to be perfectly honest with you, I am not sure, I really get it, so I'm going to follow-up with you offline on that. And then, maybe comment from you on unallocated expenses. They've been coming down pretty hard in the first half of the year. And I'm wondering is there a number that you are targeting that's implied within your guidance. My best guess is that, this number should be declining pretty significantly on a year-over-year basis in order to get to $1.50? J. Michael Nauman - President, Chief Executive Officer & Director: So, interesting in my philosophy, I have not been driving for specific cost reductions, because, I don't think that is a healthy philosophy. What I have actually been doing is putting in structures, guidelines, expectations and the end results of all of that is the efficiencies are being automatically driven throughout the organization. To be clear, I have not set a single target guideline for cost reductions, because I'm changing the entire mindset of how we do business and that is absolutely to your point going to the bottom line as people realize how much more effectively and efficiently we can operate under those guidelines and those principals. I hope that helps? Mig Dobre - Robert W. Baird & Co., Inc. (Broker): That helps from a big picture standpoint. But, just to sort of clarify, we are talking about double-digit year-over-year declines here in the back half of the year. Correct? J. Michael Nauman - President, Chief Executive Officer & Director: Yes, we are. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Then the last question from me would be surrounding incentive comp. I remember that this was a $0.10 headwind previously, given everything that's been going on FX and so on, has there been an adjustment to incentive comp for this year? Aaron James Pearce - Senior Vice President and Chief Financial Officer: Not a material adjustment. J. Michael Nauman - President, Chief Executive Officer & Director: No. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): All right. That's it from me. Thank you, guys. J. Michael Nauman - President, Chief Executive Officer & Director: Thank you, sir. Aaron James Pearce - Senior Vice President and Chief Financial Officer: Thank you.

Ladies and gentlemen that concludes today's Q&A. I'll now turn the call back over to Ms. Thornton, for closing remarks. Please proceed. Ann Thornton - Director of Investor Relations: We 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 be available via the phone beginning at 11:30 Central Time today, February 19. The phone number to access the call is 1-888-286-8010. International callers can dial 617-801-6888. And the pass code is 29394832. As always, if you have questions, please contact us. Thanks and have a nice day. Operator, could you please disconnect the call?

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.