UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

OR

Securities registered pursuant to Section 12(g) of the Act: None 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer”,filer,” “accelerated filer”, andfiler,” “smaller reporting company”company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

The aggregate market value of the non-voting common stock held by non-affiliates of the registrant as of January 31, 2015,2017, was approximately $1,174,025,350$1,632,463,306 based on the closing sale price of $26.17$36.35 per share on that date as reported for the New York Stock Exchange. As of September 18, 2015,11, 2017, there were 47,711,83347,844,015 outstanding shares of Class A Nonvoting Common Stock (the “Class A Common Stock”), and 3,538,628 shares of Class B Common Stock. The Class B Common Stock, all of which is held by affiliates of the registrant, is the only voting stock.

Brady Corporation is a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The ability to provide customers with a broad range of proprietary, customized and diverse products for use in various applications, along with a commitment to quality and service, a global footprint, and multiple sales channels, have made Brady a leader in many of its markets.

The Company’s primary objective is to build upon its market position and increase shareholder value by improving inperformance of the following key competencies:

OverThe long-term sales growth and profitability of our segments will depend not only on improved demand in end markets and the last two years, we made significant portfolio and management decisions designedoverall economic environment, but also on our ability to better position the Company for growth in the future. These changes were a meaningful shift from the more volatile and less profitable consumer electronics Die-Cut business, which was partially divested in fiscal 2014 and fully divested in the first quarter of fiscal 2015, to acontinuously improve operational excellence, focus on organic growth opportunities withinthe customer, develop and market innovative new products, and to advance our digital capabilities. In our Identification Solutions (“("ID Solutions" or "IDS”"IDS") and Workplace Safety ("WPS") segments. In our IDS business, our strategy for growth includes expandingan increased focus on key customers, industries and products and improving the business in high opportunity marketsefficiency and investing ineffectiveness of the research and development ("R&D") activities to develop and launch innovative, high-value products more efficiently.function. In our WPSWorkplace Safety ("WPS") business, our strategy to return tofor growth includes a focus on workplace safety critical industries, expansion of ourinnovative new product offerings, further developed pricing capabilities,compliance expertise, and increased investment in digital.improving our digital capabilities.

The following were key initiatives supporting the strategy in fiscal 2015:2017:

(b) Financial Information About Industry Segments

(c) Narrative Description of Business

Approximately 65% of ID Solutions products are sold under the Brady brand. In the United States, identification products for the utility industry are marketed under the Electromark brand; spill-control products are marketed under the SPC brand; and security and identification badges and systems are marketed under the B.I.G., Identicard/Identicam,Identicard, PromoVision, and Brady People ID brands. Wire identification products are marketed under the Modernotecnica brand in Italy and lockout/tagout products are offered under the Scafftag brand in the U.K. Custom labels and nameplates are available under the Stickolor brand in Brazil; and; identification and patient safety products in the healthcare industry are available under the PDC Healthcare brand in the U.S. and Europe; and custom wristbands for the leisure and entertainment industry are available under the PDC Innovative brand in the U.S. and the B.I.G. brand in Europe.

The ID Solutions segment offers high quality products with rapid response and superior service to provide solutions to customers. The business markets and sells products through multiple channels including distributors, direct sales, catalog marketing, and e-commerce.digital. The ID Solutions sales force partners with end-users and distributors by providing technical application and product expertise.

Products within the Workplace Safety segment are sold under a variety of brands including: safety and facility identification products offered under the Seton, Emedco, Signals, Safety Signs, ServiceSafetyShop, Signs & Labels and Pervaco brands; first aid supplies under the Accidental Health and Safety, Trafalgar, and Securimed brands; warehouse supplies and industrial furniture under the Runelandhs and Welco brands;brand; wire identification products marketed under the Carroll brand; and labor law compliance posters under the Personnel Concepts brand.

The Workplace Safety platformsegment manufactures a broad range of stock and custom identification products, and also sells a broad range of related resale products. Historically, both the Company and many of our competitors focused their businesses on catalog marketing, often with varying product niches. However, the competitive landscape is changinghas changed with the continued evolution of digital channels. Many of our competitors extensively utilize e-commerce to promote the sale of their products. A consequence of this shift is price transparency, as prices on non-proprietary products can be easily compared. Therefore, to compete effectively, we continue to focus on developing dynamic pricing capabilities, and enhancing customer experience, and providing compliance expertise as these are critical to convert customers from traditional catalog channels to digital. Workplace Safety primarily sells to businesses and serves many industries, including manufacturers, process industries, government, education, construction, and utilities.

Discontinued operations include the Asia Die-Cut and European Die-Cut businesses ("Die-Cut"), which were announced as held for sale in the third and fourth quarters of fiscal 2013, respectively. In fiscal 2014, the Company entered into an agreement with LTI Flexible Products, Inc. (d/b/a Boyd Corporation) for the sale of Die-Cut. The first phase of the divestiture closed in the fourth quarter of fiscal 2014 and the second phase of the divestiture closed in the first quarter of fiscal 2015. The assets and liabilities of the businesses included in the second phase were classified as held for sale on the consolidated balance sheet as of July 31, 2014. The operating results of the Die-Cut, businesses were reflected as discontinued operations in the consolidated statements of earnings for the yearsyear ended July 31, 2015 2014 and 2013. In addition,for the Brady Medical and Varitronics businesses were previously divested in fiscal 2013 and were reported within discontinued operations. These divested businesses were partsecond phase of the IDS business platform.divestiture.

The Die-Cut business consisted of the manufacture and sale of precision converted products such as gaskets, meshes, heat-dissipation materials, antennaes, dampers, filters, and similar products sold primarily to the electronics industry with a concentration in the mobile-handset and hard-disk drive industries.

Research and Development

The Company owns patents and tradenames relating to certain products in the United States and internationally. Although the Company believes that patents are a significant driver in maintaining its position for certain products, technology in the areas covered by many of the patents continues to evolve and may limit the value of such patents. The Company's business is not dependent on any single patent or group of patents. Patents applicable to specific products extend for up to 20 years according to the date of patent application filing or patent grant, depending upon the legal term of patents in the various countries where patent protection is obtained. The Company's tradenames are valid ten years from the date of registration, and are typically renewed on an ongoing basis.

Operations

suppliers and the disruption would be modest. In certain instances, the qualification process could be more costly or take a longer period of time and in rare circumstances, such as a global shortage of critical materials or components, the financial impact could be significant.material. The Company currently operates 4239 manufacturing orand distribution facilities globally.

The Company carries working capital mainly related to accounts receivable and inventory. Inventory consists of raw materials, work in process and finished goods. Generally, custom products are made to order while an on-hand quantity of stock product is maintained to provide customers with timely delivery. Normal and customary payment terms range from net 3010 to 90 days from date of invoice and varies by geographies.

The Company has a broad customer base, and no individual customer is 5%10% or more of total net sales.

Average delivery time for customer orders varies from same-day delivery to one month, depending on the type of product, customer request, and whether the product is stock or custom-designed and manufactured. The Company's backlog is not material, does not provide significant visibility for future business and is not pertinent to an understanding of the business.

Environment

Employees

(d) Financial Information About Foreign and Domestic Operations and Export Sales

(e) Information Available on the Internet

Investors should carefully consider the risks set forth below and all other information contained in this report and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general riskrisks and uncertainties that affect many other companies, such as market conditions, geopolitical events, changes in laws or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or other disruptions of expected economic or business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business including our results of operations, liquidity and financial conditions.results.

Business Risks

Failure to compete effectively or to successfully implementexecute our Workplace Safety strategy, or if successfully implemented, failure to realize the benefits expected from the strategy may adversely affecthave a negative impact on our business sales, results of operations, cash flow and liquidity.financial results.

We actively compete with companies that produce and 7.0% in fiscal 2013, all compared tomarket the same periodsor similar products, and in some instances, with companies that sell different products that are designed for the prior year. During fiscal 2015, we recorded impairment chargessame end user. Competition may force us to reduce prices or incur additional costs to remain competitive in an environment in which business models are changing rapidly. We compete on the basis of $46.9 million primarily relatedprice, customer support, product innovation, product offering, product quality, expertise, digital capabilities, production capabilities, and for multinational customers, our global footprint. Present or future competitors may develop and introduce new and enhanced products, offer products based on alternative technologies and processes, accept lower profit, have greater financial, technical or other resources, or have lower production costs or other pricing advantages. Any of these could put us at a disadvantage by threatening our share of sales or reducing our profit margins, which could adversely impact our business and financial results.

Our strategy is to expand into higher-growth adjacent product categories and markets with technologically advanced new products, as well as to grow our sales generated through the goodwill and other intangible assets in the WPS Americas and WPS Asia-Pacific ("WPS APAC") reporting units. The WPS segment has experienced a deterioration in sales and profits due to a reduction in direct catalog mailings, increased digital competition, and pricing adjustments.channel. While traditional direct marketing channels such as catalogs are an important means of selling WPSour products, an increasing number of customers are purchasing products on the Internet. The Company'sinternet. Our strategy to grow this business includes: a focus on workplace safety critical industries, expansion of our product offerings, further developed pricing capabilities, and increasedincrease sales through the digital channel is an investment in digital.our internet sales capabilities. There is a risk that the Companywe may not continue to successfully implement this strategy, or if successfully implemented, not realize its expected benefits due to the continued levels of increased competition and pricing pressure brought about by the Internet. Although the rate of sales decline has slowed over the past three years, there is also a risk that the Company may not be ableinternet. Our failure to permanently reverse the downward trends in this business and return the segment to historic levels of sales and profits. If these risks materialize, their effectssuccessfully implement our strategy could adversely impact our business sales, results of operations, cash flow and liquidity.financial results.

Failure to develop technologically advanced products that meet customer demands, (includingincluding price expectations) and expand into adjacent product categories and marketsexpectations, could adversely impact our business sales, results of operations, cash flow and liquidity.financial results.

Development of technologically advanced new products is targeted as a driver of our organic growth and profitability. Technology is changing rapidly and our competitors are innovating quickly. If we do not keep pace with developing technologically advanced products, we risk product commoditization, deterioration of the value of our brand, and reduced ability to effectively compete. We must continue to develop innovative products, as well as acquire and retain the necessary intellectual property rights in these products. If we fail to make innovations, or we launch products with quality problems, or if customers do not accept our products, then our business sales,and financial results of operations, cash flow, and liquidity could be adversely affected.

Our failure or the failure of third-party service providers to protect our sites, networks and systems against security breaches, or otherwise to protect our confidential information, may substantially harmcould adversely affect our business sales, results of operations, cash flow and liquidity.financial results.

Our business systems collect, maintain, transmit and store data about our customers, vendors and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers that store, process and transmit proprietary, personal and confidential information on our behalf. We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise maintain.

We and our service providers may not have the resources or technical sophistication to anticipate or prevent all types of attacks, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships. Although we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate or cover liabilities actually incurred, or that insurance will continue to be available to us on economically reasonable terms, or at all. Any compromise or breach of our security measures, or those of our third-party service providers, could adversely impact our ability to conduct business, violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have an adverse and material effect on our business sales, results of operations, cash flow and liquidity.

Demand for our products may be adversely affected by numerous factors, some of which we cannot predict or control. This could adversely affect our business sales, results of operations, cash flow and liquidity.financial results.

Numerous factors may affect the demand for our products, including:

If any of these factors occur, the demand for our products could suffer, and this could adversely impact our business and financial results.

The loss of large customers or a significant reduction in sales results of operations, cash flows and liquidity.

While we have a broad customer base and no individual customer represents 5%10% or more of total sales, we conduct business with several large customers and distribution companies. Our dependence on these customers makes relationships with them important. We cannot guarantee that these relationships will be retained in the future. Because these large customers account for a significant portion of sales, they may possess a greater capacity to negotiate reduced prices. If we are unable to provide products to our customers at the quality and prices acceptable to them, some of our customers may shift their business to competitors or may substitute another manufacturer's products. If one of theour large customers consolidates, is acquired, or loses market share, the result of that event may have an adverse impact on our business. The loss of or reduction of business from one or more of these large customers could have a materialan adverse impact on our business sales, results of operations, cash flows, and liquidity.financial results.

We are a global company headquartered in the United States. We are subject to extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities at various levels of the governing bodies. Failure to comply with laws and regulations could adversely affect our business sales, results of operations, cash flow and liquidity.financial results.

Our operations are subject to the risks of doing business domestically and globally, including the following:

There is no trading market for the Company’s Class B Voting Common Stock.

 

Fiscal 20152017 vs. 20142016     

Net cash provided by operating activities decreased slightlyincreased to $93.3$144.0 million during fiscal 20152017 compared to $93.4$139.0 million in the prior year. The prior year results included discontinued operations, which generated approximately $2.7 million in cash from operating activities. Therefore, there was an increase in cash flow fromprovided by operating activities from continuing operations of $2.6 million. This increase$5.0 million was primarily due to a change in working capital of $36.0 million, largelyhigher net earnings partially offset by the decrease in segment profit of $33.4 million. A majority of the decrease in working capital related to a decrease in prepaid catalog costs at July 31, 2015 compared to July 31, 2014 due to a reduction in catalog mailingslower non-cash depreciation and a change in the timing of such catalog mailings. Inventories were also built in advance of facility consolidations in fiscal 2014, whereas inventories were effectively flat in fiscal 2015.amortization.

Net cash provided by operating activities was $93.4increased to $139.0 million during fiscal 20142016 compared to $143.5$93.3 million in the prior year. The decreaseincrease in cash provided by operating activities of $45.7 million was primarily due to changesan improvement in operating assets and liabilities. The Company used cashworking capital of approximately $4 million, $13$14.0 million and $21 million for accounts receivable, inventory and accounts payable and accrued expenses, respectively. Cash used for accounts receivable increasedan increase in fiscal 2014 due primarily to geographic sales mix. Sales increased in EMEA and APACnet earnings compared to the prior year and these regions have a higher days sales outstanding.fiscal year. The accounts payable and accrued liabilities use of cash included $10 million of restructuring expenses relatedincrease to fiscal 2013working capital was due to reduced inventory levels that were paidelevated in fiscal 2014. Cash used for inventory increased primarily to maintain service levels during facility consolidations.

Net cash used in investing activities was $325.8$15.4 million during fiscal 2013 primarily2016, compared to $14.4 million during fiscal 2015. Fiscal 2016 capital expenditures were $17.1 million compared to $26.7 million in the prior year due to the acquisitioncompletion of PDCfacility consolidation activities in fiscal 2015. Fiscal 2015 capital expenditures were offset by $6.2 million in cash received for $301.2 million.certain assets sold as part of facility consolidation activities, and $6.1 million in net cash received from the Die-Cut divestiture.

Net cash used in financing activities was $115.4$99.6 million during fiscal 2014,2016, compared to $33.1$32.2 million during the prior year. InThe increase in cash used in financing activities was primarily due to improved operating performance and cash flow resulting in decreased net borrowings, which were partially offset by $23.6 million of share repurchases in fiscal 2014,2016.

The effect of fluctuations in foreign currency exchange rates increased cash balances by $2.8 million in fiscal 2016 primarily due to cash balances held in currencies that appreciated against the Company used cash to pay dividends of $40.5 million, purchased common shares for $30.6 million, and made a principal payment of $61.3 million on its private placement debt. This was offset primarily by cash proceeds of $12.1 million from the issuance of common stock related to stock option exercisesU.S. dollar during the year. Incurrent fiscal 2013, the Company used cash of $39.2 million to pay dividends and made a principal payment of $61.3 million on its private placement debt. This was offset by cash proceeds of $20.3 million from the issuance of common stock related to stock option exercises, and by the borrowing activity from the Company's credit revolver and multi-currency line of credit in China, which provided $50.6 million in cash in fiscal 2013.

Subsequent Events Affecting Financial Condition

On September 10, 2015, the Company's Board of Directors authorized an increase in the Company’s share repurchase program, authorizing the repurchase of up to a total of two million shares of the Company’s Class A Common Stock, inclusive of the shares in the existing share repurchase program. The plan may be implemented by purchasing shares in the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company's stock-based plans and for other corporate purposes.

Off-Balance Sheet Arrangements

The Company does not have material off-balance sheet arrangements or related-party transactions.arrangements. The Company is not aware of factors that are reasonably likely to adversely affect liquidity trends, other than the risk factors described in this and other Company filings. However, the following additional information is provided to assist those reviewing the Company’s financial statements.

Operating Leases — The leases generally are entered into for investments in facilities such as manufacturing facilities, warehouses and office space computer equipment and Company vehicles.

Purchase Commitments — The Company has purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of its business. In the aggregate, such commitments are not in excess of current market prices and are not material to the financial position of the Company. Due to the proprietary nature of many of the Company’s materials and processes, certain supply contracts contain penalty provisions for early termination. The Company does not believe a material amount of penalties will be incurred under these contracts based upon historical experience and current expectations.

Other Contractual Obligations — The Company does not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity.