Brady
Annual Report 2014

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended July 31, 2014OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to Commission file number 1-14959 BRADY CORPORATION(Exact name of registrant as specified in charter) Wisconsin 39-0178960(State or other jurisdiction ofincorporation or organization) (IRS EmployerIdentification No.)6555 West Good Hope Road,Milwaukee, WI 53223(Address of principal executive offices) (Zip Code)(414) 358-6600(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredClass A Nonvoting Common Stock, ParValue $.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ýIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes ý No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “largeaccelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filerx Accelerated filer¨Non-accelerated filer¨ (Do not check if a smaller reporting company) Smaller reporting company¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ýThe aggregate market value of the non-voting common stock held by non-affiliates of the registrant as of January 31, 2014, was approximately $1,258,833,135 based onclosing sale price of $27.36 per share on that date as reported for the New York Stock Exchange. As of September 24, 2014, there were 47,708,274 outstanding shares of Class ANonvoting 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 theregistrant, is the only voting stock.Table of ContentsINDEXPART IPageItem.1 Business3General Development of Business3Financial Information About Industry Segments3Narrative Description of Business3Overview3Research and Development5Operations6Environment6Employees6Financial Information About Foreign and Domestic Operations and Export Sales6Information Available on the Internet6Item 1A. Risk Factors7Item 1B. Unresolved Staff Comments12Item 2. Properties12Item 3. Legal Proceedings12Item 4. Mine Safety Disclosures12PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities13Item 6. Selected Financial Data15Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations16Item 7A. Quantitative and Qualitative Disclosures About Market Risk32Item 8. Financial Statements and Supplementary Data33Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure73Item 9A. Controls and Procedures74Item 9B. Other Information76PART III Item 10. Directors and Executive Officers of the Registrant76Item 11. Executive Compensation81Compensation Discussion and Analysis81Management Development and Compensation Committee Interlocks and Insider Participation94Management Development and Compensation Committee Report94Compensation Policies and Practices95Summary Compensation Table95Grants of Plan-Based Awards for 201497Outstanding Equity Awards at 2014 Fiscal Year End97Option Exercises and Stock Vested for Fiscal 201499Non-Qualified Deferred Compensation for Fiscal 2014100Potential Payments Upon Termination or Change in Control100Compensation of Directors102Director Compensation Table — Fiscal 2014103Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters104Item 13. Certain Relationships, Related Transactions, and Director Independence106Item 14. Principal Accounting Fees and Services107PART IV Item 15. Exhibits and Financial Statement Schedules108Signatures1142PART IItem 1. Business(a) General Development of BusinessBrady Corporation (“Brady,” “Company,” “we,” “us,” “our”) was incorporated under the laws of the state of Wisconsin in 1914. The Company’scorporate headquarters are located at 6555 West Good Hope Road, Milwaukee, Wisconsin 53223, and the telephone number is (414) 358-6600.Brady Corporation is a global manufacturer and supplier of identification solutions, specialty materials, and workplace safety products that identifyand protect premises, products and people. The ability to provide customers with a broad range of proprietary, customized, and diverse products for use invarious applications, along with a commitment to quality and service, a global footprint and multiple sales channels, have made Brady a world leader inmany of its markets.The Company’s primary objective is to build upon its market position and increase shareholder value by improving in the following key competencies:•Global leadership position in niche markets•Innovation advantage — Internally developed products drive growth and sustain gross profit margins•Operational excellence — Continuous productivity improvement, business simplification and process transformation•Customer service — Focus on the customer and understanding customer needs•Compliance expertiseOver the last two years, we made significant portfolio and management decisions designed 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 infiscal 2014, to an expansion of our core Identification Solutions (“ID Solutions" or "IDS”) business to focus on markets with long-term growth trends. In ourWorkplace Safety ("WPS") business, our strategy to return to growth included a focus on workplace safety critical industries in addition to increasedinvestment in e-commerce expertise.Key initiatives supporting the strategy in fiscal 2014 included:•Enhanced the WPS segment's multi-channel direct marketing model and increased its offering of identification and workplace safety productswith a heightened focus on proprietary and customized product offerings.•Increased investment in the WPS segment with an emphasis on e-commerce capabilities.•Modified the healthcare strategy to focus on key accounts, the development of proprietary new products, and expansion of the sales focus onalternate healthcare sites.•Expanded the Company's IDS business through sales force expansion in the United States and EMEA, increased focus on strategic accounts, anddeveloped innovative proprietary new products.•Divested the Company's less profitable Die-Cut business in Asia and Europe.•Reduced the Company's cost structure through the consolidation of selected manufacturing facilities in the Americas and EMEA.•Focused on the development of high quality products and improvements in customer service.In fiscal 2014, the Company entered into an agreement with LTI Flexible Products, Inc. (d/b/a Boyd Corporation) for the sale of its Die-Cut business.The first phase of the divestiture closed on May 1, 2014 and included the Company’s European Die-Cut business and the portions of the Asia Die-Cutbusiness operated in Korea, Thailand and Malaysia, together with the transfer of certain of the Company’s employees in the United States supporting thoseoperations. The second phase of the divestiture was for the Company's Die-Cut businesses located in China and closed on August 1, 2014, subsequent to thefiscal year ended July 31, 2014.(b) Financial Information About Industry SegmentsThe information required by this Item is provided in Note 9 of the Notes to Consolidated Financial Statements contained in Item 8 - FinancialStatements and Supplementary Data.(c) Narrative Description of BusinessOverviewThe Company is organized and managed on a global basis within two business platforms: Identification Solutions and Workplace Safety, which are thereportable segments.Table of ContentsThe IDS segment includes high-performance and innovative identification and healthcare products that are manufactured internally under the Bradybrand, and are primarily sold through distribution to a broad range of MRO and OEM customers and through other channels, including direct sales, catalogmarketing, and the Internet.The WPS segment includes workplace safety and compliance products, which are sold under multiple brand names through catalog and e-business to abroad range of MRO customers. Approximately half of the WPS business is resale product and half is manufactured internally.Below is a summary of sales by reportable segments for the fiscal years ended July 31: 2014 2013 2012IDS 67.4% 63.8% 59.4%WPS 32.6% 36.2% 40.6%Total 100% 100% 100%ID SolutionsWithin the ID Solutions platform, the primary product categories include:•Facility identification, which includes safety signs, pipe markers, labeling systems, spill control products, and lockout/tagout devices•Product identification, which includes materials and printing systems for product identification, brand protection labeling, work in processlabeling, and finished product identification•Wire identification, which includes hand-held printers, wire markers, sleeves, and tags•People identification, which includes self-expiring name tags, badges, lanyards, and access control software•Patient identification, which includes wristbands and labels used in hospitals for tracking and improving the safety of patients•Custom wristbands used in the leisure and entertainment industry such as theme parks, concerts and festivalsApproximately 73% of ID Solutions products are sold under the Brady brand. In the United States, identification products for the utility industry aremarketed under the Electromark brand; spill-control products are marketed under the SPC brand; and security and identification badges and systems aremarketed under the B.I.G., Identicard/Identicam, STOPware, PromoVision, and Brady People ID brands. Wire identification products are marketed under theModernotecnica brand in Italy and lockout/tagout products are offered under the Scafftag brand in the U.K. Custom labels and nameplates are availableunder the Stickolor brand in Brazil; and identification and patient safety products in the healthcare industry and custom wristbands for the leisure andentertainment industry are available under the PDC Innovative brand in the U.S. and Europe.The ID Solutions platform offers high quality products with rapid response and superior service to provide solutions to customers. The business marketsand sells products through multiple channels including distributors, direct sales, catalog marketing, and the Internet. The businesses' sales force partners withend-users and distributors by providing technical application and product expertise.ID Solutions serves customers in many industries, which include industrial manufacturing, electronic manufacturing, healthcare, chemical, oil, gas,food and beverage, aerospace, defense, mass transit, electrical contractors, leisure and entertainment and telecommunications, among others.The ID Solutions platform manufactures differentiated, proprietary products, most of which have been internally developed. These internally developedproducts include materials, printing systems, and software. IDS competes for business principally on the basis of production capabilities, engineering,research and development capabilities, materials expertise, global account management where needed, customer service, product quality and price.Competition is highly fragmented, ranging from smaller companies offering minimal product variety, to some of the world's largest major adhesive andelectrical product companies offering competing products as part of their overall product lines.Workplace SafetyWithin the Workplace Safety business platform, the primary product categories are workplace safety and compliance products, which includeinformational signs, tags, security, safety and traffic compliance related products, first aid supplies, material handling, asset identification, safety and facilityidentification, and workplace regulatory products.Products within the Workplace Safety platform are sold under a variety of brands including: safety and facility identification products offered under theSeton, Emedco, Signals, Personnel Concepts, Safety Signs Service and Pervaco brands; first aid supplies under the Accidental Health and Safety, Trafalgar,and Securimed brands; industrial, office equipment under the Runelandhs brand; and wire identification products marketed under the Carroll brand.4Table of ContentsWorkplace Safety markets and sells products through multiple channels, including catalog, telemarketing and e-commerce. The business servescustomers in many industries, including process industries, manufacturers, government, education, construction, and utilities.The Workplace Safety platform manufactures a broad range of stock and custom identification products, and also sells a broad range of related resaleproducts. 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 changing with the continued evolution of e-commerce 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 easilycompared. Dynamic pricing capabilities and enhanced customer experience are critical to convert customers from traditional catalog channels to the Internet.Discontinued OperationsDiscontinued operations include the Asia Die-Cut and Balkhausen Die-Cut businesses ("Die-Cut"), which were announced as held for sale in the thirdand fourth quarters of fiscal 2013, respectively. In fiscal 2014, the Company entered into an agreement with LTI Flexible Products, Inc. (d/b/a BoydCorporation) for the sale of Die-Cut. The first phase of the divestiture closed in May 2014 and the second phase of the divestiture closed in August 2014. Theassets 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. Theoperating results of the Die-Cut businesses were reflected as discontinued operations in the consolidated statements of earnings for the years ended July 31,2014, 2013 and 2012. In addition, the following previously divested businesses were reported within discontinued operations: Brady Medical andVaritronics (divested in fiscal 2013) and Etimark (divested in fiscal 2012). These divested businesses were part of the IDS business platform.The Die-Cut business consisted of the manufacture and sale of precision converted products such as gaskets, meshes, heat-dissipation materials,antennae, dampers, filters, and similar products sold primarily to the electronics industry with a concentration in the mobile-handset and hard-disk driveindustries and other traditional die-cut parts and thermal management products used in the automotive, electronics and telecommunications industries.Products within the Die-Cut business were sold primarily under the Brady brand, with some European business marketed under the Balkhausen brand. Thebusiness sold through a technical direct sales force and was supported by global strategic account management. The Die-Cut business served customers inmany industries, including mobile handset, hard disk drive, consumer electronics, and other computing devices, as well as products for the automotive andmedical equipment industries.Research and DevelopmentThe Company focuses its research and development ("R&D") efforts on pressure sensitive materials, printing systems and software, and it mainlysupports the IDS segment. Material development involves the application of surface chemistry concepts for top coatings and adhesives applied to a variety ofbase materials. Systems design integrates materials, embedded software and a variety of printing technologies to form a complete solution for customerapplications. In addition, the research and development team supports production and marketing efforts by providing application and technical expertise.The Company owns patents and tradenames relating to certain products in the United States and internationally. Although the Company believes thatpatents are a significant driver in maintaining its position for certain products, technology in the areas covered by many of the patents continues to evolveand 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 specificproducts 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 variouscountries where patent protection is obtained. The Company's tradenames are valid ten years from the date of registration, and are typically renewed on anongoing basis.The Company spent $35.0 million, $33.6 million, and $34.5 million during the fiscal years ended July 31, 2014, 2013, and 2012, respectively, on itsR&D activities related to continuing operations. The increase in R&D spending in 2014 was primarily due to increased investment in new products. Inaddition, in fiscal 2014, the Company realigned the R&D processes in order to accelerate new product innovation and invested in emerging technologiessuch as RFID and sensing technology for harsh environments and mobile applications that allow users to work with a variety of electronic devices. As of July31, 2014, 198 employees were engaged in research and development activities for the Company.5Table of ContentsOperationsThe materials used in the products manufactured consist primarily of a variety of plastic and synthetic films, paper, metal and metal foil, cloth,fiberglass, inks, dyes, adhesives, pigments, natural and synthetic rubber, organic chemicals, polymers, and solvents for consumable identification products inaddition to electronic components, molded parts and sub-assemblies for printing systems. The Company operates a coating facility that manufactures bulkrolls of label stock for internal and external customers. In addition, the Company purchases finished products for resale.The Company purchases raw materials, components and finished products from many suppliers. Overall, the Company is not dependent upon anysingle supplier for its most critical base materials or components; however, the Company has chosen in certain situations to sole source, or limit the sources ofmaterials, components, or finished items for design or cost reasons. As a result, disruptions in supply could have an impact on results for a period of time, butwe believe any disruptions would simply require qualification of new suppliers and the disruption would be modest. In certain instances, the qualificationprocess 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, thefinancial impact could be significant. The Company currently operates 50 manufacturing or distribution facilities globally.The Company carries working capital mainly related to accounts receivable and inventory. Inventory consists of raw materials, work in process andfinished goods. Generally, custom products are made to order while an on-hand quantity of stock product is maintained to provide customers with timelydelivery. Normal and customary payment terms range from net 30 to 90 days from date of invoice and varies by geographies.The Company has a broad customer base, and no individual customer is 5% 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, andwhether the product is stock or custom-designed and manufactured. The Company's backlog is not material, does not provide significant visibility for futurebusiness and is not pertinent to an understanding of the business.EnvironmentCompliance with federal, state and local environmental protection laws during fiscal 2014 did not have a material impact on the Company’s business,financial condition or results of operations.EmployeesAs of July 31, 2014, the Company employed approximately 7,200 individuals. Brady has never experienced a material work stoppage due to a labordispute and considers its relations with employees to be good.(d) Financial Information About Foreign and Domestic Operations and Export SalesThe information required by this Item is provided in Note 9 of the Notes to Consolidated Financial Statements contained in Item 8 — FinancialStatements and Supplementary Data.(e) Information Available on the InternetThe Company’s Corporate Internet address is http://www.bradycorp.com. The Company makes available, free of charge, on or through its Internetwebsite copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to all such reports assoon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The Company is not including the informationcontained on or available through its website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.6Table of ContentsItem 1A. Risk FactorsInvestors should carefully consider the risks set forth below and all other information contained in this report and other documents we file with theSEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Ourbusiness is also subject to general risk and uncertainties that affect many other companies, such as market conditions, geopolitical events, changes in lawsor accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or other disruptions of expectedeconomic or business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impairour business, including our results of operations, liquidity and financial conditions.Business RisksFailure to successfully implement our strategy in the Healthcare sector, or if successfully implemented, failure to realize the benefits expected fromthe strategy, may adversely affect our business, sales, results of operations, cash flow and liquidity.In December 2012, Brady acquired Precision Dynamics Corporation (“PDC”) to establish a base for our healthcare strategy. In fiscal 2014, PDCrepresented 12.5% of our total sales from continuing operations. Sales declined approximately 2% at PDC in fiscal 2014 and the healthcare industrycontinues to be in a state of change with the uncertainty relating to government healthcare reforms. During fiscal 2014, we recorded impairment charges of$148.6 million, primarily related to the goodwill and other intangible assets in the PeopleID reporting unit, which consists primarily of the PDC business.The Company’s strategy to grow this business includes: key account focus offering customers a broad range of products to meet their complete identificationneeds, development and launch of proprietary new products, full continuum of care in the healthcare industry, and international sales penetration. There is arisk that the Company will not be able to return the business to growth and grow the business consistently, the strategy will fail, or the business will faceincreased levels of competition and pricing pressure. If these risks materialize, their effects could adversely impact our business, sales, results of operations,cash flow and liquidity.Failure to successfully implement our Workplace Safety strategy, or if successfully implemented, failure to realize the benefits expected from thestrategy, may adversely affect our business, sales, results of operations, cash flow and liquidity.In fiscal 2014, the Workplace Safety segment represented 32.6% of our total sales from continuing operations. Beginning in the second quarter of fiscal2012, the WPS segment experienced deterioration in sales and profits due to a reduction in direct catalog mailings, increased e-commerce competition, andpricing adjustments. While traditional direct marketing channels such as catalogs are important means of selling WPS products, an increasing number ofcustomers are purchasing products on the Internet. The Company's strategy to grow this business includes: increased volume of catalog mailings, expanded e-commerce presence, further developed pricing capabilities, growing the customer base, and the expansion of products offered. The rate of sales decline infiscal 2014 lessened each quarter and the segment returned to positive organic growth of 0.9% in the fourth quarter of fiscal 2014 as the strategy began totake hold. There is a risk that the Company will not continue to successfully implement this strategy, or if successfully implemented, not realize its expectedbenefits, due to the continued levels of increased competition and pricing pressure brought about by the Internet. There is also a risk that the Company maynot be able 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 effects could adversely impact our business, sales, results of operations, cash flow and liquidity.Failure to compete effectively or remain competitive may have a negative impact on our business, sales, results of operations, cash flow and liquidity.We actively compete with companies that produce and market the same or similar products, and in some instances, with companies that sell differentproducts that are designed for the same end user. Additionally, we continue to face competition through the Internet in our entire business. Competition mayforce us to reduce prices or incur additional costs to remain competitive. We compete on the basis of price, customer support, product innovation, productoffering, product quality, expertise, production capabilities, and for multinational customers, our global footprint. Present or future competitors may developand introduce new and enhanced products, offer products based on alternative technologies and processes, accept lower profit, have greater financial,technical or other resources, or lower production costs or other pricing advantages. Any of these could put us at a disadvantage by threatening our share ofsales or reducing our profit margins, which could adversely impact our results of operations, cash flow and liquidity. Additionally, throughout our globalbusiness, distributors and customers may seek lower cost sourcing opportunities, which could result in a loss of business that may adversely impact ourbusiness, sales, results of operations, cash flow and liquidity.Failure to successfully complete our facility consolidation plans may adversely impact our business, sales, results of operations, cash flow andliquidity.We continue to implement measures to reduce our cost structure, simplify our business structure, and standardize our processes. In fiscal 2013, weincurred approximately $26 million in restructuring costs associated with the reorganization of the7Table of ContentsCompany along global product lines, which included the standardization of business systems and a restructuring of the global workforce. At the end of fiscal2013 and into fiscal 2014, our focus turned to the consolidation of facilities, which resulted in approximately $15 million of restructuring expense in fiscal2014. Facility consolidation activities will extend into fiscal 2015 as we slowed certain consolidation activities to ensure the highest levels of quality anddelivery throughout the transition. Successfully completing the facilities consolidations is critical to our future competitiveness and to improve profitability.Facility consolidations will result in a higher concentration of operations in certain locations. Risks related to facility consolidations include poor executionimpacting customer service, customer acceptance of these changes, inability to implement standard processes and systems, resource allocation amongcompeting priorities, employee disruption and turnover, inability to manufacture and supply products in the event of a material casualty event at one of ourprincipal facilities, and additional or higher than anticipated charges related to these actions. These actions to reduce our cost structure and the chargesrelated to these actions could have a material adverse impact on our business, sales, results of operations, cash flow and liquidity.Deterioration of or instability in the global economy and financial markets may adversely affect our business, sales, results of operations, cash flowand liquidity.Our business and operating results could be affected by global economic conditions. In fiscal 2013, our business was negatively impacted by the weakeconomy in Europe, Australia and Brazil. In fiscal 2014, Brazil continued to weaken. When global economic conditions deteriorate or economic uncertaintycontinues, customers and potential customers may experience deterioration of their businesses, which may result in the delay or cancellation of plans topurchase our products. Our sensitivity to economic cycles and any related fluctuations in the businesses of our customers or potential customers could have amaterial adverse impact on our business, sales, results of operations, cash flow and liquidity.Our failure or the failure of third-party service providers to protect our sites, networks and systems against security breaches, or otherwise to protectour confidential information, may substantially harm our business, sales, results of operations, cash flow and liquidity.Our business systems collect, maintain, transmit and store data about our customers, vendors and others, including credit card information andpersonally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers that store, processand transmit proprietary, personal and confidential information on our behalf. We rely on encryption and authentication technology licensed from thirdparties 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, phishingattacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmittedby 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 resourcesor technical sophistication to anticipate or prevent all types of attacks, and techniques used to obtain unauthorized access to or sabotage systems changefrequently 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 ofnon-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships. Althoughwe maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate for liabilities actuallyincurred 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 andmaterial effect on our business, sales, results of operations, cash flow and liquidity.The global nature of our business exposes us to foreign currency fluctuations that could adversely affect sales, results of operations, cash flow, andliquidity.Approximately 50% of our sales are derived outside the United States. Sales and purchases in currencies other than the U.S. dollar expose us tofluctuations in foreign currencies relative to the U.S. dollar, and may adversely affect our financial statements. Increased strength of the U.S. dollar willincrease the effective price of our products sold in currencies other than U.S. dollars into other countries. Decreased strength of the U.S. dollar could adverselyaffect the cost of materials, products, and services purchased overseas. Our sales and expenses are translated into U.S. dollars for reporting purposes, and thestrengthening or weakening of the U.S. dollar could result in unfavorable translation effects. In addition, certain of our subsidiaries may invoice customers ina currency other than its functional currency, which could result in unfavorable translation effects on sales, results of operations, cash flow and liquidity.8Table of ContentsFailure to develop new products or gain acceptance of new products could adversely impact our sales, results of operations, cash flow and liquidity.Development of proprietary products is a driver of core growth and reasonable gross profit margins both currently and in the future, particularly withinour ID Solutions segment. Therefore, we must continue to develop new and innovative products, as well as acquire and retain the necessary intellectualproperty rights in these products. We continue to invest in the development and marketing of new products. These expenditures do not always result inproducts that will be accepted by our customers. Failure to develop successful new products may also cause customers to buy from a competitor or may causeus to lower our prices in order to compete. If we fail to make innovations, if we launch products with quality problems, or if customers do not accept our newproducts, then our sales, results of operations, cash flows, and liquidity could be adversely affected.Inability to identify, complete, and integrate acquisitions and grow acquired companies, may adversely impact our sales, results of operations, cashflow and liquidity.Our historical growth has included acquisitions, and our future growth strategy may include acquisition opportunities. For example, in fiscal 2013 theCompany acquired PDC, a manufacturer of identification products primarily for the healthcare sector, for $301.2 million. We have not met the sales growthsynergies identified at the time of the PDC acquisition, which, in addition to other factors, resulted in the Company recording impairment charges of $148.6million during fiscal 2014, primarily related to the goodwill and other intangible assets in the PeopleID reporting unit, which consists primarily of the PDCbusiness. Failure to achieve these synergies for PDC or other acquired companies may adversely impact our sales, results of operations, cash flow andliquidity. We may not focus on acquisitions as part of our growth strategy, or if we do, we may not be able to identify acquisition targets or successfullycomplete acquisitions in the future due to the absence of quality companies in our target markets, economic conditions, or price expectations from sellers. Ifwe do not complete additional acquisitions, our growth may be limited.Acquisitions place significant demands on management, operational, and financial resources. Recent and future acquisitions will require integration ofoperations, sales and marketing, information technology, finance, and administrative operations, which could decrease the time available to focus on ourother growth strategies. We cannot assure that we will be able to successfully integrate acquisitions, that these acquisitions will operate profitably, or that wewill be able to achieve the desired sales growth or operational success. Our sales, results of operations, cash flow, and liquidity could be adversely affected ifwe do not successfully integrate the newly acquired businesses, or if our other businesses suffer due to the increased focus on the acquired businesses.Demand for our products may be adversely affected by numerous factors, some of which we cannot predict or control. This could adversely affect oursales, results of operations, cash flow and liquidity.Numerous factors may affect the demand for our products, including:•Future financial performance of major markets served•Consolidation in the marketplace, allowing competitors and customers to be more efficient and more price competitive•Future competitors entering the marketplace•Decreasing product life cycles•Changes in customer preferencesIf any of these factors occur, the demand for our products could suffer, and this could adversely impact our sales, results of operations, cash flows andliquidity.A large customer loss could significantly affect sales, results of operations, cash flow, and liquidity.While we have a broad customer base and no individual customer represents 5% or more of total sales, we conduct business with several largecustomers and distribution companies. Our dependence on these customers makes relationships with them important. We cannot guarantee that theserelationships will be retained in the future. Because these large customers account for a significant portion of sales, they may possess a greater capacity tonegotiate 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 shifttheir business to competitors or may substitute another manufacturer's products. If one of the 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 havea material adverse impact on our sales, results of operations, cash flows, and liquidity.We depend on key employees and the loss of these individuals could have an adverse effect on our operations.Our success depends to a large extent upon the continued services of our key executives, managers and other skilled employees. Over the past two fiscalyears, we have experienced the loss of several key executives. We cannot ensure that we will be able to retain our key executives, managers and employees.The departure of our key personnel without adequate replacement could disrupt our business operations. Additionally, we need qualified managers andskilled employees with technical and industry9Table of Contentsexperience to operate our business successfully. If we are unable to attract and retain qualified individuals or our costs to do so increase significantly, ouroperations could be materially adversely affected.Divestitures could negatively impact our business and contingent liabilities from divested businesses could adversely affect our results of operations,cash flow and liquidity.We continually assess the strategic fit of our existing businesses and may divest businesses that we determine do not align with our strategic plan, orthat are not achieving the desired return on investment. For example, over the last three fiscal years, we have divested our Etimark, Brady Medical, andVaritronics businesses, and our Asia Die-Cut and Balkhausen Die-Cut businesses. Divestitures pose risks and challenges that could negatively impact ourbusiness. For example, when we decide to sell a business or assets, we may be unable to do so on satisfactory terms and within our anticipated time-frame, andeven after reaching a definitive agreement to sell a business, the sale is typically subject to satisfaction of pre-closing conditions which may not be satisfied.In addition, the impact of the divestiture on our revenue and net earnings may be larger than projected, which could distract management, and disputes mayarise with buyers. Also, we have retained responsibility for and have agreed to indemnify buyers against some contingent liabilities related to a number ofbusinesses that we have recently sold. The resolution of these contingencies has not had a material adverse impact on our results of operations, cash flow andliquidity, but we cannot be certain that this favorable pattern will continue.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 sales, results ofoperations, cash flow and liquidity.Our operations are subject to the risks of doing business domestically and globally, including the following:•Delays or disruptions in product deliveries and payments in connection with international manufacturing and sales•Political and economic instability and disruptions•Imposition of duties and tariffs•Import, export and economic sanction laws•Current and changing governmental policies, regulatory, and business environments•Disadvantages from competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign CorruptPractices Act•Local labor market conditions•Regulations relating to climate change, air emissions, wastewater discharges, handling and disposal of hazardous materials and wastes•Regulations relating to health, safety and the protection of the environment•Specific country regulations where our products are manufactured or sold•Laws and regulations that apply to companies doing business with the government, including audit requirements of government contractsrelated to procurement integrity, export control, employment practices, and the accuracy of records and recording of costsFurther, these laws and regulations are constantly evolving and it is impossible to accurately predict the effect they may have upon our sales, results ofoperations, cash flows and liquidity.We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents orbusiness partners that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, anti-kickbackand false claims rules, competition, export and import compliance, money laundering and data privacy. Any such improper actions could subject us to civilor criminal investigations in the U.S. and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and relatedshareholder lawsuits, could damage our reputation, and could adversely impact our results of operations, cash flow and liquidity.Product liability claims could adversely impact our financial condition, results of operations, cash flows, and reputation.Our business exposes us to potential product liability risk, as well as warranty and recall claims that are inherent in the design, manufacture, sale anduse of our products. We sell products in industries such as aerospace, defense, healthcare, chemical, and energy where the impact of product liability risk ishigh. To date, we have not incurred material costs related to these types of claims. However, in the event our products actually or allegedly fail to perform asexpected and we are subject to such claims above the amount of insurance coverage, outside the scope of our coverage, or for which we do not have coverage,our financial condition, results of operations and cash flows, as well as our reputation, could be materially and adversely affected.10Table of ContentsFinancial/Ownership RisksFailure to execute our strategies could result in impairment of goodwill or other intangible assets, which may negatively impact earnings andprofitability.We have goodwill of $515.0 million and other intangible assets of $91.0 million as of July 31, 2014, which represents 48.3% of our total assets. Duringfiscal 2014, we recorded impairment charges of $148.6 million, primarily related to the goodwill and other intangible assets in the PeopleID reporting unit.During fiscal 2013, we recorded impairment charges of $204.4 million primarily related to goodwill in the WPS Americas and IDS APAC reporting units. Weevaluate goodwill for impairment on an annual basis, or more frequently if impairment indicators are present, based upon the fair value of each reporting unit.We assess the impairment of other intangible assets on an annual basis, or more frequently if impairment indicators are present, based upon the expectedfuture cash flows of the respective assets. These valuations include management's estimates of sales, profitability, cash flow generation, capital structure, costof debt, interest rates, capital expenditures, and other assumptions. Significant negative industry or economic trends, disruptions to our business, inability toachieve sales projections or cost savings, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use ofthe assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations. If the estimated fair value of our reporting unitschanges in future periods, we may be required to record an impairment charge related to goodwill or other intangible assets, which would reduce earnings andprofit in such period.Changes in tax legislation or tax rates could adversely affect results of operations and financial statements. Additionally, audits by taxingauthorities could result in tax payments for prior periods.We are subject to income taxes in the U.S. and in many non-U.S. jurisdictions. As such, our earnings are subject to risk due to changing tax laws and taxrates around the world. At any point in time, there are a number of tax proposals at various stages of legislation throughout the globe. While it is impossiblefor us to predict whether some or all of these proposals will be enacted, it likely would have an impact on our earnings.Our tax filings are subject to audit by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in payments orassessments that differ from our reserves, our future net earnings may be adversely impacted.We review the probability of the realization of our deferred tax assets on a quarterly basis based on forecasts of taxable income in both the U.S. andforeign jurisdictions. As part of this review, we utilize historical results, projected future operating results, eligible carry-forward periods, tax planningopportunities, and other relevant considerations. Adverse changes in profitability and financial outlook in both the U.S. and/or foreign jurisdictions, orchanges in our geographic footprint may require changes in the valuation allowances in order to reduce our deferred tax assets. Such changes could result in amaterial impact on earnings.Our annual cash needs could require us to repatriate cash to the U.S. from foreign jurisdictions, which may result in tax charges. For example, in fiscal2014, we repatriated cash to the U.S. in connection with the sale of the Die Cut businesses, which resulted in a tax charge of $4.0 million in continuingoperations. In fiscal 2013, we repatriated cash to the U.S. in connection with the acquisition of PDC, which resulted in a tax charge of $26.6 million.Substantially all of our voting stock is controlled by members of the Brady family, while our public investors hold non-voting stock. The interests ofthe voting and non-voting shareholders could differ, potentially resulting in decisions that unfavorably affect the value of the non-voting shares.Substantially all of our voting stock is controlled by Elizabeth P. Pungello, one of the Directors, and William H. Brady III, both of whom aredescendants of the Company's founder. All of our publicly traded shares are non-voting. Therefore, Ms. Pungello and Mr. Brady have control in most mattersrequiring approval or acquiescence by shareholders, including the composition of our Board of Directors and many corporate actions. Such concentration ofownership may discourage a potential acquirer from making a purchase offer that our public shareholders may find favorable, which in turn could adverselyaffect the market price of our common stock or prevent our shareholders from realizing a premium over our stock price. Furthermore, this concentration ofvoting share ownership may adversely affect the trading price for our non-voting common stock because investors may perceive disadvantages in owningstock in companies whose voting stock is controlled by a limited number of shareholders.Failure to meet certain financial covenants required by our debt agreements may adversely affect our assets, results of operations, cash flows, andliquidity.As of July 31, 2014, we had $263.2 million in outstanding indebtedness. In addition, based on the availability under our credit facilities as of July 31,2014, we had the ability to incur an additional $404.4 million under our revolving credit agreement. Our current revolving credit agreement and long-termdebt obligations also impose certain restrictions on us. Refer to Management's11Table of ContentsDiscussion and Analysis of Financial Condition and Results of Operations ("MD&A") within Item 7 for more information regarding our credit agreement andlong-term debt obligations. If we breach any of these restrictions or covenants and do not obtain a waiver from the lenders, then subject to applicable cureperiods, the outstanding indebtedness (and any other indebtedness with cross-default provisions) could be declared immediately due and payable, whichcould adversely affect our assets, results of operations, cash flows and liquidity.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe Company currently operates 50 manufacturing or distribution facilities across the globe and are split by reporting segment as follows: IDS: Thirty-seven facilities are used for our IDS business. Ten of which are located within the United States; five each are located in Belgium and Mexico;four in China; three each in the United Kingdom and Brazil; and one each in Canada, India, Italy, Hong Kong, Japan, Malaysia, and Singapore. WPS: Thirteen facilities are used for our WPS business. Three of which are located in France; two each are located in Australia, Germany, and the UnitedStates; and one each in the Netherlands, Poland, Sweden, and the United Kingdom. The Company’s present operating facilities contain a total of approximately 2.8 million square feet of space, of which approximately 2.1 million squarefeet is leased. The Company believes that its equipment and facilities are modern, well maintained, and adequate for present needs.Item 3. Legal ProceedingsThe Company is, and may in the future be, party to litigation arising in the normal course of business. The Company is not currently a party to anymaterial pending legal proceedings in which management believes the ultimate resolution would have a material effect on the Company’s consolidatedfinancial statements.Item 4. Mine Safety DisclosuresNot applicable.12Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities(a)Market InformationBrady Corporation Class A Nonvoting Common Stock trades on the New York Stock Exchange under the symbol BRC. The following table sets forththe range of high and low daily closing sales prices for the Company’s Class A stock as reported on the New York Stock Exchange for each of the quarters inthe fiscal years ended July 31: 2014 2013 2012 High Low High Low High Low4th Quarter $30.75 $24.26 $35.58 $29.76 $31.28 $25.153rd Quarter $27.89 $25.15 $36.33 $31.51 $34.37 $29.412nd Quarter $31.61 $27.36 $35.00 $30.18 $34.40 $27.091st Quarter $35.54 $29.19 $31.22 $26.34 $32.24 $24.73There is no trading market for the Company’s Class B Voting Common Stock.(b)HoldersAs of September 24, 2014, there were 1,023 Class A Common Stock shareholders of record and approximately 10,467 beneficial shareholders. There arethree Class B Common Stock shareholders.(c)Issuer Purchases of Equity SecuritiesThe Company has a share repurchase program of the Company’s Class A Nonvoting Common Stock. The plan may be implemented by purchasingshares in the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company’s stock-basedplans and for other corporate purposes. During the three months ended July 31, 2014, the Company purchased 287,717 shares of its Class A NonvotingCommon Stock under this plan for $7.2 million. As of July 31, 2014, there remained 966,242 shares to purchase in connection with this share repurchaseprogram.Period Total Number ofShares Purchased Average Price Paidper Share Total Number of SharesPurchased as Part ofPublicly Announced Plans Maximum Number ofShares that May Yet BePurchased Under the PlanMay 1, 2014 - May 31, 2014 287,717 $25.18 287,717 966,242June 1, 2014 - June 30, 2014 — — — 966,242July 1, 2014 - July 31, 2014 — — — 966,242Total 287,717 $25.18 287,717 966,242(d)DividendsThe Company has historically paid quarterly dividends on outstanding common stock. Before any dividend may be paid on the Class B CommonStock, holders of the Class A Common Stock are entitled to receive an annual, noncumulative cash dividend of $0.01665 per share (subject to adjustment inthe event of future stock splits, stock dividends or similar events involving shares of Class A Common Stock). Thereafter, any further dividend in that fiscalyear must be paid on all shares of Class A Common Stock and Class B Common Stock on an equal basis. The Company believes that based on its historicdividend practice, this requirement will not impede it in following a similar dividend practice in the future.During the two most recent fiscal years and for the first quarter of fiscal 2015, the Company declared the following dividends per share on its Class Aand Class B Common Stock for the years ended July 31: 2015 2014 2013 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th QtrClass A $0.20 $0.195 $0.195 $0.195 $0.195 $0.19 $0.19 $0.19 $0.19Class B 0.18335 0.17835 0.195 0.195 0.195 0.17335 0.19 0.19 0.1913Table of Contents(e)Common Stock Price Performance GraphThe graph below shows a comparison of the cumulative return over the last five fiscal years had $100 been invested at the close of business on July 31,2009, in each of Brady Corporation Class A Common Stock, the Standard & Poor’s (S&P) 500 Index, the Standard and Poor’s SmallCap 600 Index, and theRussell 2000 Index.Comparison of 5 Year Cumulative Total Return*Among Brady Corporation, the S&P 500 Index,the S&P SmallCap 600 Index, and the Russell 2000 Index*$100 invested on July 31, 2009 in stock or index—including reinvestment of dividends. Fiscal years ended July 31: 2009 2010 2011 2012 2013 2014Brady Corporation $100.00 $96.90 $105.43 $96.91 $124.47 $100.49S&P 500 Index 100.00 113.84 136.21 148.64 185.80 217.28S&P SmallCap 600 Index 100.00 119.17 148.63 154.56 208.31 231.31Russell 2000 Index 100.00 118.33 146.65 146.94 198.06 215.02Copyright (C) 2014, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved.14Table of ContentsItem 6. Selected Financial DataCONSOLIDATED STATEMENTS OF INCOME AND SELECTED FINANCIAL DATAYears Ended July 31, 2010 through 2014 2014 2013 2012 2011 2010Operating Data (1) Net Sales $1,225,034 $1,157,792 $1,071,504 $1,059,355 $966,070Gross Margin 609,564 609,348 590,969 587,950 546,413Operating Expenses: Research and development 35,048 33,552 34,528 38,268 38,279Selling, general and administrative 452,164 427,858 392,694 397,472 381,071Restructuring charges (2) 15,012 26,046 6,084 6,451 12,640Impairment charges (3) 148,551 204,448 — — —Total operating expenses 650,775 691,904 433,306 442,191 431,990Operating (Loss) Income (41,211) (82,556) 157,663 145,759 114,423Other Income (Expense): Investment and other income—net 2,402 3,523 2,082 3,989 1,169Interest expense (14,300) (16,641) (19,090) (22,124) (21,222)Net other expense (11,898) (13,118) (17,008) (18,135) (20,053)(Loss) earnings from continuing operations before incometaxes (53,109) (95,674) 140,655 127,624 94,370Income Taxes (4) (4,963) 42,583 37,162 21,667 18,605(Loss) earnings from continuing operations $(48,146) $(138,257) $103,493 $105,957 $75,765Earnings (loss) from discontinued operations, net ofincome taxes (5) 2,178 (16,278) (121,404) 2,695 6,191Net (loss) earnings $(45,968) $(154,535) $(17,911) $108,652 $81,956(Loss) earnings from continuing operations per CommonShare— (Diluted): Class A nonvoting $(0.93) $(2.70) $1.95 $1.99 $1.43Class B voting $(0.95) $(2.71) $1.94 $1.97 $1.41Earnings (loss) from discontinued operations perCommon Share - (Diluted): Class A nonvoting $0.04 $(0.32) $(2.29) $0.05 $0.12Class B voting $0.05 $(0.32) $(2.30) $0.05 $0.12Cash Dividends on: Class A common stock $0.78 $0.76 $0.74 $0.72 $0.70Class B common stock $0.76 $0.74 $0.72 $0.70 $0.68Balance Sheet at July 31: Total assets 1,253,665 1,438,683 1,607,719 1,861,505 1,746,231Long-term obligations, less current maturities 159,296 201,150 254,944 331,914 382,940Stockholders’ investment 733,076 830,797 1,009,353 1,156,192 1,005,027Cash Flow Data: Net cash provided by operating activities $93,420 $143,503 $144,705 $167,350 $165,238Net cash provided by (used in) investing activities 10,207 (325,766) (64,604) (22,631) (48,681)Net cash (used in) provided by financing activities (115,387) (33,060) (147,824) (91,574) 15,275Depreciation and amortization 44,598 48,725 43,987 48,827 53,022Capital expenditures (43,398) (35,687) (24,147) (20,532) (26,296)(1)Operating data has been impacted by the reclassification of the Die-Cut businesses into discontinued operations. The Company has elected to notseparately disclose the cash flows related to discontinued operations. Refer to Note 15 within Item 8 for further information on discontinuedoperations. The operating data is also impacted by the acquisitive nature15Table of Contentsof the Company as one, three, one, and three acquisitions were completed in fiscal years ended July 31, 2013, 2012, 2011, and 2010, respectively.There were no acquisitions during fiscal 2014. Refer to Note 2 within Item 8 for further information on the acquisitions that were completed.(2)In fiscal 2009, in response to the global economic downturn, the Company initiated several measures to address its cost structure, including areduction in its workforce and decreased discretionary spending. The Company continued certain of these measures during fiscal 2010, 2011, and2012. During fiscal 2013, the Company executed a business simplification project which included various measures to address its cost structure andresulted in restructuring charges during fiscal 2013 and into fiscal 2014. In addition, in fiscal 2014, the Company approved a plan to consolidatefacilities in North America, Europe, and Asia in order to enhance customer service, improve efficiency of operations, and reduce operating expenses.This plan resulted in restructuring charges during fiscal 2014.(3)The Company recognized an impairment charge of $148.6 million during the three months ended July 31, 2014, primarily related to the PeopleIDreporting unit. The Company recognized an impairment charge of $204.4 million during the three months ended July 31, 2013, primarily related tothe WPS segment. Refer to Note 3 within Item 8 for further information regarding the impairment charges.(4)Fiscal 2014 was significantly impacted by the goodwill impairment charge of $100.4 million recorded on the PeopleID reporting unit and a taxcharge of $4.0 million in continuing operations associated with the repatriation of the cash proceeds from the sale of the Die-Cut business. Fiscal2013 was impacted by the goodwill impairment charge of $190.5 million recorded on the WPS Americas and IDS APAC reporting units, as well as atax charge of $26.6 million associated with the funding of the PDC acquisition.(5)The earnings from discontinued operations in fiscal 2014 include a $1.2 million net loss on the sale of the Die-Cut business. The loss fromdiscontinued operations in fiscal 2013 was primarily attributable to a $15.7 million write-down of the Die-Cut business to its estimated fair value lesscosts to sell. The loss from discontinued operations in fiscal 2012 was primarily attributable to the $115.7 million goodwill impairment chargerecorded during the three months ending January 31, 2012, which was related to the Die-Cut disposal group. Refer to Note 15 within Item 8 for furtherinformation regarding discontinued operations.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverviewIn fiscal 2014, the Company posted sales of $1,225.0 million and a net loss from continuing operations of $48.1 million. Sales increased by 5.8% fromfiscal 2013. Organic sales increased by 0.2%, currency fluctuations decreased sales by 0.1% and the acquisition of PDC increased sales by 5.7%. Fiscal 2014sales growth was driven by the ID Solutions segment which grew by 11.6% from 2013 to 2014 primarily due to the acquisition, which was partially offset bythe decline in sales in the Workplace Safety segment of 4.5%.The fiscal 2014 net loss from continuing operations of $48.1 million was primarily due to non-cash impairment charges of $148.6 million andrestructuring charges of $15.0 million.The fiscal 2014 operating loss from continuing operations was $41.2 million. Excluding the impairment charges of $148.6 million and restructuringcharges of $15.0 million, the Company generated operating income from continuing operations of $122.4 million in fiscal 2014. Fiscal 2013 operating lossfrom continuing operations was $82.6 million. Excluding the impairment charges of $204.4 million and restructuring charges of $26.0 million, the Companygenerated operating income from continuing operations of $147.9 million in fiscal 2013. This decline of $25.5 million was primarily due to the decrease insegment profit in the WPS business segment. The decline in operating results within the WPS business segment was primarily due to a 4.6% organic salesdecline, incremental investment to drive key initiatives and growth, and increased costs from facility consolidation projects.16Table of ContentsResults of OperationsA comparison of results of Operating (loss) income from continuing operations for the fiscal years ended July 31, 2014, 2013, and 2012 is as follows:(Dollars in thousands) 2014 % Sales %Change 2013 % Sales %Change 2012 %SalesNet Sales $1,225,034 5.8 % $1,157,792 8.1 % $1,071,504 Gross Margin 609,564 49.8 % — % 609,348 52.6 % 3.1 % 590,969 55.2%Operating Expenses: Research and Development 35,048 2.9 % 4.5 % 33,552 2.9 % (2.8)% 34,528 3.2% Selling, General &Administrative 452,164 36.9 % 5.7 % 427,858 37.0 % 9.0 % 392,694 36.6% Restructuring charges 15,012 1.2 % (42.4)% 26,046 2.2 % 328.1 % 6,084 0.6% Impairment charges 148,551 12.1 % (27.3)% 204,448 17.7 % — % — —%Total operating expenses 650,775 53.1 % (5.9)% 691,904 59.8 % 59.7 % 433,306 40.4%Operating (loss) income $(41,211) (3.4)% 50.1 % $(82,556) (7.1)% (152.4)% $157,663 14.7%During fiscal 2014, net sales increased 5.8% from fiscal 2013, which consisted of organic growth of 0.2%, currency impact of a negative 0.1%, andgrowth from acquisitions of 5.7%. The acquisition growth was from the acquisition of PDC within the IDS segment in fiscal 2013. Organic sales within theIDS segment were up 2.9%, while organic sales within the WPS segment declined by 4.6%.During fiscal 2013, net sales increased 8.1% from fiscal 2012, which consisted of an organic decline of 2.4%, currency impact of a negative 0.8% andgrowth from acquisitions of 11.3%. Over 90% of the acquisition growth was from the acquisition of PDC in fiscal 2013, with the remainder attributable to theacquisitions of Grafo in the IDS segment and Runelandhs and Pervaco in the WPS segment in fiscal 2012. Organic sales within the IDS segment were up0.8%, while organic sales within the WPS platform declined by 7.0%. Gross margin as a percentage of sales declined to 49.8% in fiscal 2014 from 52.6% in fiscal 2013. The decline was primarily due to the sales decline andincreased pricing actions in the WPS business, and an increase in facility consolidation costs in both segments. In the WPS segment, gross margin declineddue to increased costs for facility consolidation projects, growth initiatives, and reduced sales as compared to the same period in the prior year. In the IDSsegment, gross margin was negatively impacted by facility consolidation related expenses and product mix.Gross margin as a percentage of sales declined to 52.6% in fiscal 2013 from 55.2% in fiscal 2012. Approximately half of the decline was due to theacquisition of PDC, as it is a lower gross margin business compared to the remainder of the Company. The other half of the decline was attributed to the WPSsegment in which the decline in sales, increased pricing actions, and the challenging global economy contributed to the reduced gross margin. Research and development expenses increased to $35.0 million in fiscal 2014 from $33.6 million in fiscal 2013. The increase was primarily due toincreased investment in new products. In addition, in fiscal 2014, the Company realigned the R&D processes in order to accelerate new product innovationand invested in emerging technologies such as RFID and sensing technology for harsh environments and mobile applications that allow users to work with avariety of electronic devices. R&D expenses decreased to $33.6 million in fiscal 2013 from $34.5 million in 2012 due to the global consolidation of theproject management office, which reduced costs while streamlining reporting processes globally.Selling, general and administrative (“SG&A”) expenses include selling costs directly attributed to the IDS and WPS segments, as well as administrativeexpenses including finance, information technology, human resources and legal. SG&A expenses increased to $452.2 million in fiscal 2014 compared to$427.9 million in fiscal 2013. The increase was primarily due to incremental SG&A associated with the PDC business of approximately $22 million. Inaddition, the Company expanded its sales force in multiple geographies within the IDS segment in fiscal 2014 and increased spending in both on-lineadvertising as well as traditional print advertising within the WPS segment.SG&A expense increased to $427.9 million in fiscal 2013 compared to $392.7 million in fiscal 2012. The increase was primarily due to the addition ofPDC, which also contributed to an incremental $6.0 million of amortization of intangible assets. The total increase in SG&A was partially offset by areduction in variable incentive compensation from fiscal 2012 to fiscal 2013.17Table of ContentsIn fiscal 2014, the Company announced a restructuring plan to consolidate facilities in North America, Europe and Asia. The Company implementedthis restructuring plan to enhance customer service, improve efficiency of operations and reduce operating expenses, with expected annual pre-taxoperational savings of approximately $10 million. The cash expenditures for these restructuring activities were funded with cash generated from operations.Facility consolidation activities will extend into fiscal 2015 as the Company slowed certain consolidation activities to ensure the highest levels of qualityand delivery throughout the transition, and will result in approximately $15 million of additional restructuring charges. In fiscal 2013, the Companyannounced a restructuring action to reduce its global workforce by approximately 5-7% in order to address its cost structure.In connection with these restructuring actions, the Company incurred restructuring charges of $15.0 million in fiscal 2014. These charges consisted of$9.3 million of employee separation costs, $4.4 million of facility closure related costs, $1.0 million of contract termination costs, and $0.3 million of non-cash asset write-offs. The charges for employee separation costs consisted of severance pay, outplacement services, medical and other benefits. Non-cash assetwrite-offs consist mainly of indefinite-lived tradenames written off in conjunction with brand consolidations. Of the $15.0 million recognized in fiscal 2014,$9.0 million was incurred within the IDS segment and $6.0 million was incurred within the WPS segment.Restructuring charges were $26.0 million in fiscal 2013 and consisted of employee separation costs, fixed asset write-offs, and other facility closurecosts associated with the restructuring plan announced in February 2013 to reorganize into global product-based business platforms and reduce our globalcost structure. Of the $26.0 million recognized in fiscal 2013, $15.8 million was incurred within the IDS segment and $10.2 million was incurred within theWPS segment.Restructuring charges were $6.1 million in fiscal 2012 and consisted of costs incurred to consolidate facilities within both the IDS and WPS segmentsprimarily in the Americas. The remaining charges related to severance costs associated with a prior year restructuring program. Of the $6.1 million recognizedin fiscal 2012, $4.3 million was incurred within the IDS segment and $1.8 million was incurred within the WPS segment. The Company performed its annual goodwill impairment assessment on May 1, 2014, and subsequently concluded that the PeopleID reporting unit wasimpaired. In conjunction with the goodwill impairment analysis, management concluded that other finite and indefinite-lived intangible assets within thereporting unit were impaired. Refer to the Item 7 - Business Segment Operating Results as well as Note 3 "Goodwill and Other Intangible Assets" of Item 8 forfurther discussion regarding the impairment charges. Impairment charges in continuing operations were $148.6 million in fiscal 2014, which consisted of$100.4 million in goodwill and $48.2 million in intangible assets primarily associated with the PeopleID reporting unit.As a result of the Company's annual goodwill impairment assessment performed in fiscal 2013, the Company concluded that the WPS Americas and IDSAPAC reporting units were impaired. In conjunction with the goodwill impairment analysis, management also concluded tradenames and certain fixed assetswithin the reporting units were impaired. Impairment charges in continuing operations were $204.4 million in fiscal 2013 and consisted of the following:•$172.3 million in goodwill in the WPS Americas reporting unit•$18.2 million in goodwill in the IDS APAC reporting unit•$10.6 million in tradenames in the WPS segment•$3.3 million in fixed assets in the IDS APAC reporting unitOperating loss was $41.2 million in fiscal 2014. Excluding the impairment charges of $148.6 million and restructuring charges of $15.0 million, theCompany generated operating income from continuing operations of $122.4 million in fiscal 2014. The fiscal 2013 operating loss was $82.6 million.Excluding the impairment charges of $204.4 million and restructuring charges of $26.0 million, the Company generated operating income of $147.9 millionin fiscal 2013. The decrease was mainly due to the decline in segment profit of the WPS business, which is discussed in further detail within the BusinessSegment Operating Results section.Operating loss was $82.6 million in fiscal 2013. Excluding impairment charges of $204.4 million and restructuring charges of $26.0 million, theCompany generated operating income of $147.9 million in fiscal 2013. The fiscal 2012 operating income was $157.7 million. Excluding restructuringcharges of $6.1 million, the Company generated income of $163.7 million in fiscal 2012. The decrease was mainly due to the decline in segment profit of theWPS business.This decline was partially offset by a decrease in variable incentive compensation of approximately $10 million in fiscal 2013 as compared tofiscal 2012.18Table of ContentsOPERATING INCOME TO NET INCOME(Dollars in thousands) 2014 % Sales 2013 % Sales 2012 % SalesOperating (loss) income $(41,211) (3.4)% $(82,556) (7.1)% $157,663 14.7 %Other income and (expense): Investment and other income 2,402 0.2 % 3,523 0.3 % 2,082 0.2 % Interest expense (14,300) (1.2)% (16,641) (1.4)% (19,090) (1.8)%(Loss) earnings from continuing operationsbefore tax (53,109) (4.3)% (95,674) (8.3)% 140,655 13.1 %Income taxes (4,963) (0.4)% 42,583 3.7 % 37,162 3.5 %(Loss) earnings from continuing operations (48,146) (3.9)% (138,257) (11.9)% 103,493 9.7 %Earnings (loss) from discontinued operations, netof income taxes 2,178 0.2 % (16,278) (1.4)% (121,404) (11.3)%Net (loss) earnings $(45,968) (3.8)% $(154,535) (13.3)% $(17,911) (1.7)%Investment and Other IncomeThese amounts primarily consist of interest income and gains and losses on foreign currency and securities held in executive deferred compensationplans. Income of $2.4 million in fiscal 2014, $3.5 million in fiscal 2013 and $2.1 million in fiscal 2012 has remained relatively consistent with no materialchanges year over year.Interest ExpenseInterest expense decreased to $14.3 million in fiscal 2014 compared to $16.6 million in fiscal 2013 and $19.1 million in fiscal 2012. The decline since2012 was due to the Company's declining principal balance under its outstanding debt agreements, along with changes in debt structure resulting in areduction in the weighted average interest rate.Income TaxesThe Company's effective tax rate from continuing operations was 9.3% in fiscal 2014, compared to the effective tax rate from continuing operations of(44.5)% in fiscal 2013. The income tax rate in fiscal 2014 was significantly impacted by the goodwill impairment and restructuring charges recorded in fiscal2014. The income tax rate in fiscal 2013 was impacted by the goodwill impairment charge and a tax charge associated with the funding of the PDCacquisition. Excluding these items, the effective tax rate from continuing operations would have been approximately 28% in fiscal 2014 compared to 24.5%in fiscal 2013. The increase was due to several factors including increased valuation allowances and fluctuations in geographic profit mix.The effective tax rate from continuing operations for fiscal 2013 was (44.5)% as compared to 26.4% in fiscal 2012. The lower rate in fiscal 2013 wassignificantly impacted by the goodwill impairment charge recorded on the WPS Americas and IDS Asia reporting units in fiscal 2013, as well as a tax chargeof $29.0 million primarily associated with the funding of the PDC acquisition. Excluding these items, our fiscal 2013 effective tax rate from continuingoperations would have been 24.5%, slightly lower than the fiscal 2012 rate of 26.4% due mainly to fluctuation in geographic profit mix.Earnings (Loss) from Discontinued OperationsDiscontinued operations consist of the Asia Die-Cut and Balkhausen Die-cut businesses ("Die-Cut"), which was classified as held for sale beginning inthe third quarter of fiscal 2013. In addition, the following previously divested businesses were reported within discontinued operations: Brady Medical andVaritronics (divested in fiscal 2013) and Etimark (divested in fiscal 2012). These divested businesses were part of the IDS business segment. The first phase ofthis Die-Cut divestiture closed on May 1, 2014 and the second phase of the divestiture closed on August 1, 2014, subsequent to the fiscal year ended July 31,2014.Earnings from discontinued operations net of income taxes were $2.2 million in fiscal 2014, compared to a loss from discontinued operations net ofincome taxes of $16.3 million and $121.4 million for fiscal 2013 and 2012, respectively. In fiscal 2014, the Die-Cut business had net earnings fromoperations of $3.4 million, offset by a net loss on the sale of Die-Cut of $1.2 million. The loss in fiscal 2013 primarily related to a $15.7 million write-downof the Die-Cut disposal group to estimated fair value less costs to sell. The loss in fiscal 2012 primarily related to the $115.7 million goodwill impairmentcharge recorded during the second quarter of fiscal 2012, which was related to the Die-Cut disposal group.19Table of ContentsThere was no depreciation or amortization recognized within discontinued operations for fiscal 2014 as the Die-Cut business was first reported as heldfor sale in the prior year, at which point the fixed assets and intangible assets of these businesses were no longer depreciated or amortized in accordance withapplicable U.S. GAAP. Depreciation and amortization recognized within discontinued operations for fiscal 2013 were $4.0 million and $4.8 million,respectively.Business Segment Operating ResultsThe Company is organized and managed on a global basis within two business platforms: IDS and WPS, which are the reportable segments. Eachbusiness platform has a President that reports directly to the Company's chief operating decision maker, its Chief Executive Officer. Each platform has its owndistinct operations, which are managed locally by its own management team, maintains its own financial reports and is evaluated based on global segmentprofit. The Company has determined that these business platforms comprise its operating and reportable segments based on the information used by the ChiefExecutive Officer to allocate resources and assess performance.The segment results have been adjusted to reflect continuing operations in all periods presented. The sales and profit of discontinued operations areexcluded from the following information.Following is a summary of segment information for the fiscal years ended July 31, 2014, 2013, and 2012: Years ended July 31,(Dollars in thousands) 2014 2013 2012SALES TO EXTERNAL CUSTOMERS ID Solutions $825,123 $739,116 $636,590WPS 399,911 418,676 434,914Total $1,225,034 $1,157,792 $1,071,504SALES GROWTH INFORMATION ID Solutions Organic 2.9 % 0.8 % 3.2 %Currency (0.2)% (1.0)% (1.6)%Acquisitions 8.9 % 16.3 % 0.2 %Total 11.6 % 16.1 % 1.8 %Workplace Safety Organic (4.6)% (7.0)% (0.2)%Currency 0.1 % (0.7)% (1.2)%Acquisitions —% 4.0 % 1.6 %Total (4.5)% (3.7)% 0.2 %Total Company Organic 0.2 % (2.4)% 1.8 %Currency (0.1)% (0.8)% (1.5)%Acquisitions 5.7 % 11.3 % 0.8 %Total 5.8 % 8.1 % 1.1 %SEGMENT PROFIT ID Solutions $176,129 $174,390 $160,658Workplace Safety 66,238 95,241 117,187Total $242,367 $269,631 $277,845SEGMENT PROFIT AS A PERCENT OF SALES ID Solutions 21.3 % 23.6 % 25.2 %Workplace Safety 16.6 % 22.7 % 26.9 %Total 19.8 % 23.3 % 25.9 %20Table of ContentsNET EARNINGS RECONCILIATION Years ended:(Dollars in thousands) July 31, 2014 July 31, 2013 July 31, 2012Total profit from reportable segments $242,367 $269,631 $277,845Unallocated costs: Administrative costs 120,015 121,693 114,098Restructuring charges 15,012 26,046 6,084Impairment charges 148,551 204,448 —Investment and other income (2,402) (3,523) (2,082)Interest expense 14,300 16,641 19,090(Loss) earnings from continuing operations before income taxes $(53,109) $(95,674) $140,655ID SolutionsFiscal 2014 vs. 2013 Approximately 70% of net sales in the IDS segment were generated in the Americas region, 20% in EMEA, and 10% in APAC. IDS sales increased11.6% to $825.1 million in fiscal 2014, compared to $739.1 million in fiscal 2013. The acquisition of PDC in December 2012 contributed to 8.9% of thesales growth for fiscal 2014. Organic sales increased by 2.9% and currency fluctuations were minimal, decreasing sales by 0.2% for the year ended July 31,2014, as compared to the same period in the prior year.Overall, organic sales within the IDS business grew in the low single digit percentages consistently each quarter in fiscal 2014. Organic growth in allregions was positive for the year with double digit growth in APAC, followed by mid-single digit growth in Europe and slightly lower growth in the Americasregion.Organic sales in the Americas grew in the low-single digits in fiscal 2014 as compared to fiscal 2013, primarily due to the sales force expansion and thedevelopment of proprietary new products in the core Brady brand business in the United States. This was partially offset by declines in Brazil and PDC. TheBrazil business declined in both sales and profit as OEM sales were down due to weak economic conditions and increased competitive pressure. In the fourthquarter of fiscal 2014, the Company implemented a plan to consolidate a facility in Brazil to reduce its operations footprint and lower its cost structure. Salesin the PDC business declined approximately 2% organically in fiscal 2014, compared to annualized sales in fiscal 2013. PDC’s healthcare business correlateswith U.S. hospital admission rates, which were down approximately 2% during fiscal 2014.The IDS business in EMEA grew in the mid-single digits in fiscal 2014 compared to the prior year. This growth was driven by our businesses in theestablished Western European economies as well as Central Europe. Growth was the result of expanding and refocusing our sales organization and the sale ofnew products. The exceptions were France and Italy, which are facing weak economic environments.Sales within the IDS business in APAC had double-digit growth for the year ended July 31, 2014. We experienced slower growth in the fourth quarter offiscal 2014 as compared to the preceding three quarters primarily due to the negative impact the Die-Cut divestiture had on certain Asia business units. Salesof product identification products to our OEM customers in China were particularly strong as we continue to expand production capacity and capabilities.The investment in our MRO growth strategies and the expansion of our MRO business in China also positively impacted sales.Segment profit increased to $176.1 million in fiscal 2014 from $174.4 million in fiscal 2013, an increase of $1.7 million or 1.0%. As a percent of sales,segment profit was 21.3% in fiscal 2014, compared to 23.6% in the prior year. The decline in segment profit as a percent of sales was due to lower grossmargin in fiscal 2014 as a result of product mix and increased costs associated with the facility consolidations. The main contributor to the product mix is afull year of PDC sales at lower gross margin than the existing business, as well as an increase in lower-margin printer sales. The PeopleID reporting unit consists primarily of the Company's acquisition of PDC from fiscal 2013, as well as the existing Brady PeopleID business.Organic sales within the PDC business declined in the low single digit percentages from fiscal 2013 to fiscal 2014. Hospital admission rates are the primarydriver of PDC's sales under its existing strategy, and there was a decline of approximately 2% in these rates during fiscal 2014. Management has revisited itsplanned growth and profit for the PDC business and concluded that the growth may not materialize as expected given slower than anticipated industrygrowth and fewer sales21Table of Contentssynergies than originally planned. As a result, management is implementing a modified strategy within the PDC business that will focus on the fullcontinuum of care in the healthcare industry.Management believes that the strategy modifications noted above will improve organic sales and profit within the PeopleID reporting unit in futureyears, but there is inherent risk in the revised strategy and the changing healthcare industry. As such, the Company's annual goodwill impairment analysis("Step One") reflected the risk in the strategy and the decline in fiscal 2014 sales and profitability, which occurred during a period of time in which hospitaladmission rates were declining and the healthcare industry was reacting to healthcare reform. In addition, the PDC business fell short of internal forecasts,resulting in the conclusion that the PeopleID reporting unit failed Step One as the resulting fair value was less than the carrying value of the reporting unit.Upon completion of the impairment assessment, the Company recognized a goodwill impairment charge of $100.4 million during fiscal 2014. Inconjunction with the goodwill impairment test of the PeopleID reporting unit, finite and indefinite-lived intangibles associated with the reporting unit wererevalued and analyzed for impairment. As a result, other intangibles in the amount of $48.2 million primarily associated with the PeopleID reporting unitwere impaired during fiscal 2014.Fiscal 2013 vs. 2012Net sales increased by 16.1% from fiscal 2012 to 2013, which consisted of organic growth of 0.8%, currency impact of a negative 1.0% and growth fromacquisitions of 8.9%. Acquisition growth within the IDS segment was almost entirely generated by the acquisition of PDC in December 2012, with a smallportion contributed by the acquisition of Grafo in March 2012.The PDC acquisition contributed more than $100 million in sales in fiscal 2013 and provides an entry for the Company into the healthcareidentification space. Organic sales in the IDS segment grew by 0.8% primarily due to growth within the Americas of approximately 1%, which was partiallyoffset by modest declines in Europe and APAC. Within the Americas, North America growth was partially offset by a 10% decline in Brazil. Sales over theInternet increased by more than 15%, and we experienced a positive response to our fiscal 2013 product launches. In Europe, the decline in the IDS businessplatform was mainly driven by the economy, partially offset by our increased presence in emerging geographies, new and differentiated product launches,and our strategy to increase share in specific vertical markets. In APAC, sales growth was modest, as the de-consolidation of certain business units from theAsia Die-Cut disposal group impacted sales growth negatively.Overall, sales globally were driven by new product launches and growth within vertical markets. New products launched included the BBP85 printer,which is a continuous-sleeving wire identification system for high volume applications in the electrical and aerospace markets, and three new highperformance materials to address the changing requirements for identification of printed circuit boards and electronic components. Vertical market growthwas focused within the chemical, oil, and gas industries, as well as our targeted strategic account management programs.Segment profit increased to $174.4 million in fiscal 2013 from $160.7 million in fiscal 2012, an increase of $13.7 million or 8.5%. The primary driver ofthe profit increase was the acquisition of PDC. This profit was partially offset by a decline in profitability in Brazil and Western Europe. Brazil's decline wasdue to a combination of sales decline, cost increases and expenses associated with the implementation of a new ERP system. In Western Europe, the largestdecline in sales and profit was in Italy, where we experienced a 25.0% sales decline partially due to one-time sales in the prior year. In addition, Italy'sprofitability was impacted by product quality issues associated with a printer introduced in fiscal 2012.The Company performed its annual goodwill impairment assessment for fiscal 2013 on May 1, 2013, and subsequently concluded that the IDS APACreporting unit was impaired. Although sales grew from 2012 to 2013, profit declined and neither were as high as anticipated. Specifically, fourth quarter fiscal2013 gross margin and segment profit declined compared to the prior year, while results were anticipated to increase over the prior year fourth quarter. Inaddition, projections were not sufficient to support the balance of goodwill remaining within the reporting unit. As such, the Company recorded a goodwillimpairment charge of $18.2 million during fiscal 2013, which represented all of the remaining goodwill for this reporting unit.Workplace SafetyFiscal 2014 vs. 2013Approximately 50% of net sales in the WPS segment were generated in EMEA, 30% in the Americas, and 20% in APAC. Net sales decreased 4.5% from$418.7 million in fiscal 2013 to $399.9 million in fiscal 2014. The sales decline consists of a decrease in organic sales of 4.6%, partially offset by 0.1%growth due to positive currency fluctuations.22Table of ContentsOrganic sales in the WPS segment declined since the second quarter of fiscal 2012 through the third quarter of fiscal 2014, due to a reduction in directcatalog mailings, increased e-commerce competition, and pricing adjustments. As a result, in connection with our organizational change to global businessplatforms in fiscal 2013, we refined our business strategy to focus on and invest in the following: expanding our e-commerce presence, increasing the offeringof workplace safety products, enhancing our industry expertise, and further developing our pricing capabilities in order to optimize sales across multiplechannels.Although we experienced an organic sales decline for the year ended July 31, 2014, the sales decline lessened each quarter and returned to growth inthe fourth quarter of fiscal 2014. This improving trend was primarily due to increased catalog mailings, better execution of our Internet offerings, and moreeffective pricing strategies that optimize both sales and profits. As a result of these changes, we saw WPS sales trends in the Americas improved slightly infiscal 2014 compared to 2013 as the percentage rate of decline lessened to mid-single digits. WPS sales in APAC, which consists entirely of Australia, andWPS sales in EMEA returned to modest growth in the fourth quarter, primarily due to an increase in new customers, order volumes, and growth initiatives.Segment profit decreased to $66.2 million in fiscal 2014 from $95.2 million in the prior year, a decline of $29.0 million, or 30.5%. As a percent of sales,segment profit was 16.6% in fiscal 2014, compared to 22.7% in the prior year. Similar to sales, although profit has declined, the rate of decline slowed in thesecond half of fiscal 2014 as the modified strategy began to take hold. WPS profit was also impacted by the increased costs due to facility consolidations andthe incremental investment in implementing its e-commerce strategy.In performing the fiscal 2014 annual goodwill impairment assessment, the Company completed a sensitivity analysis on the material assumptions usedin the discounted cash flow models for each of its reporting units. The fair value was substantially in excess of carrying value for the entire WPS segment,however, the Company is providing a detailed sensitivity analysis of the WPS Europe and WPS APAC reporting units given that the WPS strategy remains akey risk in the current fiscal year. The WPS Americas reporting unit was impaired in the prior year and therefore has an insignificant goodwill balanceremaining, as such, a sensitivity analysis was not completed.The fair value of the WPS Europe and WPS APAC reporting units were substantially in excess of carrying value at the annual goodwill assessment dateof May 1, 2014, with goodwill balances of $60.3 million and $32.8 million, respectively. The Company considers a reporting unit's fair value to besubstantially in excess of its carrying value at 20% or greater. The Company prepares a discounted cash flow model and market multiples model to concludeupon fair value as part of its annual goodwill impairment test. In order to arrive at the assumptions for the discounted cash flow analysis completed as part ofthe annual goodwill impairment test, the Company considered multiple factors, including (a) macroeconomic conditions, (b) industry and market factors suchas competition and changes in the market for the reporting unit's products, (c) overall financial performance such as cash flows, actual and planned revenueand profitability, and (d) changes in strategy for the reporting unit. The assumption with the most impact on our determination of fair value of both reportingunits is profitability. A reduction in the annual profitability assumption by 100 basis points results in a decrease in the amount of fair value in excess ofcarrying value of 11% and 9% for WPS Europe and WPS APAC, respectively, but would still result in fair value substantially in excess of carrying value forboth reporting units.Fiscal 2013 vs. 2012Net sales decreased by 3.7% from fiscal 2012 to 2013, which consisted of an organic decline of 7.0%, currency impact of a negative 0.7%, and growthfrom acquisitions of 4.0%. The Company acquired Runelandhs and Pervaco in Europe in May 2012.Organic sales in the WPS segment declined 7.0% within all geographies from fiscal 2012 to 2013, and have declined for the preceding seven quarters.WPS APAC sales are generated entirely in Australia, and have declined for the last four quarters mainly due to the weakness in the Australian economy. In theAmericas and Europe, organic sales declined by 5% and 6%, respectively. Beginning in fiscal 2012, we experienced a deterioration of this business due to areduction in direct catalog mailings, increased e-commerce competition, and pricing adjustments. The Company continued to modify its strategy to grow thisbusiness, which included: investments in e-commerce capabilities, pricing structure changes and expansion of product offerings.Segment profit decreased in fiscal 2013 to $95.2 million from $117.2 million, a decline of $22.0 million or 18.8%. This was primarily due to volumeand price declines as a result of increased competition and reduced catalog advertising. In addition, the Company redirected some of its investment from thetraditional catalog model to e-business, the benefits of which were anticipated to be realized in future fiscal years.Since the global economic recession of 2009, organic growth within the WPS Americas reporting unit has been difficult to achieve, especially withinmature economies such as the U.S. and Canada where business-to-business transactions over the Internet are more advanced than many of the European andAustralian markets. With the acceleration of the Internet in the business-to-23Table of Contentsbusiness market, competition and pricing pressure have intensified. As a result, organic sales declined by approximately 7.0% and segment profit declined bynearly 20% during fiscal 2013 as compared to fiscal 2012.The Company modified its strategy within the WPS platform in fiscal 2013, which included investments in enhanced e-commerce capabilities,expanded product offerings, enhanced industry-specific expertise, and adjustments to pricing strategies. Although management believed the strategymodifications would improve organic sales and profitability of the WPS platform in future years, there is risk associated with any strategy. As such, theCompany's fiscal 2013 annual goodwill impairment analysis ("Step One") reflected the risk in the strategy and the decline in fiscal 2013 sales andprofitability, which occurred during a period of time in which the Company was redirecting its investment from the traditional catalog model to e-business. Inaddition, the rate of decline became more pronounced during the second half of fiscal 2013 and fell short of internal forecasts, resulting in the conclusion thatWPS Americas failed Step One, as the resulting fair value was less than the carrying value of the reporting unit.Upon completion of the impairment assessment, the Company recognized a goodwill impairment charge of $172.3 million during fiscal 2013. Inconjunction with the goodwill impairment test of the WPS Americas reporting unit, indefinite-lived tradenames associated with the reporting unit wererevalued and analyzed for impairment. As a result, indefinite-lived tradenames in the amount of $10.6 million primarily associated with the WPS Americasreporting unit were impaired during fiscal 2013.Liquidity & Capital ResourcesCash and cash equivalents were $81.8 million at July 31, 2014, a decline of $9.2 million from July 31, 2013. The significant changes were as follows: Years ended July 31,(Dollars in thousands)2014 2013 2012Net cash flow provided by (used in): Operating activities$93,420 $143,503 $144,705Investing activities10,207 (325,766) (64,604)Financing activities(115,387) (33,060) (147,824)Effect of exchange rate changes on cash2,536 481 (16,348)Net decrease in cash and cash equivalents$(9,224) $(214,842) $(84,071)Net cash provided by operating activities was $93.4 million during fiscal 2014 compared to $143.5 million in the prior year. The decrease was primarilydue to changes in operating assets and liabilities. The Company used cash of approximately $4 million, $13 million, and $21 million for accounts receivable,inventory and accounts payable and accrued liabilities, respectively. Cash used for accounts receivable increased in fiscal 2014 due primarily to geographicsales mix. Sales increased in EMEA and APAC compared to the prior year and these regions have a higher days sales outstanding. The accounts payable andaccrued liabilities use of cash included $10 million of restructuring expenses related to fiscal 2013 that were paid in fiscal 2014. Cash used for inventoryincreased primarily to maintain service levels during facility consolidations.Net cash provided by investing activities was $10.2 million during fiscal 2014 primarily due to the cash received from the first phase of the sale of theDie-Cut business of $54.2 million, offset by $43.4 million spent on capital expenditures in fiscal 2014. Net cash used in investing activities was $325.8million during fiscal 2013 primarily due to the acquisition of PDC for $301.2 million.Net cash used in financing activities was $115.4 million during fiscal 2014, compared to $33.1 million during the prior year. In fiscal 2014, theCompany 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 itsprivate placement debt. This was offset primarily by cash proceeds of $12.1 million from the issuance of common stock related to stock option exercisesduring the year. In fiscal 2013, the Company used cash of $39.2 million to pay dividends and made a principal payment of $61.3 million on its privateplacement 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 borrowingactivity from the Company's credit revolver and multi-currency line of credit in China, which provided $50.6 million in cash in fiscal 2013.Net cash provided by operating activities was $143.5 million during fiscal 2013 compared to $144.7 million in fiscal 2012. Although there wasminimal change in total from fiscal 2012 to 2013, the cash flow from pre-tax income declined approximately $30 million, primarily due to the decline insales and profits in our WPS segment. This was offset by the improvement in working24Table of Contentscapital of approximately $30 million. This improvement was primarily attributable to a positive change in accounts payable and accrued liabilities related tofiscal 2013 working capital initiatives, which significantly improved days payable outstanding.Net cash used in investing activities was $325.8 million during fiscal 2013, compared to net cash used in investing activities of $64.6 million in fiscal2012. The increase in cash used in investing activities of $261.2 million was primarily due to cash used in the purchase of PDC in fiscal 2013 for $301.2million and an increase in capital expenditures of $11.5 million for machinery in Brazil and new facilities in Thailand and Australia. This was partially offsetby cash provided by divestitures of $10.2 million. See Note 2 within Item 8 for further information regarding acquisitions and divestitures.Net cash used in financing activities was $33.1 million during fiscal 2013, compared to $147.8 million in fiscal 2012. The decrease in cash used infinancing activities was due to a net draw on the Company's credit revolver and multi-currency line of credit in China for $50.6 million. In addition, cashprovided by the issuance of common stock increased by $16.5 million, while cash used to repurchase common shares decreased by $44.8 million comparedto 2012.During fiscal 2004 through fiscal 2007, the Company completed three private placement note issuances totaling $500 million in ten-year fixed ratenotes with varying maturity dates to institutional investors at interest rates varying from 5.14% to 5.33%. The notes must be repaid equally over seven years,with initial payment due dates ranging from 2008 to 2011, with interest payable on the notes due semiannually on various dates throughout the year, whichbegan in December 2004. The private placements were exempt from the registration requirements of the Securities Act of 1933. The notes were not registeredfor resale and may not be resold absent such registration or an applicable exemption from the registration requirements of the Securities Act of 1933 andapplicable state securities laws. The notes have certain prepayment penalties for repaying them prior to the maturity date. Under the debt agreement, theCompany made scheduled principal payments of $61.3 million during each of the years ended July 31, 2008 through 2014.On May 13, 2010, the Company completed a private placement of €75 million aggregate principal amount of senior unsecured notes to accreditedinstitutional investors. The €75 million of senior notes consists of €30 million aggregate principal amount of 3.71% Series 2010-A Senior Notes, dueMay 13, 2017 and €45 million aggregate principal amount of 4.24% Series 2010-A Senior Notes, due May 13, 2020, with interest payable on the notessemiannually. This private placement was exempt from the registration requirements of the Securities Act of 1933. The notes were not registered for resaleand may not be resold absent such registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicablestate securities laws. The notes have certain prepayment penalties for prepaying them prior to maturity. The notes have been fully and unconditionallyguaranteed on an unsecured basis by the Company's domestic subsidiaries. These unsecured notes were issued pursuant to a note purchase agreement, datedMay 13, 2010.On February 1, 2012, the Company and certain of its subsidiaries entered into an unsecured $300 million multi-currency revolving loan agreement witha group of six banks that replaced and terminated the Company's previous credit agreement that had been entered into on October 5, 2006, and amended onMarch 18, 2008. Under the revolving loan agreement, which has a final maturity date of February 1, 2017, the Company has the option to select either a baseinterest rate (based upon the higher of the federal funds rate plus one-half of 1% or the prime rate of Bank of America plus a margin based upon theCompany's consolidated leverage ratio) or a Eurocurrency interest rate (at the LIBOR rate plus a margin based on the Company's consolidated leverage ratio).At the Company's option, and subject to certain conditions, the available amount under the revolving loan agreement may be increased from $300 million upto $450 million.In December 2012, the Company drew down $220 million from its revolving loan agreement with a group of six banks to fund a portion of the purchaseprice of the acquisition of PDC. The borrowings bear interest at LIBOR plus 1.125% per annum, which will be reset from time to time based upon changes inthe LIBOR rate. As of July 31, 2013, there was $39 million outstanding on this revolving loan agreement, which was repaid during fiscal 2014. During fiscal2014, the Company drew down an additional $63 million in order to fund dividends, principal payments on the private placement note issuances, sharerepurchases, and general corporate needs. The Company repaid $21 million of this borrowing during the three months ended July 31, 2014. During fiscal2014, the maximum amount outstanding on the revolving loan agreement was $72 million. As of July 31, 2014, the outstanding balance on the credit facilitywas $42 million and the Company had outstanding letters of credit under the revolving loan agreement of $3.6 million. There was $254 million available forfuture borrowing under the credit facility, which can be increased to $404.4 million at the Company's option, subject to certain conditions.In February 2013, the Company entered into an unsecured $26.2 million multi-currency line of credit in China, which was amended in November 2013to $24.2 million and is due on demand. The line of credit supports USD-denominated or CNY-denominated borrowing to fund working capital andoperations for the Company's Chinese entities. Borrowings under this facility may be made for a period up to one year from the date of borrowing withinterest on the borrowings incurred equal to US Dollar LIBOR on the date of borrowing plus a margin based upon duration. There is no ultimate maturity onthe facility and the facility25Table of Contentsis subject to periodic review and repricing. The Company is not required to comply with any financial covenants as part of this agreement. During fiscal2014, the maximum amount outstanding was $19.4 million, which was also the outstanding balance as of July 31, 2014. This was comprised of $6.9 millionUSD-denominated borrowings and $12.5 million USD equivalent of CNY-denominated borrowings. As of July 31, 2014, there was $4.8 million available forfuture borrowing under this credit facility.The Company’s debt and revolving loan agreements require it to maintain certain financial covenants. The Company’s June 2004, February2006, March 2007, and May 2010 private placement debt agreements require the Company to maintain a ratio of debt to the trailing twelve months EBITDA,as defined in the debt agreements, of not more than a 3.5 to 1.0 ratio (leverage ratio). As of July 31, 2014, the Company was in compliance with the financialcovenant of the February 2006, March 2007, and May 2010 private placement debt agreements, with the ratio of debt to EBITDA, as defined by theagreements, equal to 1.7 to 1.0. Additionally, the Company’s February 2012 revolving loan agreement requires the Company to maintain a ratio of debt totrailing twelve months EBITDA, as defined by the debt agreement, of not more than a 3.25 to 1.0 ratio. The revolving loan agreement requires the Company’strailing twelve months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of July 31, 2014, the Company was incompliance with the financial covenants of the revolving loan agreement, with the ratio of debt to EBITDA, as defined by the agreement, equal to 1.7 to 1.0and the interest expense coverage ratio equal to 11.5 to 1.0Long-term obligations (including current maturities) as a percentage of long-term obligations plus stockholders' investment were 21.6% at July 31,2014 and 24.0% at July 31, 2013. Long-term obligations decreased by $60.6 million from July 31, 2013 to July 31, 2014, due to the principal payment ondebt of $61.3 million, partially offset by the negative impact of foreign currency translation on the Company's Euro-denominated debt of $0.7 million.Stockholders' investment decreased $97.7 million from July 31, 2013 to July 31, 2014, primarily due to the net loss of $46.0 million, an increase in treasurystock of $23.5 million from share repurchases in the second half of fiscal 2014, and dividend payments of $40.5 million. This was offset by an increase inadditional paid-in capital of $5.6 million and an increase in Accumulated Other Comprehensive Income ("AOCI") of $8.1 million.The Company's cash balances are generated and held in numerous locations throughout the world. At July 31, 2014, 87.9% of the Company's cash andcash equivalents were held outside the United States. The Company's growth has historically been funded by a combination of cash provided by operatingactivities and debt financing. The Company believes that its cash flow from operating activities, in addition to its borrowing capacity, are sufficient to fundits anticipated requirements for working capital, capital expenditures, restructuring activities, acquisitions, common stock repurchases, scheduled debtrepayments, and dividend payments for the next twelve months.In fiscal 2014, the Company completed the first phase of the sale of its Die-Cut businesses. In conjunction with the sale of this business, the Companyrepatriated approximately $57 million of the cash received, which primarily consisted of purchase price, to the United States. The cash received from the saleof Die-Cut in fiscal 2014 and the fiscal 2013 acquisition of PDC resulted in repatriations of cash to the United States from foreign jurisdictions, whichresulted in a $4.0 million and $26.6 million tax charge recognized in continuing operations during the fiscal years ended July 31, 2014 and 2013,respectively. The Company believes that its current credit arrangements are sound and that the strength of its balance sheet will allow financial flexibility torespond to both internal growth opportunities and those available through acquisition. However, future cash needs could require the Company to repatriateadditional cash to the U.S. from foreign jurisdictions, which could result in material tax charges recognized in the period in which the decisions are made.26Table of ContentsSubsequent Events Affecting Financial ConditionOn August 1, 2014, the Company closed the second and final phase of the sale of the Die-Cut business to LTI Flexible Products, Inc. (d/b/a BoydCorporation) for cash proceeds of approximately $7 million. The second-phase closing involved the sale of the remainder of the Company’s Asian Die-Cutbusiness, with operations in Langfang, Wuxi and Shenzhen in China and associated global sales support.On August 1, 2014, the Board of Directors appointed J. Michael Nauman as President and Chief Executive Officer of the Company, effective August 4,2014. In addition, Mr. Nauman was appointed as a member of the Board of Directors, effective as of August 4, 2014, with a term expiring at the next annualmeeting of shareholders in November 2014.On September 10, 2014, the Board of Directors appointed Thomas J. Felmer to serve as the Company’s Senior Vice President and President -Workplace Safety, effective immediately. With Mr. Felmer’s appointment as President - Workplace Safety, the Board of Directors appointed Aaron J. Pearceto serve as Senior Vice President and Chief Financial Officer of the Company, effective immediately.On September 10, 2014, the Company announced an increase in the annual dividend to shareholders of the Company's Class A Common Stock, from$0.78 to $0.80 per share. A quarterly dividend of $0.20 will be paid on October 31, 2014, to shareholders of record at the close of business on October 10,2014. This dividend represents an increase of 2.6% and is the 29th consecutive annual increase in dividends.Off-Balance Sheet ArrangementsThe Company does not have material off-balance sheet arrangements or related-party transactions. The Company is not aware of factors that arereasonably likely to adversely affect liquidity trends, other than the risk factors described in this and other Company filings. However, the followingadditional 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 theordinary conduct of its business. In the aggregate, such commitments are not in excess of current market prices and are not material to the financial positionof the Company. Due to the proprietary nature of many of the Company’s materials and processes, certain supply contracts contain penalty provisions forearly termination. The Company does not believe a material amount of penalties will be incurred under these contracts based upon historical experience andcurrent expectations.Other Contractual Obligations — The Company does not have material financial guarantees or other contractual commitments that are reasonablylikely to adversely affect liquidity.Related-Party Transactions — Based on an evaluation for the year ended July 31, 2014, the Company does not have material related party transactionsthat affect the results of operations, cash flow or financial condition.Payments Due Under Contractual ObligationsThe Company’s future commitments in continuing operations at July 31, 2014 for long-term debt, operating lease obligations, purchase obligations,interest obligations and other obligations are as follows (dollars in thousands): Payments Due by PeriodContractual Obligations Total Less than1 Year 1-3Years 3-5Years Morethan5 Years UncertainTimeframeLong-Term Debt Obligations $201,810 $42,514 $99,050 $— $60,246 $—Operating Lease Obligations 71,453 16,163 21,640 16,700 16,950 —Purchase Obligations (1) 52,933 51,302 204 1,351 76 —Interest Obligations 26,123 8,487 10,519 5,109 2,008 —Tax Obligations 17,849 — — — — 17,849Other Obligations (2) 7,101 476 1,120 1,368 4,137 —Total $377,269 $118,942 $132,533 $24,528 $83,417 $17,849 27Table of Contents(1)Purchase obligations include all open purchase orders as of July 31, 2014.(2)Other obligations represent expected payments under the Company’s U.S. postretirement medical plan and international pension plans as disclosed inNote 5 to the consolidated financial statements, under Item 8 of this report.Inflation and Changing PricesEssentially all of the Company’s revenue is derived from the sale of its products in competitive markets. Because prices are influenced by marketconditions, it is not always possible to fully recover cost increases through pricing. Changes in product mix from year to year, timing differences ininstituting price changes, and the large amount of part numbers make it impracticable to accurately define the impact of inflation on profit margins.Critical Accounting EstimatesManagement’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s ConsolidatedFinancial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of thesefinancial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, andrelated disclosure of contingent assets and liabilities. The Company bases these estimates and judgments on historical experience and on various otherassumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgments.The Company believes the following accounting estimates are most critical to an understanding of its financial statements. Estimates are considered tobe critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accountingestimates are made, and (2) material changes in the estimates are reasonably likely from period to period. For a detailed discussion on the application of theseand other accounting estimates, refer to Note 1 to the Company’s Consolidated Financial Statements.Income TaxesThe Company’s effective tax rate is based on pre-tax income and the tax rates applicable to that income in the various jurisdictions in which theCompany operates. Significant judgment is required in determining the Company’s effective income tax rate and in evaluating its tax positions. TheCompany establishes liabilities when it is more likely than not that the Company will not realize the full tax benefit of the position. The Company adjuststhese liabilities in light of changing facts and circumstances.Tax regulations may require items of income and expense to be included in a tax return in different periods than the items are reflected in theconsolidated financial statements. As a result, the effective income tax rate reflected in the consolidated financial statements may be different than the taxrate reported in the income tax return. Some of these differences are permanent, such as expenses that are not deductible on the income tax return, and someare temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generallyrepresent items that can be used as tax deductions or credits in the tax return in future years for which the Company has already recorded the tax benefit in theconsolidated financial statements. The Company establishes valuation allowances against its deferred tax assets when it is more likely than not that theamount of expected future taxable income will not support the use of the deduction or credit. The determination of the amount of valuation allowance to beprovided on recorded deferred tax assets involves estimates regarding (1) the timing and amount of the reversal of taxable temporary differences, (2) expectedfuture taxable income, and (3) the impact of tax planning strategies, and can also be impacted by changes to tax laws. Deferred tax liabilities generallyrepresent tax expense recognized in the consolidated financial statements for which payment has been deferred or expensed for which the Company hasalready taken a deduction on an income tax return but has not yet recognized as expense in the consolidated financial statements.The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technicalmerits, it is “more-likely-than-not” that the position will be sustained upon examination. Judgment is required in evaluating tax positions and determiningincome tax provisions. The Company generally re-evaluates the technical merits of its tax positions and recognizes an uncertain tax benefit when (i) there iscompletion of a tax audit; (ii) there is a change in applicable tax law including a tax case ruling or legislative guidance; or (iii) there is an expiration of thestatute of limitations.In fiscal 2014, the Company completed the first phase of the sale of its Die-Cut businesses. In conjunction with the sale of this business platform, theCompany repatriated approximately $57 million of the cash received, which primarily consisted of purchase price, to the United States. The Company doesnot provide for U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been re-invested indefinitely. Theseearnings related to ongoing operations have been reinvested in non-U.S. business operations, and the Company does not intend to repatriate these earnings tofund U.S. operations. In fiscal 2013, the Company repatriated approximately $204 million of foreign cash to help fund the acquisition of PDC. Given28Table of Contentsthe sale of the Die-Cut business was the largest business divestiture in the Company's history and the acquisition of PDC was the largest acquisition in theCompany's history, these repatriations were unique, and do not change management's assertion that the remaining cumulative earnings are reinvestedindefinitely.Goodwill and Other Indefinite-lived Intangible AssetsThe allocation of purchase price for business combinations requires management estimates and judgment as to expectations for future cash flows of theacquired business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair value for purchase price allocationpurposes. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result ina possible impairment of the intangible assets and goodwill or require acceleration of the amortization expense of finite-lived intangible assets. In addition,accounting guidance requires that goodwill and other indefinite-lived intangible assets be tested at least annually for impairment. If circumstances or eventsprior to the date of the required annual assessment indicate that, in management's judgment, it is more likely than not that there has been a reduction of fairvalue of a reporting unit below its carrying value, the Company performs an impairment analysis at the time of such circumstance or event. Changes inmanagement's estimates or judgments could result in an impairment charge, and such a charge could have an adverse effect on the Company's financialcondition and results of operations. To aid in establishing the value of goodwill and other intangible assets at the time of acquisition, Company policy statesthat all acquisitions with goodwill of greater than $20 million require the use of external valuations.The Company has identified two operating segments, Identification Solutions and Workplace Safety. The Company has identified six reporting unitswithin its two operating segments with the following goodwill balances as of July 31, 2014: IDS Americas & Europe, $319.0 million; IDS APAC, $0;PeopleID, $93.3 million; WPS Americas, $10.9 million; WPS Europe, $58.9 million; and WPS APAC, $32.9 million. Brady continues to believe that thediscounted cash flow model and market multiples model provide a reasonable and meaningful fair value estimate based upon the reporting units' projectionsof future operating results and cash flows and replicates how market participants would value the Company's reporting units. The projections of futureoperating results, which are based on both past performance and the projections and assumptions used in the Company's current and long range operatingplans, are subject to change as a result of changing economic and competitive conditions. Significant estimates used by management in the discounted cashflows methodology include estimates of future cash flows based on expected growth rates, price increases, fluctuations in gross margin and SG&A as apercentage of sales, capital expenditures, working capital levels, income tax rates, the benefits of recent acquisitions and expected synergies, and a weighted-average cost of capital that reflects the specific risk profile of the reporting unit being tested. Significant negative industry or economic trends, disruptions tothe Company's business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or plannedchanges in use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations.In the event the fair value of a reporting unit is less than the carrying value, including goodwill, the Company would then perform an additionalassessment that would compare the implied fair value of goodwill with the carrying amount of goodwill. The determination of the implied fair value ofgoodwill would require management to compare the fair value of the reporting unit to the estimated fair value of the assets and liabilities of the reportingunit. If necessary, the Company may consult valuation specialists to assist with the assessment of the estimated fair value of assets and liabilities for thereporting unit. If the implied fair value of the goodwill is less than the carrying value, an impairment charge would be recorded. The Company considers a reporting unit’s fair value to be substantially in excess of its carrying value at 20% or greater. The annual impairment testingperformed on May 1, 2014, in accordance with ASC 350, “Intangibles - Goodwill and Other” (“Step One”) indicated that each of the following reportingunits had a fair value substantially in excess of its carrying value: IDS Americas & Europe, IDS APAC, WPS Americas, WPS Europe, and WPS APAC. TheCompany concluded that the PeopleID reporting unit failed Step One of the goodwill impairment test.PeopleID Goodwill ImpairmentManagement proceeded to measure the amount of the potential impairment ("Step Two") for the PeopleID reporting unit with the assistance of a thirdparty valuation firm utilizing a discounted cash flow model and market multiples approach. The Company calculated the fair value of the identifiable assetsand liabilities of the reporting unit as if it had been acquired in a business combination, and the excess fair value of the reporting unit over the fair value of itsidentifiable assets and liabilities was the implied fair value of goodwill. Upon completion of the assessment, the Company recognized a goodwill impairmentcharge of $100.4 million during the three months ended July 31, 2014.29Table of ContentsIn conjunction with the goodwill impairment test of the PeopleID reporting unit, the carrying value of the finite and indefinite-lived intangible assetswithin the reporting unit were compared to the fair value calculated as part of the Step Two analysis described above. Finite and indefinite-lived otherintangible assets in the amount of $48.2 million primarily associated with the PeopleID reporting unit were impaired during the three months ended July 31,2014.Reserves and AllowancesThe Company has recorded reserves or allowances for inventory obsolescence, uncollectible accounts receivable, and credit memos. These accountsrequire the use of estimates and judgment. The Company bases its estimates on historical experience and on various other assumptions that are believed to bereasonable under the circumstances. The Company believes that such estimates are made with consistent and appropriate methods. Actual results may differfrom these estimates under different assumptions or conditions.New Accounting StandardsThe information required by this Item is provided in Note 1 of the Notes to Consolidated Financial Statements contained in Item 8 — FinancialStatements and Supplementary Data.Forward-Looking StatementsIn this annual report on Form 10-K, statements that are not reported financial results or other historic information are “forward-looking statements.”These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs,earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar terminology aregenerally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees,uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady's control, that could cause actual results to differ materiallyfrom those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from:•Implementation of the healthcare strategy;•Implementation of the Workplace Safety strategy;•Future competition;•Risks associated with restructuring plans;•Future financial performance of major markets Brady serves, which include, without limitation, telecommunications, hard disk drive, manufacturing,electrical, construction, laboratory, education, governmental, public utility, computer, healthcare and transportation;•Technology changes and potential security violations to the Company's information technology system•Fluctuations in currency rates versus the U.S. dollar;•Risks associated with international operations;•Difficulties associated with exports;•Brady's ability to develop and successfully market new products;•Risks associated with identifying, completing, and integrating acquisitions;•Changes in the supply of, or price for, parts and components;•Increased price pressure from suppliers and customers;•Brady's ability to retain significant contracts and customers;•Risk associated with loss of key talent;•Risks associated with divestitures and businesses held for sale;•Risks associated with obtaining governmental approvals and maintaining regulatory compliance;•Risk associated with product liability claims;•Environmental, health and safety compliance costs and liabilities;•Potential write-offs of Brady's substantial intangible assets;•Risks associated with our ownership structure;•Unforeseen tax consequences;•Brady's ability to maintain compliance with its debt covenants;•Increase in our level of debt; and30Table of Contents•Numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory naturecontained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the“Risk Factors” section within Item 1A of Part I of this Form 10-K.These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady doesnot undertake to update its forward-looking statements except as required by law.Risk FactorsRefer to the information contained in Item 1A - Risk Factors.31Table of ContentsItem 7A. Quantitative and Qualitative Disclosures About Market RiskThe Company’s business operations give rise to market risk exposure due to changes in foreign exchange rates. To manage that risk effectively, theCompany enters into hedging transactions, according to established guidelines and policies that enable it to mitigate the adverse effects of this financialmarket risk.The global nature of the Company’s business requires active participation in the foreign exchange markets. As a result of investments, productionfacilities and other operations on a global scale, the Company has assets, liabilities and cash flows in currencies other than the U.S. Dollar. The objective ofthe Company’s foreign currency exchange risk management is to minimize the impact of currency movements on non-functional currency transactions andminimize the foreign currency translation impact on the Company’s operations. To achieve this objective, the Company hedges a portion of knownexposures using forward contracts. Main exposures are related to transactions denominated in the British Pound, the Euro, Canadian Dollar, AustralianDollar, Swiss Franc, Malaysian Ringgit, and Singapore Dollar. As of July 31, 2014, the Company had no outstanding forward foreign exchange contractsdesignated as cash flow hedges. The Company uses Euro-denominated debt of €75.0 million and British Pound-denominated intercompany debt of £25.0million designated as hedge instruments to hedge portions of the Company’s net investments in its European and British Pound denominated foreignoperations. The Company's revolving credit facility allows it to borrow up to $100.0 million in currencies other than U.S. Dollars under an alternativecurrency sub-limit. The Company has periodically borrowed funds in Euro and British Pounds under this sub-limit. Debt issued in currencies other than U.S.Dollars acts as a natural hedge to the Company's exposure to the associated currency.The Company also faces exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactionsbetween affiliates. Although the Company has a U.S. dollar functional currency for reporting purposes, it has manufacturing sites throughout the world andthe majority of its sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the United States aretranslated into U.S. dollars using exchange rates effective during the respective period. As a result, the Company is exposed to movements in the exchangerates of various currencies against the U.S. dollar. In particular, the Company has more sales in European currencies than it has expenses in those currencies.Therefore, when European currencies strengthen or weaken against the U.S. dollar, operating profits are increased or decreased, respectively.Currency exchange rates decreased fiscal 2014 sales by 0.1% compared to fiscal 2013 as the U.S. dollar appreciated, on average, against other majorcurrencies throughout the year. The most significant impact on sales due to currency fluctuations occurred during the second quarter ended January 31, 2014,as sales declined by 0.6% as compared to the same quarter of the prior year. This decline was primarily driven by the appreciation of the U.S. dollar againstthe Euro.The Company is subject to the risk of change in foreign currency exchange rates due to its operations in foreign countries. The Company hasmanufacturing facilities and sells and distributes its products throughout the world. As a result, the Company’s financial results could be significantlyaffected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Companymanufactures, distributes and sells its products. The Company’s operating results are principally exposed to changes in exchange rates between the U.S.dollar and the Australian dollar, the Canadian dollar, the Singapore dollar, the Euro, the British Pound, the Brazilian Real, and the Chinese Yuan. Changes inforeign currency exchange rates for the Company’s foreign subsidiaries reporting in local currencies are generally reported as a component of stockholders’investment. The Company’s currency translation adjustment recorded in fiscal 2014 and 2013 as a separate component of stockholders’ investment was $7.5million favorable and $2.3 million unfavorable, respectively. As of July 31, 2014 and 2013, the Company’s foreign subsidiaries had net current assets(defined as current assets less current liabilities) subject to foreign currency translation risk of $200.1 million and $245.1 million, respectively. The potentialdecrease in net current assets as of July 31, 2014, from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates would beapproximately $20 million. This sensitivity analysis assumes a parallel shift in all major foreign currency exchange rates versus the U.S. dollar. Exchangerates rarely move in the same direction relative to the U.S. dollar due to positive and negative correlations of the various global currencies. This assumptionmay overstate the impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.The Company could be exposed to interest rate risk through its corporate borrowing activities. The objective of the Company’s interest rate riskmanagement activities is to manage the levels of the Company’s fixed and floating interest rate exposure to be consistent with the Company’s preferred mix.The interest rate risk management program allows the Company to enter into approved interest rate derivatives if there is a desire to modify the Company’sexposure to interest rates. As of July 31, 2014, the Company had no interest rate derivatives.32Table of ContentsItem 8. Financial Statements and Supplementary DataBRADY CORPORATION & SUBSIDIARIESINDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm34Financial Statements: Consolidated Balance Sheets — July 31, 2014 and 201335Consolidated Statements of Earnings — Years Ended July 31, 2014, 2013, and 201236Consolidated Statements of Comprehensive Loss — Years Ended July 31, 2014, 2013 and 201237Consolidated Statements of Stockholders’ Investment — Years Ended July 31, 2014, 2013, and 201238Consolidated Statements of Cash Flows — Years Ended July 31, 2014, 2013, and 201239Notes to Consolidated Financial Statements — Years Ended July 31, 2014, 2013, and 20124033Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofBrady CorporationMilwaukee, WisconsinWe have audited the accompanying consolidated balance sheets of Brady Corporation and subsidiaries (the "Company") as of July 31, 2014 and 2013, andthe related consolidated statements of earnings, comprehensive loss, stockholders' investment, and cash flows for each of the three years in the period endedJuly 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financialstatement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statementsand financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Brady Corporation and subsidiaries atJuly 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 2014, in conformitywith accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered inrelation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal controlover financial reporting as of July 31, 2014, based on the criteria established in Internal Control-Integrated Framework (1992) issued by the Committee ofSponsoring Organizations of the Treadway Commission and our report dated September 29, 2014, expressed an unqualified opinion on the Company'sinternal control over financial reporting./s/ DELOITTE & TOUCHE LLPMilwaukee, WisconsinSeptember 29, 201434Table of ContentsBRADY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJuly 31, 2014 and 2013 2014 2013 (Dollars in thousands)ASSETS Current assets: Cash and cash equivalents$81,834 $91,058Accounts receivable — net177,648 169,261Inventories: Finished products73,096 64,544Work-in-process17,689 14,776Raw materials and supplies22,490 15,387Total inventories113,275 94,707Assets held for sale49,542 119,864Prepaid expenses and other current assets41,543 37,600Total current assets463,842 512,490Other assets: Goodwill515,004 617,236Other intangible assets91,014 156,851Deferred income taxes27,320 8,623Other22,314 21,325Property, plant and equipment: Cost: Land7,875 7,861Buildings and improvements101,866 91,471Machinery and equipment288,409 266,787Construction in progress12,500 11,842 410,650 377,961Less accumulated depreciation276,479 255,803Property, plant and equipment — net134,171 122,158Total$1,253,665 $1,438,683LIABILITIES AND STOCKHOLDERS’ INVESTMENT Current liabilities: Notes payable$61,422 $50,613Accounts payable88,099 82,519Wages and amounts withheld from employees38,064 42,413Liabilities held for sale10,640 34,583Taxes, other than income taxes7,994 8,243Accrued income taxes7,893 7,056Other current liabilities35,319 36,806Current maturities on long-term debt42,514 61,264Total current liabilities291,945 323,497Long-term obligations, less current maturities159,296 201,150Other liabilities69,348 83,239Total liabilities520,589 607,886Stockholders’ investment: Class A nonvoting common stock — Issued 51,261,487 and 51,261,487 shares, respectively; (aggregate liquidationpreference of $42,803 and $42,803 at July 31, 2014 and 2013, respectively)513 513Class B voting common stock — Issued and outstanding 3,538,628 shares35 35Additional paid-in capital311,811 306,191Earnings retained in the business452,057 538,512Treasury stock — 3,477,291 and 2,626,276 shares, respectively of Class A nonvoting common stock, at cost(93,337) (69,797)Accumulated other comprehensive income64,156 56,063Other(2,159) (720)Total stockholders’ investment733,076 830,797Total$1,253,665 $1,438,683See Notes to Consolidated Financial Statements.35Table of ContentsBRADY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EARNINGSYears Ended July 31, 2014, 2013 and 2012 2014 2013 2012 (In thousands, except per share amounts)Net sales$1,225,034 $1,157,792 $1,071,504Cost of products sold615,470 548,444 480,535Gross margin609,564 609,348 590,969Operating expenses: Research and development35,048 33,552 34,528Selling, general and administrative452,164 427,858 392,694Restructuring charges15,012 26,046 6,084Impairment charges148,551 204,448 —Total operating expenses650,775 691,904 433,306Operating (loss) income(41,211) (82,556) 157,663Other income and (expense): Investment and other income2,402 3,523 2,082Interest expense(14,300) (16,641) (19,090)(Loss) earnings from continuing operations before income taxes(53,109) (95,674) 140,655Income tax (benefit) expense(4,963) 42,583 37,162(Loss) earnings from continuing operations$(48,146) $(138,257) $103,493Earnings (loss) from discontinued operations, net of income taxes2,178 (16,278) (121,404)Net loss$(45,968) $(154,535) $(17,911)(Loss) earnings from continuing operations per Class A Nonvoting Common Share Basic$(0.93) $(2.70) $1.97Diluted$(0.93) $(2.70) $1.95(Loss) earnings from continuing operations per Class B Voting Common Share: Basic$(0.95) $(2.71) $1.95Diluted$(0.95) $(2.71) $1.94Earnings (loss) from discontinued operations per Class A Nonvoting Common Share: Basic$0.04 $(0.32) $(2.31)Diluted$0.04 $(0.32) $(2.29)Earnings (loss) from discontinued operations per Class B Voting Common Share: Basic$0.05 $(0.32) $(2.31)Diluted$0.05 $(0.32) $(2.30)Net loss per Class A Nonvoting Common Share: Basic$(0.89) $(3.02) $(0.35)Diluted$(0.89) $(3.02) $(0.34)Dividends$0.78 $0.76 $0.74Net loss per Class B Voting Common Share: Basic$(0.90) $(3.03) $(0.36)Diluted$(0.90) $(3.03) $(0.36)Dividends$0.76 $0.74 $0.72Weighted average common shares outstanding (in thousands): Basic51,866 51,330 52,453Diluted51,866 51,330 52,821See Notes to Consolidated Financial Statements.36Table of ContentsBRADY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSYears Ended July 31, 2014, 2013 and 2012 2014 2013 2012 (Dollars in thousands)Net loss$(45,968) $(154,535) $(17,911)Other comprehensive (loss) income: Foreign currency translation adjustments: Net gain (loss) recognized in other comprehensive income (loss)4,543 (2,312) (62,827)Reclassification adjustment for losses included in net loss3,004 — — 7,547 (2,312) (62,827) Net investment hedge translation adjustments(4,243) (6,537) 20,508Long-term intercompany loan translation adjustments: Net gain (loss) recognized in other comprehensive income (loss)211 3,108 (2,170)Reclassification adjustment for losses included in net loss865 — — 1,076 3,108 (2,170) Cash flow hedges: Net gain (loss) recognized in other comprehensive income (loss)8 (652) 2,389Reclassification adjustment for (gains) losses included in net loss(147) (578) 494 (139) (1,230) 2,883Pension and other post-retirement benefits: Net gain (loss) recognized in other comprehensive income (loss)5,211 1,617 (1,015)Actuarial gain amortization(240) (25) (201)Prior service credit amortization(203) (203) (203)Reclassification adjustment for losses included in net earnings131 — — 4,899 1,389 (1,419) Other comprehensive income (loss), before tax9,140 (5,582) (43,025)Income tax (expense) benefit related to items of other comprehensive income (loss)(1,047) 2,234 (11,462)Other comprehensive income (loss), net of tax8,093 (3,348) (54,487)Comprehensive loss$(37,875) $(157,883) $(72,398)See Notes to Consolidated Financial Statements.37Table of ContentsBRADY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENTYears Ended July 31, 2014, 2013 and 2012 CommonStock AdditionalPaid-InCapital EarningsRetainedin theBusiness TreasuryStock AccumulatedOtherComprehensiveIncome Other (In thousands, except per share amounts)Balances at July 31, 2011 $548 $307,527 $789,100 $(50,017) $113,898 $(4,864)Net (loss) earnings — — (17,911) — — —Net currency translation adjustment and other (Note4) — — — — (54,487) —Issuance of 265,491 shares of Class A CommonStock under stock option plan — (3,516) — 7,380 — —Other (Note 8) — (1,637) — (30) — 1,560Tax benefit from exercise of stock options anddeferred compensation distributions — 1,167 — — — —Stock-based compensation expense (Note 8) — 9,467 — — — —Purchase of 1,869,193 shares of Class A CommonStock — — — (49,933) — —Cash dividends on Common Stock Class A — $0.74 per share — — (36,340) — — —Class B — $0.72 per share — — (2,559) — — —Balances at July 31, 2012 $548 $313,008 $732,290 $(92,600) $59,411 $(3,304)Net (loss) earnings — — (154,535) — — —Net currency translation adjustment and other (Note4) — — — — (3,348) —Issuance of 1,080,089 shares of Class A CommonStock under stock option plan — (9,721) — 30,045 — —Other (Note 8) — (1,266) — (2,121) — 2,584Tax benefit from exercise of stock options anddeferred compensation distributions — 2,434 — — — —Stock-based compensation expense (Note 8) — 1,736 — — — —Purchase of 188,167 shares of Class A CommonStock — — — (5,121) — —Cash dividends on Common Stock Class A — $0.76 per share — — (36,613) — — —Class B — $0.74 per share — — (2,630) — — —Balances at July 31, 2013 $548 $306,191 $538,512 $(69,797) $56,063 $(720)Net (loss) earnings — — (45,968) — — —Net currency translation adjustment and other (Note4) — — — — 8,093 —Issuance of 490,507 shares of Class A CommonStock under stock option plan — 847 — 11,266 — —Other (Note 8) — (371) — (4,225) — (1,439)Tax benefit from exercise of stock options anddeferred compensation distributions — (70) — — — —Stock-based compensation expense (Note 8) — 5,214 — — — —Purchase of 1,180,531 shares of Class A CommonStock — — — (30,581) — —Cash dividends on Common Stock Class A — $0.78 per share — — (37,786) — — —Class B — $0.76 per share — — (2,701) — — —Balances at July 31, 2014 $548 $311,811 $452,057 $(93,337) $64,156 $(2,159)See Notes to Consolidated Financial Statements.38Table of ContentsBRADY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended July 31, 2014, 2013 and 2012 2014 2013 2012 (Dollars in thousands)Operating activities: Net loss$(45,968) $(154,535) $(17,911)Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization44,598 48,725 43,987Non-cash portion of restructuring charges566 3,699 458Non-cash portion of stock-based compensation expense5,214 1,736 9,735Impairment charges148,551 204,448 115,688Loss on write-down of assets held for sale— 15,658 —Loss on sales of businesses1,238 3,138 204Deferred income taxes(27,516) 21,630 (9,679)Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures): Accounts receivable(3,600) 1,535 18,089Inventories(12,608) 2,440 (7,674)Prepaid expenses and other assets(278) 5,036 (2,744)Accounts payable and accrued liabilities(20,508) (2,285) (29,370)Income taxes3,731 (7,722) 23,922Net cash provided by operating activities93,420 143,503 144,705Investing activities: Purchases of property, plant and equipment(43,398) (35,687) (24,147)Payments of contingent consideration— — (2,580)Settlement of net investment hedges— — (797)Acquisition of business, net of cash acquired— (301,157) (37,649)Sales of businesses, net of cash retained54,242 10,178 856Other(637) 900 (287)Net cash provided by (used in) investing activities10,207 (325,766) (64,604)Financing activities: Payment of dividends(40,487) (39,243) (38,899)Proceeds from issuance of common stock12,113 20,324 3,864Purchase of treasury stock(30,581) (5,121) (49,933)Proceeds from borrowing on notes payable63,000 220,000 —Repayment of borrowing on notes payable(60,000) (181,000) —Proceeds from borrowings on line of credit10,334 11,613 —Repayment of borrowing on line of credit(2,398) — —Principal payments on debt(61,264) (61,264) (62,687)Debt issuance costs— — (961)Income tax benefit from the exercise of stock options and deferred compensation distributions, and other(6,104) 1,631 792Net cash used in financing activities(115,387) (33,060) (147,824)Effect of exchange rate changes on cash2,536 481 (16,348)Net decrease in cash and cash equivalents(9,224) (214,842) (84,071)Cash and cash equivalents, beginning of period91,058 305,900 389,971Cash and cash equivalents, end of period$81,834 $91,058 $305,900Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of capitalized interest$14,594 $17,162 $19,194Income taxes, net of refunds33,043 34,030 35,292Acquisitions: Fair value of assets acquired, net of cash$— $168,724 $23,792Liabilities assumed— (37,747) (8,987)Goodwill— 170,180 22,844Net cash paid for acquisitions$— $301,157 $37,649See Notes to Consolidated Financial Statements.39Table of ContentsBRADY CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended July 31, 2014, 2013 and 2012(In thousands, except share and per share amounts)1. Summary of Significant Accounting PoliciesNature of Operations — Brady Corporation is an international manufacturer of identification solutions and specialty materials that identify and protectpremises, products and people. The ability to provide customers with a broad range of proprietary, customized, and diverse products for use in variousapplications, along with a commitment to quality and service, a global footprint, and multiple sales channels, have made Brady a world leader in many of itsmarkets.Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Brady Corporation and its subsidiaries(“Brady” or the “Company”), all of which are wholly-owned. All intercompany accounts and transactions have been eliminated in consolidation.Discontinued Operations — The results of operations of the Die-Cut businesses have been reported as discontinued operations for all periods presented.The corresponding assets and liabilities have been reclassified in accordance with the authoritative literature on assets held for sale at July 31, 2014 and2013. In accordance with the authoritative literature, the Company has elected to not separately disclose the cash flows related to discontinued operations.See Note 15 for additional information about the Company's discontinued operations.Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States ofAmerica requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets andliabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differfrom those estimates.Subsequent Events — On August 1, 2014, the Company closed the second and final phase of the sale of the Die-Cut business to LTI Flexible Products,Inc. (d/b/a Boyd Corporation) for cash proceeds of approximately $7 million. The second-phase closing involved the sale of the remainder of the Company’sAsian Die-Cut business, with operations in Langfang, Wuxi and Shenzhen in China and associated global sales support.On August 1, 2014, the Board of Directors appointed J. Michael Nauman as President and Chief Executive Officer of the Company, effective August 4,2014. In addition, Mr. Nauman was appointed as a member of the Board of Directors, effective as of August 4, 2014, with a term expiring at the next annualmeeting of shareholders in November 2014.On September 10, 2014, the Board of Directors appointed Thomas J. Felmer to serve as the Company’s Senior Vice President and President -Workplace Safety, effective immediately. With Mr. Felmer’s appointment as President - Workplace Safety, the Board of Directors appointed Aaron J. Pearceto serve as Senior Vice President and Chief Financial Officer of the Company, effective immediately.On September 10, 2014, the Company announced an increase in the annual dividend to shareholders of the Company's Class A Common Stock, from$0.78 to $0.80 per share. A quarterly dividend of $0.20 will be paid on October 31, 2014, to shareholders of record at the close of business on October 10,2014. This dividend represents an increase of 2.6% and is the 29th consecutive annual increase in dividends.Fair Value of Financial Instruments — The Company believes the carrying amount of its financial instruments (cash and cash equivalents, accountsreceivable and accounts payable) is a reasonable estimate of the fair value of these instruments due to their short-term nature. See Note 7 for more informationregarding the fair value of long-term debt and Note 12 for fair value measurements.Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less when acquired to be cashequivalents, which are recorded at cost.Accounts Receivables — Accounts receivables are stated net of allowances for doubtful accounts of $3,069 and $5,093 as of July 31, 2014 and 2013,respectively. The allowance for doubtful accounts decreased for the year ended July 31, 2014 compared to the year ended July 31, 2013. No single customercomprised more than 5% of the Company’s consolidated net sales in fiscal 2014, 2013 or 2012, or 5% of the Company’s consolidated accounts receivable asof July 31, 2014 or 2013. Specific customer provisions are made during review of significant outstanding amounts, in which customer creditworthiness andcurrent economic trends may indicate that collection is doubtful. In addition, provisions are made for the remainder of accounts receivable based upon theage of the receivable and the Company’s historical collection experience.40Table of ContentsInventories — Inventories are stated at the lower of cost or market. Cost has been determined using the last-in, first-out (“LIFO”) method for certaindomestic inventories (11.7% of total inventories at July 31, 2014, and 12.0% of total inventories at July 31, 2013) and the first-in, first-out (“FIFO”) oraverage cost methods for other inventories. Had all domestic inventories been accounted for on a FIFO basis instead of on a LIFO basis, the carrying valuewould have increased by $7,637 and $7,923 on July 31, 2014 and 2013, respectively.Goodwill — Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might beimpaired. The Company completes impairment reviews for its reporting units using a fair-value method based on management's judgments and assumptions.The fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between market participants on an arms-lengthbasis. In estimating the fair value, the Company utilizes a discounted cash flow model and market multiples approach. The estimated fair value is comparedwith the carrying amount of the reporting unit, including goodwill. The annual impairment testing performed on May 1, 2014, in accordance with ASC 350,"Intangibles - Goodwill and Other" ("Step One") indicated that the following reporting units had a fair value substantially in excess of its carrying value: IDSAmericas & Europe, IDS APAC, WPS Americas, WPS Europe and WPS APAC. The results of the Step One analysis completed over the Company's remainingreporting unit, PeopleID, indicated that it was potentially impaired. Refer to Note 3, "Goodwill and Other Intangible Assets" for further information.Long-Lived and Other Intangible Assets — The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economicbenefits consumed on a straight-line basis, over the estimated periods benefited. Intangible assets with indefinite useful lives as well as goodwill are notsubject to amortization. These assets are assessed for impairment annually or more frequently as deemed necessary.The Company evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived and other finite-lived intangible assets may warrant revision or that the remaining balance of an asset may not be recoverable. If impairment is determined to exist, any relatedimpairment loss is calculated by comparing the fair value of the asset to its carrying value. In conjunction with the goodwill impairment test over thePeopleID reporting unit, long-lived assets associated with the reporting unit were analyzed for potential impairment. As a result, long-lived assets in theamount of $48,139 were impaired during the current period. Refer to Note 3, "Goodwill and Other Intangible Assets" for further information.Property, Plant, and Equipment — Property, plant, and equipment are recorded at cost. The cost of buildings and improvements and machinery andequipment is being depreciated over their estimated useful lives using primarily the straight-line method for financial reporting purposes. The estimateduseful lives range from 3 to 33 years as shown below.Asset Category Range of Useful LivesBuildings & Improvements 10 to 33 YearsComputer Systems 5 YearsMachinery & Equipment 3 to 10 YearsFully depreciated assets are retained in property and accumulated depreciation accounts until disposal. Upon disposal, assets and related accumulateddepreciation are removed from the accounts and the net amount, less proceeds from disposal, is charged or credited to operations. Leasehold improvementsare depreciated over the shorter of the lease term or the estimated useful life of the respective asset. Depreciation expense was $26,727, $22,976, and $21,672for the years ended July 31, 2014, 2013 and 2012, respectively.Catalog Costs and Related Amortization — The Company accumulates all direct costs incurred, net of vendor cooperative advertising payments, in thedevelopment, production, and circulation of its catalogs on its balance sheet until such time as the related catalog is mailed. The catalog costs aresubsequently amortized into selling, general, and administrative expense over the expected sales realization cycle, which is one year or less. Consequently,any difference between the estimated and actual revenue stream for a particular catalog and the related impact on amortization expense is realized within aperiod of one year or less. The estimate of the expected sales realization cycle for a particular catalog is based on the Company’s historical sales experiencewith identical or similar catalogs, and an assessment of prevailing economic conditions and various competitive factors. The Company tracks subsequentsales realization, reassesses the marketplace, and compares its findings to the previous estimate, and adjusts the amortization of future catalogs, if necessary.At July 31, 2014 and 2013, $13,959 and $11,255, respectively, of prepaid catalog costs were included in prepaid expenses and other current assets.Revenue Recognition — Revenue is recognized when it is both earned and realized or realizable. The Company’s policy is to recognize revenue whentitle to the product and risk of loss have transferred to the customer, persuasive evidence of an arrangement exists, and collection of the sales proceeds isreasonably assured, all of which generally occur upon shipment of goods to customers. The majority of the Company’s revenue relates to the sale ofinventory to customers, and revenue is recognized41Table of Contentswhen title and the risks and rewards of ownership pass to the customer. Given the nature of the Company’s business and the applicable rules guiding revenuerecognition, the Company’s revenue recognition practices do not contain estimates that materially affect the results of operations, with the exception ofestimated returns and credit memos. The Company provides for an allowance for estimated product returns and credit memos which is recognized as adeduction from sales at the time of the sale. As of July 31, 2014 and 2013, the Company had a reserve for estimated product returns and credit memos of$3,161 and $2,711, respectively.Sales Incentives — The Company accounts for cash consideration (such as sales incentives and cash discounts) given to its customers or resellers as areduction of revenue rather than an operating expense. Sales incentives for the years ended July 31, 2014, 2013, and 2012 were $36,175, $28,000, and$18,474, respectively. The increase in sales incentives for the year ended July 31, 2014 as compared to the prior two years was due to twelve months of salesincentives related to Precision Dynamics Corporation ("PDC") compared to seven months in the prior year.Shipping and Handling Fees and Costs — Amounts billed to a customer in a sale transaction related to shipping and handling fees are reported as netsales and the related costs incurred for shipping and handling are reported as cost of goods sold.Advertising Costs — Advertising costs are expensed as incurred, except catalog and mailing costs as outlined above. Advertising expense for the yearsended July 31, 2014, 2013, and 2012 was $82,561, $77,905, and $74,830, respectively.Stock-Based Compensation — The Company has an incentive stock plan under which the Board of Directors may grant nonqualified stock options topurchase shares of Class A Nonvoting Common Stock, restricted stock unit awards ("RSUs"), or restricted and unrestricted shares of Class A NonvotingCommon Stock to employees and non-employee directors. The options have an exercise price equal to the fair market value of the underlying stock at thedate of grant and generally vest ratably over a three-year period, with one-third becoming exercisable one year after the grant date and one-third additional ineach of the succeeding two years. Options issued under the plan, referred to herein as “service-based” options, generally expire 10 years from the date ofgrant. The Company also grants stock options to certain executives and key management employees that vest upon meeting certain financial performanceconditions over the vesting schedule described above. These options are referred to herein as “performance-based” options. Performance-based stock optionsexpire 10 years from the date of grant. The restricted shares and RSUs have an issuance price equal to the fair market value of the underlying stock at the dateof grant.In accordance with ASC 718 "Compensation - Stock Compensation," the Company measures and recognizes the compensation expense for all share-based awards made to employees and directors based on estimated grant-date fair values. The Black-Scholes option valuation model is used to determine thefair value of stock option awards on the date of grant. The Company recognizes the compensation cost of all share-based awards at the time it is deemedprobable the award will vest. This cost is recognized on a straight-line basis over the vesting period of the award. If it is determined that it is not likely theaward will vest, the expense recognized to date for the award is reversed in the period in which this is evident and the remaining expense is not recorded.The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards. The Company uses historical dataregarding stock option exercise behaviors to estimate the expected term of options granted based on the period of time that options granted are expected tobe outstanding. Expected volatilities are based on the historical volatility of the Company’s stock. The expected dividend yield is based on the Company’shistorical dividend payments and historical yield. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the lengthof time corresponding to the expected term of the option. The market value is calculated as the average of the high and the low stock price on the date of thegrant.The Company has estimated the fair value of its service-based and performance-based stock option awards granted during the years ended July 31,2014, 2013, and 2012 using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model arereflected in the following table:42Table of Contents 2014 2013 2012 Service-Based Performance-Based Service-Based Performance-Based Service-Based Performance-BasedBlack-Scholes Option ValuationAssumptions OptionAwards Option Awards OptionAwards Option Awards OptionAwards Option AwardsExpected term (in years) 5.97 — 5.93 — 5.89 6.57Expected volatility 37.32% —% 38.67% —% 39.41% 39.21%Expected dividend yield 2.35% —% 2.21% —% 2.07% 1.99%Risk-free interest rate 1.80% —% 0.91% —% 1.16% 2.05%Weighted-average market value ofunderlying stock at grant date $30.98 $— $30.58 $— $27.05 $29.55Weighted-average exercise price $30.98 $— $30.58 $— $27.05 $29.55Weighted-average fair value of optionsgranted during the period $9.17 $— $9.05 $— $8.42 $10.01The Company includes as part of cash flows from financing activities the benefits of tax deductions in excess of the tax-effected compensation of therelated stock-based awards for options exercised and restricted shares and RSUs vested during the period. See Note 8 “Stockholder’s Investment” for moreinformation regarding the Company’s incentive stock plans.Research and Development — Amounts expended for research and development are expensed as incurred.Other Comprehensive Income — Other comprehensive income consists of foreign currency translation adjustments, net unrealized gains and losses fromcash flow hedges and net investment hedges, and the unamortized gain on the post-retirement medical plans net of their related tax effects.Foreign Currency Translation — Foreign currency assets and liabilities are translated into United States dollars at end of period rates of exchange, andincome and expense accounts are translated at the weighted average rates of exchange for the period. Resulting translation adjustments are included in othercomprehensive income.Risk Management Activities — The Company is exposed to market risk, such as changes in interest rates and currency exchange rates. The Companydoes not hold or issue derivative financial instruments for trading purposes.Income Taxes — The Company accounts for income taxes in accordance with ASC 740 "Income Taxes", which requires an asset and liability approachto financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financialstatement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable tothe periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assetsto the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period indeferred tax assets and liabilities. The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not.Changes in recognition or measurement are reflected in the period in which a change in judgment occurs.Foreign Currency Hedging — The objective of the Company’s foreign currency exchange risk management is to minimize the impact of currencymovements on non-functional currency transactions and minimize the foreign currency translation impact on the Company’s foreign operations. While theCompany’s risk management objectives and strategies are driven from an economic perspective, the Company attempts, where possible and practical, toensure that the hedging strategies it engages in qualify for hedge accounting and result in accounting treatment where the earnings effect of the hedginginstrument provides substantial offset (in the same period) to the earnings effect of the hedged item. Generally, these risk management transactions willinvolve the use of foreign currency derivatives to protect against exposure resulting from transactions in a currency differing from the respective functionalcurrency.The Company recognizes derivative instruments as either assets or liabilities in the accompanying Consolidated Balance Sheets at fair value. Changesin the fair value (i.e., gains or losses) of the derivatives are recorded in the accompanying Consolidated Statements of Earnings as "Investment and otherincome", net, or as a component of Accumulated Other Comprehensive Income ("AOCI") in the accompanying Consolidated Balance Sheets and in theConsolidated Statements of Comprehensive Loss, as discussed below.The Company utilizes forward foreign exchange currency contracts to reduce the exchange rate risk of specific foreign currency denominatedtransactions. These contracts typically require the exchange of a foreign currency for U.S. dollars at a fixed rate at a future date, with maturities of less than 18months. These instruments may or may not qualify as hedges under the43Table of Contentsaccounting guidance for derivative instruments and hedging activities based upon the intended objective of the contract. Hedge effectiveness is determinedby how closely the changes in the fair value of the hedging instrument offset the changes in the fair value or cash flows of the hedged item. Hedge accountingis permitted only if the hedging relationship is expected to be highly effective at the inception of the hedge and on an on-going basis. Gains or losses on thederivative related to hedge ineffectiveness are recognized in current earnings. The amount of hedge ineffectiveness was not significant for the fiscal yearsended July 31, 2014, 2013, and 2012.The Company has designated a portion of its foreign exchange contracts as cash flow hedges. For these instruments, the effective portion of the gain orloss on the derivative is reported as a component of AOCI and in the cash flow hedge section of the Consolidated Statements of Comprehensive Loss, andreclassified into earnings in the same period or periods during which the hedged transaction affects earnings.The Company has designated a portion of its foreign exchange contracts as net investment hedges of the Company’s net investments in foreignoperations. The Company also utilizes Euro-denominated debt and British Pound-denominated intercompany loans designated as hedge instruments tohedge portions of the Company’s net investments in Euro and British- Pound denominated foreign operations. For net investment hedges that meet theeffectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded as cumulative translation within AOCI and areincluded in the net investment hedge section of the Consolidated Statements of Comprehensive Loss. Any ineffective portions are to be recognized inearnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantiallycomplete liquidation of the net investment in the hedged foreign operation.The Company also enters into foreign exchange contracts to create economic hedges to manage foreign exchange risk exposure. The Company has notdesignated these derivative contracts as hedge transactions, and accordingly, the mark-to-market impact of these derivatives is recorded each period incurrent earnings.See Note 14 "Derivatives and Hedging Activities" for more information regarding the Company’s derivative instruments and hedging activities.New Accounting Standards — In March 2013, the FASB issued ASU 2013-05, "Parent's Accounting for the Cumulative Translation Adjustment uponDerecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity," which applies to the release of thecumulative translation adjustment into net earnings when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controllingfinancial interest in a subsidiary or group of assets that is a business within a foreign entity. The guidance requires that a parent deconsolidate a subsidiary orderecognize a group of assets that is a business if the parent ceases to have a controlling financial interest in that group of assets, and resolves the diversity inpractice for the treatment of business combinations achieved in stages involving a foreign entity. The guidance is effective for annual and interim reportingperiods beginning after December 15, 2013, with early adoption permitted. The Company adopted this update in connection with the accounting for the saleof the Die-Cut business. It did not have a material impact on the Company's consolidated financial statements.In July 2013, the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar TaxLoss, or a Tax Credit Carryforward Exists," which requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a netoperating loss (“NOL”) or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income ortax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with adeferred tax asset as of the reporting date. This guidance is effective for fiscal years beginning after December 15, 2013. The Company is not anticipatingadoption of this update to have a material impact on the Company's consolidated financial statements.In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity", whichincludes amendments that change the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations.Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shiftsshould have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures aboutdiscontinued operations that will provide financial statement users with more information about the assets, liabilities, income, expenses and cash flows ofdiscontinued operations. The guidance is effective for fiscal and interim periods beginning after December 15, 2014. The adoption of this update is notexpected to have a material impact on the financial statements of the Company.In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers ", which eliminates the transaction-and industry-specificrevenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. The accountingstandard update requires revenue recognition when control of the goods or44Table of Contentsservices transfers to the customer, replacing the existing guidance which requires revenue recognition when the risks and rewards transfer to thecustomer. Under the new guidance, companies should recognize revenues in amounts that reflect the payment to which a company expects to be entitled inexchange for those goods or services. The guidance is effective for fiscal and interim periods beginning after December 15, 2016. The Company is currentlyevaluating the impact of this update on its consolidated financial statements.2. AcquisitionsThe Company did not complete any business acquisitions during the fiscal year ended July 31, 2014, had one business acquisition during the fiscalyear ended July 31, 2013, and completed three business acquisitions during the fiscal year ended July 31, 2012. All of these transactions were accounted forusing business combination accounting; therefore, the results of the acquired operations are included in the accompanying consolidated financial statementsonly since their acquisition dates.Fiscal 2013On December 28, 2012, the Company acquired all of the outstanding shares of Precision Dynamics Corporation ("PDC"), a manufacturer ofidentification products primarily for the healthcare sector headquartered in Valencia, California. PDC is reported within the Company's ID Solutions segment.Financing for this acquisition consisted of $220,000 from the Company's revolving loan agreement and the balance from cash on hand. As of July 31, 2014,the Company has repaid the entire amount of the borrowing, of which $39,000 was repaid in fiscal 2014.The Company acquired PDC to establish itself in the healthcare sector, consistent with the Company's mission to identify and protect premises,products and people. PDC's large customer base, strong channels to market, and broad product offering provide a foundation for future growth.The following table details the final allocation of the PDC purchase price:Fair values: Cash and cash equivalents$12,904 Accounts receivable — net21,178 Total inventories16,788 Prepaid expenses and other current assets4,233 Goodwill168,150 Other intangible assets109,300 Other assets483 Property, plant and equipment18,015 Accounts payable(10,060) Wages and amounts withheld from employees(4,234) Taxes, other than income taxes(600) Accrued income taxes(57) Other current liabilities(5,181) Other long-term liabilities(16,858) 314,061 Less: cash acquired(12,904)Fair value of total consideration$301,157 The final valuation was completed upon the conclusion of various state and local tax filing determinations in the second quarter of fiscal 2014. Theother intangible assets consist of customer relationships of $102,500, which are being amortized over a life of 10 years, and a definite-lived trademark of$6,800, which is being amortized over a life of 3 years. Of the total $168,150 in acquired goodwill, $57,374 is tax deductible and $51,672 of the total$109,300 in other intangible assets is tax deductible.45Table of ContentsThe following table reflects the unaudited pro-forma operating results of the Company for fiscal years 2013 and 2012 which give effect to theacquisition of PDC as if it had occurred at the beginning of fiscal 2012, after giving effect to certain adjustments, including amortization of intangible assets,interest expense on acquisition debt, and income tax effects. The pro-forma results have been prepared for comparative purposes only and are not necessarilyindicative of the results of operations which may occur in the future or that would have occurred had the acquisitions been effected on the date indicated, norare they necessarily indicative of the Company's future results of operations. 2013 2012Net sales, as reported $1,157,792 $1,071,504Net sales, pro forma 1,226,217 1,241,372(Loss) earnings from continuing operations, as reported (138,257) 103,493(Loss) earnings from continuing operations, pro forma (133,957) 104,014Basic (loss) earnings from continuing operations per Class A Common Share, as reported (2.70) 1.97Basic (loss) earnings from continuing operations per Class A Common Share, pro forma (2.61) 1.98Diluted (loss) earnings from continuing operations per Class A Common Share, as reported (2.70) 1.95Diluted (loss) earnings from continuing operations per Class A Common Share, pro forma (2.61) 1.96Pro forma results for fiscal 2013, were adjusted to exclude $3,600 of acquisition-related expenses and $1,530 of nonrecurring expense related to the fairvalue adjustment to acquisition-date inventory, and were adjusted to include $529 in interest expense on acquisition debt and $429 in income tax benefit.Pro forma results for fiscal 2012, were adjusted to include $3,600 of acquisition-related expenses, $1,530 of nonrecurring expense related to the fairvalue adjustment to acquisition-date inventory, $1,402 in interest expense on acquisition debt, and $2,526 in income tax expense.Pro forma results for fiscal years 2013 and 2012 include $5,215 and $12,517 of pre-tax amortization expense related to intangible assets, respectively.Fiscal 2012In March 2012, the Company acquired Grafo Wiremarkers Africa (Proprietary) Limited (“Grafo”), based in Johannesburg, South Africa for $3,039. Grafooffers a comprehensive range of wire identification products and is the sole distributor in Africa of locally developed Dartag® ABS cablemarkers, andstainless steel ties and tags. Grafo has annual sales of approximately $3,000 and is included in the Company’s IDS segment. The purchase price allocationresulted in $1,227 assigned to goodwill and $961 assigned to customer relationships. The amount assigned to the customer relationships is being amortizedover seven years. The acquisition provided a base in South Africa for the Company to further expand its business with the established distributors andcustomers throughout South Africa and the Southern African Development Community (SADC) countries.In May 2012, the Company acquired Runelandhs Försäljnings AB (“Runelandhs”), based in Kalmar, Sweden for $22,499, net of cash received.Runelandhs is a direct marketer of industrial and office equipment with annual sales of approximately $19,000. Its products include lifting, transporting, andwarehouse equipment; workbenches and material handling supplies; products for environmental protection; and entrance, reception, and office furnishings.Runelandhs is included in the Company’s WPS segment. The final purchase price allocation resulted in $13,177 assigned to goodwill, $5,340 assigned to thetradename, $5,474 assigned to customer relationships, and $95 assigned to non-compete agreements. The amount assigned to the trademark has an indefinitelife. The amounts assigned to the customer relationships and non-compete agreements are being amortized over seven and five years, respectively. Theacquisition expanded the Company's direct marketing presence in Scandinavia.In May 2012, the Company acquired Pervaco AS (“Pervaco”), based in Kjeller, Norway for $12,111, net of cash received. Pervaco is a direct marketer offacility identification products with annual sales of approximately $6,000. Pervaco is included in the Company’s WPS segment. The purchase priceallocation resulted in $8,440 assigned to goodwill, $1,538 assigned to the tradename, $2,468 assigned to customer relationships, and $91 assigned to non-compete agreements. The amount assigned to the tradename has an indefinite life. The amounts assigned to the customer relationships and non-competeagreements are being amortized over five and three years, respectively. This acquisition also expanded the Company's direct marketing presence inScandinavia.46Table of ContentsThe following table summarizes the combined estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:Current assets net of cash$5,082Property, plant & equipment2,743Goodwill22,844Customer relationships8,903Tradenames6,878Non-compete agreements186 Total assets acquired net of cash$46,636Liabilities assumed7,555Debt assumed1,432 Net assets acquired$37,649 The results of the operations of the acquired business have been included since the date of acquisition in the accompanying consolidated financialstatements. Pro forma information related to the acquisitions during the twelve months ended July 31, 2012, is not included because the impact on theCompany’s consolidated results of operations is considered to be immaterial.3. Goodwill and Other Intangible AssetsChanges in the carrying amount of goodwill by reportable segment for the years ended July 31, 2014 and 2013, were as follows: IDS WPS Die-Cut TotalBalance as of July 31, 2012$367,893 $276,941 $31,957 $676,791Current year acquisitions170,180 — — 170,180Current year divestitures(2,882) — — (2,882)Reclassification to assets held for sale(4,129) — (33,218) (37,347)Impairment charge(18,225) (172,280) — (190,505)Translation adjustments4,192 (4,454) 1,261 999Balance as of July 31, 2013$517,029 $100,207 $— $617,236Impairment charge(100,412) — — (100,412)Purchase accounting adjustments(2,168) — — (2,168)Translation adjustments(2,160) 2,508 — 348Balance as of July 31, 2014$412,289 $102,715 $— $515,004Goodwill decreased by $102,232 during fiscal 2014. The decline in the balance consisted of an impairment charge of $100,412 recognized on theCompany's PeopleID reporting unit, and purchase accounting adjustments of $2,168 for the deferred tax impact primarily related to the release of escrow fromthe fiscal 2013 acquisition of Precision Dynamics Corporation ("PDC"). These decreases were partially offset by the positive effects of foreign translation of$348.Goodwill at July 31, 2014 included $118,637 and $172,280 of accumulated impairment losses within the IDS and WPS segments, respectively, for atotal of $290,917. Goodwill at July 31, 2013 included $18,225 and $172,280 of accumulated impairment losses within the IDS and WPS segments,respectively, for a total of $190,505.The annual impairment testing performed on May 1, 2014, in accordance with ASC 350, “Intangibles - Goodwill and Other” (“Step One”) indicated thateach of the following reporting units had a fair value substantially in excess of its carrying value: IDS Americas & Europe, IDS APAC, WPS Americas, WPSEurope, and WPS APAC. The results of the Step One analysis completed over the Company's People ID reporting unit indicated that it was potentiallyimpaired.47Table of ContentsPeopleID Goodwill ImpairmentThe PeopleID reporting unit consists primarily of the Company's acquisition of PDC from fiscal 2013, as well as the existing Brady PeopleID business.Organic sales within the PDC business declined in the low single digit percentages from fiscal 2013 to fiscal 2014. Hospital admission rates are the primarydriver of PDC's sales under its existing strategy, and there was a decline of approximately 2% in these rates during fiscal 2014. Management has revisited itsplanned growth and profit for the PDC business and concluded that the growth may not materialize as expected given slower than anticipated industrygrowth and fewer sales synergies than originally planned.Management believes that strategy modifications will improve organic sales and profit within the PeopleID business in future years, but there isinherent risk in the revised strategy and the changing healthcare industry. As such, the Company's annual goodwill impairment analysis ("Step One")reflected the risk in the strategy and the decline in fiscal 2014 sales and profitability, which occurred during a period of time in which hospital admissionrates were declining. In addition, the PDC business fell short of internal forecasts, resulting in the conclusion that the PeopleID reporting unit failed Step Oneas the resulting fair value was less than the carrying value of the reporting unit.The Company proceeded to measure the amount of the potential impairment ("Step Two") with the assistance of a third party valuation firm utilizing adiscounted cash flow model and market multiples approach. In Step Two of the goodwill impairment test, the Company determined the implied fair value ofthe goodwill and compared it to the carrying value. The Company allocated the fair value of the PeopleID reporting unit to its assets and liabilities as if thereporting unit had been acquired in a business combination. The excess fair value of the reporting unit over the fair value of its identifiable assets andliabilities was the implied fair value of goodwill. Upon completion of the assessment, the Company recognized a goodwill impairment charge of $100,412during fiscal 2014.Other Intangible AssetsOther intangible assets include patents, tradenames, customer relationships, non-compete agreements and other intangible assets with finite lives beingamortized in accordance with the accounting guidance for other intangible assets. The net book value of these assets was as follows: July 31, 2014 July 31, 2013 WeightedAverageAmortizationPeriod(Years) GrossCarryingAmount AccumulatedAmortization Net BookValue WeightedAverageAmortizationPeriod(Years) GrossCarryingAmount AccumulatedAmortization Net BookValueAmortized other intangible assets: Patents5 $11,656 $(10,160) $1,496 5 $11,053 $(9,597) $1,456Tradenames and other5 15,366 (10,706) 4,660 5 15,289 (8,398) 6,891Customer relationships7 168,525 (114,363) 54,162 8 261,076 (144,620) 116,456Non-compete agreements andother4 10,089 (9,622) 467 4 14,942 (14,215) 727Unamortized other intangibleassets: TradenamesN/A 30,229 — 30,229 N/A 31,321 — 31,321Total $235,865 $(144,851) $91,014 $333,681 $(176,830) $156,851The value of goodwill and other intangible assets in the consolidated balance sheets at July 31, 2014 and 2013, differs from the value assigned to themin the original allocation of purchase due to the effect of fluctuations in foreign exchange rates. In conjunction with the goodwill impairment test of thePeopleID reporting unit, finite and indefinite-lived other intangible assets associated with the reporting unit were written down to fair value. As a result, theCompany recognized an impairment charge of $48,139 during fiscal 2014.Amortization expense on intangible assets during fiscal 2014, 2013, and 2012 was $17,871, $17,148 and $10,576, respectively. The amortization overeach of the next five fiscal years is projected to be $12,474, $10,267, $7,747, $6,850 and $6,305 for the fiscal years ending July 31, 2015, 2016, 2017, 2018and 2019, respectively.48Table of Contents4. Other Comprehensive IncomeOther comprehensive income consists of foreign currency translation adjustments, net unrealized gains and losses from cash flow hedges and netinvestment hedges, and the unamortized gain on the post-retirement medical plans net of their related tax effects.The following table illustrates the changes in the balances of each component of accumulated other comprehensive income for the periods presented.The unrealized gain (loss) on cash flow hedges and the unrecognized gain on the postretirement medical plan are presented net of tax: Unrealizedgain (loss) oncash flowhedges Gain onpostretirementmedical plan Foreigncurrencytranslationadjustments AccumulatedothercomprehensiveincomeEnding balance, July 31, 2012$876 $978 $57,557 $59,411Other comprehensive (loss) income before reclassification(425) 1,103 (3,446) (2,768)Amounts reclassified from accumulated other comprehensiveincome(352) (228) — (580)Ending balance, July 31, 2013$99 $1,853 $54,111 $56,063Other comprehensive (loss) income before reclassification(21) 3,313 1,334 4,626Amounts reclassified from accumulated other comprehensiveincome(90) (312) 3,869 3,467Ending balance, July 31, 2014$(12) $4,854 $59,314 $64,156The increase in accumulated other comprehensive income ("AOCI") as of July 31, 2014 compared to July 31, 2013 was primarily due to theaccumulated foreign currency translation loss in Korea and Thailand, which was reclassified into earnings upon the completion of the first phase of the Die-Cut divestiture during the year ended July 31, 2014. The increase in AOCI is also attributable to a $4,691 actuarial gain on the U.S. post-retirement medicalplan valuation for the year ended July 31, 2014. The depreciation of the U.S. dollar against other currencies also contributed to the increase in AOCI from theprior year. The foreign currency translation adjustments line in the table above includes the impact of foreign currency translation, foreign currencytranslation on intercompany notes, and the settlements of net investment hedges, net of tax. Of the total $3,467 in amounts reclassified from AOCI, the$3,869 loss on foreign currency translation adjustments was reclassified to the loss on the sale of the Die-Cut divestiture, the $90 gain on cash flow hedgeswas reclassified into cost of products sold, and the $312 net gain on postretirement plans was split with $443 of gains reclassified into SG&A and a $131 lossreclassified to the loss on the sale of the Die-Cut divestiture.The following table illustrates the income tax (expense) benefit on the components of other comprehensive income: 2014 2013 2012Income tax (expense) benefit related to items of other comprehensive (loss)income: Net investment hedge translation adjustments $302 $2,877 $(7,784)Long-term intercompany loan settlements 579 (650) (2,508)Cash flow hedges 28 454 (855)Pension and other post-retirement benefits (1,898) (555) 583Other income tax adjustments (58) 108 (898)Income tax (expense) benefit related to items of other comprehensive (loss) income $(1,047) $2,234 $(11,462)5. Employee Benefit PlansThe Company provides postretirement medical benefits (the “Plan”) for eligible regular full and part-time domestic employees (including spouses) asoutlined by the Plan. Postretirement benefits are provided only if the employee was hired prior to April 1, 2008, and retires on or after attainment of age 55with 15 years of credited service. Credited service begins accruing at the later of age 40 or date of hire. All active employees first eligible to retire afterJuly 31, 1992, are covered by an unfunded, contributory postretirement healthcare plan where employer contributions will not exceed a defined dollarbenefit amount, regardless of the cost of the program. Employer contributions to the plan are based on the employee’s age and service at retirement.The accounting guidance on defined benefit pension and other postretirement plans requires full recognition of the funded status of defined benefit andother postretirement plans on the balance sheet as an asset or a liability. The guidance also requires49Table of Contentsthat unrecognized prior service costs/credits, gains/losses, and transition obligations/assets be recorded in AOCI, thus not changing the income statementrecognition rules for such plans.The Plan is unfunded and recorded as a liability in the accompanying consolidated balance sheets as of July 31, 2014 and 2013. The following tableprovides a reconciliation of the changes in the Plan’s accumulated benefit obligation during the years ended July 31: 2014 2013Obligation at beginning of year $13,023 $14,225Service cost 674 770Interest cost 534 476Actuarial (gain)/loss (4,691) (1,745)Benefit payments (473) (703)Plan amendments (1,011) —Obligation at end of fiscal year $8,056 $13,023Estimated savings of $3,408 were included as an actuarial gain due to decreases in expected participation rate assumptions used in the actuarialvaluation. The change in participation assumptions was primarily caused by the impact of the Health Care and Education Reconciliation Act of 2010 andPatient Protection and Affordable Care Act and significantly increased premium costs passed on to participants as a result of plan amendments made in recentprior years. It is anticipated that due to the availability of subsidized health insurance exchanges, which began operating January 1, 2014, the majority offuture eligible retirees will now have access to more affordable plans and will not elect coverage under the current Company-sponsored plan.In fiscal 2014, the Company amended the Plan effective January 1, 2015 to eliminate future increases in target contribution levels to eligible planparticipants. This amendment resulted in a decrease in the accumulated benefit obligation of $1,011.As of July 31, 2014 and 2013, amounts recognized as liabilities in the accompanying consolidated balance sheets consist of: 2014 2013Current liability $476 $677Non-current liability 7,580 12,346 $8,056 $13,023As of July 31, 2014 and 2013, pre-tax amounts recognized in accumulated other comprehensive income in the accompanying consolidated balancesheets consist of: 2014 2013Net actuarial gain $7,960 $3,534Prior service credit 2,011 1,203 $9,971 $4,737Net periodic benefit cost for the Plan for fiscal years 2014, 2013, and 2012 includes the following components: Years Ended July 31, 2014 2013 2012Net periodic postretirement benefit cost included the following components: Service cost — benefits attributed to service during the period $674 $770 $644Prior service credit (203) (203) (203)Interest cost on accumulated postretirement benefit obligation 534 476 633Amortization of unrecognized gain (265) (47) (189)Periodic postretirement benefit cost $740 $996 $885The estimated actuarial gain and prior service credit that will be amortized from accumulated other comprehensive income into net periodicpostretirement benefit cost over the next fiscal year are $869 and $325, respectively.50Table of ContentsThe following assumptions were used in accounting for the Plan: 2014 2013 2012Weighted average discount rate used in determining accumulated postretirement benefit obligationliability 3.50% 4.00% 3.25%Weighted average discount rate used in determining net periodic benefit cost 4.00% 3.25% 4.50%Assumed health care trend rate used to measure APBO at July 31 7.50% 8.00% 8.00%Rate to which cost trend rate is assumed to decline (the ultimate trend rate) 5.50% 5.50% 5.50%Fiscal year the ultimate trend rate is reached 2018 2018 2016The discount rate utilized in preparing the accumulated postretirement benefit obligation liability was decreased to 3.50% in fiscal 2014 from 4.00% infiscal 2013 as a result of a decrease in the bond yield as of the Company’s measurement date of July 31, 2014.A one-percentage point change in assumed health care cost trend rates would have the following effects on the Plan:One-PercentagePoint IncreaseOne-PercentagePoint DecreaseEffect on future service and interest cost$14$(14)Effect on accumulated postretirement benefit obligation at July 31, 201426(28)The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the years ending July 31: 2015$47620165242017596201865420197142020 through 20244,137The Company sponsors defined benefit pension plans that are primarily unfunded and provide an income benefit upon termination or retirement forcertain of its international employees. As of July 31, 2014 and 2013, the accumulated pension obligation related to these plans was $4,553 and $3,977,respectively. As of July 31, 2014 and 2013, pre-tax amounts recognized in accumulated other comprehensive income in the accompanying balance sheetswere gains of $1,228 and $807, respectively. The net periodic benefit cost for these plans was $286, $388, and $299 during the years ended July 31, 2014,2013 and 2012, respectively.The Company has retirement and profit-sharing plans covering substantially all full-time domestic employees and certain employees of its foreignsubsidiaries. Contributions to the plans are determined annually or quarterly, according to the respective plans, based on earnings of the respectivecompanies and employee contributions. Accrued retirement and profit-sharing contributions of $2,938 and $3,615 were included in other current liabilitieson the accompanying consolidated balance sheets as of July 31, 2014 and 2013, respectively. The amounts charged to expense for these retirement and profitsharing plans were $10,830, $10,110, and $12,569 during the years ended July 31, 2014, 2013 and 2012, respectively.The Company also has deferred compensation plans for directors, officers and key executives which are discussed below. At July 31, 2014 and 2013,$18,694 and $15,769, respectively, of deferred compensation was included in other long-term liabilities in the accompanying consolidated balance sheets.During fiscal 1998, the Company adopted a new deferred compensation plan that invests solely in shares of the Company’s Class A NonvotingCommon Stock. Participants in a predecessor phantom stock plan were allowed to convert their balances in the old plan to this new plan. The new plan wasfunded initially by the issuance of shares of Class A Nonvoting Common Stock to a Rabbi Trust. All deferrals into the new plan result in purchases of Class ANonvoting Common Stock by the Rabbi Trust. No deferrals are allowed into a predecessor plan. Shares held by the Rabbi Trust are distributed to participantsupon separation from the Company as defined in the plan agreement.During fiscal 2002, the Company adopted a new deferred compensation plan for executives and non-employee directors that allows futurecontributions to be invested in shares of the Company’s Class A Nonvoting Common Stock or in certain other51Table of Contentsinvestment vehicles. Prior deferred compensation deferrals must remain in the Company’s Class A Nonvoting Common Stock. All participant deferrals intothe new plan result in purchases of Class A Nonvoting Common Stock or certain other investment vehicles by the Rabbi Trust. Balances held by the RabbiTrust are distributed to participants upon separation from the Company as defined in the plan agreement. On May 1, 2006, the plan was amended to requirethat deferrals into the Company’s Class A Nonvoting Common Stock must remain in the Company’s Class A Nonvoting Common Stock and be distributed inshares of the Company’s Class A Nonvoting Common Stock. On May 21, 2014, the Director Deferred Compensation Plan was amended to allow participantsto transfer funds from other investment funds into the Company’s Class A Nonvoting Common Stock. Funds are not permitted to be transferred from theCompany’s Class A Nonvoting Common Stock into other investment funds until six months after the Director resigns from the Board. No such amendmentwas made to the Executive Deferred Compensation Plan.6. Income Taxes(Loss) earnings from continuing operations consists of the following: Years Ended July 31, 2014 2013 2012United States $(134,596) $(144,941) $44,713Other Nations 81,487 49,267 95,942Total $(53,109) $(95,674) $140,655Income tax (benefit) expense from continuing operations consists of the following: Years Ended July 31, 2014 2013 2012Current income tax expense: United States $(1,137) $64 $9,606Other Nations 19,513 19,795 34,948States (U.S.) 1,090 1,094 2,287 $19,466 $20,953 $46,841Deferred income tax (benefit) expense: United States $(22,754) $22,882 $(1,480)Other Nations (1,803) (806) (7,325)States (U.S.) 128 (446) (874) $(24,429) $21,630 $(9,679)Total $(4,963) $42,583 $37,162Deferred income taxes result from temporary differences in the recognition of revenues and expenses for financial statement and income tax purposes.52Table of ContentsThe approximate tax effects of temporary differences are as follows: July 31, 2014 Assets Liabilities TotalInventories $5,460 $(126) $5,334Prepaid catalog costs 30 (3,180) (3,150)Employee benefits 1,533 (27) 1,506Accounts receivable 852 (9) 843Other, net 8,700 (1,015) 7,685Current $16,575 $(4,357) $12,218Fixed Assets 2,431 (4,587) (2,156)Intangible Assets 1,706 (27,381) (25,675)Capitalized R&D expenditures 1,425 — 1,425Deferred compensation 21,733 — 21,733Postretirement benefits 5,002 (4) 4,998Tax credit carry-forwards and net operating losses 58,870 — 58,870Less valuation allowance (37,409) — (37,409)Other, net 1,411 (6,499) (5,088)Non-current $55,169 $(38,471) $16,698Total $71,744 $(42,828) $28,916 July 31, 2013 Assets Liabilities TotalInventories $5,880 $(280) $5,600Prepaid catalog costs 9 (2,407) (2,398)Employee benefits 1,973 (5) 1,968Accounts receivable 1,292 (63) 1,229Other, net 9,721 (4,684) 5,037Current $18,875 $(7,439) $11,436Fixed Assets 2,717 (4,811) (2,094)Intangible Assets 1,705 (54,008) (52,303)Capitalized R&D expenditures 1,755 — 1,755Deferred compensation 24,565 — 24,565Postretirement benefits 7,220 — 7,220Tax credit carry-forwards and net operating losses 62,199 (125) 62,074Less valuation allowance (37,142) — (37,142)Other, net 109 (8,952) (8,843)Non-current $63,128 $(67,896) $(4,768)Total $82,003 $(75,335) $6,668Tax loss carry-forwards at July 31, 2014 are comprised of:•Foreign net operating loss carry-forwards of $114,219, of which $88,297 have no expiration date and the remainder of which expire within the nextfive to eight years.•State net operating loss carry-forwards of $59,349, which expire from 2015 to 2033.•Foreign tax credit carry-forwards of $14,812, which expire from 2018 to 2024.•State research and development credit carry-forwards of $10,731, which expire from 2015 to 2029.The valuation allowance increased by $267 during the fiscal year ended July 31, 2014 mainly due to increased valuation allowances against state taxcredit carry-forwards and increased valuation allowances in certain jurisdictions, including Brazil, Shenzhen, and Langfang. These increases were primarilyoffset by reductions in the tax rates applied to valuation allowances in Sweden and the United Kingdom. The valuation allowance increased by $11,295during the fiscal year ended July 31, 2013 mainly due to additional valuation allowances for Wuxi, Shenzhen, and Brazil. If realized or reversed in futureperiods, substantially all of the valuation allowance would impact the income tax rate.53Table of Contents Rate ReconciliationA reconciliation of the tax computed by applying the statutory U.S. federal income tax rate to earnings (loss) from continuing operations before incometaxes to the total income tax expense is as follows: Years Ended July 31, 2014 2013 2012Tax at statutory rate 35.0 % 35.0 % 35.0 %Goodwill impairment (1) (40.3)% (53.4)% — %State income taxes, net of federal tax benefit (2) (1.1)% (0.2)% 0.1 %International rate differential (1.3)% (4.6)% (6.6)%Non-creditable withholding taxes — % (1.5)% 2.3 %Rate variances arising from foreign subsidiary distributions (7.5)% (25.3)% (6.5)%Adjustments to tax accruals and reserves (3) 25.5 % 1.0 % 7.5 %Research and development tax credits and section 199 manufacturer’s deduction 3.6 % 3.1 % (1.0)%Non-deductible divestiture fees and account write-offs (5.2)% — % — %Deferred tax and other adjustments 0.7 % 2.4 % (3.4)%Other, net (0.1)% (1.0)% (1.0)%Effective tax rate 9.3 % (44.5)% 26.4 %(1)$61.1 million of the total goodwill impairment of $100.4 million recorded during the year ended July 31, 2014 is nondeductible for income taxpurposes. $168.9 million of the total goodwill impairment of $190.5 million recorded during the year ended July 31, 2013 is nondeductible forincome tax purposes.(2)Includes a $3.1 million increase in valuation allowances against certain state tax credit carry-forwards during the year ended July 31, 2014.(3)Includes the reduction of uncertain tax positions resulting from the settlement of certain domestic and foreign income tax audits during the yearended July 31, 2014.In fiscal 2013 and 2012, the Company was eligible for tax holidays on the earnings of certain subsidiaries. The benefits realized as a result of these taxholidays reduced the consolidated effective tax rate by approximately 0.7% in both fiscal 2013 and 2012. Remaining tax holidays as of July 31, 2014 are notsignificant.54Table of ContentsUncertain Tax PositionsThe Company follows the guidance in ASC 740, "Income Taxes" regarding uncertain tax positions. The guidance requires application of a “more likelythan not” threshold to the recognition and de-recognition of tax positions. A reconciliation of unrecognized tax benefits (excluding interest and penalties) isas follows:Balance at July 31, 2011$22,343 Additions based on tax positions related to the current year6,983Additions for tax positions of prior years9,460Reductions for tax positions of prior years—Lapse of statute of limitations(949)Settlements with tax authorities—Cumulative Translation Adjustments and other(1,305) Balance as of July 31, 2012$36,532 Additions based on tax positions related to the current year4,015Additions for tax positions of prior years (1)2,809Reductions for tax positions of prior years—Lapse of statute of limitations(5,613)Settlements with tax authorities(590)Cumulative Translation Adjustments and other422 Balance as of July 31, 2013$37,575 Additions based on tax positions related to the current year4,596Additions for tax positions of prior years—Reductions for tax positions of prior years(14,569)Lapse of statute of limitations(3,711)Settlements with tax authorities(5,832)Cumulative Translation Adjustments and other(210) Balance as of July 31, 2014$17,849(1)Includes acquisitionsThe $17,849 of unrecognized tax benefits, if recognized, would affect the Company's effective income tax rate. The Company has classified $11,357and $32,759, excluding interest and penalties, of the reserve for uncertain tax positions in Other Liabilities on the Consolidated Balance Sheets as of July 31,2014 and 2013, respectively. The Company has classified $6,492 and $4,816, excluding interest and penalties, as a reduction of long-term deferred incometax assets on the Consolidated Balance Sheets as of July 31, 2014 and 2013, respectively.The Company recognizes interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidatedstatements of earnings.Interest expense is recognized on the amount of potentially underpaid taxes associated with the Company's tax positions, beginning in the first periodin which interest starts accruing under the respective tax law and continuing until the tax positions are settled. The Company recognized a decrease of $498,and an increase of $200 and $539 in interest expense during the years ended July 31, 2014, 2013, and 2012, respectively. There were increases of $25, $313and $855 of penalties related to the reserve for uncertain tax positions during the yeas ended July 31, 2014, 2013 and 2012, respectively. These amounts arenet of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2014 and 2013, the Company had $1,739and $2,265, respectively, accrued for interest on unrecognized tax benefits. Penalties are accrued if the tax position does not meet the minimum statutorythreshold to avoid the payment of a penalty.At July 31, 2014 and 2013, the Company had $2,664 and $2,689, respectively, accrued for penalties on unrecognized tax benefits.The Company estimates that it is reasonably possible that the unrecognized tax benefits may be reduced by $688 within twelve months as a result of theresolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or statute55Table of Contentsexpirations. The maximum amount that would be recognized through the consolidated statements of earnings as an income tax benefit is $688.During the year ended July 31, 2014, the Company recognized $4,111 of tax benefits (including interest and penalties) associated with the lapse ofstatutes of limitations.The Company and its subsidiaries file income tax returns in the U.S., various state, and foreign jurisdictions. The following table summarizes the opentax years for the Company's major jurisdictions:Jurisdiction Open Tax YearsUnited States — Federal F’13 — F’14France F’13 — F’14Germany F’09 — F’14United Kingdom F’11 — F’14Unremitted EarningsThe Company does not provide for U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been reinvestedindefinitely. These earnings relate to ongoing operations and at July 31, 2014, were approximately $433,382. These earnings have been reinvested in non-U.S. business operations, and the Company does not intend to repatriate these earnings to fund U.S. operations. It is impracticable to determine the incometax liability that would be payable if such earnings were not indefinitely reinvested.7. Long-Term ObligationsOn February 1, 2012, the Company and certain of its subsidiaries entered into an unsecured $300,000 multi-currency revolving loan agreement with agroup of six banks that replaced and terminated the Company’s previous credit agreement. Under the credit agreement, which has a final maturity date ofFebruary 1, 2017, the Company has the option to select either a base interest rate (based upon the higher of the federal funds rate plus one-half of 1% or theprime rate of Bank of America plus a margin based on the Company’s consolidated leverage ratio) or a Eurocurrency interest rate (at the LIBOR rate plus amargin based on the Company’s consolidated leverage ratio). At the Company’s option, and subject to certain conditions, the available amount under thenew credit facility may be increased from $300,000 up to $450,000.In December 2012, the Company drew down $220,000 from its revolving loan agreement to fund a portion of the purchase price of the acquisition ofPDC. The borrowings bear interest at LIBOR plus 1.125% per annum, which will be reset from time to time based upon changes in the LIBOR rate. As ofJuly 31, 2013, there was $39,000 outstanding on this revolving loan agreement, which was repaid during fiscal 2014. During fiscal 2014, the Company drewdown an additional $63,000 in order to fund dividends, principal payments on the private placement note issuances, share repurchases, and general corporateneeds. The Company repaid $21,000 of this borrowing during the three months ended July 31, 2014, and intends to repay the remainder within 12 months ofthe current period end, as such, the borrowing is classified as "Notes Payable" within current liabilities on the Consolidated Balance Sheets. During fiscal2014, the maximum amount outstanding on the revolving loan agreement was $72,000. As of July 31, 2014, the outstanding balance on the credit facilitywas $42,000 and the Company had outstanding letters of credit under the revolving loan agreement of $3,634. There was $254,366 available for futureborrowing under the credit facility, which can be increased to $404,366 at the Company's option, subject to certain conditions.In February 2013, the Company entered into an unsecured $26,200 multi-currency line of credit in China, which was amended in November 2013 to$24,200 and is due on demand. The line of credit supports USD-denominated or CNY-denominated borrowing to fund working capital and operations for theCompany's Chinese entities. Borrowings under this facility may be made for a period up to one year from the date of borrowing with interest on theborrowings incurred equal to U.S. Dollar LIBOR on the date of borrowing plus a margin based upon duration. There is no ultimate maturity on the facilityand the facility is subject to periodic review and repricing. The Company is not required to comply with any financial covenants as part of this agreement.During fiscal 2014, the maximum amount outstanding was $19,422, which was also the outstanding balance as of July 31, 2014. This was comprised of$6,923 USD-denominated borrowings and $12,499 USD equivalent of CNY-denominated borrowings. As of July 31, 2014, there was $4,778 available forfuture borrowing under this credit facility.56Table of ContentsAs of July 31, 2014, borrowings on the revolving loan agreement and China line of credit were as follows: July 31, 2014 Interest RateUSD-denominated borrowing on revolving loan agreement$42,000 1.2472%USD-denominated borrowing on China line of credit6,923 1.3548%RMB-denominated borrowing on China line of credit (USD equivalent)12,499 5.0400%Notes payable$61,422 2.0311%As of July 31, 2013, borrowings on the revolving loan agreement and China line of credit were as follows: July 31, 2013 Interest RateUSD-denominated borrowing on revolving loan agreement$39,000 1.2787%USD-denominated borrowing on China line of credit11,613 1.1201%Notes payable$50,613 1.2423%The Company had outstanding letters of credit of $3,634 and $3,570 at July 31, 2014 and July 31, 2013, respectively.On May 13, 2010, the Company completed a private placement of €75.0 million aggregate principal amount of senior unsecured notes to accreditedinstitutional investors. The €75.0 million of senior notes consists of €30.0 million aggregate principal amount of 3.71% Series 2010-A Senior Notes, dueMay 13, 2017 and €45.0 million aggregate principal amount of 4.24% Series 2010-A Senior Notes, due May 13, 2020, with interest payable on the notessemiannually. This private placement was exempt from the registration requirements of the Securities Act of 1933. The notes were not registered for resaleand may not be resold absent such registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicablestate securities laws. The notes have certain prepayment penalties for repaying them prior to maturity. The notes have been fully and unconditionallyguaranteed on an unsecured basis by the Company’s domestic subsidiaries.During fiscal 2004 through fiscal 2007, the Company completed three private placement note issuances totaling $500 million in ten-year fixed ratenotes with varying maturity dates to institutional investors at interest rates varying from 5.14% to 5.33%. The notes must be repaid equally over seven years,with initial payment due dates ranging from 2008 to 2011, with interest payable on the notes due semiannually on various dates throughout the year, whichbegan in December 2004. The private placements were exempt from the registration requirements of the Securities Act of 1933. The notes were not registeredfor resale and may not be resold absent such registration or an applicable exemption from the registration requirements of the Securities Act of 1933 andapplicable state securities laws. The notes have certain prepayment penalties for repaying them prior to the maturity date. Under the debt agreement, theCompany made scheduled principal payments of $61.3 million during each of the years ended July 31, 2008 through 2014.The Company’s debt and revolving loan agreements require it to maintain certain financial covenants. The Company’s February 2006, March 2007,and May 2010 private placement debt agreements require the Company to maintain a ratio of debt to the trailing twelve months EBITDA, as defined in thedebt agreements, of not more than a 3.5 to 1.0 ratio (leverage ratio). As of July 31, 2014, the Company was in compliance with the financial covenant of theFebruary 2006, March 2007, and May 2010 private placement debt agreements, with the ratio of debt to EBITDA, as defined by the agreements, equal to 1.7to 1.0. Additionally, the Company’s February 2012 revolving loan agreement requires the Company to maintain a ratio of debt to trailing twelve monthsEBITDA, as defined by the debt agreement, of not more than a 3.25 to 1.0 ratio. The revolving loan agreement requires the Company’s trailing twelve monthsEBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of July 31, 2014, the Company was in compliance with thefinancial covenants of the revolving loan agreement, with the ratio of debt to EBITDA, as defined by the agreement, equal to 1.7 to 1.0 and the interestexpense coverage ratio equal to 11.5 to 1.0.57Table of ContentsLong-term obligations consist of the following as of July 31: 2014 2013Euro-denominated notes payable in 2017 at a fixed rate of 3.71% $40,164 $39,900Euro-denominated notes payable in 2020 at a fixed rate of 4.24% 60,246 59,850USD-denominated notes payable through 2014 at a fixed rate of 5.14% — 18,750USD-denominated notes payable through 2016 at a fixed rate of 5.30% 52,286 78,428USD-denominated notes payable through 2017 at a fixed rate of 5.33% 49,114 65,486 $201,810 $262,414Less current maturities $(42,514) $(61,264) $159,296 $201,150The estimated fair value of the Company’s long-term obligations was $216,280 and $276,132 at July 31, 2014 and July 31, 2013, respectively, ascompared to the carrying value of $201,810 and $262,414 at July 31, 2014 and July 31, 2013, respectively. The fair value of the long-term obligations,which were determined using the market approach based upon the interest rates available to the Company for borrowings with similar terms and maturities,were determined to be Level 2 under the fair value hierarchy. Due to the short-term nature and variable interest rate pricing of the Company's revolving debt,it is determined that the carrying value of the debt equals the fair value of the debt.Maturities on long-term debt are as follows:Years Ending July 31, 2015$42,514201642,514201756,5362018—2019—Thereafter60,246 Total$201,810 8. Stockholder's InvestmentInformation as to the Company’s capital stock at July 31, 2014 and 2013 is as follows: July 31, 2014 July 31, 2013 SharesAuthorized SharesIssued (thousands)Amount SharesAuthorized SharesIssued (thousands)AmountPreferred Stock, $.01 par value 5,000,000 5,000,000 Cumulative Preferred Stock: 6% Cumulative 5,000 5,000 1972 Series 10,000 10,000 1979 Series 30,000 30,000 Common Stock, $.01 par value: Class ANonvoting 100,000,000 51,261,487 $513 100,000,000 51,261,487 $513Class B Voting 10,000,000 3,538,628 35 10,000,000 3,538,628 35 $548 $548Before any dividend may be paid on the Class B Common Stock, holders of the Class A Common Stock are entitled to receive an annual,noncumulative cash dividend of $.01665 per share. Thereafter, any further dividend in that fiscal year must be paid on each share of Class A Common Stockand Class B Common Stock on an equal basis.Other than as required by law, holders of the Class A Common Stock are not entitled to any vote on corporate matters, unless, in each of the threepreceding fiscal years, the $.01665 preferential dividend described above has not been paid in full. Holders of the Class A Common Stock are entitled to onevote per share for the entire fiscal year immediately following the third consecutive fiscal year in which the preferential dividend is not paid in full. Holdersof Class B Common Stock are entitled to one vote per share for the election of directors and for all other purposes.58Table of ContentsUpon liquidation, dissolution or winding up of the Company, and after distribution of any amounts due to holders of Cumulative Preferred Stock,holders of the Class A Common Stock are entitled to receive the sum of $0.835 per share before any payment or distribution to holders of the Class BCommon Stock. Thereafter, holders of the Class B Common Stock are entitled to receive a payment or distribution of $0.835 per share. Thereafter, holders ofthe Class A Common Stock and Class B Common Stock share equally in all payments or distributions upon liquidation, dissolution or winding up of theCompany.The preferences in dividends and liquidation rights of the Class A Common Stock over the Class B Common Stock will terminate at any time that thevoting rights of Class A Common Stock and Class B Common Stock become equal.The following is a summary of other activity in stockholders’ investment for the fiscal years ended July 31, 2014, 2013, and 2012: Unearned RestrictedStock Deferred Compensation Shares Held in RabbiTrust, at cost TotalBalances at July 31, 2011 $(5,362) $12,093 $(11,595) $(4,864)Shares at July 31, 2011 560,078 560,078 Sale of shares at cost — (1,407) 1,368 (39)Purchase of shares at cost — 924 (924) —Amortization of restricted stock 1,599 — — 1,599Balances at July 31, 2012 (3,763) 11,610 (11,151) (3,304)Shares at July 31, 2012 $517,105 $517,105 Sale of shares at cost $— (1,461) 1,419 $(42)Purchase of shares at cost — 891 (891) —Forfeitures of restricted stock 838 — — 838Amortization of restricted stock 1,788 — — 1,788Balances at July 31, 2013 $(1,137) $11,040 $(10,623) $(720)Shares at July 31, 2013 469,797 469,797 Sale of shares at cost — (1,637) 1,496 (141)Purchase of shares at cost — 821 (821) —Effect of plan amendment — (2,435) — (2,435)Amortization of restricted stock 1,137 — — 1,137Balances at July 31, 2014 $— $7,789 $(9,948) $(2,159)Shares at July 31, 2014 338,711 423,415 Deferred Compensation PlansPrior to 2002, all Brady Corporation deferred compensation was invested in the Company’s Class A Nonvoting Common Stock. In 2002, theCompany adopted a new deferred compensation plan for both executives and directors which allowed investing in other investment funds in addition to theCompany’s Class A Nonvoting Common Stock. Under this plan, participants were allowed to transfer funds between the Company’s Class A NonvotingCommon Stock and the other investment funds. On May 1, 2006 the plan was amended with the provision that deferrals into the Company’s Class ANonvoting Common Stock must remain in the Company’s Class A Nonvoting Common Stock and be distributed in shares of the Company’s Class ANonvoting Common Stock. On May 21, 2014, the Director Deferred Compensation Plan was amended to allow participants to transfer funds from otherinvestment funds into the Company’s Class A Nonvoting Common Stock. Funds are not permitted to be transferred from the Company’s Class A NonvotingCommon Stock into other investment funds until six months after the Director resigns from the Board. No such amendment was made to the ExecutiveDeferred Compensation Plan.At July 31, 2014, the deferred compensation balance in stockholders’ investment represents the investment at the original cost of shares held in theCompany’s Class A Nonvoting Common Stock for the deferred compensation plan prior to 2002 and the investment at the cost of shares held in theCompany’s Class A Nonvoting Common Stock for the plan subsequent to 2002, adjusted for the plan amendments on May 1, 2006 and May 21, 2014. Thebalance of shares held in the Rabbi Trust represents the investment in the Company’s Class A Nonvoting Common Stock at the original cost of all theCompany’s Class A Nonvoting Common Stock held in deferred compensation plans.59Table of ContentsIncentive Stock PlansThe Company has an incentive stock plan under which the Board of Directors may grant nonqualified stock options to purchase shares of Class ANonvoting Common Stock, restricted stock units ("RSUs"), or restricted and unrestricted shares of Class A Nonvoting Common Stock to employees and non-employee directors.The options issued under the plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and generally vestratably over a three-year period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding twoyears. Options issued under the plan, referred to herein as “service-based” options, generally expire 10 years from the date of grant. The Company also grantsstock options to certain executives and key management employees that vest upon meeting certain financial performance conditions over the vestingschedule described above. These options are referred to herein as “performance-based” options. Performance-based stock options expire 10 years from thedate of grant.Restricted shares and RSUs issued under the plan have an issuance price equal to the fair market value of the underlying stock at the date of grant. Therestricted shares awarded in fiscal 2008 were amended in fiscal 2011 to allow for vesting after either a five-year period or a seven-year period based upon bothperformance and service conditions. The restricted shares awarded in fiscal 2011 vest ratably at the end of years 3, 4 and 5 upon meeting certain performanceand service conditions. These shares are referred to herein as “performance-based restricted shares.” Restricted shares awarded in fiscal 2013 vest at the end ofa three-year period based upon service conditions. These shares are referred to herein as “cliff-vested restricted shares.” The restricted shares awarded in fiscal2014 were issued to the Interim President and Chief Executive Officer in recognition of the increased duties upon appointment and are service-based. Theshares vest upon the earlier of the end of the individual's term as Interim President and CEO or the Board appointment of a permanent President andCEO. These shares are referred to herein as “service-based cliff-vested restricted shares.” The RSUs granted in fiscal 2014 vest ratably over a three-year period,with one-third vesting one year after the grant date and one-third additional in each of the succeeding two years. The Company also grants RSUs to certainexecutives and key management employees that vest upon meeting certain financial performance conditions over a specified vesting period, referred toherein as “performance-based RSUs.” The performance-based RSUs granted in fiscal 2013 vest over a two-year period upon meeting both performance andservice conditions.As of July 31, 2014, the Company has reserved 4,389,117 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs andrestricted and unrestricted shares and 4,022,854 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs and restrictedand unrestricted shares under the active plans. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares underthese plans.The Company recognizes the compensation cost of all share-based awards at the time it is deemed probable the award will vest. This cost is recognizedon a straight-line basis over the vesting period of the award. If it is determined that it is unlikely the award will vest, the expense recognized to date for theaward is reversed in the period in which this is evident and the remaining expense is not recorded. Total stock-based compensation expense recognized bythe Company during the years ended July 31, 2014, 2013, and 2012 was $5,214 ($3,232 net of taxes), $1,736 ($1,059 net of taxes), and $9,735 ($5,939 net oftaxes), respectively. The increase in expense from fiscal 2013 to fiscal 2014 was due to the reversal of stock-based compensation expense of $7,883 in fiscal2013 primarily related to performance awards that would not meet the financial performance conditions to vest.As of July 31, 2014, total unrecognized compensation cost related to share-based compensation awards that are expected to vest was $5,507 pre-tax, netof estimated forfeitures, which the Company expects to recognize over a weighted-average period of 1.3 years.60Table of ContentsThe following is a summary of stock option activity for the fiscal years ended July 31, 2014, 2013, and 2012: Option Price Options Outstanding Weighted Average Exercise PriceBalance as of July 31, 2011 $13.31—$40.37 5,726,017 $29.24Options granted 27.00—33.54 1,212,450 27.91Options exercised 13.31—29.78 (266,991) 20.21Options cancelled 16.00—38.31 (417,725) 31.16Balance as of July 31, 2012 $13.31—$40.37 6,253,751 $29.24Options granted 30.21—36.25 828,450 30.58Options exercised 13.31—31.54 (1,080,089) 22.79Options cancelled 16.39—38.31 (895,527) 30.02Balance as of July 31, 2013 $17.23—$40.37 5,106,585 $30.68Options granted 29.28—31.07 375,272 30.98Options exercised 17.33—30.21 (490,507) 26.45Options cancelled 20.95—38.31 (787,090) 32.71Balance as of July 31, 2014 $17.23—$40.37 4,204,260 $30.82The total fair value of options vested during the fiscal years ended July 31, 2014, 2013, and 2012 was $6,605, $11,086, and $8,016, respectively. Thetotal intrinsic value of options exercised during the fiscal years ended July 31, 2014, 2013, and 2012 was $2,452, $10,728, and $3,096, respectively.There were 3,004,348, 3,311,043, and 3,503,963 options exercisable with a weighted average exercise price of $31.15, $31.46, and $29.69 at July 31,2014, 2013, and 2012, respectively. The cash received from the exercise of options during the fiscal years ended July 31, 2014, 2013, and 2012 was $12,113,$20,324, and $3,864, respectively. The tax benefit on options exercised during the fiscal years ended July 31, 2014, 2013, and 2012 was $952, $1,964, and$777, respectively.The following table summarizes information about stock options outstanding at July 31, 2014: Options Outstanding Options Outstanding andExercisableRange of Exercise Prices Number of SharesOutstanding atJuly 31, 2014 Weighted AverageRemainingContractual Life(in years) WeightedAverageExercisePrice SharesExercisableat July 31,2014 Weighted AverageRemainingContractual Life(in years) WeightedAverageExercisePrice$17.00 - $27.99 664,383 6.2 $25.00 504,258 5.8 $24.32$28.00 - $37.99 2,956,377 5.7 30.66 1,916,590 4.4 30.77$38.00 - $40.99 583,500 2.8 38.26 583,500 2.8 38.26Total 4,204,260 5.4 30.82 3,004,348 4.3 $31.15As of July 31, 2014, the aggregate intrinsic value (defined as the amount by which the fair value of the underlying stock exceeds the exercise price ofan option) of options outstanding and the options exercisable was $1,145 and $1,145, respectively. 61Table of ContentsThe following tables summarize the RSU and restricted share activity for the fiscal years ended July 31, 2014, 2013, and 2012:Service-Based RSUs and Restricted Shares Shares Weighted AverageGrant Date Fair ValueBalance as of July 31, 2012 — $—New grants 5,000 32.99Vested — —Forfeited — —Balance as of July 31, 2013 5,000 $32.99New grants 108,055 30.93Vested — —Forfeited (8,198) 31.05Balance as of July 31, 2014 104,857 $31.02Performance-Based RSUs and Restricted Shares Shares Weighted AverageGrant Date Fair ValueBalance as of July 31, 2012 310,000 $31.38New grants 10,000 30.21Vested (33,333) 28.35Forfeited (55,000) 32.83Balance as of July 31, 2013 231,667 $31.43New grants — —Vested (35,001) 28.35Forfeited (116,666) 31.61Balance as of July 31, 2014 80,000 $32.509. Segment InformationEffective May 1, 2013, the Company is organized and managed on a global basis within two business platforms: Identification Solutions andWorkplace Safety, which are the reportable segments.The Company evaluates short-term segment performance based on segment profit or loss and customer sales. Segment profit or loss does not includecertain administrative costs, such as the cost of finance, information technology, human resources, legal, and executive leadership, which are managed asglobal functions. Restructuring charges, impairment charges, equity compensation costs, interest expense, investment and other income (expense) andincome taxes are also excluded when evaluating segment performance.Each business platform has a President that reports directly to the Company's chief operating decision maker, its Chief Executive Officer. Each platformhas its own distinct operations, is managed locally by its own management team, maintains its own financial reports and is evaluated based on globalsegment profit. The Company has determined that these business platforms comprise its operating and reportable segments based on the information used bythe Chief Executive Officer to allocate resources and assess performance.The segment results have been adjusted to reflect continuing operations in all periods presented. The depreciation and amortization expense andexpenditures for property, plant and equipment for discontinued operations are included under “corporate,” which then reconcile to the total companyamounts as listed in the statement of cash flows.62Table of ContentsFollowing is a summary of segment information for the years ended July 31, 2014, 2013 and 2012: 2014 2013 2012Sales to External Customers: IDS $825,123 $739,116 $636,590WPS 399,911 418,676 434,914Total Company $1,225,034 $1,157,792 $1,071,504Depreciation & Amortization: IDS $28,955 $25,920 $18,253WPS 7,919 9,078 7,827Corporate 7,724 13,727 17,907Total Company $44,598 $48,725 $43,987Segment Profit: IDS $176,129 $174,390 $160,658WPS 66,238 95,241 117,187Total Company $242,367 $269,631 $277,845Assets: IDS $882,440 $989,216 $744,055WPS 239,848 239,219 439,255Corporate 131,377 210,248 424,409Total Company $1,253,665 $1,438,683 $1,607,719Expenditures for property, plant & equipment: IDS $28,774 $18,186 $15,213WPS 10,580 8,459 4,989Corporate 4,044 9,042 3,945Total Company $43,398 $35,687 $24,147Following is a reconciliation of segment profit to net earnings (loss) for the years ended July 31, 2014, 2013 and 2012: Years Ended July 31, 2014 2013 2012Total profit from reportable segments$242,367 $269,631 $277,845Unallocated costs: Administrative costs120,015 121,693 114,098Restructuring charges15,012 26,046 6,084Impairment charges (1)148,551 204,448 —Investment and other income(2,402) (3,523) (2,082)Interest expense14,300 16,641 19,090(Loss) earnings from continuing operations before income taxes$(53,109) $(95,674) $140,655(1) The impairment charges in fiscal 2014 were in the IDS reportable segment. Of the total $204,448 impairment charges in fiscal 2013, $182,800 was in theWPS reportable segment and $21,648 was in the IDS reportable segment. Revenues*Years Ended July 31, Long-Lived Assets**As of Years Ended July 31, 2014 2013 2012 2014 2013 2012Geographic information: United States $675,771 $615,861 $522,393 $425,733 $576,539 $479,791Other 615,974 602,582 611,899 314,456 319,706 411,134Eliminations (66,711) (60,651) (62,788) — — —Consolidated total $1,225,034 $1,157,792 $1,071,504 $740,189 $896,245 $890,925* Revenues are attributed based on country of origin.** Long-lived assets consist of property, plant, and equipment, other intangible assets and goodwill.63Table of Contents10. Net (Loss) Earnings per Common ShareNet (loss) earnings per common share is computed by dividing net (loss) earnings (after deducting restricted stock dividends and the applicablepreferential Class A Common Stock dividends) by the weighted average Common Shares outstanding of 51,866 for 2014, 51,330 for 2013, and 52,453 for2012. The Company utilizes the two-class method to calculate earnings per share.In June 2008, the Financial Accounting Standards Board (“FASB”) issued accounting guidance addressing whether instruments granted in share-basedpayment transactions are participating securities prior to vesting, and therefore, need to be included in the earnings allocation in computing earnings pershare. This guidance requires that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends be consideredparticipating securities in undistributed earnings with common shareholders. The Company adopted the guidance during the first quarter of fiscal 2010. As aresult, the dividends on the Company’s performance-based restricted shares are reconciling items in the basic and diluted earnings per share calculations forthe respective periods presented.64Table of ContentsReconciliations of the numerator and denominator of the basic and diluted per share computations for the Company’s Class A and Class B commonstock are summarized as follows: Years ended July 31, 2014 2013 2012Numerator: (in thousands) (Loss) earnings from continuing operations$(48,146) $(138,257) $103,493Less: Restricted stock dividends(92) (238) (229)Numerator for basic and diluted earnings from continuing operations per Class A Nonvoting CommonShare$(48,238) $(138,495) $103,264Less: Preferential dividends(813) (797) (818)Preferential dividends on dilutive stock options(6) (5) (5)Numerator for basic and diluted earnings from continuing operations per Class B Voting Common Share$(49,057) $(139,297) $102,441Denominator: (in thousands) Denominator for basic earnings from continuing operations per share for both Class A and Class B51,866 51,330 52,453Plus: Effect of dilutive stock options— — 368Denominator for diluted earnings from continuing operations per share for both Class A and Class B51,866 51,330 52,821(Loss) earnings from continuing operations per Class A Nonvoting Common Share: Basic$(0.93) $(2.70) $1.97Diluted$(0.93) $(2.70) $1.95(Loss) earnings from continuing operations per Class B Voting Common Share: Basic$(0.95) $(2.71) $1.95Diluted$(0.95) $(2.71) $1.94Earnings (loss) from discontinued operations per Class A Nonvoting Common Share: Basic$0.04 $(0.32) $(2.31)Diluted$0.04 $(0.32) $(2.29)Earnings (loss) from discontinued operations per Class B Voting Common Share: Basic$0.05 $(0.32) $(2.31)Diluted$0.05 $(0.32) $(2.30)Net loss per Class A Nonvoting Common Share: Basic$(0.89) $(3.02) $(0.35)Diluted$(0.89) $(3.02) $(0.34)Net loss per Class B Voting Common Share: Basic$(0.90) $(3.03) $(0.36)Diluted$(0.90) $(3.03) $(0.36)In accordance with ASC 260, “Earnings per Share,” all options to purchase Class A Nonvoting Common Stock were not included in the computationof diluted loss per share for fiscal 2014 and 2013, since to do so would be anti-dilutive. Options to purchase approximately 4,592,486 shares of Class ANonvoting Common Stock for the fiscal year ended July 31, 2012, were not included in the computation of diluted net earnings (loss) per share as the impactof the inclusion of the options would have been anti-dilutive.65Table of Contents11. Commitments and ContingenciesThe Company has entered into various non-cancellable operating lease agreements. Rental expense charged to continuing operations on a straight-linebasis was $17,344, $18,108, and $15,196 for the years ended July 31, 2014, 2013, and 2012, respectively. Future minimum lease payments required undersuch leases in effect at July 31, 2014 were as follows:Years ending July 31, 2015$16,163201611,81320179,82720188,98520197,715Thereafter16,950 $71,453In the normal course of business, the Company is named as a defendant in various lawsuits in which claims are asserted against the Company. In theopinion of management, the liabilities, if any, which may ultimately result from lawsuits are not expected to have a material effect on the consolidatedfinancial statements of the Company.12. Fair Value MeasurementsThe Company follows the guidance in ASC 820, "Fair Value Measurements and Disclosures" as it relates to its financial and non-financial assets andliabilities. The accounting guidance applies to other accounting pronouncements that require or permit fair value measurements, defines fair value basedupon an exit price model, establishes a framework for measuring fair value, and expands the applicable disclosure requirements. The accounting guidanceindicates, among other things, that a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market forthe asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.The accounting guidance on fair value measurements establishes a fair market value hierarchy for the pricing inputs used to measure fair market value.The Company’s assets and liabilities measured at fair market value are classified in one of the following categories:Level 1 — Assets or liabilities for which fair value is based on (unadjusted) quoted prices in active markets for identical instruments that are accessible as ofthe reporting date.Level 2 — Assets or liabilities for which fair value is based on other significant pricing inputs that are either directly or indirectly observable.Level 3 — Assets or liabilities for which fair value is based on significant unobservable pricing inputs to the extent little or no market data is available,which result in the use of management's own assumptions.66Table of ContentsThe following tables set forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fairvalue on a recurring basis at July 31, 2014, and July 31, 2013, according to the valuation techniques the Company used to determine their fair values. InputsConsidered As Quoted Prices in ActiveMarkets for IdenticalAssets (Level 1) Significant OtherObservable Inputs(Level 2) Fair Values Balance Sheet ClassificationsJuly 31, 2014 Trading securities$15,962 $— $15,962 Other assetsForeign exchange contracts— 166 166 Prepaid expenses and other current assetsTotal Assets$15,962 $166 $16,128 Foreign exchange contracts$— $389 $389 Other current liabilitiesTotal Liabilities$— $389 $389 July 31, 2013 Trading securities$14,975 $— $14,975 Other assetsForeign exchange contracts— 294 294 Prepaid expenses and other current assetsTotal Assets$14,975 $294 $15,269 Foreign exchange contracts$— $890 $890 Other current liabilitiesTotal Liabilities$— $890 $890 The following methods and assumptions were used to estimate the fair value of each class of financial instrument:Trading securities: The Company’s deferred compensation investments consist of investments in mutual funds. These investments were classified asLevel 1 as the shares of these investments trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.Foreign exchange contracts: The Company’s foreign exchange contracts were classified as Level 2, as the fair value was based on the present value ofthe future cash flows using external models that use observable inputs, such as interest rates, yield curves and foreign exchange rates. See Note 14,“Derivatives and Hedging Activities” for additional information.There have been no transfers of assets or liabilities between the fair value hierarchy levels, outlined above, during the fiscal years ended July 31, 2014and July 31, 2013.The Company’s financial instruments, other than those presented in the disclosures above, include cash and cash equivalents, accounts receivable,notes payable, accounts payable, accrued liabilities and short-term and long-term debt. The fair values of cash and cash equivalents, accounts receivable,notes payable, accounts payable, and accrued liabilities approximated carrying values because of the short-term nature of these instruments. See Note 7 forinformation regarding the fair values of the Company's short-term and long-term debt.During fiscal 2014, goodwill with a carrying amount of $193,689 in the PeopleID reporting unit was written down to its estimated implied fair value of$93,277, resulting in a non-cash impairment charge of $100,412. In order to arrive at the implied fair value of goodwill, the Company calculated the fairvalue of all of the assets and liabilities of the reporting unit as if it had been acquired in a business combination. After assigning fair value to the assets andliabilities of the reporting unit, the result was the implied fair value of goodwill of $93,277, which represented a Level 3 asset measured at fair value on anonrecurring basis subsequent to its original recognition.The PeopleID reporting unit had intangible assets consisting of tradenames and customer relationships, which were valued using the income approachas part of the goodwill impairment valuation described above. The valuation was based upon current sales projections and profitability for each asset group,and the relief from royalty method was applied. As a result of the analysis, a definite-lived customer relationship with a carrying amount of $88,803 waswritten down to its estimated fair value of $44,600. In addition, indefinite-lived tradenames and other definite-lived customer relationships with a carryingamount of $5,384 were written down to their estimated fair value of $1,448. These represented Level 3 assets measured at fair value on a nonrecurring basissubsequent to their original recognition. These items resulted in a total non-cash impairment charge of $48,139 within the IDS segment.67Table of ContentsDuring fiscal 2013, the Company implemented a plan to divest its Die-Cut business. A fair-value measurement was performed and the assets andliabilities of the disposal group were recorded at approximate fair value less costs to sell and classified as "Assets held for sale" and "Liabilities held for sale."This resulted in a loss on the write-down of the disposal group of $15,658, recorded within discontinued operations in the third quarter of fiscal 2013. Fairvalue measurements were performed each subsequent quarter through July 31, 2014. There were no additional fair value adjustments recorded during fiscal2014. Fair value was determined utilizing a combination of external market factors and internal projections in accordance with ASC 360, "Property, Plant andEquipment."During fiscal 2013, goodwill with a carrying amount of $183,146 in the WPS Americas reporting unit was written down to its estimated implied fairvalue of $10,866, resulting in a non-cash impairment charge of $172,280. In order to arrive at the implied fair value of goodwill, the Company calculated thefair value of all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. After assigning fairvalue to the assets and liabilities of the reporting unit, the result was the implied fair value of goodwill of $10,866, which represented a Level 3 assetmeasured at fair value on a nonrecurring basis subsequent to its original recognition.The WPS Americas reporting unit had intangible assets consisting of tradenames and customer relationships, which were valued using the incomeapproach as part of the goodwill impairment test described above. The valuation was based upon current sales projections and profitability for each assetgroup, and the relief from royalty method was applied. As a result of the analysis, indefinite-lived tradenames with a carrying amount of $25,449 were writtendown to the estimated fair value of $14,881, which represented a Level 3 liability measured at fair value on a nonrecurring basis subsequent to its originalrecognition. This resulted in a non-cash impairment charge of $10,568 within the WPS segment.During fiscal 2013, goodwill with a carrying amount of $18,225 in the IDS APAC reporting unit was written off, resulting in a non-cash impairmentcharge of $18,225. When management compared the fair value to the carrying value of the reporting unit as part of the annual goodwill impairment test (StepOne), a qualitative assessment was completed for Step Two because the amount by which the carrying value exceeded fair value was more than the balance ofgoodwill remaining. The fair value of the reporting unit was determined utilizing a combination of external market factors, internal projections, and otherrelevant Level 3 measurements. As such, the Company recognized a goodwill impairment charge of the entire remaining goodwill balance of $18,225 duringthe year ended July 31, 2013. As a result of the goodwill impairment, the Company analyzed fixed assets for potential impairment within the IDS APACreporting unit by comparing undiscounted future cash flows to the carrying amount of the assets. Undiscounted future cash flows were determined using theCompany's internal projections and other relevant Level 3 measurements. As a result, the Company concluded that fixed assets with a carrying amount of$4,367 was written down to its estimated fair value of $1,100 during the year ended July 31, 2013.13. RestructuringDuring fiscal 2012, the Company took various measures to address its cost structure in response to weaker sales forecasts across the Company. As aresult of these actions, the Company recorded restructuring charges in continuing operations of $6,084, which consisted of $4,947 of employee separationcosts, $458 of fixed asset write-offs, $653 of other facility closure related costs, and $26 of contract termination costs. Of the $6,084 of restructuring chargesrecorded during fiscal 2012, $4,254 was incurred within IDS and $1,830 within WPS.In fiscal 2013, the Company announced a restructuring action to reduce its global workforce by approximately 5-7% in order to address its coststructure. In connection with this restructuring action, the Company incurred restructuring charges of $26,046 in continuing operations. These chargesconsisted of $18,350 of employee separation costs, $4,125 of fixed asset write-offs and $3,571 of other facility closure related costs. Of the $26,046 ofrestructuring charges recorded during fiscal 2013, $15,870 was incurred within IDS and $10,176 within WPS. The charges for employee separation costsconsisted of severance pay, outplacement services, medical and other benefits. Long-lived asset write-offs include both the net book value of property, plantand equipment written off in conjunction with facility consolidations, as well as indefinite-lived tradenames written off in conjunction with brandconsolidations within the WPS segment.In fiscal 2014, the Company announced a restructuring plan to consolidate facilities in North America, Europe and Asia. The Company implementedthis restructuring plan to enhance customer service, improve efficiency of operations and reduce operating expenses. In connection with this restructuringplan, the Company incurred restructuring charges of $15,012 in continuing operations in fiscal 2014. These charges consisted of $9,328 of employeeseparation costs, $4,374 of facility closure related costs, $1,043 of contract termination costs, and $267 of non-cash asset write-offs. Of the $15,012 ofrestructuring charges recorded during fiscal 2014, $9,013 was incurred within IDS and $5,999 was incurred within WPS. The charges for employee separationcosts consisted of severance pay, outplacement services, medical and other benefits. Non-cash asset write-offs consist mainly of68Table of Contentsfixed assets written off in conjunction with facility consolidations. Facility consolidation activities will extend into fiscal 2015 and will result inapproximately $15 million of additional restructuring charges.The costs related to these restructuring activities were recorded on the consolidated statements of earnings as restructuring charges. The Companyexpects the majority of the remaining cash payments to be made during the next twelve months. The liability is included in wages and amounts withheldfrom employees on the consolidated balance sheets.A roll-forward of the Company’s restructuring activity for fiscal 2014, 2013 and 2012 is below. EmployeeRelated AssetWrite-offs Other FacilityClosure/LeaseTermination Costs TotalRestructuring liability ending balance, July 31, 2011 $2,207 $— $50 $2,257Restructuring charges in continuing operations 4,947 458 679 6,084Restructuring charges in discontinued operations 5,997 — 29 6,026Non-cash write-offs — (458) — (458)Cash payments (4,342) — (492) (4,834)Restructuring liability ending balance, July 31, 2012 $8,809 $— $266 $9,075Restructuring charges in continuing operations $18,350 $4,125 $3,571 $26,046Restructuring charges in discontinued operations 2,811 362 1,376 4,549Non-cash write-offs — (4,487) — (4,487)Cash payments (18,495) — (2,482) (20,977)Restructuring liability ending balance, July 31, 2013 $11,475 $— $2,731 $14,206Restructuring charges in continuing operations $9,328 $267 $5,417 $15,012Restructuring charges in discontinued operations 6,615 299 75 6,989Non-cash write-offs — (566) — (566)Cash payments (24,029) — (6,617) (30,646)Restructuring liability ending balance, July 31, 2014 $3,389 $— $1,606 $4,99514. Derivatives and Hedging ActivitiesThe Company utilizes forward foreign exchange contracts to reduce the exchange rate risk of specific foreign currency denominated transactions. Thesecontracts typically require the exchange of a foreign currency for U.S. dollars at a fixed rate at a future date, with maturities of less than 18 months, whichqualify as cash flow hedges or net investment hedges under the accounting guidance for derivative instruments and hedging activities. The primary objectiveof the Company’s foreign currency exchange risk management program is to minimize the impact of currency movements due to transactions in other thanthe respective subsidiaries’ functional currency and to minimize the impact of currency movements on the Company’s net investment denominated in acurrency other than the U.S. Dollar. To achieve this objective, the Company hedges a portion of known exposures using forward foreign exchange contracts.As of July 31, 2014 and July 31, 2013, the notional amount of outstanding forward foreign exchange contracts was $104,000 and $157,500, respectively.The Company hedges a portion of known exposures using forward foreign exchange contracts. Main exposures are related to transactions denominatedin the British Pound, the Euro, Canadian Dollar, Australian Dollar, Malaysian Ringgit and Singapore Dollar. Generally, these risk management transactionswill involve the use of foreign currency derivatives to minimize the impact of currency movements on non-functional currency transactions.Hedge effectiveness is determined by how closely the changes in fair value of the hedging instrument offset the changes in the fair value or cash flowsof the hedged item. Hedge accounting is permitted only if the hedging relationship is expected to be highly effective at the inception of the hedge and on anon-going basis. Gains or losses on the derivative related to hedge ineffectiveness are recognized in current earnings.69Table of ContentsCash Flow HedgesThe Company has designated a portion of its forward foreign exchange contracts as cash flow hedges and recorded these contracts at fair value on theconsolidated balance sheets. For these instruments, the effective portion of the gain or loss on the derivative is reported as a component of othercomprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. At July 31,2014 and July 31, 2013, unrealized losses of $21 and unrealized gains of $118 have been included in OCI, respectively. These balances are expected to bereclassified from OCI to earnings during the next twelve months when the hedged transactions impact earnings. For the years ended July 31, 2014, 2013, and2012, the Company reclassified gains of $147 and $578, and losses of $494 from OCI into cost of goods sold, respectively.The Company had no outstanding forward foreign exchange contracts designated as cash flow hedges at July 31, 2014 or July 31, 2013.Net Investment HedgesThe Company has also designated intercompany and third party foreign currency denominated debt instruments as net investment hedges. During2014, the Company designated certain British Pound intercompany loans as net investment hedges to hedge portions of its net investment in British foreignoperations. At July 31, 2014, the Company had £25,000 of intercompany loans so designated. As of July 31, 2014 and 2013, the Company recognized in OCIlosses of $2,271 and gains of $2,121, respectively, on its intercompany loans designated as net investment hedges. On May 13, 2010, the Companycompleted the private placement of €75.0 million aggregate principal amount of senior unsecured notes to accredited institutional investors. This Euro-denominated debt obligation was designated as a net investment hedge to selectively hedge portions of its net investment in European foreign operations. Asof July 31, 2014 and 2013, the cumulative balance recognized in accumulated other comprehensive income were losses of $5,495 and $4,835, respectively,on the Euro-denominated debt obligation. The changes recognized in other comprehensive income during the years ended July 31, 2014, 2013 and 2012were losses of $660 and $7,470 and gains of $15,705, respectively, on the Euro-denominated debt obligation. The Company’s foreign denominated debtobligations are valued under a market approach using publicized spot prices.Additionally, the Company utilizes forward foreign exchange contracts designated as hedge instruments to hedge portions of its net investments inforeign operations. The net gains or losses attributable to changes in spot exchange rates are recorded in other comprehensive income. Recognition inearnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of thenet investment in the hedged foreign operation. At July 31, 2014 and 2013, the U.S dollar equivalent of these outstanding forward foreign exchangecontracts totaled $5,300 and $4,500, respectively. As of July 31, 2014 and 2013, the Company recognized in OCI losses of $265 and $150, respectively, onits net investment hedges.Non-Designated HedgesDuring the fiscal year ended July 31, 2014, the Company recognized a gain of $1,147 in “Investment and other income” on the consolidated statementsof earnings related to non-designated hedges. For the fiscal year ended July 31, 2013, the Company recognized a loss of $1,594 in "Investment and otherincome" on the consolidated statement of earnings related to non-designated hedges.70Table of ContentsFair values of derivative instruments in the consolidated balance sheets were as follows: Asset Derivatives Liability Derivatives July 31, 2014 July 31, 2013 July 31, 2014 July 31, 2013 BalanceSheetLocation FairValue BalanceSheetLocation FairValue BalanceSheetLocation FairValue BalanceSheetLocation FairValueDerivatives designated ashedging instruments Net investment hedges Foreign exchangecontractsPrepaid expensesand other currentassets $— Prepaid expensesand other currentassets $7 Other currentliabilities $14 Other currentliabilities $—Foreign currencydenominated debtPrepaid expensesand other currentassets $— Prepaid expensesand other currentassets $— Long termobligations, lesscurrent maturities $100,410 Long termobligations, lesscurrent maturities $99,750Total derivatives designatedas hedging instruments $— $7 $100,424 $99,750Derivatives not designatedas hedging instruments Foreign exchangecontractsPrepaid expensesand other currentassets $166 Prepaid expensesand other currentassets $287 Other currentliabilities $375 Other currentliabilities $890Total derivatives notdesignated as hedginginstruments $166 $287 $375 $89015. Discontinued OperationsDiscontinued operations consist of the Asia Die-Cut and Balkhausen Die-cut businesses ("Die-Cut"), which were classified as held for sale beginning inthe third quarter of fiscal 2013. In addition, the following previously divested businesses were reported within discontinued operations: Brady Medical andVaritronics (divested in fiscal 2013) and Etimark (divested in fiscal 2012). These divested businesses were part of the IDS business segment.The Company entered into an agreement with LTI Flexible Products, Inc. (d/b/a Boyd Corporation) on February 24, 2014, for the sale of its Die-Cutbusinesses. The first phase of the divestiture closed on May 1, 2014 and the Company received approximately $54.2 million of cash proceeds for itsbusinesses in Korea, Thailand and Malaysia, and its Balkhausen business in Europe. The second phase included the remainder of the Die-Cut businesseslocated in China. This portion of the divestiture closed on August 1, 2014.The following table summarizes the operating results of discontinued operations for the fiscal years ending July 31, 2014, 2013, and 2012: 2014 2013 2012Net sales$179,050 $214,137 $259,668Earnings (loss) from discontinued operations (1)6,715 4,083 (117,905)(Loss) on write-down of disposal group (2)— (15,658) —Income tax (expense) (3)(3,299) (4,703) (3,499)Loss on sale of discontinued operations (4)(1,602) — —Income tax benefit on sale of discontinued operations (5)364 — —Earnings (loss) from discontinued operations, net of tax$2,178 $(16,278) $(121,404)(1)The loss from operations of discontinued businesses in fiscal 2012 was primarily attributable to the $115.7 million goodwill impairment chargerecorded during the three months ended January 31, 2012, which was related to the Die-Cut business.(2)The Company recorded a $15.7 million loss to write-down the Die-Cut business to its estimated fair value less costs to sell in the three months endedApril 30, 2013.(3)Fiscal 2013 income tax expense was significantly impacted by the fiscal 2013 losses in China and Sweden, which had no tax benefit, and the increasein valuation allowance related to Shenzhen, China.71Table of Contents(4)Represents the loss incurred on the sale of the Die-Cut business, recorded in the three months ended July 31, 2014 and includes $3.9 million inliabilities retained as part of the divestiture agreement.(5)The income tax benefit on the sale of discontinued operations was significantly impacted by the release of a reserve for uncertain tax positions of $4.0million, which was triggered as a result of the Thailand stock sale during the three months ended July 31, 2014. This was offset by $3.6 million in taxexpense related to the gain on the sale of the Balkhausen assets. The Thailand stock sale and the Balkhausen asset sale were included in the first phaseof the Die-Cut divestiture.The first phase of the Die-Cut sale closed in the fourth quarter of fiscal 2014 and the second phase closed in the first quarter of fiscal 2015. The assetsand liabilities of the second phase were classified as held for sale as of July 31, 2014 and were as follows: July 31, 2014Accounts receivable—net$20,174Total inventories5,883Prepaid expenses and other current assets52Total current assets26,109 Other assets: Goodwill8,923Other intangible assets280Other89Property, plant and equipment—net14,141Total assets$49,542 Current liabilities: Accounts payable$9,199Wages and amounts withheld from employees1,140Other current liabilities301Total current liabilities10,640 Net assets of disposal group at fair value38,902In accordance with authoritative literature, accumulated other comprehensive income will be reclassified to the statement of earnings upon liquidationor substantial liquidation of the disposal group. As of July 31, 2014, the accumulated other comprehensive income attributable to the second phase of theDie-Cut divestiture was approximately $35,000, which reduces the net book value of the disposal group.72Table of Contents16. Unaudited Quarterly Financial Information Quarters First Second Third Fourth Total2014 Net sales $307,530 $291,194 $309,577 $316,733 $1,225,034Gross margin 157,847 142,536 155,120 154,061 609,564Operating income (loss) * 29,689 18,346 26,767 (116,013) (41,211)Earnings (loss) from continuing operations 18,135 10,517 20,183 (96,981) (48,146)Earnings (loss) from discontinued operations, net of income taxes ** 5,795 5,907 3,904 (13,428) 2,178Net earnings (loss) from continuing operations per Class A Common Share: Basic*** $0.35 $0.20 $0.39 $(1.89) $(0.93)Diluted*** $0.35 $0.20 $0.39 $(1.89) $(0.93)Net earnings (loss) from discontinued operations per Class A Common Share: Basic*** $0.11 $0.11 $0.08 $(0.26) $0.04Diluted*** $0.11 $0.11 $0.08 $(0.26) $0.042013 Net sales $272,015 $272,702 $302,483 $310,592 $1,157,792Gross margin 150,185 141,891 159,401 157,871 609,348Operating income * 43,236 21,797 30,935 (178,524) (82,556)Earnings from continuing operations 26,291 (10,671) 21,680 (175,557) (138,257)Earnings (loss) from discontinued operations, net of income taxes ** 896 1,987 (17,447) (1,714) (16,278)Net earnings from continuing operations per Class A Common Share: Basic*** $0.51 $(0.21) $0.42 $(3.40) $(2.70)Diluted*** $0.51 $(0.21) $0.42 $(3.40) $(2.70)Net earnings (loss) from discontinued operations per Class A Common Share: Basic*** $0.02 $0.04 $(0.34) $(0.03) $(0.32)Diluted*** $0.02 $0.04 $(0.34) $(0.03) $(0.32)The quarterly financial data has been impacted by the reclassification of the Die-Cut business into discontinued operations. Refer to Note 15 withinItem 8 for further information on discontinued operations.* In fiscal 2014, the Company recorded before tax impairment charges of $148,551 in the fourth quarter ended July 31, 2014 and before tax restructuringcharges of $6,840, $4,324, $3,039 and $809 in the first, second, third, and fourth quarters of fiscal 2014, respectively, for a total of $15,012. In fiscal2013, the Company recorded before tax impairment charges of $204,448 in the fourth quarter ended July 31, 2013 and before tax restructuring chargesof $1,933, $8,540 and $15,573 in the second, third and fourth quarters of fiscal 2013, respectively, for a total of $26,046.**In fiscal 2014, the Company recorded restructuring charges of $6,989 and a loss on the sale of the Die Cut business of $1,602 in discontinuedoperations in the fourth quarter ended July 31, 2014. In fiscal 2013, the Company recorded a $15,658 loss to write-down the Die-Cut business to itsestimated fair value less costs to sell in the three months ended April 30, 2013.*** The sum of the quarters does not equal the year-to-date total for fiscal 2014 and fiscal 2013 due to the quarterly changes inweighted-average shares outstanding.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.73Table of ContentsItem 9A. Controls and ProceduresDisclosure Controls and Procedures:Brady Corporation maintains a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by theCompany in the reports filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed,summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation,controls and procedures designed to ensure that information required to be disclosed by the Company in the reports the Company files under the ExchangeAct is accumulated and communicated to the Company’s management, including the Company’s principal executive and principal financial officers, orpersons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, underthe supervision and with the participation of its management, including its President and Chief Executive Officer and its Senior Vice President and ChiefFinancial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of theExchange Act. Based on that evaluation, the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.Management’s Report on Internal Control Over Financial Reporting:The management of Brady Corporation and its subsidiaries is responsible for establishing and maintaining adequate internal control over financialreporting for the Company, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control overfinancial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles.With the participation of the Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of ourinternal control over financial reporting as of July 31, 2014, based on the framework and criteria established in Internal Control — Integrated Framework(1992), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management concluded that, as ofJuly 31, 2014, the Company’s internal control over financial reporting is effective based on those criteria. The Company’s internal control over financialreporting, as of July 31, 2014, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, whichis included herein.Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis. Also,projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls maybecome inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Changes in Internal Control Over Financial Reporting:There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) thatoccurred during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting.74Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofBrady CorporationMilwaukee, WisconsinWe have audited the internal control over financial reporting of Brady Corporation and subsidiaries (the "Company") as of July 31, 2014, based on criteriaestablished in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. TheCompany's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the Company's internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principalfinancial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition ofthe company's assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override ofcontrols, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2014, based on the criteriaestablished in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financialstatements and financial statement schedule as of and for the year ended July 31, 2014, of the Company and our report dated September 29, 2014, expressedan unqualified opinion on those consolidated financial statements and financial statement schedule./s/ DELOITTE & TOUCHE LLPMilwaukee, WisconsinSeptember 29, 201475Table of ContentsItem 9B. Other InformationNone.PART IIIItem 10. Directors and Executive Officers of the RegistrantName Age TitleJ. Michael Nauman 52 President, CEO and DirectorAaron J. Pearce 43 Senior V.P., CFOThomas J. Felmer 52 Senior V.P., President - Workplace SafetyStephen Millar (1) 53 President - Die Cut, President - Brady Asia Pacific and V.P., BradyCorporationMatthew O. Williamson 58 President - Identification Solutions and V.P., Brady CorporationHelena R. Nelligan 48 Senior V.P. - Human ResourcesLouis T. Bolognini 58 Senior V.P., Secretary and General CounselBentley N. Curran 52 V.P. - Digital Business and Chief Information OfficerKathleen M. Johnson 60 V.P. and Chief Accounting OfficerPaul T. Meyer 45 Treasurer and Vice President - TaxPatrick W. Allender 67 DirectorGary S. Balkema 59 DirectorNancy L. Gioia 54 DirectorConrad G. Goodkind 70 DirectorFrank W. Harris 72 DirectorElizabeth P. Pungello 47 DirectorBradley C. Richardson 56 Director(1) On August 1, 2014, the Company announced that Mr. Millar would be leaving his employment with the Company effective September 30, 2014.J. Michael Nauman - Mr. Nauman has served on the Company’s Board of Directors and as the Company’s President and CEO since August 2014. Priorto joining the Company, from 1994 to 2014 he held a number of senior management positions at Molex Incorporated. Mr. Nauman was Molex's ExecutiveVice President and President of the Global Integrated Products Division from 2009 to 2014, where he led global business units in the automotive, datacommunications, industrial, medical, military/aerospace and mobile sectors. From 2004 to 2009, he served as Molex’s Senior Vice President and President,Global Integrated Product Division, President, Integrated Products Division and President, High Performance Products Division. The Company currentlytransacts business with Molex, and has historically done so, in the ordinary course of business and on an arm’s length basis. Prior to joining Molex in 1994,Mr. Nauman was Controller and then President of Ohio Associated Enterprises, Inc., and a tax accountant and auditor for Arthur Andersen. He is a boardmember of the Arkansas Science & Technology Authority, Arkansas Science, Technology, Engineering and Math Coalition, and Museum of Discovery. Mr.Nauman’s broad operational and financial experience, as well as his leadership and strategic perspective, provide the Board with insight and expertise todrive the Company’s growth and performance. Mr. Nauman was identified as an officer and director candidate through a process conducted by a Search76Table of ContentsCommittee of the Board of Directors, which utilized the resources of an executive search firm. Mr. Nauman holds a bachelor’s of science degree inmanagement from Case Western Reserve University, and is a certified public accountant and charter global management accountant.Aaron J. Pearce - Mr. Pearce joined the Company in 2004 as Director of Internal Audit. From 2006 to 2008, he served as Finance Director for theCompany’s Asia Pacific region, and from 2008 to 2010, served as Global Tax Director. In January 2010, Mr. Pearce was appointed Vice President, Treasurer,and Director of Investor Relations, and in April, 2013, was named Vice President - Finance, with responsibility for finance support to the Company’sWorkplace Safety and ID Solutions businesses, financial planning and analysis, and investor relations. In September 2014, Mr. Pearce was appointed SeniorVice President and Chief Financial Officer. Prior to joining the Company, Mr. Pearce was an auditor with Deloitte & Touche LLP from 1994 to 2004. Heholds a bachelors degree in business administration from the University of Wisconsin-Milwaukee and is a certified public accountant.Thomas J. Felmer - Mr. Felmer joined the Company in 1989 and has held several sales and marketing positions until being named Vice President andGeneral Manager of Brady's U.S. Signmark Division in 1994. In 1999, Mr. Felmer moved to Europe where he led the European Signmark business for twoyears, then gained additional responsibility for the European direct marketing business platforms, which he also led for two years. In 2003, Mr. Felmerreturned to the United States where he was responsible for Brady's global sales and marketing processes, Brady Software businesses, and integration leader ofthe EMED acquisition. In June 2004, he was appointed President - Direct Marketing Americas, and was named Chief Financial Officer in January 2008. InOctober 2013, Mr. Felmer was appointed Interim President and CEO, and served in these positions until August 2014. In September 2014, Mr. Felmer wasnamed President - Workplace Safety. Mr. Felmer received a bachelor's degree in business administration from the University of Wisconsin - Green Bay.Stephen Millar - Mr. Millar joined the Company in 1999 as Managing Director of Brady Australia, a position he held until 2008 when he joined BradyAmericas' leadership team as Vice President and General Manager responsible for its portfolio of people identification, medical and education businesses. In2010, he returned to Asia in the role of MRO Director for the region. He was appointed President - Brady Asia Pacific in March 2011 and was appointedPresident - Die Cut effective May 1, 2013. Prior to joining Brady, Mr. Millar served in a variety of leadership positions in Australia and New Zealand withGNB Technologies, a global manufacturer of automotive and industrial batteries. He holds a bachelor's of commerce and administration degree from VictoriaUniversity of Wellington, New Zealand and is a member of the institute of Chartered Accountants of New Zealand. Matthew O. Williamson - Mr. Williamson joined the Company in 1979. From 1979 to 1994, he served in a variety of sales and marketing leadershiproles. From 1995 to 2003, Mr. Williamson served as the Vice President and General Manager of the Company's specialty tape and identification solutionbusinesses. From 1996 to 1998, Mr. Williamson served as the Vice President and General Manager of the Identification Solutions and Specialty TapesDivision. From 1998 to 2001, he served as Vice President and General Manager of the Identification Solutions Division. From 2001 to 2003, he served asVice President and General Manager of the Global High Performance Identification Business. In April 2003, he was appointed President of the BradyAmericas business, and in January 2008, Mr. Williamson assumed responsibility for the Direct Marketing Americas business. Effective May 1, 2013, Mr.Williamson was appointed President - Identification Solutions, and has responsibility for the Identification Solutions business platform globally. He holds abachelor's degree in marketing from the University of Wisconsin - Milwaukee.Helena R. Nelligan - Ms. Nelligan joined the Company as Senior Vice President - Human Resources in November 2013. Prior to joining the Company,Ms. Nelligan held a variety of human resources leadership roles at Eaton Corporation from 2005 to 2013, including Vice President of Human Resources -Electrical Products Group, Vice President - Human Resources, Electrical Sector Americas and Director Human Resources - Electrical Components Division.From 1997 to 2005, Ms. Nelligan served in human resources leadership roles with Merisant Worldwide, Inc. and British Petroleum. She holds a bachelor’sdegree in criminal justice and a master’s degree in labor relations and human resources from Michigan State University.Louis T. Bolognini - Mr. Bolognini joined the Company as Senior Vice President, General Counsel and Secretary in January 2013. Prior to joining theCompany, he served as Senior Vice President, General Counsel and Secretary of Imperial Sugar Company from June 2008 through September 2012 and wasVice President and General Counsel of BioLab, Inc., a pool and spa manufacturing and marketing company from 1999 to 2008. Mr. Bolognini served asAssistant General Counsel to BioLab's parent company, Great Lakes Chemical Corporation, from 1990 to 1999. Mr. Bolognini served as an officer of BioLab,Inc. within a two-year period prior to the March 18, 2009 Chapter 11 bankruptcy petition filed by BioLab's parent company, Chemtura Corporation, onbehalf of itself and 26 U.S. affiliates, including BioLab. He holds a bachelor's degree in political science from Miami University and a Juris Doctor degreefrom the University of Toledo.77Table of ContentsBentley N. Curran - Mr. Curran joined the Company in 1999 and has held several technology leadership positions until being named Vice President ofInformation Technology in 2005. In October 2007, he was appointed Chief Information Officer of Brady globally. In February 2012, he was appointed to hiscurrent position, Vice President of Digital Business and Chief Information Officer. Prior to joining Brady, Mr. Curran served in a variety of technologyleadership roles for Compucom and the Speed Queen Company. He holds a bachelor's degree in business administration from Marian University and holds anassociate of science degree in electronics and engineering systems.Kathleen M. Johnson - Ms. Johnson joined the Company in 1989 as a division controller and became group finance director in 1996. In 2000, she wasappointed Vice President. In 2008, she was appointed Chief Accounting Officer. Prior to joining Brady, she spent six years with Kraft Food Service. Shestarted her career as a Certified Public Accountant with Deloitte & Touche. She holds a bachelor's degree in accounting from the University of Wisconsin -Whitewater.Paul T. Meyer - Mr. Meyer joined the Company in 2009 as Global Tax Director. In May 2013, he was appointed Treasurer, and was named VicePresident - Tax in November 2013. Prior to joining the Company, Mr. Meyer worked in the corporate tax departments of GE Healthcare and JohnsonDiversey.He began his career as a tax consultant with Ernst & Young. He holds a bachelor's degree in accounting and a master's degree in taxation from the Universityof Wisconsin-Milwaukee.Patrick W. Allender - Mr. Allender was elected to the Board of Directors in 2007. He serves as the Chair of the Finance Committee and as a member ofthe Audit and Corporate Governance Committees. He served as Executive Vice President and CFO of Danaher Corporation from 1998 to 2005 and ExecutiveVice President from 2005 to 2007. Additionally, he served as a public accountant at Arthur Andersen from 1968 to 1985. He has served as a director of ColfaxCorporation since 2008 and Diebold, Inc. since May 2011. Mr. Allender's strong background in finance and accounting, as well as his past experience as theCFO of a public company, provides the Board with financial expertise and insight.Gary S. Balkema - Mr. Balkema was elected to the Board of Directors in 2010. He currently serves as the Chair of the Management Development andCompensation Committee and is a member of the Audit and Technology Committees. From 2000 to 2011, he served as the President of Bayer HealthcareLLC and Worldwide Consumer Care Division. He was also responsible for overseeing Bayer LLC USA's compliance program. He has over 20 years of generalmanagement experience. Mr. Balkema brings strong experience in consumer marketing skills and mergers and acquisitions and integrations. His broadoperating and functional experience are valuable to the Company given the diverse nature of the Company's portfolio.Nancy L. Gioia - Ms. Gioia was elected to the Board of Directors in 2013, and serves on the Technology Committee. Ms. Gioia joined Ford MotorCompany in 1982 and will retire in October 2014. She currently serves as Director, Global Connectivity, Electrical and User Experience , and has held avariety of engineering and technology roles with Ford Motor Company, including Director, Global Electrification; Director, Sustainable MobilityTechnologies and Hybrid Vehicle Programs; Director, North America Current Vehicle Model Quality; Engineering Director, Visteon/Ford Due Diligence;Engineering Director, Small FWD/RWD Car Platforms-North America; and Vehicle Programs Director, Lifestyle Vehicles. She previously served as a Directorof Auto Alliance International, a joint venture of Ford Motor Company and Mazda Corporation; Director of the Electric Drive Transportation Association;and Director of the California Plug-in EV Collaborative; and currently serves as a Director of Inforum and the State of Michigan, Governor's TalentInvestment Board. Ms. Gioia's extensive experience in strategy, technology and engineering solutions, as well as her general business experience, providesthe Board with important expertise in product development and operations.Conrad G. Goodkind - Mr. Goodkind was elected to the Board of Directors in 2007. He currently serves as the Lead Independent Director, Chair of theCorporate Governance Committee and as a member of the Finance and Audit Committees. He previously served as Secretary of the Company from 1999 to2007. Mr. Goodkind was a partner in the law firm of Quarles & Brady, LLP, where his practice concentrated in corporate and securities law from 1979 to2009. Prior to 1979, he served as Wisconsin's Deputy Commissioner of Securities. Mr. Goodkind previously served as a director of Cade Industries, Inc. andAble Distributing, Inc. His extensive experience in advising companies on a broad range of transactional matters, including mergers and acquisitions andsecurities offerings, and historical knowledge of the Company provide the Board with expertise and insight into governance, business and compliance issuesthat the Company encounters.Frank W. Harris, Ph.D - Dr. Harris was elected to the Board of Directors in 1991. He serves as the Chair of the Technology Committee and as a memberof the Management Development and Compensation Committee. He served as the Distinguished Professor of Polymer Science and Biomedical Engineeringat the University of Akron from 1983 to 2008 and Professor of Chemistry at Wright State University from 1970 to 1983. He is the founder of severaltechnology based companies including Akron Polymer Systems where he serves as President and CEO. Dr. Harris is the inventor of several commercializedproducts including an optical film that realized over one billion dollars in sales. His extensive experience in technology and engineering solutions providesthe78Table of ContentsBoard with important expertise in new product development.Elizabeth P. Pungello, Ph.D - Dr. Pungello was elected to the Board of Directors in 2003. She serves as a member of the Management Development andCompensation, Corporate Governance and Technology Committees. Dr. Pungello is the President of the Brady Education Foundation in Chapel Hill, NorthCarolina and a Research Associate Professor in the Developmental Psychology Program at the University of North Carolina at Chapel Hill, and hasappointments at the Frank Porter Graham Development Institute and the Center for Developmental Science. Dr. Pungello also serves on the editorial board ofthe Journal of Marriage and Family and the Early Childhood Research Quarterly, as a reviewer for several other journals, and on a number of other non-profitboards. She is the granddaughter of William H. Brady, Jr., the founder of Brady Corporation. As a result of her substantial ownership stake in the Company, aswell as her family's history with the Company, she is well positioned to understand, articulate and advocate for the rights and interests of the Company'sshareholders.Bradley C. Richardson - Mr. Richardson was elected to the Board of Directors in 2007. He serves as the Chair of the Audit Committee and is a memberof the Management Development and Compensation, Corporate Governance and Finance Committees. He is the Executive Vice President and CFO ofPolyOne Corporation. He previously served as the Executive Vice President and CFO of Diebold, Inc. from 2009 to 2013, and as Executive Vice PresidentCorporate Strategy and CFO of Modine Manufacturing from 2003 to 2009. Prior to Modine, he spent 21 years with BP Amoco serving in various financialand operational roles with assignments in North America, South America and Europe. Mr. Richardson has served on the boards of Modine Manufacturing andTronox, Inc. He brings to the Company extensive knowledge and experience in the areas of operations, strategy, accounting, tax accounting and finance,which are areas of critical importance to the Company as a global public company.All Directors serve until their respective successors are elected at the next annual meeting of shareholders. Officers serve at the discretion of the Board ofDirectors. None of the Company's Directors or executive officers has any family relationship with any other Director or executive officer.Board Leadership Structure - The Board does not have a formal policy regarding the separation of the roles of Chief Executive Officer and Chairman ofthe Board as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company andthe membership of the Board. The Board currently has not appointed a Chairman of the Board, and the Board has not had a practice of appointing a Chairmanfor a period in excess of 20 years. In fiscal 2010, the Board formalized the position of Lead Independent Director, which is elected on an annual basis fromamong the independent Directors of the Board based upon the recommendation of the Corporate Governance Committee. In fiscal 2011, upon therecommendation of the Corporate Governance Committee, the Board enhanced the duties of the Lead Independent Director, which include, among others:chairing executive sessions of the non-management Directors; meeting periodically with the Chief Executive Officer and consulting as necessary withmanagement on current significant issues facing the Company; facilitating effective communication among the Chief Executive Officer and all members ofthe Board; and overseeing the Board's shareholder communication policies and procedures. Mr. Goodkind served as the Lead Independent Director in fiscal2014.The Board believes that its current leadership structure has enhanced the Board's oversight of, and independence from, Company management; theability of the Board to carry out its roles and responsibilities on behalf of our shareholders; and our overall corporate governance.Risk Oversight - The Board oversees the Company's risk management processes directly and through its committees. In general, the Board oversees themanagement of risks inherent in the operation of the Company's businesses, the implementation of its strategic plan, its acquisition and capital allocationprogram and its organizational structure. Each of the Board's committees also oversees the management of Company risks that fall within the committee'sareas of responsibility. The Company's management is responsible for reporting significant risks to executives at the quarterly disclosure committee meeting.The significance of the risk is assessed by executive management and escalation to the respective board committee and Board of Directors is determined. TheCompany reviews its risk assessment with the Audit Committee annually.Audit Committee Financial Expert - The Company's Board of Directors has determined that at least one Audit Committee financial expert is serving onits Audit Committee. Messrs. Richardson, Chair of the Audit Committee, and Allender and Balkema, members of the Audit Committee, are financial expertsand are independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.Director Independence - A majority of the Directors must meet the criteria for independence established by the Board in accordance with the rules of theNew York Stock Exchange (“NYSE”). In determining the independence of a Director, the Board must find that a Director has no relationship that mayinterfere with the exercise of his or her independence from management79Table of Contentsand the Company. In undertaking this determination, the Board considered the commercial relationships of the Company with Mr. Richardson’s employer,PolyOne Corporation, and with Ms. Gioia’s employer, Ford Motor Company. The commercial relationships, which involve the purchase and sale of productson customary terms, do not exceed the maximum amounts proscribed by the director independence rules of the NYSE over the past three fiscal years. Thecompensation paid to Mr. Richardson and Ms. Gioia by their employers is not linked in any way to the commercial relationships their employers have withthe Company. After consideration of these factors, the Board concluded that the commercial relationships were not material and did not prevent Mr.Richardson and Ms. Gioia from being considered independent. Based on application of the NYSE independence criteria, all current Directors and Directorsduring fiscal 2014, with the exception of Mr. Nauman, President and CEO, and the Company’s former President and CEO, Mr. Jaehnert, are deemedindependent. All members of the Audit, Management Development and Compensation, and Corporate Governance Committees are deemed independent.Meetings of Non-management Directors - The non-management Directors of the Board regularly meet alone without any members of managementpresent. The Lead Independent Director, currently Mr. Goodkind, is the presiding Director at these sessions. In fiscal 2014, there were 6 executive sessions.Interested parties can raise concerns to be addressed at these meetings by calling the confidential Brady hotline at 1-800-368-3613.Audit Committee Members - The Audit Committee, which is a separately-designated standing committee of the Board of Directors, is composed ofMessrs. Richardson (Chairman), Allender, Balkema, and Goodkind. Each member of the Audit Committee has been determined by the Board to beindependent under the rules of the SEC and NYSE.Code of Ethics - For a number of years, the Company has had a code of ethics for its employees. This code of ethics applies to all of the Company'semployees, officers and Directors. The code of ethics can be viewed at the Company's corporate website, www.bradycorp.com, or may be obtained in print byany person, without charge, by contacting Brady Corporation, Investor Relations, P.O. Box 571, Milwaukee, WI 53201. The Company intends to satisfy thedisclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of its code of ethics by placing suchinformation on its Internet website.Corporate Governance Guidelines - Brady's Corporate Governance Principles, as well as the charters of the Audit Committee, Corporate GovernanceCommittee, and Management Development and Compensation Committee, are available on the Company's Corporate website, www.bradycorp.com.Shareholders may request printed copies of these documents from Brady Corporation, Investor Relations, P.O. Box 571, Milwaukee, WI 53201.Director Qualifications - Brady's Corporate Governance Committee reviews the individual skills and characteristics of the Directors, as well as thecomposition of the Board as a whole. This assessment includes a consideration of independence, diversity, age, skills, expertise, and industry backgrounds inthe context of the needs of the Board and the Company. Although the Company has no policy regarding diversity, the Corporate Governance Committeeseeks a broad range of perspectives and considers both the personal characteristics and experience of Directors and prospective nominees to the Board so that,as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company's businesses.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Exchange Act requires the Company’s Directors and executive officers, and persons who own more than ten percent of a registeredclass of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and otherequity securities of the Company. Executive officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish theCompany with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on a review of the copies of such reports furnished tothe Company and written representations that no other reports were required, during the fiscal year ended July 31, 2014, all Section 16(a) filing requirementsapplicable to its officers, directors and greater than 10 percent beneficial owners were complied with other than with respect to the following:•A Form 4 for Mr. Felmer that was not filed on or before December 10, 2012, or a Form 5 at fiscal year end, as required to report the sale of 2,869shares of Class A Nonvoting Common Stock on December 6, 2012. This transaction was reported on a Form 4 for Mr. Felmer that was filed onAugust 21, 2014.80Table of ContentsItem 11. Executive CompensationCompensation Discussion and AnalysisOverviewOur Compensation Discussion and Analysis focuses upon the Company's total compensation philosophy, the role of the Management Development &Compensation Committee (for purposes of the Compensation Discussion and Analysis section, the “Committee”), total compensation components inclusiveof base salary, short-term incentives, long-term incentives, benefits, perquisites, severance amounts and change-in-control agreements for our executiveofficers, market and peer group data and the approach used by the Committee when determining each element of the total compensation package.For fiscal 2014, the following executive officers' compensation is disclosed and discussed in this section (the “named executive officers” or “NEOs”):•Thomas J. Felmer, Senior Vice President, President-Workplace Safety, and Former Chief Financial Officer (1);•Frank M. Jaehnert, Former President, Chief Executive Officer and Director (2);•Louis T. Bolognini, Senior Vice President, General Counsel and Secretary;•Stephen Millar, Vice President, Brady Corporation, President, Brady Asia Pacific, and President-Die Cut (3), and;•Matthew O. Williamson, President-Identification Solutions and Vice President, Brady Corporation(1) Effective October 7, 2013, Mr. Felmer was appointed by the Company as Interim President and Chief Executive Officer during the search forMr. Jaehnert’s permanent replacement and held these positions until the appointment of J. Michael Nauman as the President and Chief Executive Officer, onAugust 4, 2014. Mr. Felmer also retained his position of Senior Vice President and CFO of the Company and served as Acting President-Workplace Safetyduring fiscal 2014. In September 2014, Mr. Felmer was named President-Workplace Safety.(2) Effective October 7, 2013, Mr. Jaehnert retired and resigned from his position as President and Chief Executive Officer and Director of the Company.(3) On August 1, 2014, the Company entered into a Separation Agreement with Mr. Millar in connection with his departure from the Company as a resultof the elimination of his positions following the divestiture of the Company’s Die Cut business. Mr. Millar's employment with the Company will end onSeptember 30, 2014. Retirement of Frank Jaehnert: On October 7, 2013, Mr. Jaehnert retired as the Company’s President and Chief Executive Officer, effective October 7, 2013.Mr. Jaehnert remained employed by the Company through December 31, 2013, during which time he was available in a consultative position to assist withrespect to transition issues. The Company entered into a written agreement with Mr. Jaehnert in connection with his retirement that provided for payment ofhis salary and benefits through December 31, 2013, and a severance payment of $800,000 to be paid in equal installments throughout the calendar yearfollowing his separation from employment on December 31, 2013. The agreement also contains 12-month non-competition and non-solicitation provisions,as well as standard confidentiality, waiver and non-disparagement provisions. The Company entered into the agreement with Mr. Jaehnert in order to obtainhis assistance on transition issues and for an agreement not to compete with the Company or solicit its employees, customers and vendors for a period of 12months after his retirement.Appointment of J. Michael Nauman: On August 1, 2014, the Board of Directors appointed J. Michael Nauman as President, Chief Executive Officer andDirector of the Company, effective August 4, 2014. None of Mr. Nauman's compensation was paid or payable in fiscal 2014. The Company entered into an employment offer letter dated August 1, 2014 with Mr. Nauman (the “Offer Letter”)providing that Mr. Nauman will receive an annual base salary of $675,000, subject to periodic review and adjustment. The Offer Letter also provides that hewill participate in the Company’s annual cash incentive plan in fiscal 2015, with a targeted annual incentive opportunity of 100% of base salary and amaximum annual incentive opportunity of 200% of base salary. The Offer Letter further provides the Mr. Nauman will receive awards under the Company’s2012 Omnibus Incentive Stock Plan in September 2014, subject to the discretion of the Management Development and Compensation Committee, with agrant date value of $1.8 million, divided equally between time-based options and restricted stock units. Under the terms of the Offer Letter, Mr. Nauman willbe required to hold, directly or indirectly, shares of Brady common stock equal to five times his base salary within five years of his appointment. The Offer Letter provides that Mr. Nauman will be able to participate in all employee benefit plans and programs generally available to theCompany’s executive officers, including perquisites covering a car allowance, financial planning and executive physical program, and will be reimbursed forcertain of his relocation expenses. The Offer Letter also contains 24-81Table of Contentsmonth non-competition and non-solicitation provisions, as well as standard confidentiality, waiver and non-disparagement provisions. ShouldMr. Nauman’s employment be terminated by the Company without cause or should he resign for good reason (as such events are defined in the Offer Letter),the Company will pay Mr. Nauman a severance benefit equal to two times the sum of his base salary and target bonus. Upon commencement of his employment on August 4, 2014, and pursuant to the terms of the Offer Letter, the Company entered into a RestrictedStock Unit Agreement with Mr. Nauman (the “RSU Agreement”) under which Mr. Nauman received 53,668 restricted stock units with an aggregate awardvalue of $1.5 million, as calculated based on the 30-day average NYSE closing price of the Company’s Class A Non-Voting Common Stock. The restrictedstock units will vest in equal annual increments on the third, fourth and fifth anniversaries of the grant date, with vesting accelerated in the event of death,disability, termination following a change of control, or termination by the Company without cause (as such events are defined in the RSU Agreement). Effective August 4, 2014, the Company also entered into a Change of Control Agreement with Mr. Nauman (the “Change of Control Agreement”). Under the terms of the Change of Control Agreement, in the event of a qualifying termination within 24 months following a change of control (as such eventsare defined in the Change of Control Agreement), Mr. Nauman will receive two times his annual base salary, two times his target bonus, and the amount of histarget bonus prorated based on when the termination occurs.Executive SummaryOur BusinessSince our founding nearly 100 years ago, we have grown the Company by developing innovative high-performing products, participating in growingmarkets, delivering on-time solutions and leveraging our core competencies across our businesses. Our strategy is to be the market leader in each of theglobal businesses we are focused on.Our passion around market leadership is tempered only by the fact that when we win, we win the right way. Our values have been, and will be, thecornerstone of everything that we do at Brady. Focus on the Customer, Invest in our People, Embrace Teamwork, Excel at Everything We Do, Be Bold andDecisive, Protect Our Future and Win the Right Way describe the behaviors that we expect and reward at Brady.In order to achieve our goals, we recognize it is critical to assemble and maintain a leadership team with the integrity, skills and dedication needed toexecute our growth plan. We design and use our compensation plans to help us achieve these objectives and align our rewards with the intended behaviorsand outcomes.Our Fiscal 2014 Performance and Link to Pay DecisionsFiscal 2014 Resulted in No or Below Target Bonuses and Unearned Performance-Based Stock Options, Restricted Stock and Restricted Stock Units forNEOsFiscal 2014 was a year of challenge for Brady. We continued to be challenged by the competitive environment in our Workplace Safety ("WPS")business as new market entrants and the ongoing shift of buying patterns to the web have had a negative impact on our business. We returned both of Brady’ssegments to profitable organic sales growth in the fourth quarter of fiscal 2014 and we are confident that the actions we have taken and the improvements weare now seeing will enable future sales, profitability, and cash flow growth.In fiscal 2014, we made significant portfolio and management decisions to better position the Company for growth in the future. These changes were ameaningful shift in the industries we serve as we are reducing our reliance on the more volatile and less profitable consumer electronics industry, to anexpansion of our core Identification Solutions ("IDS”) business to focus on markets with long-term growth trends. In our WPS business, our strategy to returnto growth included a focus on workplace safety critical industries in addition to increased investment in e-commerce expertise.•On a GAAP basis, we incurred a fiscal 2014 net loss from continuing operations of $48.1 million.•Brady continues to demonstrate adequate cash generation to meet ongoing business needs as we generated $93.4 million of cash flow fromoperating activities during the year ended July 31, 2014.•Our sales from continuing operations for the full year were $1.23 billion, up 5.8% from fiscal 2013. Organic sales were up 0.2%, acquisitionsincreased sales by 5.7%, and foreign currency translation decreased sales by 0.1%.82Table of ContentsOur gross debt-to-EBIDTA remains at approximately 1.7. Having a strong balance sheet puts us in a solid financial position to fund future growthopportunities or return value to our shareholders.For fiscal 2014, with the exception of Messrs. Felmer and Bolognini, we did not increase the base salary or target bonus opportunities of our namedexecutive officers. Mr. Felmer received a 2.5% increase in base salary over fiscal 2013 levels to better align his base pay with the peer group market medianfor Chief Financial Officers. Mr. Bolognini received a 3.1% increase in base salary over fiscal 2013 levels in recognition of the level of work performed in hisfirst year as General Counsel.Except for Messrs. Millar and Williamson, no named executive officer received a performance-based bonus award for fiscal 2014. In connection withMr. Millar’s contributions to the divestiture of the Company’s Asia Die Cut business, Mr. Jaehnert recommended and the Committee approved a one-timediscretionary bonus to Mr. Millar of $25,000. The bonus, which was paid on November 1, 2013, was reflective of Mr. Millar’s commitment and contributionsto improving performance of the Die Cut business despite the challenging business environment after the public announcement of the divestiture, whichresulted in significant employee retention and motivational challenges. Organic sales growth, income from operations and net income financial metrics, aswell as individual performance funded by the achievement of net income goals, served as the performance objectives under our fiscal 2014 bonus plan. Mr.Jaehnert was not eligible for a bonus due to his separation from the Company on December 31, 2013. Since we did not achieve the threshold level ofperformance relative to our Workplace Safety segment or total Company objectives, Messrs. Felmer and Bolognini did not receive a bonus for fiscal 2014.Mr. Millar received a bonus equal to AUD $43,953 which was reflective of the partial achievement of the Die Cut segment income from operations goal. Mr.Williamson received a bonus equal to $31,422 which was reflective of the partial achievement of the Identification Solutions segment organic sales growthgoal.Mr. Jaehnert did not receive a long-term incentive grant in fiscal 2014. As a group and excluding Mr. Jaehnert, the 2014 grant date fair market value ofall equity compensation granted to our named executive officers was 120.7% of salary. Fiscal 2014 grants were made in the form of time-based stock optionsand time-based restricted stock units. Stock options, which are inherently performance-based and have value only to the extent that the price of our stockincreases, have been and continue to be a significant part of our named executive officers' compensation package. Restricted stock units that vest with thepassage of time were granted to our named executive officers for the first time beginning in fiscal 2014 and were intended to facilitate retention while shiftingthe Company's use of different equity types to more closely reflect general market norms. Excluding Mr. Jaehnert, the grant date value of awards granted toall other named executive officers was 31.9% higher than in fiscal 2013, realigning target total compensation levels with the market median after a year oflower than market equity award sizes (2013). Overall, target total compensation for our named executive officers was at the median of our peer groupcompanies for fiscal 2014.The final vesting opportunity to achieve the earnings per share goal established by the Committee for the 2008 and 2012 awards of performance-basedrestricted stock was fiscal 2014. Based on the performance of the Company in fiscal 2014, the vesting criteria for these awards was not met for the namedexecutive officers who are currently employed by the Company and who had received these awards (Messrs. Felmer, Williamson, and Millar). As a result, theawards were forfeited on September 9, 2014, the date the Audit Committee accepted the results of the fiscal year audit.The performance-based stock options granted in fiscal 2012 contain a performance vesting requirement based on the achievement of annual dilutedearnings per share growth, including a second opportunity to vest over a two or three year period if the compound annual growth rate exceeds the annualgrowth target. The final vesting opportunity was fiscal 2014. Based on the performance of the Company in fiscal 2014, the vesting criteria for this award werenot met for the named executive officers who had received this award (Messrs. Felmer, Jaehnert, Williamson, and Millar). As a result, the awards were forfeitedon September 9, 2014, the date the Audit Committee accepted the results of the fiscal year audit.Based upon input from an external compensation consultant and the Committee's desire to provide an incentive for retention and improved Companyperformance, effective August 2, 2010, a grant of 100,000 shares of performance-based restricted stock was issued to Mr. Jaehnert. This grant of performance-based restricted stock included both a performance vesting requirement based upon earnings per share growth and a service vesting requirement. Theearnings per share growth goal was satisfied during fiscal 2011 and as of July 31, 2013, 33,333 shares of this award were vested. In accordance with the awardagreement given in connection with this grant, an additional 35,001 shares vested upon Mr. Jaehnert's retirement and the remaining 31,666 shares forfeitedon December 31, 2013, the date of Mr. Jaehnert’s separation from the Company.On October 7, 2013, Mr. Felmer was awarded 5,000 shares of service-based restricted stock in recognition of his increased duties upon his appointmentas Interim President and Chief Executive Officer. The shares would vest upon the earlier of the end of Mr. Felmer’s service as Interim President and CEO orthe Board appointment of a permanent President and CEO, with the vesting having occurred upon the appointment of Mr. Nauman as President and ChiefExecutive Officer on August 4, 2014. On August 4, 2014, the Committee, for retention purposes, awarded Mr. Felmer an additional 5,000 time-basedrestricted stock units which will83Table of Contentsvest upon the first anniversary of the grant date, with vesting accelerated in the event of death, disability, termination following a change of control, or upontermination of employment by the Company without cause.Executive Compensation PracticesAs part of the Company's pay for performance philosophy, the Company's compensation program includes several features that maintain alignmentwith shareholders: Emphasis on Variable Compensation More than 45% of the named executive officers' possible compensation is tied to Company performancewhich the Company believes drives shareholder value. Ownership Requirements During fiscal 2014, the chief executive officer was required to own at least 100,000 shares of stock in theCompany and Mr. Nauman is required to own shares in the Company at a value equal to five times his basesalary. All other named executive officers are required to hold at least 30,000 shares of stock. Officers mustmeet their ownership requirements within five years. Clawback Provisions Following a review and analysis of relevant governance and incentive compensation practices and policiesacross our compensation peer group and other public companies, the Committee instituted a recoupmentpolicy, effective August 2013, under which incentive compensation payments and/or awards may berecouped by the Company if such payments and/or awards were based on erroneous results. If theCommittee determines that an executive officer or other key executive of the Company who participates inany of the Company's incentive plans has engaged in intentional misconduct that results in a materialinaccuracy in the Company's financial statements or fraudulent or other willful and deliberate conduct thatis detrimental to the Company or there is a material, negative revision of a performance measure for whichincentive compensation was paid or awarded, the Committee may take a variety of actions including,among others, seeking repayment of incentive compensation (cash and/or equity) that is greater than whatwould have been awarded if the payments/awards had been based on accurate results and the forfeiture ofincentive compensation. As this policy suggests, the Committee believes that any incentive compensationshould be based only on accurate and reliable financial and operational information, and, thus, anyinappropriately paid incentive compensation should be returned to the Company for the benefit ofshareholders. The Committee expects that the implementation of this policy will serve to enhance theCompany's compensation risk mitigation efforts. While the implemented policy affords the Committeediscretion regarding the application and enforcement of the policy, the Company and the Committee willconform the policy to any requirements that may be promulgated by the national stock exchanges in thefuture, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Performance Thresholds and Caps Historically, 100% of annual cash and equity incentive awards were performance-based. Beginning in fiscal2014, 50% of the annual equity incentive award was granted in time-based restricted stock units to facilitateretention while shifting the Company's use of different equity types to more closely reflect general marketnorms. In addition, the annual cash incentive plan has a maximum payment cap. Securities Trading Policy We prohibit executive officers from trading during certain periods at the end of each quarter until after wedisclose our financial and operating results. We may impose additional restricted trading periods at any timeif we believe trading by executives would not be appropriate because of developments that are, or could be,material and which have not been publicly disclosed. The Insider Trading Policy also prohibits thepledging of Company stock as collateral for loans, holding Company securities in a margin account byofficers, directors or employees, and the hedging of Company securities. Annual Risk Reviews The Company conducts an annual compensation-related risk review and presents findings and suggestedrisk mitigation actions to both the Audit and Management Development and Compensation Committees.84Table of ContentsThe Company’s compensation programs also maintain alignment with shareholders by not including certain features:No Excessive Change of ControlSeverance In fiscal 2014, for the former chief executive officer, the maximum cash benefit was equal to 3x salaryand 3x the average bonus payment received in the three years immediately prior to the date the change ofcontrol occurs. Mr. Nauman's maximum cash benefit is equal to 2x salary and 2x target bonus plus aprorated target bonus in the year in which the termination occurs. For all other named executive officers,the maximum cash benefit is equal to 2x salary and 2x the average bonus payment received in the threeyears immediately prior to the date the change of control occurs. In the event of a change of control,unexercised stock options become fully exercisable or, if canceled, each named executive officer shall begiven cash or stock equal to the in-the-money value of the canceled stock options. No Employment Agreements In fiscal 2014, the Company did not maintain any employment agreements with its executives. Mr.Nauman's Offer Letter provides that he is deemed an at-will employee, but will receive a severancebenefit in the event his employment is terminated by the Company without cause or for good reason asdescribed in the Offer Letter and summarized above. No Reloads, Repricing, or Options Issuedat a Discount Stock options issued are not repriced, replaced, or regranted through cancellation or by lowering theoption price of a previously granted option.Compensation Philosophy and ObjectivesWe seek to align the interests of our executives with those of our investors by evaluating performance on the basis of key financial measurements thatwe believe closely correlate to long-term shareholder value. To this end, we have structured our compensation program around the following principles:•Provide a competitive total compensation package targeted at the median of our compensation peers;•Incentivize long-term shareholder value creation by encouraging behaviors which facilitate long-term success without undue risk taking; and•Realize top-tier company performance through a merit-based, pay-for-performance culture that is aligned with our Company values.Determining CompensationManagement Development and Compensation Committee’s RoleThe Committee is responsible for monitoring and approving the compensation of the Company's named executive officers. The Committee approvescompensation and benefit policies and strategies, approves corporate goals and objectives relative to the chief executive officer and other executive officercompensation, oversees the development process and reviews development plans of key executives, reviews compensation-related risk, administers ourequity incentive plans including compliance with executive share ownership requirements, approves all severance policies or pay-outs, and consults withmanagement regarding employee compensation generally. With respect to executive officers, at the beginning of each year, the Committee sets base salaries,approves the cash bonuses paid for the prior fiscal year, approves equity incentive awards for the new fiscal year and establishes the objective performancetargets to be achieved for the new year.Consultants’ RoleThe Committee has historically utilized the services of an executive compensation consulting firm and legal counsel to assist with the review andevaluation of compensation levels and policies on a periodic basis, as well as to provide advice with respect to new or modified compensation arrangements.In fiscal 2014, the Committee utilized the services of Meridian Compensation Partners as compensation consultants and Quarles & Brady LLP, as legalcounsel, both of which were determined to be independent by the Committee.Management’s RoleTo aid in determining compensation for fiscal 2014 , management obtained data regarding comparable executive officer compensation through astandard data subscription with Equliar, Inc. For fiscal 2014, Mr. Jaehnert, our former chief executive officer, used this data to make recommendations to theCommittee concerning compensation for each named executive officer other than himself. In setting compensation for our named executive officers, theCommittee takes into consideration these recommendations, along with the results of the Company during the fiscal year, the level of responsibility,demonstrated leadership capability, the compensation levels of executives in comparable roles from within our peer group and the results of85Table of Contentsannual performance reviews which, for our chief executive officer, included feedback from his direct reports and a self-appraisal. In addition, during fiscal2014, the Committee took into consideration the recommendations of its independent compensation consultant, particularly with respect to compensationelements related to the chief executive officer transition. Our former chief executive officer did not attend the portion of any committee meeting during whichthe Committee discussed matters related specifically to his compensation.Tally SheetsThe Committee reviews executive officer compensation tally sheets each year. These summaries set forth the dollar amount of all components of eachnamed executive officer's compensation, including base salary, annual target and actual cash incentive compensation, annual equity incentive compensation,the value of outstanding equity, stock option exercises during the year, stock option gains during the year, the value of Brady's contribution to retirementplans, the value of Company-provided health and welfare benefits and social security taxes paid on the executive's behalf. Reviewing this information allowsthe Committee to determine an executive officer's total compensation is and how a potential change to an element of our compensation program would affectthe officer's overall compensation.Components of CompensationOur total compensation program includes five components: base salary, annual cash incentives, long-term equity incentives, employee benefits andperquisites. Each component serves a particular purpose and, therefore, each is considered independent of the other components, although all fivecomponents combine to provide a holistic total compensation approach. We use these components of compensation to attract, retain, motivate, develop andreward our executives.The base salary, annual cash and long-term equity incentive components are determined through a pay-for-performance approach, targeted at marketmedian for the achievement of performance goals with an opportunity for upper quartile pay when top-tier performance is achieved. Our compensationstructure is balanced by the payment of below market median compensation to our named executive officers when actual fiscal results do not meet or exceedexpected fiscal results, such as in fiscal years 2013 and 2014. The following table describes the purpose of each performance-based component and how thatcomponent is related to our pay-for-performance approach:86Table of Contents CompensationComponent Purpose of CompensationComponent Compensation Component in Relationto PerformanceBase salary A fixed level of income security used toattract and retain employees bycompensating them for the primaryfunctions and responsibilities of theposition. The base salary increase an employee receives depends upon theemployee's individual performance, the employee's displayed skillsand competencies and market competitiveness. Annual cash incentive award To attract, retain, motivate and rewardemployees for achieving or exceedingannual performance goals at Company andplatform levels. Financial performance determines the actual amount of the executive'sannual cash incentive award. Award amounts are “self-funded”because they are included in the financial performance results whendetermining actual financial performance. Annual equity incentive award:Time-based stock options and time-based restricted stock units To attract, retain, motivate and reward toptalent for the successful creation of long-term stockholder value. An assessment of executive leadership, experience and expected futurecontribution, combined with market competitive grant information,are used to determine the amount of equity granted to each executive.Stock options are inherently performance-based in that the stock pricemust increase over time to provide compensation value to theexecutive.Restricted stock units are units that are settled in shares of commonstock upon vesting. We believe restricted stock units serve as a strongreward and retention device, while promoting the alignment ofexecutive decisions with Company goals and shareholder interests.Establishing Our Total Compensation Component LevelsThe Committee uses peer group data to test the reasonableness and competitiveness of several components of compensation, including base salaries,annual cash incentives, and long-term equity incentives of positions similar to those of our named executive officers. The Committee's assessment of therevenue of the companies in the fiscal 2013 peer group resulted in revisions to the peer group for fiscal 2014 to more closely align the Company with a peergroup of companies with similar annual revenues. The following 19 companies were included in the fiscal 2014 total compensation analysis conducted usingpublicly available data sourced through Equilar, Inc: Actuant Corporation; Acuity Brands Inc.; A.O. Smith Corporation; Barnes Group Inc; Clarcor Inc.;Curtiss-Wright Corporation; Enpro Industries, Inc.; Esco Tehcnologies Inc.; Graco Inc; H.B. Fuller Company; Hexcel Corporation; IDEX Corporation; II-IVInc.; Mine Safety Appliances Company; Modine Manufacturing Company; Nordson Corporation; Plexus Corp; Watts Water Technologies Inc.; and ZebraTechnologies Corporation.Based on our analysis of the fiscal 2014 peer group used for determining fiscal 2014 compensation, performed in July 2013, the base salaries of ournamed executive officers were generally at the median of our peers. Fiscal 2014 target total compensation of our named executive officers, inclusive of basesalary, cash incentives and equity awards, was also at the median of our peer companies, although certain of the named executive officers were above andothers were below such mark.Fiscal 2014 Named Executive Officer CompensationBase SalariesOther than with respect to Messrs. Felmer and Bolognini, Mr. Jaehnert did not recommend and the Committee did not approve increases in base salaryfor the named executive officers because they were paid base salaries consistent with the median of base salaries for similar positions at our peer groupcompanies. The Committee approved a 2.5% increase in base salary for Mr. Felmer for fiscal 2014 to better align his base salary to the market median of ourpeer companies. Although Mr. Bolognini's base salary is above the median of our peer companies, Mr. Jaehnert recommended and the Committee agreed toprovide a 3.1% increase in base salary for Mr. Bolognini for fiscal 2014 in recognition of his leadership of the legal function during his first year with theCompany.87Table of ContentsNamed Executive Officer Fiscal 2013 Fiscal 2014 Percentage Increase Thomas J. Felmer $377,500 $384,625 2.5% Frank M. Jaehnert 800,000 800,000 —% Louis T. Bolognini 320,000 327,500 3.1% Stephen Millar (1) 304,313 325,160 —% Matthew O. Williamson 383,675 383,675 —% (1)The amounts in this table for Mr. Millar, who lived and worked in Australia, were paid to him in Australian Dollars. The amounts shown in U.S.dollars in the table above were converted from Australian Dollars at the average exchange rate for fiscal 2014: 1USD = 0.9195AUD; 2013: 1USD =0.9825AUD. The difference between fiscal 2013 and fiscal 2014 base salaries is entirely related to exchange rate fluctuation.The salary detail in the table above reflects the annualized 12-month salary for each executive. The salaries in the Summary Compensation Tablereflect fiscal year compensation earned including three (3) months at fiscal 2013 rates and nine (9) months at fiscal 2014 rates.Annual Cash Incentive AwardsThe Company is organized and managed on a global basis with two reportable segments: Identification Solutions (“IDS”) and Workplace Safety(“WPS”). The Company’s Asia Die Cut business, also considered a segment for the incentive award plan, is classified as discontinued operations for financialreporting purposes. All named executive officers participate in an annual cash incentive plan, which is based on fiscal year financial results of a segment orthe Company. Set forth below is a description of the fiscal 2014 financial measures:•Organic sales growth: Organic sales growth is measured as the increase in sales of continuing operations, excluding all acquired and divested salesand adjusted for foreign currency changes for the current year, divided by organic sales from continuing operations from the prior year. Organic salesare also known as “core sales” and “base sales." Organic sales growth is reported quarterly and annually in the Company's 10-Q and 10-K SECfilings.•Segment organic sales growth: Segment organic sales growth is measured as the increase in segment sales excluding all acquired and divested salesand adjusted for foreign currency changes for the current year, divided by segment organic sales from the prior year.•Income from continuing operations: Income from continuing operations is measured as sales of continuing operations less the cost of goods sold,selling expenses and research and development expenses of continuing operations, at budgeted exchange rates, for the current year.•Segment income from operations: Segment income from operations is measured as segment sales less the segment's cost of goods sold, sellingexpenses and research and development expenses, at budgeted exchange rates, for the current year.•Net income from continuing operations: Net income from continuing operations is defined as revenues from continuing operations at actualexchange rates minus expenses for the cost of doing business. Net income from continuing operations excludes certain non-routine expenses such asrestructuring charges, certain tax charges, certain other non-routine charges, and income or loss from acquisitions and divestitures completed infiscal 2014.•Total Company net income: Total Company net income is defined as total Company revenues at actual exchange rates minus total companyexpenses for the cost of doing business. Total Company net income excludes certain non-routine expenses such as restructuring charges, certain taxcharges, certain other non-routine charges, and income or loss from acquisitions and gain or loss on the sale of businesses completed in fiscal 2014.•Team Goals: Funded by the achievement of net income growth, each named executive officer is evaluated by the Committee on the attainment ofkey performance indicators agreed by the Committee at the start of the fiscal year to be critical to the execution of the Company's strategy.88Table of ContentsMessrs. Jaehnert, Felmer and BologniniThe cash incentive payable to Messrs. Jaehnert, Felmer and Bolognini for fiscal 2014 was based on organic sales growth, income from continuingoperations, net income from continuing operations, and team goals. We use organic sales growth because we believe that the long-term value of ourenterprise depends on our ability to grow revenue without regard for acquisitions. We use income from continuing operations because we believe it aligns tothe management of sales and expenses, and we use net income from continuing operations to focus on effectively managing our costs while growing ourrevenue. Funded by the achievement of our net income goals, team goals are used to assess the delivery upon key performance indicators determined to becritical to the execution of the Company's strategy.For fiscal 2014, no bonus was payable to these named executive officers as the organic sales, income from continuing operations and net income fromcontinuing operations thresholds were not achieved. No bonus was payable to Mr. Jaehnert given his separation from the Company effective December 31,2013. The threshold, target, maximum and actual amounts for Messrs. Jaehnert, Felmer, and Bolognini were as follows: Performance Measure (weighting) Threshold Target Maximum Fiscal 2014 Actual ResultOrganic Sales Growth (30%) 1.4% 4.2% 7.8% or more 0.2%Income from continuing operations (30%)(millions) $266.6 $290.0 $309.7 or more $238.9 Net Income from continuing operations (20%)(millions) $97.5 $112.0 $125.0 or more ($48.1) Team Goals (20%) Varies by IndividualFiscal 2014 Bonus Award Actual(% of Salary) Actual($)T. Felmer 0% 70% 140% 0% $0L. Bolognini 0% 60% 120% 0% $0Messrs. Millar and WilliamsonThe cash incentive payable to Mr. Millar for fiscal 2014 was based on achievement of Die Cut segment organic sales growth, Die Cut segmentincome from operations, total Company net income and team goals. The cash incentive payable to Mr. Williamson for fiscal 2014 was based on achievementof IDS segment organic sales growth, IDS segment income from operations, net income from continuing operations and team goals. We use segment organicsales and income from operations goals because we believe they align Messrs. Millar and Williamson to the management of sales and expenses directlywithin their control as the President-Brady Asia Pacific and President-Die Cut, and President-Identification Solutions, respectively. Like the other namedexecutive officers, the company-wide performance measures for Messrs. Millar and Williamson focused on driving greater overall profitability. Funded by theachievement of our net income goals, team goals are evaluated against key performance indicators determined to be critical to the execution of theCompany's strategy. Mr. Millar earned a bonus for the achievement of segment income from operations, but did not meet the threshold established for abonus payment related to segment organic sales growth. Mr. Williamson earned a bonus for the achievement of segment organic sales growth, but did notmeet the threshold established for a bonus payment related to segment income from operations. In addition, the Company did not achieve the thresholdlevels of total Company net income or net income from continuing operations for the year; therefore, no bonus is payable for these components.For 2014, the threshold, target, maximum and actual amounts for Mr. Millar were as follows:Performance Measure (weighting) Threshold Target Maximum Fiscal 2014 Actual ResultDie Cut Segment Organic Sales Growth (30%) 1.5% 5.0% 8.5% or more (2.4)%Die Cut Segment IFO (30%)(millions) $17.7 $19.6 $22.0 or more $19.4 Total Company Net Income (20%)(millions) $110.0 $126.0 $141.0 or more ($46.0) Team Goals (20%) Various goals per IndividualFiscal 2014 Bonus Award Actual(% of Salary) Actual(AUD $)S. Millar 0% 70% 140% 15 % 43,953In connection with Mr. Millar’s contributions to the divestiture of the Company’s Die Cut business, management recommended and the committeeapproved a one-time bonus to Mr. Millar of $25,000, which was paid on November 1, 2013. The bonus was reflective of Mr. Millar’s commitment andcontributions to improving performance of the Die Cut business despite the challenging business environment after the public announcement of thedivestiture which resulted in significant89Table of Contentsemployee retention and motivational challenges. In addition, the Committee approved within Mr. Millar's Separation Agreement signed August 1, 2014, aone-time bonus of AUD $100,000 in recognition of his efforts in connection with the completion of the divestiture of the Company’s Die Cut business. Thesebonuses are not reflected in the above table.For 2014, the threshold, target, maximum and actual amounts for Mr. Williamson were as follows:Performance Measure (weighting) Threshold Target Maximum Fiscal 2014 Actual ResultIDS Segment Organic Sales Growth (30%) 2.4% 4.2% 7.8% ormore 2.9%IDS Segment IFO (30%)(millions) $184.0 $192.5 $204.8 ormore $173.9 Net Income from continuing operations (20%)(millions) $97.5 $112.0 $125.0 ormore ($48.1) Team Goals (20%) Various goals per IndividualFiscal 2014 Bonus Award Actual(% of Salary) Actual($)M. Williamson 0% 70% 140% 8% $31,422The target annual cash incentive award that would be payable to each executive officer is calculated as a percentage of the officer's eligiblecompensation defined as base salary in effect during the fiscal year, pro-rated to reflect base salary adjustments throughout the fiscal year.For fiscal 2014, the Committee reviewed the impact of unusual and unforeseen events on the payout of bonuses and determined that none would beconsidered in the calculation of bonus payouts. In general, the Committee regularly reviews and makes decisions on the impact of unusual events on a case-by-case basis and continually evaluates compensation policies and practices in light of ongoing developments and best practices in the area of incentivecompensation. Long-Term Equity Incentive AwardsThe Company has historically utilized a variety of incentive vehicles including performance-based stock options, time-based stock options,performance-based restricted shares, time-based restricted shares and time-based restricted stock units to attract, retain and motivate key employees whodirectly impact the long-term performance of the Company. The size and type of equity awards for executives other than the chief executive officer aredetermined annually by the Committee with input from the chief executive officer. With regard to the award size given to the chief executive officer, theCommittee uses its discretion in combination with market competitive information obtained periodically from Equilar Inc and, for fiscal 2014 in connectionwith the chief executive officer transition, the recommendation of its independent compensation consultant.For fiscal 2014, the Committee reviewed the Black-Scholes valuations of historical grants, median levels of equity awarded to similar positions at ourpeer companies and the estimated value of all proposed grants and then authorized fiscal 2014 awards consisting of a combination of time-based stockoptions and time-based restricted stock units.Performance-based Stock Options: Although stock options are inherently performance-based in that options have no value unless the stock price increases,the Committee believes that using additional performance criteria for vesting of stock options can serve as an additional motivator for executives to furtherdrive Company performance. Performance-based stock options granted in fiscal 2012 have vesting criteria based upon year-over-year diluted EPS growth andan additional opportunity to vest over a two- or three-year period if the compound annual growth rate exceeds the annual target. Performance-based stockoptions granted prior to fiscal 2012 have vesting criteria based only upon year-over-year diluted EPS growth as measured against the S&P 600. Noperformance-based stock options were granted in fiscal 2013 or 2014.Time-based Stock Options: Time-based stock option grants in fiscal 2014 were reviewed and approved by the Committee on September 10, 2013, with aneffective grant date of September 20, 2013. The grant price was the fair market value of the stock on the grant date, which was calculated as the average of thehigh and low stock price on that date. The time-based stock options generally vest one-third each year for the first three years and have a ten-year life.Time-based Restricted Stock/Units: The Company's first grants of time-based restricted stock units were awarded to our named executive officers at the startof fiscal 2014. Time-based restricted stock unit grants for fiscal 2014 were reviewed and approved by the Committee on September 10, 2013, with aneffective grant date of September 20, 2013. The grant price was the final closing price on the date of grant. The time-based restricted stock units vest one-third each year for the first three years.Service-Based Restricted Stock: Effective October 7, 2013, Mr. Felmer was awarded 5,000 shares of service-based restricted stock in recognition of hisincreased duties upon his appointment as Interim President and Chief Executive Officer. The shares would vest upon the earlier of the end of Mr. Felmer’sservice as Interim President and CEO or the Board appointment of a90Table of Contentspermanent President and CEO, with the vesting having occurred upon the appointment of Mr. Nauman as President and Chief Executive Officer on August 4,2014. Performance-based Restricted Stock/Units: Periodically, the Company has issued restricted stock or restricted stock units to key executives as an element oftheir overall compensation. In January 2008, the Committee approved the issuance of performance-based restricted stock awards to six of Brady's seniorexecutives including current named executive officers Messrs. Jaehnert, Felmer, and Williamson. A total of 210,000 restricted shares were issued andincluded both a performance vesting requirement (earnings per share) and a service vesting requirement (five years). In addition to the original vestingcriteria, the restricted stock awards were amended effective July 20, 2011, to include an additional vesting opportunity based upon earnings per share growthfor the fiscal years ending July 31, 2013 or July 31, 2014, and a service vesting requirement through July 31, 2014. The final opportunity to achieve thevesting criteria was fiscal 2014, and based on the performance of the Company in fiscal 2014, the vesting criteria for this was award was not met which causedthese awards to be forfeited.On September 21, 2012, Mr. Millar was awarded 10,000 restricted stock units with both a performance vesting requirement and a service vestingrequirement (two years). This award was approved to align Mr. Millar's incentive opportunity with the earnings per share goal established for the other NEOsin 2008. The final opportunity to achieve the vesting criteria was fiscal 2014, and based on the performance of the Company in fiscal 2014, the vestingcriteria for this was award was not met which caused this award to be forfeited.Based upon input from an external compensation consultant and the Committee's desire to provide an incentive for retention and improved Companyperformance, effective August 2, 2010, a grant of 100,000 shares of performance-based restricted stock was issued to Mr. Jaehnert. This grant of performance-based restricted stock included both a performance vesting requirement based upon earnings per share growth and a service vesting requirement. Theearnings per share growth goal was satisfied during fiscal 2011 and as of July 31, 2013, 33,333 shares of this award were vested. In accordance with the awardagreement given in connection with this grant, an additional 35,001 shares vested upon Mr. Jaehnert's retirement and the remaining 31,666 shares forfeitedon December 31, 2013, the date of Mr. Jaehnert’s separation from the Company.Fiscal 2014 Annual Equity Grants Named Officers Number of Time-BasedStock Options Grant DateFair Value Number ofTime-BasedRSUs Grant DateFair Value Number ofTime-BasedRestrictedShares Grant DateFair ValueT. Felmer 33,682 $325,001 10,580 $325,118 5,000 $145,050F. Jaehnert _ _ _ _ _ _L. Bolognini 4,848 $142,508 4,639 $144,134 _ _S. Millar 14,327 $137,508 4,476 $139,069 _ _M. Williamson 25,006 $240,003 7,813 $242,750 _ _Other Elements of CompensationHealth and Welfare Benefits: We provide subsidized health and welfare benefits which include medical, dental, life and accidental death or dismembermentinsurance, disability insurance and paid time off. Executive officers are entitled to participate in our health and welfare plans on generally the same terms andconditions as other employees, subject to limitations under applicable law. In addition, the Company provides employer-paid long-term care insurance andmaintains a supplemental executive disability policy for executives. The supplemental disability policy provides for Group Long Term Disability insurance(LTD) of up to 60% of pre-tax base salary and bonus, up to a monthly maximum benefit of $25,000. Brady Corporation pays the premiums for these benefits;therefore, these benefits are taxable to the executive.Retirement Benefits: Brady employees (including named executive officers) in the United States and certain expatriate employees working for itsinternational subsidiaries are eligible to participate in the Brady Corporation Matched 401(k) Plan (the “Matched 401(k) Plan”). In addition, namedexecutive officers in the United States and employees at many of our United States locations are also eligible to participate in the Brady Corporation FundedRetirement Plan (“Funded Retirement Plan”).Under the Funded Retirement Plan, the Company contributes 4% of the eligible earnings of each employee covered by the Funded Retirement Plan. Inaddition, participants may elect to have their annual pay reduced by up to 5% and have the amount of this reduction contributed to their Matched 401(k)Plan and matched with an additional 4% contribution by the Company. Participants may also elect to have up to another 45% of their eligible earningscontributed to the Matched 401(k) Plan (without an additional matching contribution by the Company and up to the maximum allowed by the IRS). Theassets of the Matched 401(k) Plan and91Table of ContentsFunded Retirement Plan credited to each participant are invested by the trustee of the Plans as directed by each plan participant in a variety of investmentfunds as permitted by the Matched 401(k) Plan and the Funded Retirement Plan.Due to the IRS income limitations for participating in the Matched 401(k) Plan and the Funded Retirement Plan, the named executive officers areeligible to participate in the Brady Restoration Plan. The Brady Restoration Plan is a non-qualified deferred compensation plan that allows an equivalentbenefit to the Matched 401(k) Plan and the Funded Retirement Plan for named executive officer income above the IRS compensation limits.Benefits are generally payable upon the death, disability, or retirement of the participant, or upon termination of employment before retirement,although benefits may be withdrawn from the Matched 401(k) Plan and paid to the participant if required for certain emergencies. Under certain specifiedcircumstances, the Matched 401(k) Plan allows loans to be drawn on a participant's account. The participant is immediately fully vested with respect toemployee contributions; all other contributions become fully vested over a two-year period of continuous service for the Matched 401(k) Plan and after sixyears of continuous service for the Funded Retirement Plan.Deferred Compensation Arrangements: During fiscal 2002, the Company adopted the Brady Corporation Executive Deferred Compensation Plan(“Executive Deferred Compensation Plan”), under which executive officers, corporate staff officers and certain key management employees of the Companyare permitted to defer portions of their salary and bonus into a plan account, the value of which is measured by the fair value of the underlying investments.The assets of the Executive Deferred Compensation Plan are held in a Rabbi Trust and are invested by the trustee as directed by the participant in severalinvestment funds as permitted by the Executive Deferred Compensation Plan. The investment funds available in the Executive Deferred Compensation Planinclude Brady Corporation Class A Nonvoting Common Stock and various mutual funds that are provided in the Matched 401(k) Plan. On May 1, 2006, theplan was amended to require that deferrals into the Company's Class A Nonvoting Common Stock must remain in the Company's Class A NonvotingCommon Stock and be distributed in shares of the Company's Class A Nonvoting Common Stock.At least one year prior to termination of employment, the executive must elect whether to receive their account balance following termination ofemployment in a single lump sum payment or by means of distribution under an Annual Installment Method. If the executive does not submit an electionform or has not submitted one timely, then payment shall be made each year for a period of five years. The first payment must be one-tenth of the balanceheld; the second one-ninth; and so on, with the balance held in the Rabbi Trust reduced by each payment. Distributions of the Company Class A NonvotingCommon Stock are made in-kind; distributions of other assets are in cash.Effective January 1, 2008, the Executive Deferred Compensation Plan was amended and restated to comply with the provisions of Section 409A of theInternal Revenue Code. Amounts deferred prior to January 1, 2005 (which were fully vested under the terms of the plan), including past and future earningscredited thereon, will remain subject to the terms in place prior to January 1, 2005.Millar Severance Agreement: On August 1, 2014, it was announced that Mr. Millar will be departing the Company and will remain employed by theCompany through September 30, 2014. On August 1, 2014, the Company entered into a written agreement with Mr. Millar in connection with thetermination of his employment that provided for payment of his salary and benefits through September 30, 2014, a severance payment of AUD $299,000 tobe paid in equal installments throughout the calendar year following his separation from employment on September 30, 2014 and a payment of AUD 100,000in recognition of his work on the divestiture of the Company’s Die Cut business. The agreement also contains 12-month non-competition and non-solicitation provisions, as well as standard confidentiality, waiver and non-disparagement provisions. The Company entered into the agreement with Mr.Millar in order to obtain his assistance on transition issues after the closing of the Die Cut business divestiture and for an agreement not to compete with theCompany or solicit its employees, customers and vendors for a period of 12 months after the conclusion of his employment.Perquisites: Brady provides the named executive officers with the following perquisites that are not available to other non-executive employees:•Annual allowance for financial and tax planning•Company car•Long-term care insurance•Personal liability insurance92Table of ContentsStock Ownership RequirementsWe believe that the interests of shareholders and executives become aligned when executives become shareholders in possession of a meaningfulamount of Company stock. Furthermore, this stock ownership encourages positive performance behaviors and discourages executive officers from takingundue risk. In order to encourage our executive officers and directors to acquire and retain ownership of a significant number of shares of the Company'sstock, stock ownership requirements have been established.The Board of Directors has established the following stock ownership requirements for our named executive officers: F. Jaehnert 100,000 sharesT. Felmer 30,000 sharesL. Bolognini 30,000 sharesS. Millar 30,000 sharesM. Williamson 30,000 sharesThe stock ownership requirement for each director is 5,000 shares of Company stock. Mr. Nauman's stock ownership requirement has been set at fivetimes his base salary.Each executive has a period of five years to satisfy the holding requirement. All named executive officers except Messrs. Millar and Bolognini met andretained their respective ownership levels as of fiscal 2014. Mr. Millar has until fiscal year 2016 and Mr. Bolognini has until fiscal 2018 to achieve theirrespective ownership level. If an executive does not meet the above ownership level or certain interim levels, the Committee may direct that the executive'safter-tax payout on any incentive plans will be in Class A Nonvoting Common Stock to bring the executive up to the required level, and the executive maynot sell any shares, other than to cover tax withholding requirements associated with the exercise or vesting of the equity award, until such time as they meetthe requirements.The Committee reviews the actual stock ownership levels of each of the named executive officers on an annual basis to ensure the guidelines are met.For purposes of determining whether an executive meets the required ownership level, Company stock owned outright, Company stock held in the ExecutiveDeferred Compensation Plan, Company stock owned in the Employee 401(k) Plan or pension plan and time-based restricted stock or restricted stock units areincluded. In addition, 20% of any vested stock options that are “in the money” are included.Insider Trading PolicyThe Company's Insider Trading Policy prohibits hedging and other monetization transactions in Company securities by officers, directors andemployees. The prohibition on hedging transactions includes financial instruments such as prepaid variable forwards, equity swaps, collars and exchangefunds. The Insider Trading Policy also prohibits the pledging of Company stock as collateral for loans or holding Company securities in a margin account byofficers, directors or employees.Employment and Change of Control AgreementsIn fiscal 2014, the Company did not have employment agreements with our executives. The Offer Letter entered into with Mr. Nauman on August 1,2014, provides that he is deemed an at at-will employee, but will receive a severance benefit in the event his employment is terminated without cause or forgood reason as described therein.The Board of Directors of Brady Corporation approved change of control agreements for certain executive officers of the Company, including all thenamed executive officers. The agreements applicable to all of the named executive officers other than Mr. Jaehnert and Mr. Nauman provide a payment of anamount equal to two times their annual base salary and two times the average bonus payment received in the three years immediately prior to the date thechange of control occurs in the event of termination or resignation upon a change of control. The agreements for Messrs. Felmer, Millar and Williamson alsoprovide for reimbursement of any excise taxes imposed and, all of the agreements provide for up to $25,000 of attorney fees to enforce the executive's rightsunder the agreement. Payments under the agreement will be spread over two years.In May 2003, the Board approved a Change of Control Agreement for Mr. Jaehnert, which was subsequently amended and restated in December 2008to comply with Internal Revenue Code Section 409A. This agreement expired upon Mr. Jaehnert's retirement on December 31, 2013. See the section entitled"Appointment of J. Michael Nauman" above for a description of Mr. Nauman's Change of Control Agreement.93Table of ContentsUnder the terms of the 2012 Omnibus Incentive Stock Plan, in the event of (a) the merger or consolidation of the Corporation with or into anothercorporation or corporations in which the Corporation is not the surviving corporation, (b) the adoption of any plan for the dissolution of the Corporation, or(c) the sale or exchange of all or substantially all the assets of the Corporation for cash or for shares of stock or other securities of another corporation, allthen-unexercised stock options become fully exercisable. If any stock option is canceled subsequent to the events described above, the Corporation or thecorporation assuming the obligations of the Corporation, shall pay an amount of cash or stock equal to the in-the-money value of the canceled stock options.Non-Compete/Non-Solicitation/ConfidentialitySince fiscal 2013, agreements memorializing equity awards under the Company's 2012 Omnibus Incentive Stock Plan have contained non-competition,non-solicitation and confidential information covenants applicable to the award recipients. The confidential information covenant prohibits the use,disclosure, copying or duplication of the Company's confidential information other than in the course of authorized activities conducted in the course of therecipient's employment with the Company. The other covenants prohibit the recipient, for 12 months after termination of employment with the Company,from (i) performing duties for or as a competitor of the Company which are the same or similar to those performed by the recipient in the 24 months prior totermination of employment with the Company or (ii) inducing or encouraging employees, vendors or clients of the Company to breach, modify or terminaterelationships or agreements they had with the Company during the 24 month period prior to the recipient's termination of employment. See the sectionentitled "Appointment of J. Michael Nauman" above for a description of the additional covenants applicable to Mr. Nauman.Compliance with Tax Regulations Regarding Executive CompensationSection 162(m) of the Internal Revenue Code, added by the Omnibus Budget Reconciliation Act of 1993, generally disallows a tax deduction to publiccompanies for compensation over $1 million paid to the Company's chief executive officer or the other named executive officers. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The Company's executive compensation program, as currentlyconstructed, is not likely to generate significant nondeductible compensation in excess of these limits. The Committee will continue to review these taxregulations as they apply to the Company's executive compensation program. It is the Committee's intent to preserve the deductibility of executivecompensation to the extent reasonably practicable and to the extent consistent with its other compensation objectives.The Committee also considers it important to retain flexibility to design compensation programs, even where compensation payable under suchprograms may not be fully deductible, if such programs effectively recognize a full range of criteria important to the Company's success and result in a gain tothe Company that would outweigh the limited negative tax effect.Management Development and Compensation Committee Interlocks and Insider ParticipationDuring fiscal 2014, the Board's Management Development and Compensation Committee was composed of Messrs. Balkema, Harris, and Richardsonand Ms. Pungello. None of these persons has at any time been an employee of the Company or any of its subsidiaries. There are no relationships among theCompany's executive officers, members of the Committee or entities whose executives serve on the Board that require disclosure under applicable SECregulations.Management Development and Compensation Committee ReportThe Committee has reviewed and discussed the Compensation Discussion and Analysis with management; and based on the review and discussions,the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's annual report on Form10-K.Gary Balkema, ChairmanFrank HarrisElizabeth P. PungelloBradley Richardson94Table of ContentsCompensation Policies and PracticesThe Company's compensation policies for executive officers and all other employees are designed to avoid incentives to create undue risks to theCompany. The Company's compensation programs are weighted towards offering long-term incentives that reward sustainable performance; do not offersignificant short-term incentives that might drive high-risk investments at the expense of the long-term Company value; and are set at reasonable andsustainable levels, as determined by a review of the Company's economic position, as well as the compensation offered by comparable companies. Under theoversight of its Audit and Management Development and Compensation Committees, the Company reviewed its compensation policies, practices andprocedures for all employees to evaluate and ensure that they do not foster risk taking beyond that deemed acceptable within the Company's business model.The Company believes that its compensation policies, practices and procedures do not encourage employees to take unnecessary or excessive risks that arereasonably likely to have a material adverse effect on the Company.Summary Compensation TableThe following table sets forth compensation awarded to, earned by, or paid to the named executive officers, who served as executive officers during thefiscal year ended July 31, 2014, for services rendered to the Company and its subsidiaries during the fiscal years ended July 31, 2014, July 31, 2013 andJuly 31, 2012.Name and Principal Position FiscalYear Salary($) Bonus($) RestrictedStock Awardsand RSUs($)(1) OptionAwards($)(2) Non-EquityIncentive PlanCompensation($)(3) All OtherCompensation($)(4) Total($)T.J. Felmer 2014 $384,397 — $477,221 $325,001 $— $59,842 $1,246,461Senior VP, President-Workplace Safety,Former CFO 2013 377,500 — — 422,007 — 54,164 853,671 2012 375,481 — — 755,909 — 105,811 1,237,201F.M. Jaehnert 2014 360,000 — — — — 541,074 901,074Former President, CEO, & Director (5) 2013 800,000 — — 834,740 — 101,198 1,735,938 2012 800,000 — — 2,086,727 — 238,296 3,125,023L.T. Bolognini - Senior VP-GeneralCounsel & Secretary (6) 2014 327,500 — 144,134 142,508 — 51,649 665,791S. Millar 2014 325,160 25,000 139,069 137,508 47,799 83,825 758,361President-APAC, VP - BradyCorporation (7) 2013 304,314 — 302,100 278,247 — 73,508 958,169M.O. Williamson 2014 383,675 — 242,750 240,003 31,422 30,694 928,544President - IDS & VP - BradyCorporation 2013 380,666 — — 319,984 — 62,067 762,717 2012 370,481 — — 662,218 122,148 92,492 1,247,339 (1)Represents the grant date fair value computed in accordance with accounting guidance for equity grants made or modified in the applicable year forrestricted stock awards and restricted stock units ("RSUs"). The grant date fair value is calculated based on the number of shares of Common Stockunderlying the restricted stock awards and RSUs, times the average of the high and low trade prices of Brady Common Stock on the date of grant. Theactual value of a restricted stock award or RSU will depend on the market value of the Company’s Common Stock on the date the stock is sold. Thefiscal 2014 annual grant included time-based RSUs that vest one-third each year for the first three years. Effective September 21, 2012, a grant of10,000 shares of performance-based RSUs was issued to Mr. Millar, which included a performance vesting requirement based upon earnings per sharegrowth at either July 31, 2013 or July 31, 2014, provided that Mr. Millar remain employed through July 31, 2014. Effective October 7, 2013, an awardof 5,000 shares of service-based restricted stock was issued to Mr. Felmer at a fair value of $29.70 per share as a result of his increased responsibilitieswith his appointment as Interim President and Chief Executive Officer.(2)Represents the grant date fair value computed in accordance with accounting guidance for equity grants made or modified in the applicable year forperformance-based and time-based stock options. The assumptions used to determine the value of the awards, including the use of the Black-Scholesmethod of valuation by the Company, are discussed in Note 1 of the Notes to Consolidated Financial Statements of the Company contained in Item 8of this Form 10-K, for the fiscal year ended July 31, 2014. The actual value, if any, which an option holder will realize upon the exercise of an optionwill depend on the excess of the market value of the Company’s Common Stock over the exercise price on the date the option is exercised, whichcannot be forecasted with any accuracy.95Table of Contents(3)Reflects incentive plan compensation earned during the listed fiscal years, which was paid during the next fiscal year.(4)The amounts in this column for Messrs. Jaehnert, Felmer, Bolognini, and Williamson include: matching contributions to the Company’s Matched401(k) Plan, Funded Retirement Plan and Restoration Plan, the costs of group term life insurance for each named executive officer, use of a Companycar and associated expenses, the cost of long-term care insurance, the cost of personal liability insurance, the cost of disability insurance and otherperquisites. The perquisites may include an annual allowance for financial and tax planning and the cost of an annual physical health exam. For Mr.Jaehnert, this column for fiscal 2014 also includes $440,000 in severance payments and payment by the Company for $10,000 of legal fees and$20,000 of outplacement service fees incurred in conjunction with his separation in addition to the above amounts. The amounts in this column forMr. Millar include: contributions for the Brady Australia Pension Plan, vehicle allowance and associated expenses and other perquisites as listedabove.(5)Mr. Jaehnert’s base salary did not change in fiscal 2014 from fiscal 2013. The fiscal 2014 salary of $360,000 represents the amount earned during thefiscal year through December 31, 2013, the date Mr. Jaehnert’s separation from the Company.(6)Fiscal 2014 is the first year during Mr. Bolognini’s term as officer in which he met the criteria as a Named Executive Officer.(7)The amounts in this table for Mr. Millar, who works and lives in Australia, were paid to him in Australian Dollars. The amounts shown in U.S. dollarsin the table above were converted from Australian Dollars at the average exchange rate for fiscal 2014: $1 = 0.9195 AUD and 2013: $1 = 0.9825 AUD.Fiscal 2013 was the first year during Mr. Millar's term as officer in which he met the criteria as a Named Executive Officer.Name FiscalYear RetirementPlanContri-butions($) GroupTermLifeInsurance($) CompanyCar($) Long-termCareInsurance($) PersonalLiabilityInsurance($) Temp/TotalDisability($) Severance ($) Other($) Total($)T.J. Felmer 2014 $30,505 $1,102 $20,159 $4,048 $— $— $4,028 $59,842 2013 30,200 791 14,940 3,737 — — 4,496 54,164 2012 72,759 478 24,761 3,737 — — 4,076 105,811F.M. Jaehnert(1) 2014 48,862 3,870 1,837 2,570 2,654 7,920 440,000 33,361 541,074 2013 64,000 4,028 12,201 5,141 2,654 7,920 5,254 101,198 2012 195,835 2,925 18,966 5,141 2,654 7,920 4,855 238,296L.T. Bolognini(2) 2014 24,462 763 16,201 4,274 — — 5,949 51,649S. Millar 2014 57,620 — 26,205 — — — — 83,825(3) 2013 49,227 — 24,281 — — — — 73,508M. O.Williamson 2014 30,694 — — 30,694 2013 40,581 798 10,847 5,501 — — 4,340 62,067 2012 67,001 471 15,188 5,501 — — 4,332 92,493(1) Mr. Jaehnert retired and resigned as President, Chief Executive Officer, and director effective October 7, 2013 and his employment with the Companyterminated on December 31, 2013. Payment by the Company for $10,000 of legal fees and $20,000 of outplacement service fees incurred inconjunction with his separation are included under ‘Other’ in the table above.(2) Fiscal 2014 was the first year during Mr. Bolognini’s term as officer in which he met the criteria as a Named Executive Officer.(3) The amounts in this table for Mr. Millar, who works and lives in Australia, were paid to him in Australian Dollars. The amounts shown in U.S. dollars inthe table above were converted from Australian Dollars at the average exchange rate for fiscal 2014: $1 = 0.9195AUD and 2013: $1 = 0.9825 AUD.Fiscal 2013 is the first year during Mr. Millar's term as officer in which he met the criteria as a Named Executive Officer.96Table of ContentsGrants of Plan-Based Awards for 2014The following table summarizes grants of plan-based awards made during fiscal 2014 to the named executive officers. GrantDate CompensationCommitteeApprovalDate Estimated Future Payouts UnderNon-Equity Incentive Plan Awards (1) All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions All OtherStockAwards:Number ofShares ofStock orUnits Exerciseor BasePrice ofStockorOptionAwards GrantDate FairValueofStock andOptionAwardsName Threshold ($) Target ($) Maximum ($) (#) (#) (2) ($)T.J. Felmer $— $270,900 $541,800 9/20/2013 9/10/2013 — — — 33,862 10,580 $31.07 $653,721 10/7/2013 10/6/2013 — — — 5,000(3)29.70 148,500F.M. Jaehnert — — — — — — — — —L.T. Bolognini — 198,000 396,000 9/20/2013 9/10/2013 — — — 14,848 4,639 31.07 286,642S. Millar — 209,300 418,600 9/20/2013 9/10/2013 — — — 14,327 4,476 31.07 276,577M.O. Williamson — 268,573 537,145 9/20/2013 9/10/2013 — — — 25,006 7,813 31.07 482,752 (1)At its September 2014 meeting, the Management Development and Compensation Compensation Committee approved the values of the annual cashincentive award under the Company's annual cash incentive plan. The structure of the plan is described in the Compensation Discussion and Analysisabove and was set prior to the beginning of the fiscal year. Target payout levels can range from 0 to 200 percent of base salary. (2)The exercise price and base price is the average of the high and low sale prices of the Company’s Class A Common Stock as reported by the New YorkStock Exchange on the date of the grant. The average of the high and low sale prices of the Company’s Class A Common Stock as reported by theNew York Stock Exchange on the grant dates of September 20, 2013 and October 7, 2013 was $31.07 and $29.70, respectively.(3)Represents 5,000 shares of service-based restricted stock granted to Mr. Felmer on October 7, 2013 at a fair value of $29.70 per share as a result of hisincreased responsibilities with his appointment of Interim President and Chief Executive Officer.Outstanding Equity Awards at 2014 Fiscal Year End Option Awards Stock AwardsName Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable(#) Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable(#) OptionExercisePrice($) OptionExpiration Date Equity IncentivePlan Awards; Number ofUnearned Shares, Units orOther Rights That Have NotVested(#) Equity IncentivePlan Awards:Market or PayoutValue of UnearnedShares, Units orOther Rights ThatHave Not Vested($)T.J. Felmer 30,000 $33.89 8/1/2015 25,000 37.83 11/30/2015 25,000 38.19 11/30/2016 25,000 38.31 12/4/2017 25,000 20.95 12/4/2018 23,334 29.78 8/3/2019 35,000 28.73 9/25/2019 11,667 28.35 8/2/2020 40,000 29.10 9/24/2020 45,000(1)29.55 8/1/2021 23,334 11,666(3)27.00 9/30/2021 15,167 30,333(4)30.21 9/21/2022 97Table of Contents — 33,862(7)31.07 9/20/2023 35,000(2)$915,250 10,580(8)276,667 5,000(9)130,750F.M. Jaehnert 60,000 $28.84 11/18/2014 60,000 33.89 12/31/2014 50,000 37.83 12/31/2014 50,000 38.19 11/30/2016 50,000 38.31 12/4/2017 50,000 20.95 12/4/2018 56,667 29.78 8/3/2019 70,000 28.73 9/25/2019 33,334 28.35 8/2/2020 100,000 29.10 9/24/2020 130,000(1)29.55 8/1/2021 60,000 30,000(3)27.00 9/30/2021 30,000 60,000(4)30.21 9/21/2022 L.T. Bolognini 8,334 16,666(6)34.64 1/7/2023 14,848(7)31.07 9/20/2023 4,639(8)$121,309.85 S. Millar 5,000 28.84 11/18/2014 3,500 37.83 11/30/2015 5,000 38.19 11/30/2016 5,000 38.31 12/4/2017 10,000 28.73 9/25/2019 10,000 29.10 9/24/2020 40,000(1)29.55 8/1/2021 10,000(3)27.00 9/30/2021 10,000 20,000(4)30.21 9/21/2022 14,327(7)31.07 9/20/2023 10,000(5)$261,500 4,476(8)117,047.4M.O.Williamson 30,000 28.84 11/18/2014 30,000 33.89 8/1/2015 25,000 37.83 11/30/2015 25,000 38.19 11/30/2016 25,000 38.31 12/4/2017 8,334 20.95 12/4/2018 23,334 29.78 8/3/2019 35,000 28.73 9/25/2019 10,000 28.35 8/2/2020 35,000 29.10 9/24/2020 40,000(1)29.55 8/1/2021 20,000 10,000(3)27.00 9/30/2021 11,500 23,000(4)30.21 9/21/2022 15,629(7)31.07 9/20/2013 35,000(2)$915,250 7,813(8)204,31098Table of Contents(1)The performance-based stock options granted on August 1, 2011 become exercisable in equal annual installments over a three-year period, with thevesting date being the date the Audit Committee accepts the results of the fiscal year audit confirming the achievement of annual 15 percent EPSgrowth. In the event the annual EPS growth goal is not achieved with respect to any fiscal year, the options may vest in full at the end of fiscal 2014 ifthe Corporation’s Compounded Annual Growth Rate (“CAGR”) for EPS over fiscal 2011 is 15 percent or more. Based on the performance of theCompany in fiscal 2014, the vesting criteria for this award were not not met. As a result, the awards were forfeited on September 9, 2014, the date theAudit Committee accepted the results of the fiscal year audit.(2)Effective July 20, 2011, the Management Development and Compensation Committee of the Board of Directors of the Company approved anamendment to the granting agreement under which the Company issued performance-based restricted stock on January 8, 2008. Pursuant to theamendment, the shares will vest upon meeting a financial performance vesting requirement based upon the Company’s EPS growth at either July 31,2013 or July 31, 2014, provided that the senior executives remain employed through July 31, 2014. The vesting requirement was not met at July 31,2013. Based on the performance of the Company in fiscal 2014, the vesting criteria for this award was not met. As a result, the awards were forfeited onSeptember 9, 2014, the date the Audit Committee accepted the results of the fiscal year audit.(3)The remaining options will vest on September 30, 2014.(4)One-half of the options vest on September 21, 2014 and the remaining options vest on September 21, 2015.(5)On September 21, 2012, Mr. Millar was awarded 10,000 restricted stock units with both a performance vesting requirement and a service vestingrequirement (two years). As of July 31, 2013, the vesting criteria for this award have not been met. Based on the performance of the Company in fiscal2014, the vesting criteria for this award were not met. As a result, the award was forfeited on September 9, 2014, the date the Audit Committeeaccepted the results of the fiscal year audit.(6)Mr. Bolognini was awarded 25,000 stock options on January 7, 2013, the date he joined the Company as an officer. One-half of the remaining optionsvest on January 7, 2015 and the remaining options vest on January 7, 2016.(7)One-third of the options vest on September 20, 2014, one-third of the options vest on September 20, 2015, and one-third of the options vest onSeptember 20, 2016.(8)This award represents time-based restricted stock units granted on September 20, 2013 as part of the annual fiscal 2014 equity grant. One-third of theunits vest on September 20, 2014, one-third of the units vest on September 20, 2015, and one-third of the units vest on September 20, 2016.(9)Effective October 7, 2013, Mr. Felmer was awarded 5,000 shares of service-based restricted stock in recognition of his increased duties upon hisappointment as Interim President and Chief Executive Officer. The shares vest upon the earlier of the end of Mr. Felmer’s service as Interim Presidentand CEO or the Board appointment of a permanent President and CEO. As the Board appointed a permanent President and CEO on August 4, 2014,the 5,000 shares vested on the same date.Option Exercises and Stock Vested for Fiscal 2014The following table summarizes option exercises and the vesting of restricted stock during fiscal 2014 to the named executive officers. In connectionwith Mr. Jaehnert’s retirement, 35,001 shares of restricted stock previously granted on August 2, 2010 vested on December 31, 2013 at a fair value of $30.93. Option Awards Stock AwardsName Number of SharesAcquired onExercise (#) Value Realizedon Exercise ($) Number of SharesAcquired on Vesting Value Realizedon Vesting ($)T.J. Felmer — $— $—F.M. Jaehnert 60,000 624,402 35,001 1,082,581L.T. Bolognini — — — —S. Millar 27,000 113,074 — —M.O. Williamson 46,666 348,094 — —99Table of ContentsNon-Qualified Deferred Compensation for Fiscal 2014The following table summarizes the activity within the Executive Deferred Compensation Plan and the Brady Restoration Plan during fiscal 2014 forthe named executive officers. Name ExecutiveContributions inLast Fiscal Year($) RegistrantContributions inLast Fiscal Year($) AggregateEarnings inLast Fiscal Year($) AggregateWithdrawals/Distributions($) AggregateBalance atLast Fiscal YearEnd ($)T.J. Felmer $4,958 $9,916 $266,669 $— $2,558,351F.M. Jaehnert 13,538 37,800 (293,972) (252,955) 4,667,969L.T. Bolognini 2,168 4,336 445 — 6,950S. Millar — — 2 — 2,923M.O. Williamson 5,147 10,294 3,631 — 1,176,860See discussion of the Company’s nonqualified deferred compensation plan in the Compensation Discussion and Analysis. The executive contributionamounts reported here are derived from the salary and non-equity incentive plan compensation columns of the Summary Compensation Table. The registrantcontribution amounts reported here are reported in the all other compensation columns of the Summary Compensation Table.Potential Payments Upon Termination or Change in ControlAs described in the Employment and Change of Control Agreements section of the Compensation Discussion and Analysis above, the Company hasentered into change of control agreements with each of the named executive officers. The terms of the change of control agreement are triggered if, within a24 month period beginning with the date a change of control occurs, (i) the executive’s employment with the Company is involuntarily terminated other thanby reason of death, disability or cause or (ii) the executive’s employment with the Company is voluntarily terminated by the executive subsequent to (a) anyreduction in the total of the executive’s annual base salary, exclusive of fringe benefits, and the executive’s target bonus in comparison with the executive’sannual base salary and target bonus immediately prior to the date the change of control occurs, (b) a significant diminution in the responsibilities or authorityof the executive in comparison with the executive’s responsibility and authority immediately prior to the date the change of control occurs, or (c) theimposition of a requirement by the Company that the executive relocate to a principal work location more than 50 miles from the executive’s principal worklocation immediately prior to the date the change of control occurs.Following termination due to a change in control, executives shall be paid a multiplier of their annual base salary in effect immediately prior to thedate the change of control occurs, plus a multiplier of their average bonus payment received over a three-year period prior to the date the change of controloccurs. For Messrs. Felmer, Millar, and Williamson, the Company will also reimburse the executive for any excise tax incurred by the executive as a result ofSection 280(g) of the Internal Revenue Code. If the payments upon termination due to change of control result in any excise tax incurred by Mr. Bolognini asa result of Section 280(g) of the Internal Revenue Code, he will be solely responsible for such excise tax. The Company will also reimburse a maximum of$25,000 of legal fees incurred by the executive in order to enforce the change of control agreement, in which the executive prevails.The following information and tables set forth the amount of payments to each named executive officer in the event of termination of employment as aresult of a change of control. See the section entitled "Jaehnert Severance Agreement" above in the Compensation Discussion and Analysis section for adescription of the severance benefits paid to Mr. Jaehnert upon his resignation. No other employment agreements have been entered into between theCompany and any of the named executive officers in fiscal year 2014.Assumptions and General PrinciplesThe following assumptions and general principles apply with respect to the tables that follow in this section.•The amounts shown in the tables assume that each named executive officer terminated employment on July 31, 2014. Accordingly, the tables reflectamounts earned as of July 31, 2014, and include estimates of amounts that would be paid to the named executive officer upon the occurrence of achange in control. The actual amounts that would be paid to a named executive officer can only be determined at the time of termination.•The tables below include amounts the Company is obligated to pay the named executive officer as a result of the executed change in controlagreement. The tables do not include benefits that are paid generally to all salaried employees or a broad group of salaried employees. Therefore, thenamed executive officers would receive benefits in addition to those set forth in the tables.100Table of Contents•A named executive officer is entitled to receive base salary earned during his term of employment regardless of the manner in which the namedexecutive officer’s employment is terminated. As such, this amount is not shown in the tables.Thomas J. FelmerThe following table shows the amount payable assuming that the terms of the change of control agreement were triggered on July 31, 2014 and thenamed executive officer had to legally enforce the terms of the agreement.Base Salary ($)(1) Bonus ($) (2) Restricted StockAward/Unit AccelerationGain $(3) Stock OptionAccelerationGain $ (4) Excise TaxReimbursement($) Legal FeeReimbursement($) (5) Total ($)774,000 348,899 1,322,667 — 463,778 25,000 2,934,344(1)Represents two times the base salary in effect at July 31, 2014.(2)Represents two times the average bonus payment received in the last three fiscal years ended July 31, 2014, 2013 and 2012.(3)Represents the closing market price of $26.15 on 50,580 unvested restricted stock awards and RSUs that would vest due to the change in control.(4)There are no unvested stock options that are in-the-money based upon the closing market price of $26.15 at July 31, 2014.(5)Represents the maximum reimbursement of legal fees allowed.Frank M. Jaehnert Mr. Jaehnert resigned and retired as President and Chief Executive Officer of the Company effective October 7, 2013, and remained employed bythe Company until December 31, 2013, the date of separation. The Company entered into a written agreement with Mr. Jaehnert in connection with hisretirement that provided for payment of his salary and benefits through December 31, 2013, and a severance payment of $800,000 to be paid in equalinstallments throughout the calendar year following his separation from employment on December 31, 2013. His resignation resulted in the acceleratedvesting of 35,001 restricted stock awards with a grant date of August 2, 2010 on the separation date, December 31, 2013. The value of the vested restrictedstock awards was $1,082,581, using a fair value of $30.93, the closing market price on the vesting date. No other vesting accelerations of unvested restrictedstock or unvested stock options resulted in any payment under his separation agreement.Louis T. BologniniThe following table shows the amount payable assuming that the terms of the change of control agreement were triggered on July 31, 2014 and thenamed executive officer had to legally enforce the terms of the agreement.Base Salary ($)(1) Bonus ($) (2) Restricted StockAward/Unit AccelerationGain $(3) Stock OptionAccelerationGain $ (4) Excise TaxReimbursement($) Legal FeeReimbursement($) (5) Total ($)660,000 — 121,310 — — 25,000 806,310(1)Represents two times the base salary in effect at July 31, 2014.(2)Represents two times the average bonus payment received in the last three fiscal years ended July 31, 2014, 2013 and 2012.(3)Represents the closing market price of $26.15 on 4,639 unvested RSUs that would vest due to the change in control.(4)There are no unvested stock options that are in-the-money based upon the closing market price of $26.15 at July 31, 2014.(5)Represents the maximum reimbursement of legal fees allowed.Stephen MillarThe following table shows the amount payable assuming that the terms of the change of control agreement were triggered on July 31, 2014 and thenamed executive officer had to legally enforce the terms of the agreement. Base Salary ($)(1) Bonus ($) (2) Restricted StockAward/Unit AccelerationGain $(3) Stock OptionAccelerationGain $ (4) Excise TaxReimbursement($) Legal FeeReimbursement($) (5) Total ($)650,320 103,625 378,547 — 184,345 25,000 1,341,837 (1) Represents two times the base salary in effect at July 31, 2014. As Mr. Millar works and lives in Australia, his base salary is paid to him in AustralianDollars. The amount shown in U.S. dollars was converted from Australian Dollars at the average fiscal 2014 exchange rate: $1 = 0.9195AUD.(2)Represents two times the average bonus payment received in the last three fiscal years ended July 31, 2014, 2013 and 2012.(3)Represents the closing market price of $26.15 on 14,476 unvested RSUs that would vest due to the change in control.101Table of Contents(4)There are no unvested stock options that are in-the-money based upon the closing market price of $26.15 at July 31, 2014.(5)Represents the maximum reimbursement of legal fees allowed. Matthew O. WilliamsonThe following table shows the amount payable assuming that the terms of the change of control agreement were triggered on July 31, 2014 and thenamed executive officer had to legally enforce the terms of the agreement.Base Salary ($) (1) Bonus ($) (2) Restricted StockAward/Unit AccelerationGain $(3) Stock OptionAccelerationGain $ (4) Excise TaxReimbursement($) Legal FeeReimbursement($) (5) Total ($)767,350 584,609 1,119,560 — 449,268 25,000 2,945,787(1)Represents two times the base salary in effect at July 31, 2014.(2)Represents two times the average bonus payment received in the last three fiscal years ended July 31, 2014, 2013 and 2012.(3)Represents the closing market price of $26.15 on 42,813 unvested restricted stock awards and RSUs that would vest due to the change in control.(4)There are no unvested stock options that are in-the-money based upon the closing market price of $26.15 at July 31, 2014.(5)Represents the maximum reimbursement of legal fees allowed.Potential Payments Upon Termination Due to Death or DisabilityIn the event of termination due to death or disability, all unexercised, unexpired stock options would immediately vest and all restricted stock awardswould immediately become unrestricted and fully vested. The following table shows the amount payable to the named executive officers should this eventoccur on July 31, 2014.Name Unvested Sharesof RestrictedStock/RSUs as ofJuly 31, 2014 Restricted Stock/RSUsAward AccelerationGain $ (1) Unvested Stock OptionsIn-the Money as ofJuly 31, 2014 Stock OptionAccelerationGain $ (2)T.J. Felmer 50,580 1,322,667 — —F.M. Jaehnert — — — —L.T. Bolognini 4,639 121,310 — —S. Millar 14,476 378,547 — —M.O. Williamson 42,813 1,119,560 — —(1)Represents the closing market price of $26.15 on unvested awards that would vest due to death or disability.(2)There are no unvested stock options that are in-the-money based upon the closing market price of $26.15 at July 31, 2014.Compensation of DirectorsTo ensure competitive compensation for the Directors, surveys prepared by various consulting firms and the National Association of CorporateDirectors are reviewed by the Corporate Governance Committee and the Management Development and Compensation Committee in makingrecommendations to the Board of Directors regarding Director compensation. Directors who are employees of the Company receive no additionalcompensation for service on the Board or on any committee of the Board. The annual cash retainer paid to non-management Directors is $45,000. Theremaining components of Director compensation include $10,000 for each committee chair ($15,000 for the Audit Committee Chair) and $1,500 plusexpenses for each meeting of the Board or any committee thereof, which they attend and are a member or $1,000 for single issue telephonic committeemeetings of the Board. Directors also receive $1,000 for each meeting they attend of any committee of which they are not a member. In addition, non-management Directors are eligible to receive compensation of up to $1,000 per day for special assignments required by management or the Board ofDirectors, so long as the compensation does not impair independence and is approved as required by the Board.In fiscal 2014, the annual fee of the Lead Independent Director was increased from $46,500 to $50,000, consistent with the evolving role ofindependent board leadership and the enhanced responsibilities of the position. Mr. Goodkind served as Lead Independent Director in fiscal 2014. In fiscal2014, the Corporate Governance Committee of the Board of Directors formed a search committee (“Search Committee”) comprised of Messrs. Balkema,Goodkind and Richardson and Ms. Pungello, to lead the search process for hiring a permanent CEO. In February 2014, the Board, acting through Ms. Gioiaand Messrs. Allender and102Table of ContentsHarris, all of whom were disinterested, authorized compensation of $1,000 per day for each day worked by Search Committee members on the CEO search, upto a maximum of $10,000.Under the terms of the Brady Corporation 2012 Omnibus Incentive Stock Plan, 5,500,000 shares of the Company's Class A Common Stock have beenauthorized for issuance, and the Board has full and final authority to designate the non-management Directors to whom awards will be granted, the date onwhich awards will be granted and the number of shares of stock covered by each grant.On September 11, 2013, the Board approved an annual stock-based compensation award of 4,250 time-based stock options (having a grant date fairvalue of $9.68 per share) and 1,450 unrestricted shares of Class A Common Stock (having a grant date fair value of $30.72 per share), for each non-management Director, effective September 20, 2013.Directors are also eligible to defer portions of their fees into the Brady Corporation Director Deferred Compensation Plan (“Director DeferredCompensation Plan”), the value of which is measured by the fair value of the underlying investments. The assets of the Director Deferred Compensation Planare held in a Rabbi Trust and are invested by the trustee as directed by the participant in several investment funds as permitted by the Director DeferredCompensation Plan. The investment funds available in the Director Deferred Compensation Plan include Brady Corporation Class A Nonvoting CommonStock and various mutual funds that are provided in the Employee 401(k) Plan.At least one year prior to termination from the Board, the Director must elect whether to receive his/her account balance following termination in asingle lump sum payment or by means of distribution under an Annual Installment Method. If the Director does not submit an election form or has notsubmitted one timely, then payment shall be made each year for a period of ten years. The first payment must be one-tenth of the balance held; the secondone-ninth; and so on, with the balance held in the Trust reduced by each payment. Distributions of the Company Class A Nonvoting Common Stock aremade in-kind; distributions of other assets are in cash.Effective January 1, 2008, the Director Deferred Compensation Plan was amended and restated to comply with the provisions of Section 409A of theInternal Revenue Code. On May 21, 2014, the Director Deferred Compensation Plan was amended to allow participants to transfer funds from otherinvestment funds into the Company’s Class A Nonvoting Common Stock. Funds are not permitted to be transferred from the Company’s Class A NonvotingCommon Stock into other investment funds until six months after the Director resigns from the Board.Director Compensation Table — Fiscal 2014Name Fees Earnedor Paid inCash ($) OptionAwards ($) (1) StockAwards ($) (2) Total ($)Patrick W. Allender $103,000 $41,158 $44,544 $188,702Gary S. Balkema 117,500 41,158 44,544 203,202Nancy L. Gioia (3) 51,750 38,769 42,659 133,178Conrad G. Goodkind 168,000 41,158 44,544 253,702Frank W. Harris 90,000 41,158 44,544 175,702Elizabeth P. Pungello 93,000 41,158 44,544 178,702Bradley C. Richardson 126,000 41,158 44,544 211,702 (1)Represents the grant date fair value computed in accordance with accounting guidance for equity grants made in fiscal 2014 for time-based stockoptions. The assumptions used to determine the value of the option awards, including the use of the Black-Scholes method of valuation by theCompany, are discussed in Note 1 of the Notes to Consolidated Financial Statements of the Company contained in Item 8 of this Form 10-K for thefiscal year ended July 31, 2014.The actual value, if any, which an option holder will realize upon the exercise of an option will depend on the excess of the market value of theCompany’s common stock over the exercise price on the date the option is exercised, which cannot be forecasted with any accuracy. Outstandingoption awards at July 31, 2014 for each individual who served as a Director in fiscal 2014 include the following: Ms. Pungello, 59,550 shares;Mr. Harris, 59,550 shares; Mr. Allender, 51,550 shares; Mr. Goodkind, 51,550 shares; Mr. Richardson, 45,550 shares; Mr. Balkema, 31,150; and Ms.Gioia, 4,250.103Table of Contents(2)Represents the fair value of shares of Brady Corporation Class A Non-Voting Common Stock granted in fiscal 2014 as compensation for their services.The shares granted to the non-management directors, with the exception of Ms. Gioia, were valued at the closing market price of $30.72 onSeptember 20, 2013, the date of grant. The shares granted to Ms. Gioia on were valued at the closing market price of $29.42 on December 4, 2013, thedate of grant.(3)Ms. Gioia was appointed to the Board on November 20, 2013.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters(a) Security Ownership of Certain Beneficial OwnersThe following table sets forth the current beneficial ownership of shareholders who are known by the Company to own more than five percent (5%) ofany class of the Company’s voting shares on September 12, 2014. As of that date, nearly all of the voting stock of the Company was held by two trustscontrolled by direct descendants of the Company’s founder, William H. Brady, as follows: Title of Class Name and Address of Beneficial Owner Amount of BeneficialOwnership Percent ofOwnership(2) Class B Common Stock EBL GST Non-Exempt Stock B Trust(1) c/o Elizabeth P.Pungello 2002 S. Hawick Ct. Chapel Hill, NC 27516 1,769,304 50% William H. Brady III Living Trust dated November 1,2013 (3) 1,769,304 50% c/o William H. Brady III249 Rosemont Ave.Pasadena, CA 91103 (1)The trustee is Elizabeth P. Pungello, who has sole voting and dispositive power and who is the remainder beneficiary. Elizabeth Pungello is the great-granddaughter of William H. Brady and currently serves on the Company’s Board of Directors.(2)An additional 20 shares are owned by a third trust with different trustees.(3)William H. Brady III is grantor of this revocable trust and shares voting and dispositive powers with respect to these shares with his co-trustee. WilliamH. Brady III is the grandson of William H. Brady.104Table of Contents(b) Security Ownership of ManagementThe following table sets forth the current beneficial ownership of each class of equity securities of the Company by each Director and Named ExecutiveOfficer individually and by all Directors and Officers of the Company as a group as of August 5, 2014. Unless otherwise noted, the address for each of thelisted persons is c/o Brady Corporation, 6555 West Good Hope Road, Milwaukee, Wisconsin 53223. Except as otherwise indicated, all shares are owneddirectly. Title of Class Name of Beneficial Owner & Nature of Beneficial Ownership Amount ofBeneficialOwnership(3)(4)(5) Percent ofOwnershipClass A Common Stock Elizabeth P. Pungello(1) 1,293,661 2.7% Frank M. Jaehnert(2) 928,062 1.9% Thomas J. Felmer 344,694 0.7% Matthew O. Williamson 320,365 0.7% Conrad G. Goodkind 129,034 0.3% Frank W. Harris 81,580 0.2% Stephen Millar 74,768 0.2% Patrick W. Allender 73,871 0.2% Bradley C. Richardson 50,384 0.1% Gary S. Balkema 30,503 0.1% Louis T. Bolognini 14,831 * Nancy L. Gioia 1,450 * All Officers and Directors as a Group (18 persons) 3,657,911 7.7%Class B Common Stock Elizabeth P. Pungello(1) 1,769,304 50.0%*Indicates less than one-tenth of one percent.(1)Ms. Pungello’s holdings of Class A Common Stock include 876,826 shares owned by a trust for which she is a trustee and has sole dispositive andvoting authority. Ms. Pungello’s holdings of Class B Common Stock include 1,769,304 shares owned by a trust over which she has sole dispositiveand voting authority.(2)Of the amount reported, Mr. Jaehnert’s spouse owns 5,446 shares of Class A Common Stock directly. Mr. Jaehnert was not an Officer as of July 31,2014, but is considered a Named Executive Officer for the fiscal year ended July 31, 2014.(3)The amount shown for all officers and directors individually and as a group (18 persons) includes options to acquire a total of 1,941,462 shares ofClass A Common Stock, which are currently exercisable or will be exercisable within 60 days of July 31, 2014, including the following: Ms.Pungello, 53,885 shares; Mr. Jaehnert, 700,001; Mr. Felmer, 304,957 shares; Mr. Williamson, 289,004 shares; Mr. Goodkind, 45,885 shares; Mr.Harris, 53,885 shares; Mr. Millar, 73,276 shares; Mr. Allender, 45,885 shares; Mr. Richardson, 39,885 shares; Mr. Balkema, 25,485 shares; Mr.Bolognini, 13,284 shares; Ms. Gioia, 0 shares; Mr. Curran, 143,596 shares; Ms. Johnson, 67,390 shares; Ms. Nelligan, 0 shares; Mr. Meyer, 5,536shares; Mr. Nauman, 0 shares; and Mr. Pearce, 70,508 shares. It does not include other options for Class A Common Stock which have been granted atlater dates and are not exercisable within 60 days of July 31, 2014.(4)The amount shown for all officers and directors individually and as a group (18 persons) includes unvested restricted stock units to acquire 11,263shares of Class A Common Stock, which will vest within 60 days of July 31, 2014, including the following: Mr. Jaehnert, 0 units; Mr. Felmer, 3,527units; Mr. Williamson, 2,605 units; Mr. Millar, 1,492 units; Mr. Bolognini, 1,547 units; Mr. Curran, 950 units; Ms. Johnson, 435 units; Ms. Nelligan,0 units; Mr. Meyer, 272 units;Mr. Nauman, 0 units; and Mr. Pearce, 435 units.. No unvested restricted stock units were held by directors at July 31,2014. It does not include other unvested restricted stock awards or restricted stock units to acquire Class A Common Stock which have been grantedat later dates and will not vest within 60 days of July 31, 2014.(5)The amount shown for all officers and directors individually and as a group (18 persons) includes Class A Common Stock owned in deferredcompensation plans totaling 206,333 shares of Class A Common Stock, including the following: Ms. Pungello, 2,333 shares; Mr. Jaehnert, 93,908shares; Mr. Felmer, 11,455 shares; Mr. Williamson, 15,612 shares; Mr. Goodkind, 31,846 shares; Mr. Harris, 0 shares; Mr. Millar, 0 shares;Mr. Allender, 27,986 shares; Mr. Richardson, 10,499 shares; Mr. Balkema 3,018 shares; Mr. Bolognini, 0 shares; Ms. Gioia, 0 shares; Mr. Curran, 112shares; Ms. Johnson, 6,292 shares; Ms. Nelligan, 0 shares; Mr. Meyer, 0 shares; Mr. Nauman, 0 shares; and Mr. Pearce, 3,272 shares.105Table of Contents(c) Changes in ControlNo arrangements are known to the Company, which may, at a subsequent date, result in a change in control of the Company.(d) Equity Compensation Plan Information As of July 31, 2014Plan Category Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a) Weighted-averageexercise price ofoutstanding options,warrants and rights(b) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))(c)Equity compensation plans approvedby security holders 4,389,117 $30.82 4,022,854Equity compensation plans notapproved by security holders None None NoneTotal 4,389,117 $30.82 4,022,854The Company’s equity compensation plan allows the granting of stock options, restricted stock, and restricted stock units to various officers, directorsand other employees of the Company at prices equal to fair market value at the date of grant. The Company has reserved 5,500,000 shares of Class ANonvoting Common Stock for issuance under the Brady Corporation 2012 Omnibus Incentive Stock Plan. Generally, options will not be exercisable untilone year after the date of grant, and will be exercisable thereafter, to the extent of one-third per year and have a maximum term of ten years. Generally,restricted stock units vest one-third per year for the first three years.In August of 2009, 2010, and 2011, certain executives and key management employees were issued stock options that vest upon meeting certainfinancial performance conditions in addition to the vesting schedule described above. Performance-based options expire 10 years from the date of grant. Allgrants under the equity plans are at market price on the date of the grant.The Company granted 5,000 three-year cliff-vested restricted shares in December 2012, with a grant price and fair value of $32.99. The Companygranted 5,000 service-based cliff-vested restricted shares in October 2013, with a grant price and fair value of $29.70. The Company granted 103,055 time-based RSUs in fiscal 2014, with a weighted average grant price and fair value of $30.99, of which 8,198 units were forfeited during fiscal 2014. As a result, asof July 31, 2014, $99,857 time-based restricted shares and RSUs and 5,000 service-based restricted shares were outstanding with a weighted average grantdate fair value of $31.98 and $29.70, respectively.The Company granted 210,000 performance-based restricted shares in fiscal 2008, with a grant price and fair value of $32.83, and 100,000performance-based restricted shares in August 2010, with a grant price and fair value of $28.35. The Company granted 10,000 shares of performance-basedRSUs in September 2012, with a grant price and fair value of $30.21. Of the fiscal 2008 performance-based restricted shares granted, 55,000 shares wereforfeited in fiscal 2013 and 85,000 shares were forfeited in fiscal 2014. Of the August 2010 performance-based restricted shares granted, 33,333 shares vestedin fiscal 2013, 35,001 shares vested in fiscal 2014, and 31,666 shares were forfeited in fiscal 2014. As a result, as of July 31, 2014, 80,000 performance-basedrestricted shares and RSUs were outstanding with a weighted average grant date fair value of $32.50.Item 13. Certain Relationships, Related Transactions, and Director IndependenceThe Company annually solicits information from its Directors in order to ensure there are no conflicts of interest. The information gathered annually isreviewed by the Company and if any transactions are not in accordance with the rules of the New York Stock Exchange or are potentially in violation of theCompany’s Corporate Governance Principles, the transactions are referred to the Corporate Governance Committee for approval, ratification, or other action.Further, potential affiliated party transactions are discussed at the Company’s quarterly disclosure committee meetings. In addition, pursuant to its charter,the Company’s Audit Committee periodically reviews reports and disclosures of insider and affiliated party transactions with the Company, if any.Furthermore, the Company’s Directors are expected to be mindful of their fiduciary obligations to the Company and to report any potential conflicts to theCorporate Governance Committee for review. Based on the Company’s consideration of all relevant facts and circumstances, the Corporate GovernanceCommittee will decide whether or not to approve such transactions and will approve only those transactions that are in the best interest of the Company.Additionally, the Company has processes in place to educate executives and employees about affiliated transactions. The Company maintains an anonymoushotline by which106Table of Contentsemployees may report potential conflicts of interest such as affiliated party transactions.In undertaking its review of potential related party transactions, the Board considered the commercial relationships of the Company with Mr.Richardson’s employer, PolyOne Corporation, and with Ms. Gioia’s employer, Ford Motor Company. The commercial relationships, which involve thepurchase and sale of products on customary terms, do not exceed the maximum amounts proscribed by the director independence rules of the NYSE over thepast three fiscal years. The compensation paid to Mr. Richardson and Ms. Gioia by their employers is not linked in any way to the commercial relationshipstheir employers have with the Company. After consideration of these factors, the Board concluded that Mr. Richardson and Ms. Gioia did not have a materialinterest in the transactions and the commercial relationships were not material to the Company. Based on these factors, including the evaluation of thecommercial relationships between the Company and Mr. Richardson’s and Ms. Gioia’s employers, the Company has determined that it does not have materialrelated party transactions that affect the results of operations, cash flow or financial condition. The Company has also determined that no transactionsoccurred in fiscal 2014, or are currently proposed, that would require disclosure under Item 404 (a) of Regulation S-K.See Item 10 — Directors and Executive Officers of the Registrant for a discussion of Director independence.Item 14. Principal Accounting Fees and ServicesThe following table presents the aggregate fees incurred for professional services by Deloitte & Touche LLP and Deloitte Tax LLP during the yearsended July 31, 2014 and 2013. Other than as set forth below, no professional services were rendered or fees billed by Deloitte & Touche LLP or Deloitte TaxLLP during the years ended July 31, 2014 and 2013. 2014 2013 (Dollars in thousands)Audit, audit-related and tax compliance Audit fees(1) $1,790 $1,671Tax fees — compliance 52 292Subtotal audit, audit-related and tax compliance fees 1,842 1,963Non-audit related Tax fees — planning and advice 413 464Other fees (2) — 10Subtotal non-audit related fees 413 474Total fees $2,255 $2,437 (1)Audit fees consist of professional services rendered for the audit of the Company’s annual financial statements, attestation of management’sassessment of internal control, reviews of the quarterly financial statements and statutory reporting compliance.(2)All other fees relate to expatriate activities. 2014 2013Ratio of Tax Planning and Advice Fees and All Other Fees to Audit Fees, Audit-Related Fees and TaxCompliance Fees .2 to 1 .2 to 1Pre-Approval Policy — The services performed by the Independent Registered Public Accounting Firm (“Independent Auditors”) in fiscal 2014 and2013 were pre-approved in accordance with the pre-approval policy and procedures adopted by the Audit Committee at its November 19, 2003 meeting. Thepolicy requires the Audit Committee to pre-approve the audit and non-audit services performed by the Independent Auditors in order to assure that theprovision of such services does not impair the auditor’s independence. Unless a type of service to be performed by the Independent Auditors has receivedgeneral pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will requirespecific pre-approval by the Audit Committee.107Table of ContentsPART IVItem 15. Exhibits and Financial Statement SchedulesItem 15 (a) — The following documents are filed as part of this report:1) & 2) Consolidated Financial Statement Schedule -Schedule II Valuation and Qualifying AccountsAll other schedules are omitted as they are not required, or the required information is shown in the consolidated financial statements ornotes thereto.3) Exhibits — See Exhibit Index at page 109 of this Form 10-K.108Table of ContentsEXHIBIT INDEXExhibitNumberDescription2.1Agreement and Plan of Merger, dated as of December 28, 2012, by and among Brady Corporation, BC I Merger Sub Corporation,Precision Dynamics Corporation, and Precision Dynamics Holding LLC (29)2.2Share and Asset Purchase Agreement, dated as of February 24, 2014, by and among Brady Corporation and LTI Flexible Products,Inc. (d/b/a Boyd Corporation) (6)3.1Restated Articles of Incorporation of Brady Corporation (1)3.2By-laws of Brady Corporation, as amended (23)*10.1Form of Change of Control Agreement, amended as of December 23, 2008, entered into with Thomas J. Felmer, Allan J. Klotsche,Peter C. Sephton, and Matthew O. Williamson (12)*10.2Brady Corporation BradyGold Plan, as amended (2)*10.3Executive Additional Compensation Plan, as amended (2)*10.4Executive Deferred Compensation Plan, as amended (16)*10.5Directors’ Deferred Compensation Plan, as amended (25)*10.6Forms of Non-Qualified Employee Stock Option Agreement, Director Stock Option Agreement, and Employee Performance StockOption Agreement under 2006 Omnibus Incentive Stock Plan (10)*10.7Brady Corporation 2004 Omnibus Incentive Stock Plan, as amended (10)*10.8Form of Brady Corporation 2004 Nonqualified Stock Option Agreement under the 2004 Omnibus Incentive Stock Plan, asamended (13)10.9Brady Corporation Automatic Dividend Reinvestment Plan (4)*10.10Brady Corporation 2005 Nonqualified Plan for Non-employee Directors, as amended (3)*10.11Forms of Nonqualified Stock Option Agreements under 2005 Non-qualified Plan for Non-employee Directors, as amended (8)*10.12Brady Corporation 1997 Omnibus Incentive Stock Plan, as amended (10)*10.13Brady Corporation 1997 Nonqualified Stock Option Plan for Non-Employee Directors, as amended (10)*10.14Complete and Permanent Release and Retirement Agreement, dated as of October 6, 2013, with Frank Jaehnert(14)*10.15Brady Corporation 2006 Omnibus Incentive Stock Plan, as amended (10)*10.16Change of Control Agreement, amended as of May 22, 2013, entered into with Scott Hoffman (30)*10.17Severance and Release Agreement, dated as of February 20, 2014, entered into with Scott Hoffman (25)*10.18Form of Amendment, dated March 4, 2009, to granting agreement for performance-based stock options issued on August 2, 2004to Frank M. Jaehnert, Thomas J. Felmer, Peter C. Sephton, Matthew O. Williamson, and Allan J. Klotsche (12)*10.19Form of Performance-based Restricted Stock Agreement under Brady Corporation 2006 Omnibus Incentive Stock Plan (7)*10.20Change of Control Agreement, amended as of December 23, 2008, entered into with Frank M. Jaehnert (12)*10.21Restated Brady Corporation Restoration Plan (5)*10.22Change of Control Agreement, dated as of February 28, 2013, entered into with Louis T. Bolognini (30)*10.23Brady Corporation 2003 Omnibus Incentive Stock Plan, as amended (10)109Table of Contents10.24Brady Note Purchase Agreement dated June 28, 2004 (11)10.25First Supplement to Note Purchase Agreement, dated February 14, 2006 (9)10.26Second Supplement to Note Purchase Agreement, dated March 23, 2007 (24)*10.27Form of Change of Control Agreement, amended as of December 23, 2008, entered into with Kathleen Johnson (12)*10.28Brady Corporation 2010 Omnibus Incentive Stock Plan, as amended (22)*10.29Brady Corporation 2010 Nonqualified Stock Option Plan for Non-employee Directors (17)*10.30Form of Non-Qualified Employee Stock Option Agreement and Employee Performance Stock Option Agreement under 2010Omnibus Incentive Stock Plan (17)*10.31Form of Director Stock Option Agreement under 2010 Nonqualified Stock Option Plan for Non-employee Directors (17)*10.32Form of Amendment, dated February 17, 2010, to granting agreement for performance-based stock options issued on August 1,2005 to Frank M. Jaehnert, Thomas J. Felmer, Peter C. Sephton, Matthew O. Williamson and Allan J. Klotsche (18)10.33Brady Note Purchase Agreement dated May 13, 2010 (19)*10.34Performance-based Restricted Stock Agreement with Frank M. Jaehnert, dated August 2, 2010 (20)*10.35Form of Amendment to January 8, 2008 Brady Corporation Performance-Based Restricted Stock Agreement, dated July 20, 2011(21)*10.36Brady Corporation Incentive Compensation Plan for Senior Executives (15)*10.37Form of Fiscal 2012 Performance Stock Option under the 2010 Omnibus Incentive Stock Plan (26)*10.38Brady Corporation 2012 Omnibus Incentive Stock Plan (26)*10.39Form of Non-Qualified Employee Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (26)*10.40Form of Non-Qualified Employee Performance Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (26)*10.41Form of Director Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (26)*10.42Change of Control Agreement, dated November 21, 2011, entered into with Stephen Millar (27)10.43Revolving Credit Agreement, dated as of February 1, 2012 (28)*10.44Form of Fiscal 2013 Non-Qualified Employee Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (31)*10.45Form of Fiscal 2013 Director Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (31)*10.46Performance-Based Restricted Stock Unit Agreement with Stephen Millar, dated September 21, 2012 (31)*10.47Severance Agreement, dated as of March 25, 2013, entered into with Peter Sephton (30)*10.48Form of Fiscal 2014 Non-Qualified Employee Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (32)*10.49Form of Fiscal 2014 Director Stock Option Agreement under 2012 Omnibus Incentive Stock Plan (32)*10.50Form of Fiscal 2014 Restricted Stock Unit Agreement under 2012 Omnibus Incentive Stock Plan (32)*10.51Deed of Release, dated as of August 1, 2014, with Stephen Millar (33)*10.52Separation Agreement, dated as of November 20, 2013, with Allan J. Klotsche (34)*10.53Employment Offer Letter, dated as of August 1, 2014, with J. Michael Nauman (35)110Table of Contents*10.54Restricted Stock Unit Agreement, dated as of August 4, 2014, with J. Michael Nauman (35)*10.55Change of Control Agreement, dated as of August 4, 2014, with J. Michael Nauman (35)*10.56Restricted Stock Agreement, dated as of October 7, 2013, with Thomas J. Felmer (36)*10.57Change of Control Agreement, dated as of March 3, 2014, with Helena R. Nelligan (37)*10.58Change of Control Agreement, dated as of March 3, 2014, with Bentley N. Curran (37)*10.59Change of Control Agreement, dated as of March 3, 2014, with Lee E. Marks (37)*10.60Restricted Stock Unit Agreement, dated as of August 4, 2014, with Thomas J. Felmer*10.61Form of Fiscal 2015 Non-Qualified Employee Stock Option Agreement under 2012 Omnibus Incentive Stock Plan*10.62Form of Fiscal 2015 Director Stock Option Agreement under 2012 Omnibus Incentive Stock Plan*10.63Form of Fiscal 2015 Restricted Stock Unit Agreement under 2012 Omnibus Incentive Stock Plan21Subsidiaries of Brady Corporation23Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm31.1Rule 13a-14(a)/15d-14(a) Certification of J. Michael Nauman31.2Rule 13a-14(a)/15d-14(a) Certification of Aaron J. Pearce32.1Section 1350 Certification of J. Michael Nauman32.2Section 1350 Certification of Aaron J. Pearce101Interactive Data File *Management contract or compensatory plan or arrangement(1)Incorporated by reference to Registrant’s Registration Statement No. 333-04155 on Form S-3(2)Incorporated by reference to Registrant’s Annual Report on Form 10-K filed for the fiscal year ended July 31, 1989(3)Incorporated by reference to Registrant’s Current Report on Form 8-K filed November 25, 2008(4)Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 1992(5)Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2008(6)Incorporated by reference to Registrant’s Current Report on Form 8-K filed March 19, 2008(7)Incorporated by reference to Registrant’s Current Report on Form 8-K filed January 9, 2008(8)Incorporated by reference to Registrant’s Current Report on Form 8-K filed December 4, 2006(9)Incorporated by reference to Registrant’s Current Report on Form 8-K filed February 17, 2006(10)Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2008(11)Incorporated by reference to Registrant’s 8-K/A filed August 3, 2004(12)Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2009(13)Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2005(14)Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2006(15)Incorporated by reference to Registrant’s Current Report on Form 8-K filed September 2, 2011(16)Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011(17)Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2009(18)Incorporated by reference to Registrant’s Current Report on Form 8-K filed February 23, 2010(19)Incorporated by reference to Registrant’s Current Report on Form 8-K filed May 14, 2010(20)Incorporated by reference to Registrant’s Current Report on Form 8-K filed August 4, 2010111Table of Contents(21)Incorporated by reference to Registrant’s Current Report on Form 8-K/A filed July 28, 2011(22)Incorporated by reference to Registrant’s Current Report on Form 8-K filed September 27, 2010(23)Incorporated by reference to Registrant’s Current Report on Form 8-K filed February 16, 2012(24)Incorporated by reference to Registrant’s Current Report on Form 8-K filed March 26, 2007(25)Incorporated by reference to Registrant’s Current Report on Form 8-K filed September 15, 2011(26)Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2011(27)Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2011(28)Incorporated by reference to Registrant’s Current Report on Form 8-K filed February 7, 2012(29)Incorporated by reference to Registrant's Current Report on Form 8-K filed December 31, 2012(30)Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended April 30, 2013(31)Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 2012(32)Incorporated by reference to Registrants Annual Report of Form 10-K for the fiscal year ended July 31, 2013(33)Incorporated by reference to Registrant's Current Report on Form 8-K filed August 1, 2014(34)Incorporated by reference to Registrant's Current Report on Form 8-K filed November 21, 2013(35)Incorporated by reference to Registrant's Current Report on Form 8-K filed August 4, 2014(36)Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 2013(37)Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 2014112Table of ContentsBRADY CORPORATION AND SUBSIDIARIESSCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS Year ended July 31,Description 2014 2013 2012 (Dollars in thousands)Valuation accounts deducted in balance sheet from assets to which they apply — Accountsreceivable — allowance for doubtful accounts: Balances at beginning of period $5,093 $6,005 $6,183Additions — Charged to expense 779 1,018 1,593Due to acquired businesses — 531 159Reclassified to continuing operations 31 — —Deductions — Bad debts written off, net of recoveries (2,834) (1,429) (1,930)Deductions — Reclassified to discontinued operations — (1,032) —Balances at end of period $3,069 $5,093 $6,005Inventory — Reserve for slow-moving inventory: Balances at beginning of period $11,317 $11,316 $13,009Additions — Charged to expense 3,100 2,629 2,200Due to acquired businesses — 2,887 445Reclassified to continuing operations 461 Deductions — Inventory write-offs (2,619) (1,811) (4,338)Deductions — Reclassified to discontinued operations — (3,704) —Balances at end of period $12,259 $11,317 $11,316Valuation allowances against deferred tax assets: Balances at beginning of period $37,142 $25,847 $31,844Additions during year 10,182 10,853 2,579Due to acquired businesses — 983 —Deductions — Valuation allowances reversed/utilized (9,915) (541) (3,226)Deductions — Valuation allowances reversed/written off — — (5,350)Balances at end of period $37,409 $37,142 $25,847113Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized this 29th day of September 2014.BRADY CORPORATIONBy: /s/ AARON J. PEARCE Aaron J. Pearce Senior Vice President & Chief Financial Officer (Principal Financial Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrantand in the capabilities and on the dates indicated.*Signature Title/s/ J. MICHAEL NAUMAN President and Chief Executive Officer; DirectorJ. Michael Nauman (Principal Executive Officer)/s/ KATHLEEN M. JOHNSON Vice President and Chief Accounting OfficerKathleen M. Johnson (Principal Accounting Officer)/s/ BRADLEY C. RICHARDSON Bradley C. Richardson Director/s/ PATRICK W. ALLENDER Patrick W. Allender Director/s/ FRANK W. HARRIS Frank W. Harris Director/s/ NANCY L. GIOIA Nancy L. Gioia Director/s/ CONRAD G. GOODKIND Conrad G. Goodkind Director/s/ ELIZABETH P. PUNGELLO Elizabeth P. Pungello Director/s/ GARY S. BALKEMA Gary S. Balkema Director*Each of the above signatures is affixed as of September 29, 2014114EXHIBIT 10.60RESTRICTED STOCK UNIT AGREEMENTUpon management’s recommendation, the Management Development and Compensation Committee (the “Committee”) of the Brady CorporationBoard of Directors has awarded to Thomas J. Felmer (“Employee”) a restricted stock unit award effective August 4, 2014 pursuant to the terms of the BradyCorporation 2012 Omnibus Incentive Stock Plan (the “Plan”). The Corporation’s records shall be the official record of the grant described herein and, in theevent of any conflict between this description and the Corporation’s records, the Corporation’s records shall control.1.Number of UnitsThis Restricted Stock Unit Award applies to 5,000 shares of the presently authorized Class A Nonvoting Common Stock of the Corporation, $.01 parvalue (the “Restricted Stock Units”). The Restricted Stock Units granted under this Agreement are units that will be reflected in a book accountmaintained by the Corporation until they become vested or have been forfeited.2.Service Vesting RequirementThe vesting of this Award (other than pursuant to accelerated vesting in certain circumstances as provided in Section 3 below) shall be subject to thesatisfaction of the condition set forth in Section 2(a) below:(a)Vesting. The Award shall be subject to the following service vesting requirement. If the Employee continues in employment through thefirst anniversary of the grant date, the Restricted Stock Units shall be vested.(b)Forfeiture of Restricted Stock Units. Except as provided in Section 3, if the Employee terminates employment prior to the satisfaction of thevesting requirement set forth in Section 2(a) above, the Restricted Stock Units shall immediately be forfeited. The period of time duringwhich the Restricted Stock Units covered by this Award are forfeitable is referred to as the “Restricted Period.”3.Accelerated Vesting.(a)Notwithstanding the terms and conditions of Section 2 hereof, in the event of the termination of the Employee’s employment with theCorporation (and any Affiliate) prior to the end of the Restricted Period due to death or Disability, or due to termination by the Corporationwithout Cause, the Restricted Stock Units shall become fully vested.(b)In the event of the termination of the Employee’s employment with the Corporation (and any Affiliate) prior to the end of the RestrictedPeriod due to a Change in Control, the Restricted Stock Units shall become unrestricted and fully vested.For purposes of this Agreement, a “Change of Control” shall occur if any person or group of persons (as defined in Section 13(d)(3) of the Securitiesand Exchange Act of 1934) other than the members of the family of William H. Brady, Jr. and their descendants, or trusts for their benefit, and the W.H. Brady Foundation, Inc., collectively, directly or indirectly controls in excess of 50% of the voting common stock of the Corporation.For purposes of this Agreement, a termination due to Change of Control shall occur if within the 12 month period beginning with the date a Changeof Control occurs (i) the Employee’s employment with the Corporation (and any Affiliate) is involuntarily terminated (other than by reason of death,disability or Cause) or (ii) the Employee’s employment with the Corporation (and any Affiliate) is voluntarily terminated by the Employeesubsequent to (A) a 10% or more diminution in the total of the Employee’s annual base salary (exclusive of fringe benefits) and the Employee’starget bonus in comparison with the Employee’s total of annual base salary and target bonus immediately prior to the date the Change of Controloccurs, (B) a significant diminution in the responsibilities or authority of the Employee in comparison with the Employee’s responsibility andauthority immediately prior to the date the Change of Control occurs or (C) the imposition of a requirement by the Corporation that the Employeerelocate to a principal work location more than 50 miles from the Employee’s principal work location immediately prior to the date the Change ofControl occurs.For purposes of this Agreement, Cause means (i) the Employee’s willful and continued failure to substantially perform the Employee’s duties withthe Corporation (other than any such failure resulting from physical or mental incapacity) after written demand for performance is given to theEmployee by the Corporation which specifically identifies themanner in which the Corporation believes the Employee has not substantially performed and a reasonable time to cure has transpired, (ii) theEmployee’s conviction of or plea of nolo contendere for the commission of a felony, or (iii) the Employee’s commission of an act of dishonesty or ofany willful act of misconduct which results in or could reasonably be expected to result in significant injury (monetarily or otherwise) to theCorporation, as determined in good faith by the Committee.(c)In the event of (i) the merger or consolidation of the Corporation with or into another corporation or corporations in which the Corporationis not the surviving corporation, (ii) the adoption of any plan for the dissolution of the Corporation, or (iii) the sale or exchange of all orsubstantially all the assets of the Corporation for cash or for shares of stock or other securities of another corporation, the Restricted StockUnits shall become fully vested.4.No DividendsNo dividends will be paid or accrued on any Restricted Stock Units during the Restricted Period.5.Settlement of Restricted Stock Units.As soon as practicable after Restricted Stock Units become vested, the Company shall deliver to the Employee one share of the Corporation's ClassA Nonvoting Common Stock, $.01 par value ("Corporation Stock") for each Restricted Stock Unit which becomes vested.6.Transfer RestrictionsThis Award is non-transferable and may not be assigned, pledged or hypothecated and shall not be subject to execution, attachment or similarprocess. Upon any attempt to effect any such disposition, or upon the levy of any such process, the Award shall immediately become null and voidand the Restricted Stock Units shall be forfeited.7.Withholding TaxesThe Corporation may require payment of or withhold any tax which it believes is payable as a result of the Restricted Stock Units becoming vested,and the Corporation may defer making delivery of the Corporation Stock until arrangements satisfactory to the Corporation have been made withregard to any such withholding obligations. In lieu of part or all of any such payment, the Employee, in satisfaction of all withholding taxes(including, without limitation, Federal income, FICA (Social Security and Medicare) and any state and local income taxes) payable as a result ofsuch vesting, may elect, subject to such rules and regulations as the Committee may adopt from time to time, to have the Corporation withhold thatnumber of shares of Corporation Stock (valued at Fair Market Value on the date of vesting and rounded upward) required to settle such withholdingtaxes.8.Death of EmployeeIf the Restricted Stock Units shall vest upon the death of the Employee, the shares of Corporation Stock and any amounts in the Employee'sDividend Account shall be issued and paid to the estate of the Employee unless the Corporation shall have theretofore received in writing abeneficiary designation, in which event they shall be issued and paid to the designated beneficiary.9.Confidentiality, Non-Solicitation and Non-CompeteAs consideration for the grant of this Award, Employee agrees to, understands and acknowledges the following:(a)During Employee's employment with the Corporation and its Affiliates (the "Company"), the Company will provide Employee withConfidential Information relating to the Company, its business and clients, the disclosure or misuse of which would cause severe andirreparable harm to the Company. Employee agrees that all Confidential Information is and shall remain the sole and absolute property ofthe Company. Upon the termination of Employee's employment with the Company for any reason, Employee shall immediately return tothe Company all documents and materials that contain or constitute Confidential Information, in any form whatsoever, including but notlimited to, all copies, abstracts, electronic versions, and summaries thereof. Executive further agrees that, without the written consent of theChief Executive Officer of the Corporation or, in the case of the Chief Executive Officer of the Corporation, without the written approval ofthe Board of Directors of the Corporation, Employee will not disclose, use, copy or duplicate, or otherwise permit the use, disclosure,copying or duplication of any Confidential Information of the Company, other than in connection with the authorized activities conductedin the course of Employee's employment with the Company. Employee agrees to take all reasonable steps and precautions to prevent anyunauthorized disclosure, use, copying or duplication of Confidential Information. For purposes of this Agreement, Confidential Informationmeans any and all financial, technical, commercial or other information concerning the business and affairs of the Company that isconfidential and proprietary to the Company, including without limitation,(i)information relating to the Company’s past and existing customers and vendors and development of prospective customers andvendors, including specific customer product requirements, pricing arrangements, payments terms, customer lists and other similarinformation;(ii)inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced,acquired or used by the Company;(iii)the Company’s proprietary programs, processes or software, consisting of but not limited to, computer programs in source or objectcode and all related documentation and training materials, including all upgrades, updates, improvements, derivatives andmodifications thereof and including programs and documentation in incomplete stages of design or research and development;(iv)the subject matter of the Company’s patents, design patents, copyrights, trade secrets, trademarks, service marks, trade names, tradedress, manuals, operating instructions, training materials, and other industrial property, including such information in incompletestages of design or research and development; and(v)other confidential and proprietary information or documents relating to the Company’s products, business and marketing plansand techniques, sales and distribution networks and any other information or documents which the Company reasonably regards asbeing confidential.(b)Employee agrees that, without the written consent of the Chief Executive Officer of the Corporation, in the case of the Chief ExecutiveOfficer of the Corporation, without the written approval of the Board of Directors of the Corporation, Employee shall not engage in any ofthe conduct described in subsections (i) or (ii), below, either directly or indirectly, or as an employee, contractor, consultant, partner, officer,director or stockholder, other than a stockholder of less than 5% of the equities of a publicly traded corporation, or in any other capacity forany person, firm, partnership or corporation:(i)During the time of Employee's employment with Company, Employee will not: (A) perform duties as or for a Competitor; or (B)participate in the inducement of or otherwise encourage Company employees, clients, or vendors to currently and/or prospectivelybreach, modify, or terminate any agreement or relationship they have or had with Company.(ii)For a period of 12 months following the termination of Employee's employment with Company, Employee will not: (A) performduties as or for a Competitor that are the same as or similar to the duties performed by Employee for the Company at any timeduring any part of the 24 month period preceding the termination of Employee's employment with Company; or (B) participate inthe inducement of or otherwise encourage Company employees, clients, or vendors to currently and/or prospectively breach,modify, or terminate any agreement or relationship they have or had with Company during any part of the 24 month periodpreceding the termination of Employee's employment with Company.For purposes of this Agreement, a Competitor shall mean any corporation, person, firm or organization (or division or part thereof) engagedin or about to become engaged in research and development work on, or the production and/or sale of, any product or service which isdirectly competitive with one with respect to which Employee acquired Confidential Information by reason of Employee's work with theCompany.(c)Employee acknowledges and agrees that compliance with this Section 9 is necessary to protect the Company, and that a breach of any ofthis Section 9 will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law. In theevent of a breach of this Section 9, or any part thereof, the Company, and its successors and assigns, shall be entitled to injunctive relief andto such other and further relief as is proper under the circumstances. The Company shall institute and prosecute proceedings in any Court ofcompetent jurisdiction either in law or in equity to obtain damages for any such breach of this Section 9, or to enjoin Employee fromperforming services in breach of Section 9(b) during the term of employment and for a period of 12 months following the termination ofemployment. Employee hereby agrees to submit to the jurisdiction of any Court of competent jurisdiction in any disputes that arise underthis Agreement.(d)Employee further agrees that, in the event of a breach of this Section 9, the Corporation shall also be entitled to recover the value of anyamounts previously paid or payable or any shares (or the value of any shares) delivered or deliverable to Employee pursuant to anyCompany bonus program, this Agreement, and any other Company plan or arrangement.(e)Employee agrees that the terms of this Section 9 shall survive the termination of Employee's employment with the Company.(f)EMPLOYEE HAS READ THIS SECTION 9 AND AGREES THAT THE CONSIDERATION PROVIDED BY THE CORPORATION IS FAIRAND REASONABLE AND FURTHER AGREES THAT GIVEN THE IMPORTANCE TO THE COMPANY OF ITS CONFIDENTIAL ANDPROPRIETARY INFORMATION, THE POST-EMPLOYMENT RESTRICTIONS ON EMPLOYEE'S ACTIVITIES ARE LIKEWISE FAIRAND REASONABLE.10.ClawbackThis Award is subject to the terms of the Corporation's recoupment, clawback or similar policy as it may be in effect from time to time, as well as anysimilar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any shares ofCorporation Stock or other cash or property received with respect to the awards (including any value received from a disposition of the sharesacquired upon payment of the awards).11.Adjustment of SharesThe terms and provisions of this Award (including, without limitation, the terms and provisions relating to the number and class of shares subject tothis Award) shall be subject to appropriate adjustment in the event of any recapitalization, merger, consolidation, disposition of property or stock,separation, reorganization, stock dividend, issuance of rights, combination or split-up or exchange of shares, or the like.12.Provisions of Plan ControllingThis Award is subject in all respects to the provisions of the Plan. In the event of any conflict between any provisions of this Award and theprovisions of the Plan, the provisions of the Plan shall control, except to the extent the Plan permits the Committee to modify the terms of an Awardgrant and has done so herein. Terms defined in the Plan where used herein shall have the meanings as so defined. Employee acknowledges receipt ofa copy of the Plan.13.Wisconsin ContractThis Award has been granted in Wisconsin and shall be construed under the laws of that state.14.SeverabilityWherever possible, each provision of this Award will be interpreted in such manner as to be effective and valid under applicable law, but if anyprovision hereof is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibitionor invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.IN WITNESS WHEREOF, the Corporation has granted this Award as of the day and year first above written.BRADY CORPORATIONBy: /s/ J. MICHAEL NAUMAN Name: J. Michael Nauman Its: President and Chief Executive Officer EMPLOYEE'S ACCEPTANCEI, Thomas J. Felmer, hereby accept the foregoing Award and agree to the terms and conditions thereof, including the restrictions contained in Section9 of this Agreement.EMPLOYEE: THOMAS J. FELMERSignature: /s/ THOMAS J. FELMERPrint Name: Thomas J. Felmer EXHIBIT 10.61BRADY CORPORATIONNONQUALIFIED STOCK OPTIONUpon management’s recommendation, the Management Development and Compensation Committee (the “Committee”) of the Brady CorporationBoard of Directors has awarded to _______________ (“Employee”) a non-qualified stock option (the “Option”) effective __________, 20__, pursuant to theterms of the Brady Corporation 2012 Omnibus Incentive Stock Plan (the “Plan”). The Corporation’s records shall be the official record of the Option grantdescribed herein and, in the event of any conflict between this description and the Corporation’s records, the Corporation’s records shall control.1.Number of Shares Optioned; Option PriceThe Corporation grants to the Employee the right and option to purchase, on the terms and conditions hereof, all or any part of an aggregate ofX,XXX shares of the presently authorized Class A Common Stock of the Corporation, $.01 par value, whether unissued or issued and reacquired bythe Corporation, at the price of $XX.XX per share (the “Option Price”).2.Conditions of Exercise of Options During Employee’s Lifetime; Vesting of OptionExcept as provided in this Section and in Section 3, this Option may not be exercised (a) unless Employee is at the date of the exercise in the employof the Corporation or an Affiliate, and (b) until Employee shall have been continuously so employed for a period of at least one year from the datehereof. Thereafter, this Option shall be exercisable for any amount of shares up to the maximum percentage of shares covered by this Option(rounded up to the nearest whole share), as follows (but in no event shall this Option be exercisable for any shares after the expiration date providedin Section 7):Number of Completed Years AfterDate of Grant of this OptionMaximumPercentageof Shares ForWhich Option isExercisable Less than 1ZeroAt least 1 but less than 233-1/3%At least 2 but less than 366-2/3%At least 3100%If Employee shall cease to be employed by the Corporation or an Affiliate for any reason other than as provided in Section 3 after Employee shallhave been continuously so employed for one year after the grant of this Option, Employee may, at any time within 90 days of such termination, butin no event later than the date of expiration of this Option, exercise this Option to the extent Employee was entitled to do so on the date of suchtermination. However, if Employee was dismissed for cause, of which the Committee shall be the sole judge, this Option shall forthwith expire. ThisAgreement does not confer upon Employee any right of continuation of employment by the Corporation or an Affiliate, nor does it impair any rightthe Corporation or any Affiliate may have to terminate the Employee’s employment at any time.3.Termination of EmploymentNotwithstanding the provisions of Section 2 hereof, if the Employee:(a)is terminated by the death of the Employee, any unexercised, unexpired Stock Options granted hereunder to the Employee shall be 100%vested and fully exercisable, in whole or in part, at any time within one year after the date of death, by the Employee’s personalrepresentative or by the person to whom the Stock Options are transferred under the Employee’s last will and testament or the applicablelaws of descent and distribution;(b)dies within 90 days after termination of employment by the Corporation or its Affiliates, other than for cause, any unexercised, unexpiredStock Options granted hereunder to the Employee and exercisable as of the date of such termination of employment shall be exercisable, inwhole or in part, at any time within one year after the date of death, by the Employee’s personal representative or by the person to whom theStock Options are transferred under the Employee’s last will and testament or the applicable laws of descent and distribution;(c)is terminated as a result of the disability of the Employee (a disability means that the Employee is disabled as a result of sickness or injury,such that he or she is unable to satisfactorily perform the material duties ofEmployee’s job, as determined by the Board of Directors, on the basis of medical evidence satisfactory to it), any unexercised, unexpiredStock Options granted hereunder to the Employee shall become 100% vested and fully exercisable, in whole or in part, at any time withinone year after the date of disability; or(d)is terminated as a result of the Employee’s retirement at or after age 65, any unexercised, unexpired Stock Options granted hereunder to theEmployee shall continue to vest as provided in Section 2 hereof and any option that is or becomes vested may be exercised in whole or inpart prior to the expiration date of such option.4.Deferral of ExerciseAlthough the Corporation intends to exert its best efforts so that the shares purchasable upon the exercise of this Option will be registered under, orexempt from, the registration requirements of, the Securities Act of 1933 (the “Act”) and any applicable state securities law at the time or times thisOption (or any portion of this Option) first becomes exercisable, if the exercise of this Option would otherwise result in a violation by theCorporation of any provision of the Act or of any state securities law, the Corporation may require that such exercise be deferred until theCorporation has taken appropriate action to avoid any such violation.5.Method of Exercising OptionThis Option shall be exercised by delivering to the Corporation, at the office of its Treasurer, a written notice of the number of shares with respect towhich this Option is at the time being exercised and by paying the Corporation in full the Option Price of the shares being acquired at the time.6.Method of PaymentPayment shall be made either (i) in cash; (ii) by delivering shares of the Corporation’s Class A Common Stock which have been beneficially ownedby the Employee, the spouse of the Employee, or both of them, for a period of at least six months prior to the time of exercise (“Delivered Stock”);(iii) by surrendering to the Corporation shares of Class A Common Stock otherwise receivable upon exercise of the Option (a “Net Exercise”); or (iv)any combination of the foregoing. Payment in the form of Delivered Stock shall be in the amount of the Fair Market Value of the stock at the date ofexercise, determined in accordance with Section 9.7.Expiration DateThis Option shall expire ten years after the date on which this Option was granted.8.Withholding TaxesThe Corporation may require, as a condition to the exercise of this Option, that the Employee concurrently pay to the Corporation any taxes whichthe Corporation is required to withhold by reason of such exercise. In lieu of part or all of any such payment, the Employee may elect, subject tosuch rules and regulations as the Committee may adopt from time to time, to have the Corporation withhold from the shares to be issued uponexercise that number of shares having a Fair Market Value, determined in accordance with Section 9, equal to the amount which the Corporation isrequired to withhold.9.Method of Valuation of StockThe “Fair Market Value” of the Class A Common Stock of the Corporation on any date shall mean, if the stock is then listed and traded on aregistered national securities exchange, or is quoted in the NASDAQ National Market System, the average of the high and low sales price recorded incomposite transactions for such date or, if such date is not a business day or if no sales of shares shall have been reported with respect to such date,the next preceding business date with respect to which sales were reported. In the absence of reported sales or if the stock is not so listed or quoted,but is traded in the over-the-counter market, Fair Market Value shall be the average of the closing bid and asked prices for such shares on therelevant date.10.Confidentiality, Non-Solicitation and Non-CompeteAs consideration for the grant of this Option, Employee agrees to, understands and acknowledges the following:(a)During Employee's employment with the Corporation and its Affiliates (the "Company"), the Company will provide Employee withConfidential Information relating to the Company, its business and clients, the disclosure or misuse of which would cause severe andirreparable harm to the Company. Employee agrees that all Confidential Information is and shall remain the sole and absolute property ofthe Company. Upon the termination of Employee's employment with the Company for any reason, Employee shall immediately return tothe Company all documents and materials that contain or constitute Confidential Information, in any form whatsoever, including but notlimited to, all copies, abstracts, electronic versions, and summaries thereof. Executive further agrees that, without the written consent of theChief Executive Officer of the Corporation or, in the case of the Chief Executive Officer of the Corporation, without the written approval ofthe Board of Directors of theCorporation, Employee will not disclose, use, copy or duplicate, or otherwise permit the use, disclosure, copying or duplication of anyConfidential Information of the Company, other than in connection with the authorized activities conducted in the course of Employee'semployment with the Company. Employee agrees to take all reasonable steps and precautions to prevent any unauthorized disclosure, use,copying or duplication of Confidential Information. For purposes of this Agreement, Confidential Information means any and all financial,technical, commercial or other information concerning the business and affairs of the Company that is confidential and proprietary to theCompany, including without limitation,(i)information relating to the Company’s past and existing customers and vendors and development of prospective customers andvendors, including specific customer product requirements, pricing arrangements, payments terms, customer lists and other similarinformation;(ii)inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced,acquired or used by the Company;(iii)the Company’s proprietary programs, processes or software, consisting of but not limited to, computer programs in source or objectcode and all related documentation and training materials, including all upgrades, updates, improvements, derivatives andmodifications thereof and including programs and documentation in incomplete stages of design or research and development;(iv)the subject matter of the Company’s patents, design patents, copyrights, trade secrets, trademarks, service marks, trade names, tradedress, manuals, operating instructions, training materials, and other industrial property, including such information in incompletestages of design or research and development; and(v)other confidential and proprietary information or documents relating to the Company’s products, business and marketing plansand techniques, sales and distribution networks and any other information or documents which the Company reasonably regards asbeing confidential.(b)Employee agrees that, without the written consent of the Chief Executive Officer of the Corporation, in the case of the Chief ExecutiveOfficer of the Corporation, without the written approval of the Board of Directors of the Corporation, Employee shall not engage in any ofthe conduct described in subsections (i) or (ii), below, either directly or indirectly, or as an employee, contractor, consultant, partner, officer,director or stockholder, other than a stockholder of less than 5% of the equities of a publicly traded corporation, or in any other capacity forany person, firm, partnership or corporation:(i)During the time of Employee's employment with Company, Employee will not: (A) perform duties as or for a Competitor; or (B)participate in the inducement of or otherwise encourage Company employees, clients, or vendors to currently and/or prospectivelybreach, modify, or terminate any agreement or relationship they have or had with Company.(ii)For a period of 12 months following the termination of Employee's employment with Company, Employee will not: (A) performduties as or for a Competitor that are the same as or similar to the duties performed by Employee for the Company at any timeduring any part of the 24 month period preceding the termination of Employee's employment with Company; or (B) participate inthe inducement of or otherwise encourage Company employees, clients, or vendors to currently and/or prospectively breach,modify, or terminate any agreement or relationship they have or had with Company during any part of the 24 month periodpreceding the termination of Employee's employment with Company.For purposes of this Agreement, a Competitor shall mean any corporation, person, firm or organization (or division or part thereof) engagedin or about to become engaged in research and development work on, or the production and/or sale of, any product or service which isdirectly competitive with one with respect to which Employee acquired Confidential Information by reason of Employee's work with theCompany.(c)Employee acknowledges and agrees that compliance with this Section 10 is necessary to protect the Company, and that a breach of any ofthis Section 10 will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law. In theevent of a breach of this Section 10, or any part thereof, the Company, and its successors and assigns, shall be entitled to injunctive reliefand to such other and further relief as is proper under the circumstances. The Company shall institute and prosecute proceedings in anyCourt of competent jurisdiction either in law or in equity to obtain damages for any such breach of this Section 10, or to enjoin Employeefrom performing services in breach of Section 10(b) during the term of employment and for a period of 12 months following the terminationof employment. Employee hereby agrees to submit to the jurisdiction of any Court of competent jurisdiction in any disputes that ariseunder this Agreement.(d)Employee further agrees that, in the event of a breach of this Section 10, the Corporation shall also be entitled to recover the value of anyamounts previously paid or payable or any shares (or the value of any shares) delivered or deliverable to Employee pursuant to anyCompany bonus program, this Agreement, and any other Company plan or arrangement.(e)Employee agrees that the terms of this Section 10 shall survive the termination of Employee's employment with the Company.(f)EMPLOYEE HAS READ THIS SECTION 10 AND AGREES THAT THE CONSIDERATION PROVIDED BY THE CORPORATION IS FAIRAND REASONABLE AND FURTHER AGREES THAT GIVEN THE IMPORTANCE TO THE COMPANY OF ITS CONFIDENTIAL ANDPROPRIETARY INFORMATION, THE POST-EMPLOYMENT RESTRICTIONS ON EMPLOYEE'S ACTIVITIES ARE LIKEWISE FAIRAND REASONABLE.11.ClawbackThis Option is subject to the terms of the Corporation's recoupment, clawback or similar policy as it may be in effect from time to time, as well as anysimilar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any shares of CommonStock or other cash or property received with respect to the awards (including any value received from a disposition of the shares acquired uponpayment of the awards).12.No Rights in Shares Until Certificates IssuedNeither the Employee nor his heirs nor his personal representative shall have any of the rights or privileges of a stockholder of the Corporation inrespect of any of the shares issuable upon the exercise of the Option herein granted, unless and until certificates representing such shares shall havebeen issued or shares in book entry form shall have been recorded in the records of the Corporation’s transfer agent.13.Option Not TransferableNo portion of the Option granted hereunder shall be transferable or assignable (or made subject to any pledge, lien, obligation or liability of anEmployee) except (a) by last will and testament or the laws of descent and distribution (and upon a transfer or assignment pursuant to an Employee’slast will and testament or the laws of descent and distribution, any Option must be transferred in accordance therewith); (b) during the Employee’slifetime, nonqualified stock Options may be transferred by an Employee to the Employee’s spouse, children or grandchildren or to a trust for thebenefit of such spouse, children or grandchildren, provided that the terms of any such transfer prohibit the resale of shares acquired upon exercise ofthe option at a time during which the transferor would not be permitted to sell such shares under the Corporation’s policy on trading by insiders.14.Prohibition Against Pledge, Attachment, Etc.Except as otherwise herein provided, the Option herein granted and the rights and privileges pertaining thereto shall not be transferred, assigned,pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.15.Changes in StockIn the event there are any changes in the Class A Common Stock of the Corporation through merger, consolidation, reorganization, recapitalization,stock dividend, stock split, combination or exchange of shares, rights offering or any other change affecting the Class A Common Stock of theCorporation, appropriate changes will be made by the Committee in the aggregate number of shares and the purchase price and kind of sharessubject to this Option, to prevent substantial dilution or enlargement of the rights granted to or available for Employee.16.Dissolution or MergerAnything contained herein to the contrary notwithstanding, upon the dissolution or liquidation of the Corporation, or upon any merger in which theCorporation is not the surviving corporation, at any time prior to the expiration date of the termination of this Option, the Employee shall have theright within 60 days prior to the effective date of such dissolution, liquidation or merger, to surrender all or any unexercised portion of this Option tothe Corporation for cash, subject to the discretion of the Committee as to the exact timing of said surrender. Notwithstanding the foregoing,however, in the event Employee has retired or died, Employee’s right to surrender all or any unexercised portion of this Option under this Sectionshall be available only to the extent that at the time of any such surrender, Employee would have been entitled to exercise this Option underSections 2 or 3 hereof, as the case may be. The amount of cash to be paid to Employee for the portion of this Option so surrendered, shall be equal tothe number of shares of Class A Common Stock subject tothe surrendered Option multiplied by the difference between the Option Price per share, as described in Section 1 hereof, and the Fair Market Valueper share, determined in accordance with Section 9 hereof, as of the time of surrender.17.NoticesAny notice to be given to the Corporation under the terms of this Agreement shall be addressed to the Corporation in care of its Chief FinancialOfficer, and any notice to be given to the Employee may be addressed at the address as it appears on the Corporation’s records, or at such otheraddress as either party may hereafter designate in writing to the other. Except as provided in Section 5 hereof, any such notice shall be deemed tohave been duly given, if and when enclosed in a properly sealed envelope addressed as aforesaid, and deposited, postage prepaid, in the UnitedStates mail.18.Provisions of Plan ControllingThis Option is subject in all respects to the provisions of the Plan. In the event of any conflict between any provisions of this Option and theprovisions of the Plan, the provisions of the Plan shall control, except to the extent the Plan permits the Committee to modify the terms of an Optiongrant and has done so herein. Terms defined in the Plan where used herein shall have the meanings as so defined. Employee acknowledges receipt ofa copy of the Plan.19.Wisconsin ContractThis Option has been granted in Wisconsin and shall be construed under the laws of that state.20.SeverabilityWherever possible, each provision of this Option will be interpreted in such manner as to be effective and valid under applicable law, but if anyprovision hereof is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibitionor invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.IN WITNESS WHEREOF, the Corporation has granted this Option as of the day and year first above written.BRADY CORPORATIONBy: J. MICHAEL NAUMANName: J. Michael NaumanIts: President and Chief Executive OfficerEMPLOYEE'S ACCEPTANCEI, ___________________________, hereby accept the foregoing Option award and agree to the terms andconditions thereof, including the restrictions contained in Section 10 of this Agreement.EMPLOYEE:Signature: Print Name: EXHIBIT 10.62BRADY CORPORATIONDIRECTOR NONQUALIFIED STOCK OPTION AGREEMENTOption granted on ________ X, 20XX, by Brady Corporation, a Wisconsin corporation (hereinafter called the “Company”), to____________________(hereinafter called the “Director”) pursuant to the terms of the Brady Corporation 2012 Omnibus Incentive Stock Plan. TheCorporation’s records shall be the official record of the Option grant described herein and, in the event of any conflict between this description andCorporation’s records, the Corporation’s records shall control.1.Number of Shares Optioned; Option Price. The Company grants to the Director the right and option to purchase, on the terms and conditionshereof, all or any part of an aggregate of X,XXX shares of the presently authorized Class A Common Stock of the Company, $.01 par value, whetherunissued or issued and reacquired by the Company, at the price of $XX.XX per share (the “Option Price”).2.Conditions of Exercise of Options During Director’s Lifetime; Vesting of Option. Except as provided hereinafter in this paragraph and inparagraph 3, this Option may not be exercised (a) unless Director is at the date of the exercise a Director of the Company and (b) until Director shallhave been continuously a Director for a period of at least one year from the date hereof. Thereafter, this Option shall be exercisable for any amount ofshares up to the maximum percentage of shares covered by this Option (rounded up to the nearest whole share) as follows (but in no event shall thisOption be exercisable for any shares after the expiration date provided in paragraph 7):Number of Completed Years AfterDate of Grant of this OptionMaximumPercentageof Shares ForWhich Option isExercisable Less than 1ZeroAt least 1 but less than 233-1/3%At least 2 but less than 366-2/3%At least 3100%If Director shall cease to be a Director of the Company for any reason (except death or disability, or if the Director has been a member of the Board ofDirectors for at least three years) after Director shall have been continuously a Director for one year after the grant of this Option, Director may, atany time within three months of such termination, but in no event later than the date of expiration of this Option, exercise this Option to the extentDirector was entitled to do so on the date of such termination. This Agreement does not confer upon Director any right to continue as a Director ofthe Company.3.Termination of Directorship, Etc.A. Notwithstanding the provisions of paragraph 2 hereof, in the event of the termination of the Directorship with the Company prior to three yearsfrom date of grant, due to death or disability, this Option shall become 100% vested and fully exercisable.For purposes of this Agreement, “Disability” means that the Director is disabled as a result of sickness or injury, such that he is unable satisfactorilyto perform the Director’s duties as determined by the Board of Directors, on the basis of medical evidence satisfactory to it.B. (i) If the Directorship is terminated by the death of the Director, any unexercised, unexpired Stock Options granted hereunder to the Directorshall be exercisable, in whole or in part, at any time within one year after the date of death, by the Director’s personal representative or by the personto whom the Stock Options are transferred under the Director’s last will and testament or the applicable laws of descent and distribution. (ii) If theDirectorship is terminated as a result of the disability of the Director, any unexercised, unexpired Stock Options granted hereunder to the Directorshall be exercisable, in whole or in part, at any time within one year after the date of disability. (iii) If the Directorship is terminated after the Director has been a member ofthe Board for at least three years, any unexercised, unexpired Stock Options granted hereunder to the Director shall continue to vest as provided inparagraph 2 and any option that is or becomes vested may be exercised within the term of such option.(ii) In the event of (a) the merger or consolidation of the Company with or into another corporation or corporations in which the Companyis not the surviving corporation, (b) the adoption of any plan for the dissolution of the Company, or (c) the sale or exchange of all or substantially allthe assets of the Company for cash or for shares of stock or other securities of another corporation, this Option shall become fully vested andexercisable immediately prior to any such event in which the Company is not the surviving corporation.4.Deferral of Exercise. Although the Company intends to exert its best efforts so that the shares purchasable upon the exercise of this Option will beregistered under, or exempt from the registration requirements of, the Federal Securities Act of 1933 (the “Act”) and any applicable state securitieslaw at the time or times this Option (or any portion of this Option) first becomes exercisable, if the exercise of this Option would otherwise result inthe violation by the Company of any provision of the Act or of any state securities law, the Company may require that such exercise be deferreduntil the Company has taken appropriate action to avoid any such violation.5.Method of Exercising Option. This Option shall be exercised by delivering to the Company, at the office of its Treasurer, a written notice of thenumber of shares with respect to which this Option is at the time being exercised and by paying the Company in full the Option Price of the sharesbeing acquired at the time.6.Method of Payment. Payment shall be made either (i) in cash; (ii) by delivering shares of the Company’s Class A Common Stock which have beenbeneficially owned by the Director, the spouse of the Director, or both of them, for a period of at least six months prior to the time of exercise(“Delivered Stock”); (iii) by surrendering to the Company shares of Class A Common Stock otherwise receivable upon exercise of the Option (a “NetExercise”); or (iv) any combination of the foregoing. Payment in the form of Delivered Stock shall be in the amount of the Fair Market Value of thestock at the date of exercise, determined in accordance with paragraph 9.7.Expiration Date. This Option shall expire ten years after the date on which this Option was granted.8.Withholding Taxes. The Company may require payment of or withhold any tax which it believes is payable as a result of the exercise of this Option,and the Company may defer making delivery with respect to the shares until arrangements satisfactory to the Company have been made with regardto any such withholding obligations. In lieu of part or all of any such payment, the Director, in satisfaction of all withholding taxes (including,without limitation, Federal income, FICA (Social Security and Medicare) and any state and local income taxes) payable as a result of such exercise,may elect, subject to such rules and regulations as the Company may adopt from time to time, to have the Company withhold that number of shares(valued at Fair Market Value on the date of exercise and rounded upward) required to settle such withholding taxes.9.Method of Valuation of Stock. The “Fair Market Value” of the Class A Common Stock of the Company on any date shall mean, if the stock is thenlisted and traded on a registered national securities exchange, or is quoted in the NASDAQ National Market System, the average of the high and lowsale prices recorded in composite transactions for such date or, if such date is not a business day or if no sales of shares shall have been reported withrespect to such date, the next preceding business date with respect to which sales were reported. In the absence of reported sales or if the stock is notso listed or quoted, but is traded in the over-the-counter market, Fair Market Value shall be the average of the closing bid and asked prices for suchshares on the relevant date.10.Clawback. This Option is subject to the terms of the Corporation's recoupment, clawback or similar policy as it may be in effect from time to time, aswell as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any sharesof Common Stock or other cash or property received with respect to the awards (including any value received from a disposition of the sharesacquired upon payment of the awards). 11.No Rights in Shares Until Certificates Issued. Neither the Director nor his heirs nor his personal representative shall have any of the rights orprivileges of a stockholder of the Company in respect of any of the shares issuable upon the exercise of the Option herein granted, unless and untilcertificates representing such shares shall have been issued.12.Option Not Transferable During Director’s Lifetime. This Option shall not be transferable by the Director other than by his will or by the laws ofdescent and distribution and shall be exercisable during his lifetime only by him.13.Prohibition Against Pledge, Attachment, Etc. Except as otherwise herein provided, the Option herein granted and the rights and privilegespertaining thereto shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not besubject to execution, attachment or similar process.14.Changes in Stock. In the event there are any changes in the Class A Common Stock of the Company through merger, consolidation, reorganization,recapitalization, stock dividend, stock split, combination or exchange of shares, rights offering or any other change affecting the Class A CommonStock of the Company, appropriate changes shall be made by the Board of Directors of the Company, in the aggregate number of shares and thepurchase price and kind of shares subject to this Option, to prevent substantial dilution or enlargement of the rights granted to or available forDirector.15.Dissolution or Merger. Anything contained herein to the contrary notwithstanding, upon the dissolution or liquidation of the Company, or uponany merger in which the Company is not the surviving corporation, at any time prior to the expiration date of the termination of this Option, theDirector shall have the right immediately prior to the effective date of such dissolution, liquidation or merger, to surrender all or any unexercisedportion of this Option to the Company for cash, subject to the discretion of the Board of Directors as to the exact timing of said surrender.Notwithstanding the foregoing, however, in the event Director has retired or died, Director’s right to surrender all or any unexercised portion of thisOption under this paragraph shall be available only to the extent that at the time of any such surrender, Director would have been entitled to exercisethis Option under paragraphs 2 or 3 hereof, as the case may be. The amount of cash to be paid to Director for the portion of this Option sosurrendered, shall be equal to the number of shares of Class A Common Stock subject to the surrendered Option multiplied by the difference betweenthe Option Price per share, as described in paragraph 1 hereof, and the Fair Market Value per share, determined in accordance with paragraph 9hereof, as of the time of surrender.16.Notices. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company in care of its Vice Presidentand Chief Financial Officer, and any notice to be given to the Director may be addressed at the address as it appears on the Company’s records, or atsuch other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given if andwhen enclosed in a properly sealed envelope addressed as aforesaid, and deposited, postage prepaid, in the United States mail.17.Provisions of Plan Controlling. This Option is subject in all respects to the provisions of the Plan. In the event of any conflict between anyprovisions of this Option and the provisions of the Plan, the provisions of the Plan shall control, except to the extent the Plan permits the Committeeto modify the terms of an Option grant and has done so herein. Terms defined in the Plan where used herein shall have the meanings as so defined.Director acknowledges receipt of a copy of the Plan.18.Wisconsin Contract. This Option has been granted in Wisconsin and shall be construed under the laws of that state.19.Severability. Wherever possible, each provision of this Option will be interpreted in such manner as to be effective and valid under applicable law,but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of suchprohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.IN WITNESS WHEREOF, the Corporation has granted this Option as of the day and year first above written.BRADY CORPORATIONBy: J. MICHAEL NAUMAN Name: J. Michael NaumanIts: President and Chief Executive Officer DIRECTOR'S ACCEPTANCEI, ___________________________, hereby accept the foregoing Option award and agree to the terms and conditions thereof.DIRECTOR:Signature: Print Name: EXHIBIT 10.63BRADY CORPORATIONRESTRICTED STOCK UNIT AGREEMENTUpon management’s recommendation, the Management Development and Compensation Committee (the “Committee”) of the Brady CorporationBoard of Directors has awarded to ______________ (“Employee”) a restricted stock unit award effective _____________, 20XX pursuant to the terms of theBrady Corporation 2012 Omnibus Incentive Stock Plan (the “Plan”). The Corporation’s records shall be the official record of the grant described herein and,in the event of any conflict between this description and the Corporation’s records, the Corporation’s records shall control.1.Number of UnitsThis Restricted Stock Unit Award applies to X,XXX shares of the presently authorized Class A Nonvoting Common Stock of the Corporation, $.01par value (the “Restricted Stock Units”). The Restricted Stock Units granted under this Agreement are units that will be reflected in a book accountmaintained by the Corporation until they become vested or have been forfeited.2.Service Vesting RequirementThe vesting of this Award (other than pursuant to accelerated vesting in certain circumstances as provided in Section 3 below) shall be subject to thesatisfaction of the condition set forth in Section 2(a) below:(a)Vesting. The Award shall be subject to the following service vesting requirement. If the Employee continues in employment through thevesting dates listed below, the Restricted Stock Units shall be vested as listed in the following table:Vesting DateCumulative Percentage of Vested RestrictedStock Units First anniversary of grant date33-1/3%Second anniversary of grant date66-2/3%Third anniversary of grant date100% (b)Forfeiture of Restricted Stock Units. Except as provided in Section 3, if the Employee terminates employment prior to the satisfaction of thevesting requirements set forth in Section 2(a) above, any unvested Restricted Stock Units shall immediately be forfeited. The period of timeduring which the Restricted Stock Units covered by this Award are forfeitable is referred to as the “Restricted Period.”3.Accelerated Vesting(a)Notwithstanding the terms and conditions of Section 2 hereof, in the event of the termination of the Employee’s employment with theCorporation (and any Affiliate) prior to the end of the Restricted Period due to death or Disability, the Restricted Stock Units shall becomefully vested.(b)In the event of the termination of the Employee’s employment with the Corporation (and any Affiliate) prior to the end of the RestrictedPeriod due to a Change in Control, the Restricted Stock Units shall become unrestricted and fully vested.For purposes of this Agreement, a “Change of Control” shall occur if any person or group of persons (as defined in Section 13(d)(3) of the Securitiesand Exchange Act of 1934) other than the members of the family of William H. Brady, Jr. and their descendants, or trusts for their benefit, and the W.H. Brady Foundation, Inc., collectively, directly or indirectly controls in excess of 50% of the voting common stock of the Corporation.For purposes of this Agreement, a termination due to Change of Control shall occur if within the 12 month period beginning with the date a Changeof Control occurs (i) the Employee’s employment with the Corporation (and any Affiliate) isinvoluntarily terminated (other than by reason of death, disability or Cause) or (ii) the Employee’s employment with the Corporation (and anyAffiliate) is voluntarily terminated by the Employee subsequent to (A) a 10% or more diminution in the total of the Employee’s annual base salary(exclusive of fringe benefits) and the Employee’s target bonus in comparison with the Employee’s total of annual base salary and target bonusimmediately prior to the date the Change of Control occurs, (B) a significant diminution in the responsibilities or authority of the Employee incomparison with the Employee’s responsibility and authority immediately prior to the date the Change of Control occurs or (C) the imposition of arequirement by the Corporation that the Employee relocate to a principal work location more than 50 miles from the Employee’s principal worklocation immediately prior to the date the Change of Control occurs.For purposes of this Agreement, Cause means (i) the Employee’s willful and continued failure to substantially perform the Employee’s duties withthe Corporation (other than any such failure resulting from physical or mental incapacity) after written demand for performance is given to theEmployee by the Corporation which specifically identifies the manner in which the Corporation believes the Employee has not substantiallyperformed and a reasonable time to cure has transpired, (ii) the Employee’s conviction of or plea of nolo contendere for the commission of a felony,or (iii) the Employee’s commission of an act of dishonesty or of any willful act of misconduct which results in or could reasonably be expected toresult in significant injury (monetarily or otherwise) to the Corporation, as determined in good faith by the Committee.(c)In the event of (i) the merger or consolidation of the Corporation with or into another corporation or corporations in which the Corporationis not the surviving corporation, (ii) the adoption of any plan for the dissolution of the Corporation, or (iii) the sale or exchange of all orsubstantially all the assets of the Corporation for cash or for shares of stock or other securities of another corporation, the Restricted StockUnits shall become fully vested.(d)If the vesting of the Restricted Stock Units would result in any excise tax to the Employee as a result of Section 280G of the Code, theCorporation shall pay the Employee an amount equal to such excise tax.4.No DividendsNo dividends will be paid or accrued on any Restricted Stock Units during the Restricted Period.5.Settlement of Restricted Stock Units.As soon as practicable after Restricted Stock Units become vested, the Company shall deliver to the Employee one share of the Corporation's ClassA Nonvoting Common Stock, $.01 par value ("Corporation Stock") for each Restricted Stock Unit which becomes vested.6.Transfer RestrictionsThis Award is non-transferable and may not be assigned, pledged or hypothecated and shall not be subject to execution, attachment or similarprocess. Upon any attempt to effect any such disposition, or upon the levy of any such process, the Award shall immediately become null and voidand the Restricted Stock Units shall be forfeited.7.Withholding TaxesThe Corporation may require payment of or withhold any tax which it believes is payable as a result of the Restricted Stock Units becoming vested,and the Corporation may defer making delivery of the Corporation Stock until arrangements satisfactory to the Corporation have been made withregard to any such withholding obligations. In lieu of part or all of any such payment, the Employee, in satisfaction of all withholding taxes(including, without limitation, Federal income, FICA (Social Security and Medicare) and any state and local income taxes) payable as a result ofsuch vesting, may elect, subject to such rules and regulations as the Committee may adopt from time to time, to have the Corporation withhold thatnumber of shares of Corporation Stock (valued at Fair Market Value on the date of vesting and rounded upward) required to settle such withholdingtaxes.8.Death of EmployeeIf the Restricted Stock Units shall vest upon the death of the Employee, the shares of Corporation Stock and any amounts in the Employee'sDividend Account shall be issued and paid to the estate of the Employee unless the Corporation shall have theretofore received in writing abeneficiary designation, in which event they shall be issued and paid to the designated beneficiary.9.Confidentiality, Non-Solicitation and Non-CompeteAs consideration for the grant of this Award, Employee agrees to, understands and acknowledges the following:(a)During Employee's employment with the Corporation and its Affiliates (the "Company"), the Company will provide Employee withConfidential Information relating to the Company, its business and clients, the disclosure or misuse of which would cause severe andirreparable harm to the Company. Employee agrees that all Confidential Information is and shall remain the sole and absolute property ofthe Company. Upon the termination of Employee's employment with the Company for any reason, Employee shall immediately return tothe Company all documents and materials that contain or constitute Confidential Information, in any form whatsoever, including but notlimited to, all copies, abstracts, electronic versions, and summaries thereof. Executive further agrees that, without the written consent of theChief Executive Officer of the Corporation or, in the case of the Chief Executive Officer of the Corporation, without the written approval ofthe Board of Directors of the Corporation, Employee will not disclose, use, copy or duplicate, or otherwise permit the use, disclosure,copying or duplication of any Confidential Information of the Company, other than in connection with the authorized activities conductedin the course of Employee's employment with the Company. Employee agrees to take all reasonable steps and precautions to prevent anyunauthorized disclosure, use, copying or duplication of Confidential Information. For purposes of this Agreement, Confidential Informationmeans any and all financial, technical, commercial or other information concerning the business and affairs of the Company that isconfidential and proprietary to the Company, including without limitation,(i)information relating to the Company’s past and existing customers and vendors and development of prospective customers andvendors, including specific customer product requirements, pricing arrangements, payments terms, customer lists and other similarinformation;(ii)inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced,acquired or used by the Company;(iii)the Company’s proprietary programs, processes or software, consisting of but not limited to, computer programs in source or objectcode and all related documentation and training materials, including all upgrades, updates, improvements, derivatives andmodifications thereof and including programs and documentation in incomplete stages of design or research and development;(iv)the subject matter of the Company’s patents, design patents, copyrights, trade secrets, trademarks, service marks, trade names, tradedress, manuals, operating instructions, training materials, and other industrial property, including such information in incompletestages of design or research and development; and(v)other confidential and proprietary information or documents relating to the Company’s products, business and marketing plansand techniques, sales and distribution networks and any other information or documents which the Company reasonably regards asbeing confidential.(b)Employee agrees that, without the written consent of the Chief Executive Officer of the Corporation, in the case of the Chief ExecutiveOfficer of the Corporation, without the written approval of the Board of Directors of the Corporation, Employee shall not engage in any ofthe conduct described in subsections (i) or (ii), below, either directly or indirectly, or as an employee, contractor, consultant, partner, officer,director or stockholder, other than a stockholder of less than 5% of the equities of a publicly traded corporation, or in any other capacity forany person, firm, partnership or corporation:(i)During the time of Employee's employment with Company, Employee will not: (A) perform duties as or for a Competitor; or (B)participate in the inducement of or otherwise encourage Company employees, clients, or vendors to currently and/or prospectivelybreach, modify, or terminate any agreement or relationship they have or had with Company.(ii)For a period of 12 months following the termination of Employee's employment with Company, Employee will not: (A) performduties as or for a Competitor that are the same as or similar to the duties performed by Employee for the Company at any timeduring any part of the 24 month period preceding the termination of Employee's employment with Company; or (B) participate inthe inducement of or otherwise encourage Company employees, clients, or vendors to currently and/or prospectively breach,modify, or terminate any agreement or relationship they have or had with Company during any part of the 24 month periodpreceding the termination of Employee's employment with Company.For purposes of this Agreement, a Competitor shall mean any corporation, person, firm or organization (or division or part thereof) engagedin or about to become engaged in research and development work on, or the production and/or sale of, any product or service which isdirectly competitive with one with respect to which Employee acquired Confidential Information by reason of Employee's work with theCompany.(c)Employee acknowledges and agrees that compliance with this Section 9 is necessary to protect the Company, and that a breach of any ofthis Section 9 will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law. In theevent of a breach of this Section 9, or any part thereof, the Company, and its successors and assigns, shall be entitled to injunctive relief andto such other and further relief as is proper under the circumstances. The Company shall institute and prosecute proceedings in any Court ofcompetent jurisdiction either in law or in equity to obtain damages for any such breach of this Section 9, or to enjoin Employee fromperforming services in breach of Section 9(b) during the term of employment and for a period of 12 months following the termination ofemployment. Employee hereby agrees to submit to the jurisdiction of any Court of competent jurisdiction in any disputes that arise underthis Agreement.(d)Employee further agrees that, in the event of a breach of this Section 9, the Corporation shall also be entitled to recover the value of anyamounts previously paid or payable or any shares (or the value of any shares) delivered or deliverable to Employee pursuant to anyCompany bonus program, this Agreement, and any other Company plan or arrangement.(e)Employee agrees that the terms of this Section 9 shall survive the termination of Employee's employment with the Company.(f)EMPLOYEE HAS READ THIS SECTION 9 AND AGREES THAT THE CONSIDERATION PROVIDED BY THE CORPORATIONIS FAIR AND REASONABLE AND FURTHER AGREES THAT GIVEN THE IMPORTANCE TO THE COMPANY OF ITSCONFIDENTIAL AND PROPRIETARY INFORMATION, THE POST-EMPLOYMENT RESTRICTIONS ON EMPLOYEE'SACTIVITIES ARE LIKEWISE FAIR AND REASONABLE.10.ClawbackThis Award is subject to the terms of the Corporation's recoupment, clawback or similar policy as it may be in effect from time to time, as well as anysimilar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any shares ofCorporation Stock or other cash or property received with respect to the awards (including any value received from a disposition of the sharesacquired upon payment of the awards).11.Adjustment of SharesThe terms and provisions of this Award (including, without limitation, the terms and provisions relating to the number and class of shares subject tothis Award) shall be subject to appropriate adjustment in the event of any recapitalization, merger, consolidation, disposition of property or stock,separation, reorganization, stock dividend, issuance of rights, combination or split-up or exchange of shares, or the like.12.Provisions of Plan ControllingThis Award is subject in all respects to the provisions of the Plan. In the event of any conflict between any provisions of this Award and theprovisions of the Plan, the provisions of the Plan shall control, except to the extent the Plan permits the Committee to modify the terms of an Awardgrant and has done so herein. Terms defined in the Plan where used herein shall have the meanings as so defined. Employee acknowledges receipt ofa copy of the Plan.13.Wisconsin ContractThis Award has been granted in Wisconsin and shall be construed under the laws of that state.14.SeverabilityWherever possible, each provision of this Award will be interpreted in such manner as to be effective and valid under applicable law, but if anyprovision hereof is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibitionor invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.IN WITNESS WHEREOF, the Corporation has granted this Award as of the day and year first above written.BRADY CORPORATIONBy: J. MICHAEL NAUMAN Name: J. Michael Nauman Its: Chief Executive Officer EMPLOYEE'S ACCEPTANCEI, ___________________________, hereby accept the foregoing Award and agree to the terms and conditionsthereof, including the restrictions contained in Section 9 of this Agreement.EMPLOYEE:Signature: Print Name: EXHIBIT 21SCHEDULE OF SUBSIDIARIES OF BRADY CORPORATIONJuly 31, 2014 State (Country) Percentage of VotingName of Company Of Incorporation Securities OwnedBrady Corporation Wisconsin ParentTricor Direct, Inc. Delaware 100% Doing Business As: Seton Seton Name Plate Company D&G Sign and Label Seton Identification Products Emedco Champion America DAWG, Inc. Worldmark of Wisconsin Inc. Delaware 100%AIO Acquisition Inc. Delaware 100% Doing Business As: All-In-One Products Personnel Concepts Personnel Concepts Limited Personnel Concepts Ltd. PC Limited USA Printing & Mailing Dual Core LLC Wisconsin 100% Doing Business As: Identicard Systems Worldwide Brady People ID JAM Plastics PromoVision Palomino Temtec BIG Badges Brady Holdings Mexico LLC Delaware 100%Clement Communications, Inc. Pennsylvania 100%Brady International Co. Wisconsin 100%Brady Worldwide, Inc. Wisconsin 100% Doing Business As: Brandon International Sorbent Products Company TISCOR Electromark Precision Dynamics Corporation California 100% Doing Business As: Pharmex PDMX LLC California 100%Precision Dynamics International, Inc. California 100%Brady Australia Holdings Pty. Ltd. Australia 100%Brady Australia Pty. Ltd. Australia 100%Seton Australia Pty. Ltd. Australia 100%Accidental Health & Safety Pty. Ltd. Australia 100%Trafalgar First Aid Pty. Ltd. Australia 100%Carroll Australasia Pty. Ltd. Australia 100%Scafftag Australia Pty. Ltd. Australia 100%Visisign Pty. Ltd. Australia 100%ID Warehouse Pty. Ltd. Australia 100%Mix Group Australasia Pty. Ltd. Australia 100%Transposafe Systems Belgium NV/SA Belgium 100%W.H. Brady, N.V. Belgium 100%PDC Belgium Holdings Sprl Belgium 100%PDC Europe Sprl Belgium 100%Stickolor Industria e Comércio de Auto Adesivos Ltda. Brazil 100%W.H.B. do Brasil Ltda. Brazil 100%BRC Financial Canada 100%W.H.B. Identification Solutions Inc. Canada 100% Doing Business As: Brady IDenticam Systems IDenticard Systems Seton Brady Cayman Finance Company Cayman Islands 100%Brady Investment Management (Shanghai) Co., Ltd. China 100%Brady Technology (Wuxi) Co. Ltd. China 100%Brady (Beijing) Co. Ltd. China 100%Brady (Shenzhen) Co., Ltd. China 100%Brady Technology (Dongguan) Co., Ltd. China 100%Brady Technology (Langfang) Co., Ltd. China 100%Brady (Xiamen) Co., Ltd. China 100%Brady A/S Denmark 100%Braton Europe S.A.R.L France 100%Brady Groupe S.A.S France 100% Doing Business As: Seton Signals BIG Securimed S.A.S. France 100%Brady GmbH Germany 100% Doing Business As: Seton Brady Holdings GmbH & Co. KG Germany 100%Brady Holdings Verwaltungs GmbH Germany 100%Transposafe Systems Deutschland GmbH Germany 100%Bakee Metal Manufactory Company Limited Hong Kong 100%Brady Corporation Hong Kong Limited Hong Kong 100%Brady Company India Private Limited India 100%Brady Italia, S.r.l. Italy 100%Nippon Brady K.K. Japan 100%Brady S.à r.l. Luxembourg 100%Brady Luxembourg S.à r.l. Luxembourg 100%Brady Finance Luxembourg S.à r.l. Luxembourg 100%Brady Technology SDN. BHD. Malaysia 100%W. H. Brady S. de R.L. de C.V. Mexico 100%Brady Servicios, S. de R.L. de C.V. Mexico 100%Brady Mexico, S. de R.L. de C.V. Mexico 100%Maquila Products del Noroeste S.de R.L. de C.V. Mexico 100%PDC Brazeletesy Productos S.de R.L. de C.V. Mexico 100%St. John Healthcare s.de R.L. de C.V. Mexico 100%Brady B.V. Netherlands 100%Brady Finance B.V. Netherlands 100%Holland Mounting Systems B.V. Netherlands 100%Transposafe Systems Holland B.V. Netherlands 100%Brady AS Norway 100%Pervaco AS Norway 100%Brady Philippines Direct Marketing Inc. Philippines 100%Transposafe Systems Polska Sp. Z.o.o. Poland 100%Brady ID Solutions S.R.L. Romania 100%Brady LLC Russia 100%Brady Corporation S.E.A. Pte. Ltd. Singapore 100%Brady Corporation Asia Pte. Ltd. Singapore 100%Brady Asia Holding Pte. Ltd. Singapore 100%Brady Corporation Asia Pacific Pte. Ltd. Singapore 100%Brady Asia Pacific Pte. Ltd. Singapore 100%Brady s.r.o. Slovakia 100%Wiremarkers Africa Pty. Ltd. South Africa 100%Grafo Wiremarkers Pty. Ltd. South Africa 100%Brady IDS Korea LLP South Korea 100%Brady Identificación S.L.U. Spain 100%Brady AB Sweden 100%Brady Sweden Holding AB Sweden 100%Runelandhs Fastighter AB Sweden 100%Runelandhs Försäljnings AB Sweden 100%Brady Converting AB Sweden 100%Tradex AB Sweden 100%Brady (Thailand) Co. Ltd. Thailand 100%Brady Etiket ve Isaretleme Ticaret Ltd. Sirketi Turkey 100%Brady Middle East FZE United Arab Emirates 100%B.I. (UK) Limited United Kingdom 100%Brady Corporation Limited United Kingdom 100%Brady European Finance Limited United Kingdom 100%Brady European Holdings Limited United Kingdom 100%EXHIBIT 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-38857, 333-38859, 333-44505, 333-92417, 333-110949, 333-122867, 333-134503, 333-137686, 333-141402, 333-162538 and 333-177039 on Form S-8 and 333-177529 on Form S-3 of our reports dated September 29, 2014,relating to the consolidated financial statements and financial statement schedule of Brady Corporation, and the effectiveness of Brady Corporation’sinternal control over financial reporting, appearing in this Annual Report on Form 10-K of Brady Corporation for the year ended July 31, 2014./s/ DELOITTE & TOUCHE LLPMilwaukee, WisconsinSeptember 29, 2014EXHIBIT 31.1RULE 13a-14(a)/15d-14(a) CERTIFICATIONI, J. Michael Nauman, certify that:(1) I have reviewed this annual report on Form 10-K of Brady Corporation;(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervisionto provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: September 29, 2014 /s/ J. MICHAEL NAUMAN J. Michael Nauman President and Chief Executive Officer EXHIBIT 31.2RULE 13a-14(a)/15d-14(a) CERTIFICATIONI, Aaron J. Pearce, certify that:(1) I have reviewed this annual report on Form 10-K of Brady Corporation;(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material act necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervisionto provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: September 29, 2014 /s/ AARON J. PEARCE Aaron J. Pearce Senior Vice President and Chief Financial Officer EXHIBIT 32.1SECTION 1350 CERTIFICATIONPursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of BradyCorporation (the “Company”) certifies to his knowledge that:(1) The Annual Report on Form 10-K of the Company for the year ended July 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and(2) The information contained in that Form 10-K fairly presents, in all material respects, the financial conditions and results of operations of theCompany. Date: September 29, 2014 /s/ J. MICHAEL NAUMAN J. Michael Nauman President and Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting thesignature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company andwill be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies thisreport pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the SecuritiesExchange Act of 1934, as amended.EXHIBIT 32.2SECTION 1350 CERTIFICATIONPursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of BradyCorporation (the “Company”) certifies to his knowledge that:(1) The Annual Report on Form 10-K of the Company for the year ended July 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and(2) The information contained in that Form 10-K fairly presents, in all material respects, the financial conditions and results of operations of theCompany. Date: September 29, 2014 /s/ AARON J. PEARCE Aaron J. Pearce Senior Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting thesignature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company andwill be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies thisreport pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the SecuritiesExchange Act of 1934, as amended.

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