10q10k10q10k.net

What changed in BRADY CORP's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of BRADY CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+120 added−166 removedSource: 10-K (2024-09-06) vs 10-K (2023-09-05)

Top changes in BRADY CORP's 2024 10-K

120 paragraphs added · 166 removed · 103 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

16 edited+2 added−9 removed27 unchanged
Biggest changeIDS is primarily involved in the design, manufacturing, and distribution of high-performance and innovative identification and healthcare products, while WPS manufactures a broad range of stock and custom identification products and is a distributor of a wide variety of resale products. 4 Table of Contents Below is a summary of sales for IDS and WPS within each current reportable segment during the years ended July 31: Americas & Asia 2023 2022 2021 IDS 91.4 % 90.4 % 88.3 % WPS 8.6 % 9.6 % 11.7 % Total 100.0 % 100.0 % 100.0 % Europe & Australia 2023 2022 2021 IDS 52.8 % 52.8 % 46.9 % WPS 47.2 % 47.2 % 53.1 % Total 100.0 % 100.0 % 100.0 % Identification Solutions Primary product categories include: • Product identification, which includes materials, printing systems, RFID and bar code scanners for product identification, brand protection labeling, work in process labeling, finished product identification, and industrial track and trace applications. • Facility safety and identification and protection, which includes safety signs, floor-marking tape, pipe markers, labeling systems, spill control products, lockout/tagout devices, and software and services for safety compliance auditing, procedures writing and training. • Wire identification, which includes hand-held printers, wire markers, sleeves, and tags. • People identification, which includes name tags, badges, lanyards, rigid card printing systems, and access control software. • Patient identification, which includes wristbands, labels, printing systems, and other products used in hospital, laboratories, and other healthcare settings for tracking and improving the safety of patients.
Biggest changeBelow is a summary of sales by reportable segment during the years ended July 31: 2024 2023 2022 Americas & Asia 66.1 % 66.7 % 66.1 % Europe & Australia 33.9 % 33.3 % 33.9 % Total 100.0 % 100.0 % 100.0 % Within each of the reportable segments, the Company markets, sells and distributes a broad range of identification and safety products and solutions across the following primary product categories: • Safety and facility identification and protection, which includes safety signs, traffic signs and control products, floor-marking tape, pipe markers, labeling systems, spill control products, lockout/tagout devices, personal protection equipment, first aid products, and software and services for safety compliance auditing, procedures writing and training. • Product identification, which includes materials, printing systems, radio frequency identification (“RFID”) and barcode scanners for product identification, brand protection labeling, work in process labeling, finished product identification, asset tracking labels, asset tags and industrial track and trace applications. • Wire identification, which includes handheld printers, wire markers, sleeves, and tags. • Healthcare identification, which includes wristbands, labels, printing systems, and other products used in hospital, laboratory, and other healthcare settings for tracking and improving the safety of patients. • People identification, which includes name tags, badges, lanyards, rigid card printing systems, and access control software. 4 Table of Contents The Company markets and sells its products through multiple channels, including distributors, a direct sales force, and digital channels.
Competition is present based upon several factors, including product innovation, customer service, breadth of product offering, product quality, price, expertise, production capabilities, and for multinational customers, our global footprint.
Competition is based upon several factors, including product innovation, customer service, breadth of product offering, product quality, price, expertise, production capabilities, and for multinational customers, our global footprint.
Lagging indicators include the OSHA Total Recordable Incident Rate (“TRIR”) and the Lost Time Case Rate (“LTCR”) based upon the number of incidents per 100 employees. Leading indicators include reporting and closure of all near miss events. The Company also utilizes trainings such as Environmental, Health and Safety (“EHS”) coaching and engagement conversations as preventative measure.
Lagging indicators include the OSHA Total Recordable Incident Rate (“TRIR”) and the Lost Time Case Rate (“LTCR”) based upon the number of incidents per 100 employees. Leading indicators include reporting and closure of all near miss events. The Company also utilizes trainings such as Environmental, Health and Safety (“EHS”) coaching and engagement conversations as preventative measures.
The Company operates coating facilities that manufacture bulk rolls 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, we are not dependent upon any single supplier for our most critical base materials or components.
The Company operates coating facilities that manufacture bulk rolls of label stock for internal and external customers. In addition, the Company purchases finished products for resale. 5 Table of Contents The Company purchases raw materials, components and finished products from many suppliers. Overall, we are not dependent upon any single supplier for our most critical base materials or components.
The following were key initiatives supporting the strategy in fiscal 2023: • Investing in organic growth by enhancing our research and development process and utilizing customer feedback and observations to develop innovative new products that solve customer needs and improve environmental sustainability. • Providing our customers with the highest level of customer service. • Expanding and enhancing our sales capabilities through an improved digital presence and the use of data-driven marketing automation tools. • Maintaining profitability through pricing mechanisms to mitigate the impacts of supply chain disruptions and inflationary pressures while ensuring prices are market competitive. • Executing our reorganization to a regional operating structure to support continued growth in key geographies, facilitating new product development in our recent acquisitions, and simplifying and further integrating our businesses. • Integrating recent acquisitions to further enhance our strategic position and accelerate long-term sales growth. • Driving operational excellence and executing sustainable efficiency gains within our selling, general and administrative structures and within our global operations including insourcing of critical products and manufacturing activities while reducing our environmental footprint. • Building on our culture of diversity, equity and inclusion to increase employee engagement and enhance recruitment and retention practices in order to drive differentiated performance and execute our strategy.
The following were key initiatives supporting the strategy in fiscal 2024: • Investing in organic growth by enhancing our research and development process and utilizing customer feedback and observations to develop innovative new products that solve customer needs and improve environmental sustainability. • Providing with the highest level of customer service by aligning with customers' preferred communication channels and leveraging technology to enhance the customer experience. • Expanding and enhancing our sales capabilities through an improved digital presence and the use of data-driven marketing automation tools. • Maintaining profitability through pricing mechanisms to mitigate the impacts of supply chain disruptions and inflationary pressures while ensuring prices are market competitive. • Executing our reorganization to a regional operating structure to support continued growth in key geographies, facilitating new product development in our recent acquisitions, and simplifying and further integrating our businesses. • Integrating recent acquisitions to further enhance our strategic position and accelerate long-term sales growth. • Driving operational excellence and executing sustainable efficiency gains within our selling, general and administrative structures and within our global operations including insourcing of critical products and manufacturing activities while reducing our environmental footprint. • Building on our culture of diversity, equity and inclusion to increase employee engagement and enhance recruitment and retention practices in order to drive differentiated performance and execute our strategy.
The Company provides subsidized health and welfare benefits, as well as postretirement, incentive and equity-based compensation plans and programs to eligible employees. Refer to the Compensation Discussion & Analysis for additional information regarding the Company’s compensation and benefits programs. 7 Table of Contents Information Available on the Internet The Company’s Corporate Internet address is www.bradyid.com.
The Company provides subsidized health and welfare benefits, as well as postretirement, incentive and equity-based compensation plans and programs to eligible employees. Refer to the Compensation Discussion & Analysis for additional information regarding the Company’s compensation and benefits programs. Information Available on the Internet The Company’s Corporate Internet address is www.bradyid.com.
The Vice President of Human Resources is also responsible for leading the Company’s diversity, equity, and inclusion initiatives. The Company’s Board of Directors and its committees receive regular updates on the operation and status of these initiatives and human capital trends and activities from the Vice President of Human Resources, the CEO and others within senior management.
The Vice President of Human Resources is also responsible for developing the Company’s diversity, equity, and inclusion framework for the organization. The Company’s Board of Directors and its committees receive regular updates on the operation and status of these initiatives and human capital trends and activities from the Vice President of Human Resources, the CEO and others within senior management.
Research and Development The Company focuses its research and development ("R&D") efforts on track and trace applications, pressure sensitive materials, identification and printing systems, software, and the development of other workplace safety-related products. The Company spent $61.4 million, $58.5 million, and $44.6 million on its R&D activities during the years ended July 31, 2023, 2022, and 2021, respectively.
Research and Development The Company focuses its research and development ("R&D") efforts on track and trace applications, pressure sensitive materials, identification and printing systems, software, and the development of other workplace safety-related products. The Company spent $67.7 million, $61.4 million, and $58.5 million on its R&D activities during the years ended July 31, 2024, 2023, and 2022, respectively.
During the year ended July 31, 2023, the Company had a TRIR of 0.60, a LTCR of 0.28 and no work-related fatalities. Diversity, Equity, and Inclusion : Fostering a culture of diversity, equity and inclusion in the workplace means employees are and believe that they are valued and listened to, and the Company has made this a top priority.
During the year ended July 31, 2024, the Company had a TRIR of 0.52, a LTCR of 0.23 and no work-related fatalities. Diversity, Equity, and Inclusion : Fostering a culture of diversity, equity and inclusion in the workplace means employees are and believe that they are valued and listened to, and the Company has made this a top priority.
As of July 31, 2023, 44% of the members of the Company’s Board of Directors were women and 60% of Board committee chairs were women. Training and Talent Development : The Company is committed to the continued development of its people. Strategic talent reviews and succession planning occur on a planned cadence annually.
As of July 31, 2024, 40% of the members of the Company’s Board of Directors were women and 60% of Board committee chairs were women. 6 Table of Contents Training and Talent Development : The Company is committed to the continued development of its people. Strategic talent reviews and succession planning occur on a planned cadence annually.
These products serve customers in many industries within each region, which include industrial manufacturing, electronic manufacturing, healthcare, chemical, oil, gas, alternative energy, automotive, aerospace, governments, mass transit, electrical contractors, education, leisure and entertainment and telecommunications, among others.
These products serve customers in many industries within each reportable segment, which industries include industrial manufacturing, electronic manufacturing, healthcare, chemical, oil, gas, alternative energy, automotive, aerospace, governments, mass transit, mechanical contractors, construction, utilities, education, leisure and entertainment and telecommunications, among others.
Effective February 1, 2023, the Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia.
The Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia.
This change to a regional operating structure allows the Company to further integrate its businesses, support continued growth through the application of the best go-to-market strategies in key geographies, facilitate new product development within recent acquisitions and further simplify the global business. All segment-related data has been conformed to the new reportable segments.
This regional operating structure allows the Company to further integrate its businesses, support continued growth through the application of the best go-to-market strategies in key geographies, facilitate new product development within recent acquisitions and further simplify and scale the global business.
Normal and customary payment terms primarily range from net 10 to 90 days from date of invoice and vary by geography.
Normal and customary payment terms primarily range from net 10 to 90 days from date of invoice and vary by geography. The Company has a broad customer base, and no individual customer represents 10% or more of total net sales.
The Company has a broad customer base, and no individual customer represents 10% or more of total net sales. 6 Table of Contents Human Capital Management As of July 31, 2023, the Company employed approximately 5,600 individuals worldwide, of which approximately 1,650 were employed in the United States and approximately 3,950 were employed outside the United States.
Human Capital Management As of July 31, 2024, the Company employed approximately 5,700 individuals worldwide, of which approximately 1,600 were employed in the United States and approximately 4,100 were employed outside the United States.
The direct sales force within each region partners with end-users and distributors by providing technical application and product expertise. The Company manufactures differentiated, proprietary products, most of which have been internally developed. These internally developed products include materials; printing, identification and tracking systems; and software.
Brady has long-standing relationships with a broad range of electrical, safety, industrial and other domestic and international distributors. The direct sales force within each region partners with end-users and distributors by providing technical application and product expertise. The Company provides access to its products through brand-specific websites and catalogs.
Removed
Below is a summary of sales by reportable segment during the years ended July 31: 2023 2022 2021 Americas & Asia 66.7 % 66.1 % 64.3 % Europe & Australia 33.3 % 33.9 % 35.7 % Total 100.0 % 100.0 % 100.0 % Prior to February 1, 2023, the Company operated two former segments: Identification Solutions (“IDS”) and Workplace Safety (“WPS”).
Added
The Company markets its products under a variety of brand names: • Brady: product identification labels, wire identification products, printers, software, safety and facility identification products, lock-out/tag-out products, brand protection labels, people identification products, and specialty materials • Seton, Emedco, Signals, Safety Signs Service, and Pervaco: Safety and facility identification products • PDC, PDC Healthcare, MAGiCARD, and Promovision: People and healthcare identification products • Code: Barcode scanners • Nordic ID: RFID products • SPC: Spill control products • Electromark: Identification products for the utility industry • Securimed, Accidental Health and Safety and Trafalgar: First aid products • Carroll: Wire identification products The Company manufactures differentiated, proprietary products, most of which have been internally developed.
Removed
Approximately 64% of IDS products are sold under the Brady brand, with other primary brands including identification products for the utility industry which are marketed under the Electromark brand and security and identification badges and systems which are marketed under the PromoVision, Brady People ID, BIG, and MAGiCARD brands.
Added
These internally developed products include materials; printing, identification and tracking systems; and software. Materials manufactured by the Company generally require a high degree of precision and the application of adhesives with chemical and physical properties suited for specific uses. The Company’s manufacturing processes include compounding, coating, converting, printing, melt-blown operations, software development and printer design and assembly.
Removed
Spill control products are marketed under the SPC brand, lockout/tagout products are offered under the Scafftag brand, RFID products are marketed under the Nordic ID brand, and barcode scanners are marketed under the Code brand.
Removed
Identification and patient safety products in the healthcare industry are available under the PDC Healthcare brand and custom wristbands for the leisure and entertainment industry are available under the PDC brand. Each region markets and sells high-quality and rapid response IDS products through multiple channels including distribution, a direct sales force, and digital channels.
Removed
Workplace Safety Primary product categories include: • Product identification, which includes asset tracking labels and asset tags. • Facility, safety and identification and protection, which includes safety signs, traffic signs and control products, floor-marking tape, pipe markers, lockout/tagout devices, personal protection equipment, first aid products, and other workplace compliance products. 5 Table of Contents • Wire identification, which includes handheld printers, wire markers, sleeves and tags.
Removed
Products are sold under a variety of brands including: safety and facility identification products offered under the Seton, Emedco, Signals, Safety Signs, SafetyShop, Signs & Labels, and Pervaco brands; first aid supplies marketed under the Accidental Health and Safety, Trafalgar, and Securimed brands; and wire identification products marketed under the Carroll brand.
Removed
The Company manufactures a broad range of stock and custom identification products, and also sells a broad range of related resale products. Manufactured products comprise approximately 40% of WPS product sales. Historically, both the Company and many of our competitors focused their businesses on catalog marketing, often with varying product niches.
Removed
Many of our competitors extensively utilize e-commerce to promote the sale of their products. A consequence of e-commerce is price transparency, as prices on non-proprietary products can be easily compared.
Removed
Therefore, to compete effectively, we focus on pricing our products competitively, building out our e-commerce capabilities, developing unique or customized solutions, enhancing the customer experience, and providing compliance expertise as these factors are critical to retain existing customers and convert new customers. WPS primarily sells to businesses and serves many industries, including manufacturers, process industries, government, education, construction, and utilities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

22 edited+3 added−5 removed51 unchanged
Biggest changeWhile it is impossible for us to predict whether some or all of these proposals will be enacted, many will likely have an impact on our business and financial results. Substantially all of our voting stock is controlled by two shareholders, while our public investors hold non-voting stock.
Biggest changeAccordingly, the final adoption, interpretation and implementation of Pillar Two across all jurisdictions where we conduct business could adversely affect our business and financial results. While it is impossible for us to predict whether other tax proposals will be enacted, many will likely have an impact on our business and financial results.
While we have implemented certain cost containment measures and selective price increases, as well as taken other actions to offset these inflationary pressures in our supply chain, we may not be able to offset all of the increases in our operational costs, which could adversely impact our business and financial results.
While we have implemented certain cost containment measures and selective price increases, as well as taken other actions to offset recent inflationary pressures in our supply chain, we may not be able to offset all of the increases in our operational costs, which could adversely impact our business and financial results.
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. • Regulations resulting from political and economic instability and disruptions. • Imposition of new or changes in existing duties, tariffs and trade agreements, which could have a direct or indirect impact on our ability to manufacture products, on our customers' demand for our products, or on our suppliers' ability to deliver raw materials. 10 Table of Contents • 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 Corrupt Practices Act. • Local labor regulations. • Regulations relating to climate change, air emissions, wastewater discharges, handling and disposal of hazardous materials and wastes. • Regulations relating to product content, health, safety and the protection of the environment. • Imposition of trade or travel restrictions as a result of any continuing effects of the COVID-19 pandemic, or as a result of other pandemics or global health crises. • Specific country regulations where our products are manufactured or sold. • Regulations relating to compliance with data protection and privacy laws throughout our global business. • Laws and regulations that apply to companies doing business with the government, including audit requirements of government contracts related to procurement integrity, export control, employment practices, and the accuracy of records and recording of costs.
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. • Regulations resulting from political and economic instability and disruptions. • Imposition of new or changes in existing duties, tariffs and trade agreements, which could have a direct or indirect impact on our ability to manufacture products, on our customers' demand for our products, or on our suppliers' ability to deliver raw materials. • 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 Corrupt Practices Act. • Local labor regulations. 9 Table of Contents • Regulations relating to climate change, air emissions, wastewater discharges, handling and disposal of hazardous materials and wastes. • Regulations relating to product content, health, safety and the protection of the environment. • Imposition of trade or travel restrictions as a result of any effects of pandemics or global health crises. • Specific country regulations where our products are manufactured or sold. • Regulations relating to compliance with data protection and privacy laws throughout our global business. • Laws and regulations that apply to companies doing business with the government, including audit requirements of government contracts related to procurement integrity, export control, employment practices, and the accuracy of records and recording of costs.
In addition, the impact of the divestiture on our revenue and net income may be larger than projected, which could distract management, and disputes may arise with buyers. We have retained responsibility for and have agreed to indemnify buyers against certain contingent liabilities related to several businesses that we have sold.
In addition, the impact of the divestiture on our revenue and net income may be larger than projected, which could distract management, and disputes may arise with buyers. 8 Table of Contents We have retained responsibility for and have agreed to indemnify buyers against certain contingent liabilities related to several businesses that we have sold.
Our prices and lead times for raw materials and other components necessary for production have fluctuated in the past year, including increased raw production costs, increased wage rates, and extended lead times. Significant increases could adversely affect our profit margins and results of operations.
Our prices and lead times for raw materials and other components necessary for production have continued to fluctuate over the past year, including increased raw production costs, increased wage rates, and extended lead times. Significant increases could adversely affect our profit margins and results of operations.
Additionally, the enhanced stakeholder focus on ESG issues relating to our business requires the continuous monitoring of various and evolving standards and the associated reporting requirements.
Additionally, the enhanced stakeholder focus on Environmental, Social and Governance (“ESG”) issues relating to our business requires the continuous monitoring of various and evolving standards and the associated reporting requirements.
Additionally, certain private investors, mutual funds and index sponsors have implemented rules restricting ownership, or excluding from indices, companies with non-voting publicly traded shares. For example, the Company was removed from the Russell 2000 Index in the fourth quarter of fiscal 2023 for not meeting the minimum voting rights hurdle. 12 Table of Contents Item 1B. Unresolved Staff Comments None.
Additionally, certain private investors, mutual funds and index sponsors have implemented rules restricting ownership, or excluding from indices, companies with non-voting publicly traded shares. For example, the Company was removed from the Russell 2000 Index in the fourth quarter of fiscal year 2023 for not meeting the minimum voting rights hurdle.
In addition, certain of our subsidiaries may invoice customers in a currency other than its functional currency or may be invoiced by suppliers in a currency other than its functional currency, which could result in unfavorable translation effects on our business and financial results.
In addition, certain of our subsidiaries may invoice customers in a currency other than its functional currency or may be invoiced by suppliers in a currency other than its functional currency, which could result in unfavorable translation effects on our business and financial results. Changes in tax legislation or tax rates could adversely affect results of operations and financial statements.
We are subject to litigation that could adversely impact our business, financial results, and reputation. We are a party to litigation that arises in the normal course of our business operations, including product liability and recall (strict liability and negligence) claims, patent and trademark matters, contract disputes and environmental, employment and other litigation matters.
We are, or may become, a party to litigation that arises in the normal course of our business operations, including product liability and recall (strict liability and negligence) claims, patent and trademark matters, contract disputes and environmental, employment and other litigation matters.
Further, our customers and the markets we serve may impose emissions or other environmental standards through regulation, market-based emissions policies or consumer preference that we may not be able to timely meet due to the required level of capital investment or technological advancement.
There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Further, our customers and the markets we serve may impose emissions or other environmental standards through regulation, market-based emissions policies or consumer preference that we may not be able to timely meet due to the required level of capital investment or technological advancement.
Numerous factors may affect the demand for our products, including: • Deterioration of economic conditions in major markets served • Residual economic and operational impact of the COVID-19 pandemic, or the impact of other pandemics • Economic and operational impact of the war between Russia and Ukraine or other wars • Consolidation in the marketplace allowing competitors to be more efficient and more price competitive • Competitors entering the marketplace • Decreasing product life cycles • Changes in customer preferences • Ability to achieve strong operational performance, including the manufacture and sale of high-quality products and the ability to meet customer delivery expectations If any of these factors occur, the demand for our products could suffer, and this could adversely impact our business and financial results. 8 Table of Contents Failure to compete effectively or to successfully execute our strategy may have a negative impact on our business and financial results.
Numerous factors may affect the demand for our products, including: • Deterioration of economic conditions in major markets served • Catastrophic events, including epidemics, major health concerns, or natural disasters • Economic and operational impact of the war between Russia and Ukraine or other wars • Consolidation in the marketplace allowing competitors to be more efficient and more price competitive • Competitors entering the marketplace 7 Table of Contents • Decreasing product life cycles • Changes in customer preferences • Ability to achieve strong operational performance, including the manufacture and sale of high-quality products and the ability to meet customer delivery expectations If any of these factors occur, the demand for our products could suffer, and this could adversely impact our business and financial results.
Failure to execute our strategies could result in impairment of goodwill or other intangible assets, which may negatively impact income and profitability . We have goodwill of $592.6 million and other intangible assets of $62.1 million as of July 31, 2023, which represents 47.1% of our total assets, and we have recognized impairment charges in the past.
Failure to execute our strategies could result in impairment of goodwill or other intangible assets, which may negatively impact income and profitability . We have goodwill of $589.6 million and other intangible assets of $51.8 million as of July 31, 2024, which represent 42.3% of our total assets, and we have recognized impairment charges in the past.
Global climate change and related emphasis on ESG matters by various stakeholders could negatively affect our business Increased public awareness and concern regarding global climate change may result in more regional and/or federal requirements to reduce or mitigate the effects of greenhouse gas emissions. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.
Global climate change and related emphasis on environmental matters by various stakeholders could negatively affect our business and financial results. Increased public awareness and concern regarding global climate change may result in more regional and/or federal requirements to reduce or mitigate the effects of greenhouse gas emissions.
Recent and future acquisitions will require integration of operations, sales and marketing, information technology, finance, and administrative operations, which could decrease the time available to focus on our other growth strategies.
Our historical growth has included acquisitions and our future growth strategy includes acquisitions. Acquisitions place significant demands on management, operational, and financial resources. Recent and future acquisitions will require integration of operations, sales and marketing, information technology, finance, and administrative operations, which could decrease the time available to focus on our other growth strategies.
If the estimated fair value of our goodwill or other intangible assets change in future periods, we may be required to record an impairment charge, which would reduce net income in such period.
If the estimated fair value of our goodwill or other intangible assets change in future periods, we may be required to record an impairment charge, which would reduce net income in such period. Substantially all of our voting stock is controlled by two shareholders, while our public investors hold non-voting stock.
The resolution of these contingencies has not had a material adverse impact on our financial results, but we cannot be certain that this favorable pattern will continue. 9 Table of Contents The COVID-19 pandemic has adversely impacted our operations and business.
The resolution of these contingencies has not had a material adverse impact on our financial results, but we cannot be certain that this pattern will continue.
Our sales and expenses are translated into U.S. dollars for reporting purposes, and further strengthening of the U.S. dollar could result in unfavorable translation effects, which occurred during fiscal years 2020 and 2022.
Decreased strength of the U.S. dollar could adversely affect the cost of materials, products, and services purchased overseas. Our sales and expenses are translated into U.S. dollars for reporting purposes, and further strengthening of the U.S. dollar could result in unfavorable translation effects, which occurred during fiscal year 2023 and 10 Table of Contents 2022.
A failure to adequately meet stakeholder expectations may result in the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent. 11 Table of Contents Financial and Security Ownership Risks The global nature of our business exposes us to foreign currency fluctuations that could adversely affect our business and financial results.
A failure to adequately meet stakeholder expectations may result in the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent. We are subject to litigation that could adversely impact our business, financial results, and reputation.
We actively compete with companies that produce and market the same or similar products, and in some instances, with companies that sell different products that are designed for the same target markets.
Failure to compete effectively or to successfully execute our strategy may have a negative impact on our business and financial results. We actively compete with companies that produce and market the same or similar products, and in some instances, with companies that sell different products that are designed for the same target markets.
Increased strength of the U.S. dollar will increase 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 adversely affect the cost of materials, products, and services purchased overseas.
Sales and purchases in currencies other than the U.S. dollar expos e us to fluctuations in foreign currencies relative to the U.S. dollar, and may adversely affect our financial results. Increased strength of the U.S. dollar could increase the effective price of our products sold in currencies other than U.S. dollars into other countries.
Changes in trade policies; shortages due to the residual effects of the COVID-19 pandemic, other pandemics, or any other reason; and the imposition of duties and tariffs and potential retaliatory countermeasures could adversely impact the price or availability of raw materials.
Changes in trade policies; supply chain disruptions; and the imposition of duties and tariffs and potential retaliatory countermeasures could adversely impact the price or availability of raw materials, which could adversely affect our profit margins and results of operations.
Approximately 50% o f our sales are derived outside the United States. Sales and purchases in currencies other than the U.S. dollar expos e us to fluctuations in foreign currencies relative to the U.S. dollar, and may adversely affect our financial results.
Financial and Security Ownership Risks The global nature of our business exposes us to foreign currency fluctuations that could adversely affect our business and financial results. Approximately 50% o f our sales are derived outside the United States.
Removed
The costs of certain raw materials, components, transportation and energy necessary for our operations and the production and distribution of our products have increased significantly.
Added
For example, many countries have enacted, or plan to enact, legislation and other guidance to align with the Organisation for Economic Co-operation and Development’s (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting Pillar Two (“Pillar Two”) model rules.
Removed
Our historical growth has included acquisitions and our future growth strategy includes acquisitions. We completed the acquisitions of Code, Magicard and Nordic ID in fiscal 2021 for a total purchase price of $244.0 million. Acquisitions place significant demands on management, operational, and financial resources.
Added
The OECD’s Pillar Two model rules aim to establish a global minimum tax rate of 15 percent for large multinational enterprise groups. The OECD has continued to issue new administrative guidance on the Pillar Two model rules throughout 2024.
Removed
The COVID-19 pandemic disrupted the global economy and adversely impacted our businesses, including demand for our products across multiple end-markets as well as our supply chain and operations.
Added
While we continue to monitor legislative adoption by country of the Pillar Two model rules, including additional administrative guidance from the OECD, there is significant uncertainty that exists regarding the interpretation of the detailed Pillar Two model rules, whether such rules will be implemented consistently across taxing jurisdictions, how such rules interact with existing national tax laws and whether such rules are consistent with existing tax treaty obligations.
Removed
Any future resurgence of the COVID-19 pandemic, or other health epidemics, may have an impact on our business, operations and financial results depending on factors that cannot be accurately predicted at this time, such as the severity and transmission rate of any health epidemic, the extent and effectiveness of containment actions, the extent to which vaccines or other medical treatments are developed and made available to and accepted by the public, and the impact of these and other factors on our stakeholders.
Removed
Indicators of other-than-temporary impairment were present in our equity investment in React Mobile, Inc., an employee safety software and hardware company, and we recognized an other-than-temporary impairment charge of $5.0 million in fiscal 2021. Changes in tax legislation or tax rates could adversely affect results of operations and financial statements.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeFour facilities each are located in Belgium and the United Kingdom, three are located in France; two are located in Australia; and one each in Germany, Norway, South Africa, and Turkey. The Company believes that its equipment and facilities are modern, well maintained, and adequate for present needs.
Biggest changeFour facilities each are located in Belgium and the United Kingdom, three are located in France; two are located in Australia; and one each in Germany, Norway, South Africa, and Turkey. 12 Table of Contents The Company believes that its equipment and facilities are modern, well maintained, and adequate for present needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−3 removed3 unchanged
Biggest changeThe following table provides information with respect to the purchases by the Company of Class A Nonvoting Common Stock during the three months ended July 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (Dollars in Thousands) May 1, 2023 - May 31, 2023 194,962 $ 49.20 194,962 $ 45,643 June 1, 2023 - June 30, 2023 503,541 48.86 503,541 21,040 July 1, 2023 - July 31, 2023 230,128 47.92 230,128 10,013 Total 928,631 $ 48.70 928,631 $ 10,013 14 Table of Contents (e) Common Stock Price Performance Graph The 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, 2018, in each of Brady Corporation Class A Common Stock, the Standard & Poor’s ("S&P") 500 Index, the S&P SmallCap 600 Index, the S&P SmallCap 600 Industrials Index, and the Russell 2000 Index.
Biggest changeThe following table provides information with respect to the purchases by the Company of Class A Nonvoting Common Stock during the three months ended July 31, 2024: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (Dollars in Thousands) May 1, 2024 - May 31, 2024 — $ — — $ 37,788 June 1, 2024 - June 30, 2024 — — — 37,788 July 1, 2024 - July 31, 2024 — — — 37,788 Total — $ — — $ 37,788 14 Table of Contents Common Stock Price Performance Graph The 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, 2019, in each of Brady Corporation Class A Common Stock, the Standard & Poor’s ("S&P") 500 Index, the S&P SmallCap 600 Industrials Index, and the Russell 2000 Index. 2019 2020 2021 2022 2023 2024 Brady Corporation $ 100.00 $ 90.46 $ 109.49 $ 97.58 $ 107.24 $ 151.22 S&P 500 Index 100.00 111.96 152.76 145.67 164.63 201.10 S&P SmallCap 600 Industrials Index 100.00 92.42 139.59 139.32 165.17 208.03 Russell 2000 Index 100.00 95.41 144.99 124.27 134.10 153.21 Copyright (C) 2024, Standard & Poor’s, Inc. and Russell Investments.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information Brady Corporation Class A Nonvoting Common Stock trades on the New York Stock Exchange ("NYSE") under the symbol BRC. There is no trading market for the Company’s Class B Voting Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Brady Corporation Class A Nonvoting Common Stock trades on the New York Stock Exchange ("NYSE") under the symbol BRC. There is no trading market for the Company’s Class B Voting Common Stock.
The plan may be implemented by purchasing shares in the open market or in privately negotiated transactions, with repurchased shares delivered to treasury and available for use in connection with the Company’s stock-based plans and for other corporate purposes.
The program may be implemented by purchasing shares in the open market or in privately negotiated transactions, with repurchased shares delivered to treasury and available for use in connection with the Company’s stock-based plans and for other corporate purposes.
(b) Holders As of August 31, 2023, there were approximately 1,000 Class A Common Stock shareholders of record and approximately 12,000 beneficial shareholders. There are three Class B Common Stock shareholders. (c) Dividends The Company has historically paid quarterly dividends on outstanding common stock.
Holders As of August 31, 2024, there were approximately 1,000 Class A Common Stock shareholders of record and approximately 12,000 beneficial shareholders. There are three Class B Common Stock shareholders. Dividends The Company has historically paid quarterly dividends on outstanding common stock.
During the two most recent years ended July 31 and for the first quarter of fiscal 2024, the Company declared the following dividends per share on its Class A and Class B Common Stock: 2024 2023 2022 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Class A $ 0.2350 $ 0.2300 $ 0.2300 $ 0.2300 $ 0.2300 $ 0.2250 $ 0.2250 $ 0.2250 $ 0.2250 Class B 0.2184 0.2134 0.2300 0.2300 0.2300 0.2084 0.2250 0.2250 0.2250 (d) Issuer Purchases of Equity Securities The Company has a share repurchase program for the Company’s Class A Nonvoting Common Stock.
During the two most recent years ended July 31 and for the first quarter of fiscal 2025, the Company declared the following dividends per share on its Class A and Class B Common Stock: 2025 2024 2023 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Class A $ 0.2400 $ 0.2350 $ 0.2350 $ 0.2350 $ 0.2350 $ 0.2300 $ 0.2300 $ 0.2300 $ 0.2300 Class B 0.2234 0.2184 0.2350 0.2350 0.2350 0.2134 0.2300 0.2300 0.2300 Issuer Purchases of Equity Securities The Company has a share repurchase program for the Company’s Class A Nonvoting Common Stock.
As of July 31, 2023, there were $10.0 million worth of shares authorized to purchase remaining pursuant to this share repurchase program. On August 30, 2023, the Company's Board of Directors authorized an increase in the Company's share repurchase program, authorizing the repurchase of an additional $100.0 million of the Company's Class A Nonvoting Common Stock.
As of July 31, 2024, there were $37.8 million worth of shares authorized to purchase remaining pursuant to this share repurchase program. On September 4, 2024, the Company's Board of Directors authorized an increase in the Company's share repurchase program, authorizing the repurchase of an additional $100.0 million of the Company's Class A Nonvoting Common Stock.
On May 24, 2022, the Company's Board of Directors authorized an increase in the Company's share repurchase program, authorizing the repurchase of up to $100.0 million of the Company's Class A Nonvoting Common Stock, with no expiration date associated with the authorization.
On August 30, 2023, the Company's Board of Directors authorized an increase in the Company's share repurchase program, authorizing the repurchase of an additional $100.0 million of the Company's Class A Nonvoting Common Stock, with no expiration date associated with the authorization.
Removed
The share repurchase program may be implemented from time to time on the open market or in privately negotiated transactions and has no expiration date. The repurchased shares will be available for use in connection with the Company's stock-based plans and for other corporate purposes.
Removed
The S&P SmallCap 600 Industrials Index will replace the S&P SmallCap 600 Index in future years. This change creates consistency between the index included in this Common Stock Price Performance Graph and the Pay Versus Performance table included in Item 11.
Removed
Executive Compensation. 2018 2019 2020 2021 2022 2023 Brady Corporation $ 100.00 $ 137.76 $ 124.63 $ 150.84 $ 134.43 $ 147.74 S&P 500 Index 100.00 107.99 120.90 164.96 157.31 177.78 S&P SmallCap 600 Index 100.00 93.25 85.16 133.66 125.32 131.92 S&P SmallCap 600 Industrials Index 100.00 94.96 87.76 132.55 132.29 156.84 Russell 2000 Index 100.00 95.58 91.19 138.59 118.78 128.17 Copyright (C) 2023, Standard & Poor’s, Inc. and Russell Investments.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

49 edited+12 added−46 removed22 unchanged
Biggest changeOPERATING INCOME TO NET INCOME (Dollars in thousands) 2023 % Sales 2022 % Sales 2021 % Sales Operating income $ 225,213 16.9 % $ 193,012 14.8 % $ 167,127 14.6 % Other income (expense): Investment and other income 4,022 0.3 % 244 0.0 % 4,333 0.4 % Interest expense (3,539) (0.3) % (1,276) (0.1) % (437) (0.0) % Income before income taxes and losses of unconsolidated affiliate 225,696 16.9 % 191,980 14.7 % 171,023 14.9 % Income tax expense 50,839 3.8 % 42,001 3.2 % 35,610 3.1 % Income before losses of unconsolidated affiliate 174,857 13.1 % 149,979 11.5 % 135,413 11.8 % Equity in losses of unconsolidated affiliate — — % — — % (5,754) (0.5) % Net income $ 174,857 13.1 % $ 149,979 11.5 % $ 129,659 11.3 % Fiscal 2023 Compared to Fiscal 2022 Investment and other income was $4.0 million in fiscal 2023 compared to $0.2 million in fiscal 2022.
Biggest changeThe increase in operating income in fiscal 2024 was primarily due to the increase in segment profit in the Americas & Asia segment as a result of organic sales growth, improved gross profit margin primarily due to growth in higher gross profit margin product lines and operational efficiencies throughout the region. 17 Table of Contents OPERATING INCOME TO NET INCOME The following is a reconciliation of operating income to net income for the years ended July 31: (Dollars in thousands) 2024 % Sales 2023 % Sales 2022 % Sales Operating income $ 243,414 18.1 % $ 225,213 16.9 % $ 193,012 14.8 % Other income (expense): Investment and other income 7,553 0.6 % 4,022 0.3 % 244 0.0 % Interest expense (3,126) (0.2) % (3,539) (0.3) % (1,276) (0.1) % Income before income taxes 247,841 18.5 % 225,696 16.9 % 191,980 14.7 % Income tax expense 50,626 3.8 % 50,839 3.8 % 42,001 3.2 % Net income $ 197,215 14.7 % $ 174,857 13.1 % $ 149,979 11.5 % Investment and other income was $7.6 million in fiscal 2024 compared to $4.0 million in fiscal 2023.
The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, research and development, common stock repurchases, and dividend payments for the next 12 months and beyond.
The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, research and development, common stock repurchases, dividend payments, and strategic acquisitions for the next 12 months and beyond.
Significant negative industry or economic trends, disruptions to the Company's business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations.
Significant negative industry or macroeconomic trends, disruptions to the Company's business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations.
Goodwill and Other Indefinite-lived Intangible Assets The allocation of purchase price for business combinations requires management estimates and judgment as to expectations for future cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair value.
Goodwill The allocation of purchase price for business combinations requires management estimates and judgment as to expectations for future cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair value.
The Company recognized valuation allowances for its deferred tax assets of $52.8 million and $47.3 million as of July 31, 2023 and 2022, respectively, which were primarily related to foreign tax credit carryforwards and net operating loss carryforwards in its various tax jurisdictions.
The Company recognized valuation allowances for its deferred tax assets of $47.2 million and $52.8 million as of July 31, 2024 and 2023, respectively, which were primarily related to foreign tax credit carryforwards and net operating loss carryforwards in its various tax jurisdictions.
As a result of the analysis performed on May 1, 2023, all indefinite-lived tradenames had fair value in excess of carrying value. New Accounting Standards The information required by this Item is provided in Note 1 of the Notes to Consolidated Financial Statements contained in Item 8 — Financial Statements and Supplementary Data.
As a result of the analysis performed on May 1, 2024, all indefinite-lived tradenames had fair value in excess of their carrying value. 22 Table of Contents New Accounting Standards The information required by this Item is provided in Note 1 of the Notes to Consolidated Financial Statements contained in Item 8 — Financial Statements and Supplementary Data. 23 Table of Contents
As a percentage of net sales, R&D expenses increased to 4.6% in fiscal 2023 compared to 4.5% in fiscal 2022. The increase in R&D spending in fiscal 2023 was primarily due to increased headcount as well as increased project spend. The Company remains committed to investing in new product development to increase sales within our businesses.
As a percentage of net sales, R&D expenses increased to 5.1% in fiscal 2024 compared to 4.6% in fiscal 2023. The increase in R&D spending in fiscal 2024 was primarily due to increased headcount. The Company remains committed to investing in new product development to increase sales within our businesses.
Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments. Cash Flows Cash and cash equivalents were $151.5 million at July 31, 2023, an increase of $37.5 million from July 31, 2022.
Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments. Cash Flows Cash and cash equivalents were $250.1 million at July 31, 2024, an increase of $98.6 million from July 31, 2023.
Accrued interest and penalties related to unrecognized tax benefits were $5.3 million and $4.8 million as of July 31, 2023 and 2022, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense on the Consolidated Statements of Income.
Accrued interest and penalties related to unrecognized tax benefits were $6.1 million and $5.3 million as of July 31, 2024 and 2023, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense on the Consolidated Statements of Income.
Net cash used in investing activities was $11.2 million during fiscal 2023, which consisted of capital expenditures of $19.2 million partially offset by proceeds of $8.0 million received from the sale of the PremiSys business.
Net cash used in investing activities was $11.2 million in fiscal 2023, which consisted of capital expenditures of $19.2 million partially offset by proceeds of $8.0 million from the divestiture of a business.
The liability for unrecognized tax benefits, excluding interest and penalties, was $20.9 million and $20.6 million as of July 31, 2023 and 2022, respectively. If recognized, $17.8 million of unrecognized tax benefits would reduce the Company's income tax rate as of both July 31, 2023 and 2022.
The liability for unrecognized tax benefits, excluding interest and penalties, was $22.6 million and $20.9 million as of July 31, 2024 and 2023, respectively. If recognized, $19.4 million of unrecognized tax benefits would reduce the Company's income tax rate as of both July 31, 2024 and 2023.
Organic sales grew 4.4% in the Americas & Asia segment and 7.6% in the Europe & Australia segment. Gross margin increased 4.1% to $657.3 million in fiscal 2023 compared to $631.6 million in fiscal 2022. As a percentage of net sales, gross margin increased to 49.4% in fiscal 2023 from 48.5% in fiscal 2022.
Organic sales grew 3.1% in the Americas & Asia segment and 1.6% in the Europe & Australia segment. Gross margin increased 4.7% to $687.9 million in fiscal 2024 compared to $657.3 million in fiscal 2023. As a percentage of net sales, gross margin increased to 51.3% in fiscal 2024 from 49.4% in fiscal 2023.
Investments in new printing systems, materials and the build out of industrial track and trace solutions were the primary focus of R&D expenditures in fiscal 2023.
Investments in new printing systems, materials and the build out of industrial track and trace solutions continued to be the primary focus of R&D expenditures in fiscal 2024.
The following summarizes the cash flow statement for the years ended July 31: (Dollars in thousands) 2023 2022 2021 Net cash flow provided by (used in): Operating activities $ 209,149 $ 118,449 $ 205,665 Investing activities (11,214) (43,071) (268,592) Financing activities (163,568) (102,089) (12,324) Effect of exchange rate changes on cash 3,096 (6,555) 4,943 Net increase (decrease) in cash and cash equivalents $ 37,463 $ (33,266) $ (70,308) Fiscal 2023 Compared to Fiscal 2022 Net cash provided by operating activities was $209.1 million during fiscal 2023 compared to $118.4 million in fiscal 2022.
The following summarizes the cash flow statement for the years ended July 31: (Dollars in thousands) 2024 2023 2022 Net cash flow provided by (used in): Operating activities $ 255,074 $ 209,149 $ 118,449 Investing activities (81,047) (11,214) (43,071) Financing activities (70,528) (163,568) (102,089) Effect of exchange rate changes on cash (4,913) 3,096 (6,555) Net increase (decrease) in cash and cash equivalents $ 98,586 $ 37,463 $ (33,266) Net cash provided by operating activities was $255.1 million during fiscal 2024 compared to $209.1 million in fiscal 2023.
SG&A expenses include selling and administrative costs directly attributed to the Americas & Asia and Europe & Australia segments, as well as certain other corporate administrative expenses including finance, information technology, human resources and other administrative expenses. SG&A expenses decreased 2.4% to $370.7 million in fiscal 2023 compared to $380.0 million in fiscal 2022.
SG&A expenses include selling and administrative costs directly attributed to the Americas & Asia and Europe & Australia segments, as well as certain other corporate administrative expenses including finance, information technology, human resources and other administrative expenses. SG&A expenses increased 1.6% to $376.7 million in fiscal 2024 compared to $370.7 million in fiscal 2023.
The Company has identified seven reporting units within its two reportable segments, Americas & Asia and Europe & Australia, with the following goodwill balances as of July 31, 2023: North America, $438.0 million; Europe, $151.2 million; and Latin America, $3.4 million. The other four identified reporting units each have a goodwill balance of zero.
The Company has identified six reporting units within its two reportable segments, Americas & Asia and Europe & Australia, with the following goodwill balances as of July 31, 2024: North America, $436.3 million; Europe, $150.4 million; and Latin America, $2.9 million. The other three identified reporting units each have a goodwill balance of zero.
We believe that our financial resources and liquidity levels including the remaining undrawn amount of the credit agreement and our ability to increase that credit line as necessary are sufficient to manage the continuing impact of economic or geopolitical events which may result in reduced sales, net income, or cash provided by operating activities.
We believe that our financial resources and liquidity levels, including the undrawn portion of our credit agreement and our ability to increase that credit line if necessary, are sufficient to manage the continuing impact of economic or geopolitical events that could potentially reduce sales, net income, or cash provided by operating activities.
Material Cash Requirements Our material cash requirements for known contractual obligations include capital expenditures, borrowings on credit facilities and lease obligations. We believe that net cash provided by operating activities will continue to be adequate to meet our liquidity and capital needs for these items over the next 12 months and in the long-term beyond the next 12 months.
We believe that net cash provided by operating activities will continue to be adequate to meet our liquidity and capital needs for these items over the next 12 months and in the long-term beyond the next 12 months.
A comparison of results of operating income for the years ended July 31, 2023, 2022, and 2021 is as follows: (Dollars in thousands) 2023 % Sales 2022 % Sales 2021 % Sales Net sales $ 1,331,863 $ 1,302,062 $ 1,144,698 Gross margin 657,275 49.4 % 631,552 48.5 % 561,446 49.0 % Operating expenses: Research and development 61,365 4.6 % 58,548 4.5 % 44,551 3.9 % Selling, general and administrative 370,697 27.8 % 379,992 29.2 % 349,768 30.6 % Total operating expenses 432,062 32.4 % 438,540 33.7 % 394,319 34.4 % Operating income $ 225,213 16.9 % $ 193,012 14.8 % $ 167,127 14.6 % Fiscal 2023 Compared to Fiscal 2022 Net sales increased 2.3% to $1,331.9 million in fiscal 2023 compared to $1,302.1 million in fiscal 2022, which consisted of organic sales growth of 5.5%, partially offset by a decrease from foreign currency translation of 3.0% and a decrease of 0.2% due to the divestiture of a business.
A comparison of results of operating income for the years ended July 31, 2024, 2023, and 2022 is as follows: (Dollars in thousands) 2024 % Sales 2023 % Sales 2022 % Sales Net sales $ 1,341,393 $ 1,331,863 $ 1,302,062 Gross margin 687,884 51.3 % 657,275 49.4 % 631,552 48.5 % Operating expenses: Research and development 67,748 5.1 % 61,365 4.6 % 58,548 4.5 % Selling, general and administrative 376,722 28.1 % 370,697 27.8 % 379,992 29.2 % Total operating expenses 444,470 33.1 % 432,062 32.4 % 438,540 33.7 % Operating income $ 243,414 18.1 % $ 225,213 16.9 % $ 193,012 14.8 % Net sales increased 0.7% to $1,341.4 million in fiscal 2024 compared to $1,331.9 million in fiscal 2023, which consisted of organic sales growth of 2.6% and an increase from foreign currency translation of 0.2%, partially offset by a decrease of 2.1% due to divestitures.
At July 31, 2023 , we had cash of $151.5 million , as well as a credit agreement with $248.3 million available for future borrowing, which can be increased up to $1,068.3 million at the Company's option and subject to certain conditions, for total available liquidity o f $1,219.8 million.
At July 31, 2024 , we had cash of $250.1 million, as well as a credit agreement with $207.3 million available for future borrowing, which can be increased up to $1,042.3 million at the Company's option and subject to certain conditions, for total available liquidity of $1,292.4 million.
Europe & Australia Europe & Australia sales increased 0.5% to $443.0 million in fiscal 2023 compared to $441.0 million in fiscal 2022. The net sales increase consisted of organic sales growth of 7.6% and a decrease from foreign currency translation of 7.1%.
Europe & Australia Europe & Australia sales increased 2.7% to $454.9 million in fiscal 2024 compared to $443.0 million in fiscal 2023. The net sales increase consisted of organic sales growth of 1.6% and an increase from foreign currency translation of 1.1%. Organic sales in Europe increased in the low-single digits in fiscal 2024.
The following is a summary of segment information for the years ended July 31: 2023 2022 2021 SALES GROWTH INFORMATION Americas & Asia Organic 4.4 % 10.3 % 1.9 % Currency (0.9) % (0.1) % 0.6 % Divestiture (0.3) % — % — % Acquisition — % 6.9 % 0.8 % Total 3.2 % 17.1 % 3.3 % Europe & Australia Organic 7.6 % 7.9 % 1.1 % Currency (7.1) % (7.0) % 8.1 % Acquisition — % 6.9 % 1.6 % Total 0.5 % 7.8 % 10.8 % Total Company Organic 5.5 % 9.4 % 1.6 % Currency (3.0) % (2.6) % 3.2 % Divestiture (0.2) % — % — % Acquisition — % 6.9 % 1.1 % Total 2.3 % 13.7 % 5.9 % SEGMENT PROFIT AS A PERCENT OF NET SALES Americas & Asia 20.3 % 18.3 % 18.6 % Europe & Australia 14.8 % 14.3 % 13.5 % Total 18.5 % 16.9 % 16.8 % Fiscal 2023 Compared to Fiscal 2022 Americas & Asia Americas & Asia net sales increased 3.2% to $888.9 million in fiscal 2023 compared to $861.1 million in fiscal 2022.
Interest expense, investment and other income, income tax expense, and certain corporate administrative expenses are excluded when evaluating segment performance. 18 Table of Contents The following is a summary of segment information for the years ended July 31: 2024 2023 2022 SALES GROWTH INFORMATION Americas & Asia Organic 3.1 % 4.4 % 10.3 % Currency (0.2) % (0.9) % (0.1) % Divestiture (3.2) % (0.3) % — % Acquisition — % — % 6.9 % Total (0.3) % 3.2 % 17.1 % Europe & Australia Organic 1.6 % 7.6 % 7.9 % Currency 1.1 % (7.1) % (7.0) % Acquisition — % — % 6.9 % Total 2.7 % 0.5 % 7.8 % Total Company Organic 2.6 % 5.5 % 9.4 % Currency 0.2 % (3.0) % (2.6) % Divestiture (2.1) % (0.2) % — % Acquisition — % — % 6.9 % Total 0.7 % 2.3 % 13.7 % SEGMENT PROFIT AS A PERCENT OF NET SALES Americas & Asia 22.2 % 20.3 % 18.3 % Europe & Australia 15.5 % 14.8 % 14.3 % Total 19.9 % 18.5 % 16.9 % Americas & Asia Americas & Asia net sales decreased 0.3% to $886.5 million in fiscal 2024 compared to $888.9 million in fiscal 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Brady Corporation is a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Brady Corporation is a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia.
The Company believes it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $2.6 million in 22 Table of Contents the next 12 months as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or statute expirations, which would be the maximum amount that would be recognized as an income tax benefit in the Consolidated Statements of Income.
The Company believes it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $4.2 million in the next 12 months as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or statute expirations, which would be the maximum amount that would be recognized as an income tax benefit in the Consolidated Statements of Income. 21 Table of Contents The Company recognizes deferred tax assets and liabilities for differences between the financial statement 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 to the periods in which the differences are expected to affect taxable income.
Refer to Risk Factors, included in Part I, Item 1A of this Annual Report on Form 10-K for the year ended July 31, 2023 , for further discussion of the possible impact of global economic or geopolitical events on our business. 16 Table of Contents Results of Operations The comparability of the operating results for the year ended July 31, 2022 to the year ended July 31, 2021 has been impacted by the following acquisitions: Magicard Holdings Limited ("Magicard") and Nordic ID Oyj ("Nordic ID") which were completed in May 2021, and The Code Corporation ("Code") which was completed in June 2021.
Refer to Risk Factors, included in Part I, Item 1A of this Annual Report on Form 10-K for the year ended July 31, 2024 , for further discussion of the possible impact of global economic or geopolitical events on our business. 16 Table of Contents Results of Operations The comparability of the operating results for the year ended July 31, 2024 to the year ended July 31, 2023 has been impacted by the divestiture of two non-core businesses, one in March 2023 and another in October 2023.
The Company's organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing.
At July 31, 2024, approximately 98% of the Company's cash and cash equivalents were held outside the United States. The Company's organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing.
Fair value is estimated using the income approach based upon current sales projections applying the relief from royalty method. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
The increase in organic sales was primarily due to organic sales growth in IDS products with strongest growth in the safety and facility identification, healthcare identification and wire identification product lines, which was partially offset by an organic sales decline in the product identification product line.
The increase in organic sales was primarily due to growth in the wire identification, product identification and safety and facility identification product lines, which was partially offset by a decline in the people identification product line. Organic sales in Asia increased in the low-single digits in fiscal 2024.
References in this Annual Report on Form 10-K to “organic sales” refer to sales calculated in accordance with U.S. GAAP, excluding the impact of foreign currency translation, sales recorded from divested companies up to the first anniversary of their divestiture and sales recorded from acquired companies prior to the first anniversary date of their acquisition.
GAAP, excluding the impact of foreign currency translation, sales recorded from divested companies up to the first anniversary of their divestiture and sales recorded from acquired companies prior to the first anniversary date of their acquisition.
If necessary, the Company may consult valuation specialists to assist with the assessment of the estimated fair value of the reporting unit. The Company considers a reporting unit’s fair value to be substantially in excess of its carrying value at 20% or greater.
If necessary, the Company may consult valuation specialists to assist with the assessment of the estimated fair value of the reporting unit.
The Company completes its annual goodwill impairment analysis on May 1 of each fiscal year and evaluates its reporting units for potential triggering events on a quarterly basis in accordance with ASC 350, "Intangibles - Goodwill and Other." In addition to the metrics listed above, the Company considers multiple internal and external factors when evaluating its reporting units for potential impairment, including (i) U.S.
The Company completes its annual goodwill impairment analysis on May 1 of each fiscal year and evaluates its reporting units for potential triggering events on a quarterly basis in accordance with ASC 350, "Intangibles - Goodwill and Other." In addition to the metrics listed above, the Company considers multiple internal and external factors when evaluating its reporting units for potential impairment, including (i) GDP growth for the respective geography, (ii) industry and market factors such as competition and changes in the market for the reporting unit's products, (iii) new product development, (iv) competing technologies, (v) overall financial performance such as cash flows, actual and planned revenue and profitability, and (vi) changes in the strategy of the reporting unit.
The following discussion is intended to help the reader understand the results of operations and financial condition of the Company for the year ended July 31, 2023 compared to the year ended July 31, 2022 and the year ended July 31, 2022 compared to the year ended July 31, 2021.
The following discussion is intended to help the reader understand the results of operations and financial condition of the Company for the year ended July 31, 2024 compared to the year ended July 31, 2023. References in this Annual Report on Form 10-K to “organic sales” refer to sales calculated in accordance with U.S.
Segment profit increased 13.9% to $63.1 million in fiscal 2022 compared to $55.4 million in fiscal 2021. As a percentage of net sales, segment profit increased to 14.3% in fiscal 2022 compared to 13.5% in fiscal 2021.
As a percentage of net sales, segment profit increased to 15.5% in fiscal 2024 compared to 14.8% in fiscal 2023.
Organic sales grew in all major product lines with the strongest growth in the wire identification and safety and facility identification product lines, which was partially offset by a low-single digit sales decline in WPS products. Organic sales in Asia increased nearly 12% in fiscal 2022.
Organic sales grew in the safety and facility identification, product identification and wire identification product lines, which was partially offset by a decline in the people identification product line.
The increase in investment and other income in fiscal 2023 was primarily due to an increase in the market value of securities held in deferred compensation plans and an increase in interest income. Interest expense increased to $3.5 million in fiscal 2023 compared to $1.3 million in fiscal 2022.
The increase in investment and other income in fiscal 2024 was primarily due to an increase in interest income driven by a larger cash balance invested and higher interest rates throughout the year, and an increase in the market value of securities held in deferred compensation plans.
The increase in organic sales in Europe was primarily driven by a mid-single digit increase in Western Europe, partially offset by a single-digit decline in the Nordic region. Organic sales growth was approximately 21% across Eastern Europe, the Middle East and Africa.
The increase in organic sales in Europe was primarily driven by growth in Western Europe and the Nordic region, partially offset by a decline in the United Kingdom. 19 Table of Contents Organic sales in Australia increased in the low-single digits in fiscal 2024.
As a percentage of net sales, SG&A expense decreased to 27.8% in fiscal 2023 compared to 29.2% in fiscal 2022. The decrease in SG&A expenses in fiscal 2023 was due to foreign currency translation.
As a percentage of net sales, SG&A expense increased to 28.1% in fiscal 2024 compared to 27.8% in fiscal 2023.
Net cash used in investing activities was $43.1 million in fiscal 2022, which was elevated due to the purchase of two facilities that were previously leased. Net cash used in financing activities was $163.6 million during fiscal 2023 compared to $102.1 million in fiscal 2022.
Capital expenditures were elevated in fiscal 2024 due to the purchase of a facility that was previously leased as well as other facility construction costs to support continued growth in the Americas and Europe. Net cash used in financing activities was $70.5 million during fiscal 2024 compared to $163.6 million in fiscal 2023.
The increase in gross margin as a percentage of net sales was primarily due to operating efficiencies resulting from investment in process automation and reductions in freight expense, partially offset by an increase in material costs due to inflationary pressures. R&D expenses increased 4.8% to $61.4 million in fiscal 2023 compared to $58.5 million in fiscal 2022.
The increase in gross margin as a percentage of net sales was primarily due to organic sales growth in higher gross margin product lines, improvements in inventory management and reductions in freight expenses. R&D expenses increased 10.4% to $67.7 million in fiscal 2024 compared to $61.4 million in fiscal 2023.
The net sales increase consisted of organic sales growth of 4.4% and decreases from foreign currency translation of 0.9% and the sale of the PremiSys business of 0.3%. Organic sales in the Americas increased in the mid-single digits in fiscal 2023.
Organic sales growth of 3.1% was offset by a decline from divestitures of 3.2% and a decrease from foreign currency translation of 0.2%. Organic sales in the Americas increased in the low-single digits in fiscal 2024.
The increase in cash used in financing activities was primarily due to an increase in share repurchases of $105.6 million, which was partially offset by a $19.0 million increase in net borrowings on the credit agreement in fiscal 2022 compared to fiscal 2021.
Interest expense decreased to $3.1 million in fiscal 2024 compared to $3.5 million in fiscal 2023. The decrease in interest expense in fiscal 2024 was primarily due to a decrease in outstanding borrowings on the Company's credit agreement, which was partially offset by an increase in interest rates on the Company's credit agreement compared to fiscal 2023.
The organic sales decline in China was due to the spread of COVID-19 primarily during the second quarter of fiscal 2023. 19 Table of Contents Segment profit increased 14.7% to $180.5 million in fiscal 2023 from $157.3 million in fiscal 2022. As a percent of net sales, segment profit increased to 20.3% in fiscal 2023 from 18.3% in fiscal 2022.
The organic sales increase was primarily driven by growth in Singapore, India and Japan, which was partially offset by a decline in volume in China. Segment profit increased 9.1% to $196.8 million in fiscal 2024 from $180.5 million in fiscal 2023. As a percent of net sales, segment profit increased to 22.2% in fiscal 2024 from 20.3% in fiscal 2023.
Operating income increased 16.7% to $225.2 million in fiscal 2023 compared to $193.0 million in fiscal 2022.
Operating income increased 8.1% to $243.4 million in fiscal 2024 compared to $225.2 million in fiscal 2023. As a percentage of sales, operating income increased to 18.1% in fiscal 2024 compared to 16.9% in fiscal 2023.
Organic sales in Europe increased in the mid-single digits in fiscal 2023 which was driven by mid-single digit growth in both IDS and WPS products. Organic growth was strongest in the safety and facility identification and product identification product lines, followed by the wire identification product line.
Organic sales growth was primarily driven by the wire identification product line, which was partially offset by a decline in the safety and facility identification product line. Segment profit increased 7.4% to $70.6 million in fiscal 2024 compared to $65.7 million in fiscal 2023.
We believe we have the financial strength to continue to invest in organic sales growth opportunities including sales, marketing, R&D and inorganic sales opportunities including acquisitions, while continuing to drive sustainable efficiency gains and automation in our operations and selling, general and administrative ("SG&A") functions and return capital to our shareholders in the form of dividends and share repurchases.
We remain focused on driving sustainable efficiency gains and automation across our operations and selling, general and administrative ("SG&A") functions, while also returning capital to our shareholders through dividends and share repurchases.
The annual impairment testing performed on May 1, 2023, in accordance with ASC 350, “Intangibles - Goodwill and Other” indicated that each of the reporting units had a fair value substantially in excess of its carrying value. 23 Table of Contents Other Indefinite-Lived Intangible Assets Other indefinite-lived intangible assets, which consists of tradenames, are tested for impairment in accordance with the Company's policy outlined above using the income approach.
Other Indefinite-Lived Intangible Assets Other indefinite-lived intangible assets, which consists of tradenames, are tested for impairment in accordance with the Company's policy outlined above using the income approach. Fair value is estimated using the income approach based upon current sales projections applying the relief from royalty method.
The increase in interest expense in fiscal 2023 was primarily due to an increase in benchmark interest rates compared to fiscal 2022. The Company's income tax rate was 22.5% in fiscal 2023. Refer to Note 11, "Income Taxes" for additional information on the Company's income tax rates.
The Company's income tax rate was 20.4% in fiscal 2024. Refer to Note 11, "Income Taxes" for additional information on the Company's income tax rates. Business Segment Operating Results The Company evaluates short-term segment performance based on segment profit and customer sales.
The increase in cash used in financing activities was primarily due to $102.3 million of net repayment activity on the credit agreement in fiscal 2023 compared to fiscal 2022, which was due to the increase in net cash provided by operating activities in fiscal 2023.
The increase in cash provided by operating activities was primarily due to an increase in profit, as well as continued reductions in inventory levels in fiscal 2024. Net cash used in investing activities was $81.0 million during fiscal 2024, which primarily consisted of capital expenditures of $79.9 million.
The decrease in SG&A expenses as a percentage of sales in fiscal 2023 was primarily due to reduced headcount, lower advertising spend and a decrease in amortization expense of $3.2 million, which was partially offset by costs associated with the change to a regional reporting structure.
The increase in SG&A expenses in fiscal 2024 was due to increased headcount in sales and technology-related roles and investments in digital advertising and broader omnichannel strategies, which was partially offset by a decrease in selling expenses from divested businesses and a decrease in amortization expense.
Removed
Effective February 1, 2023, the Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia. As such, all segment-related data has been recast to reflect our new reportable segments in the Management's Discussion and Analysis of Financial Condition and Results of Operations section.
Added
Macroeconomic Conditions and Trends The Company continues to be impacted by inflationary pressures to raw material and labor costs, supply chain disruptions, and other global macroeconomic challenges.
Removed
Prior to February 1, 2023, the Company operated two former segments: IDS and WPS. IDS products include high-performance and innovative identification and healthcare products that are designed, manufactured, and distributed within the Company's value chain.
Added
While we experienced material increases to raw material and labor costs and supply chain disruptions in previous years, fiscal 2024 showed signs of easing, with a moderation of raw material and labor cost inflation and improved supply chain stability, which we anticipate will persist into fiscal 2025.
Removed
WPS products include a broad range of stock and custom identification products that the Company manufactures, as well as a wide variety of products that the Company purchases and resells as a distributor.
Added
The Company has taken and will continue to take actions to mitigate inflationary pressures through targeted pricing actions and a commitment to driving long-term efficiency improvements. We believe our financial strength positions us well to continue investing in acquisitions and organic growth opportunities, such as expanded sales channels, marketing programs, and R&D.
Removed
Macroeconomic Conditions and Trends The Company has experienced, and expects to continue to experience, inflationary pressures and supply chain and other business disruptions. The Company has taken and will continue to take actions to mitigate inflation issues through pricing actions and the execution of sustainable efficiency gains.
Added
Both divestitures impacted the Americas & Asia reportable segment.
Removed
All three acquisitions operate within both of our reportable segments. In addition, in March 2023 the Company divested the PremiSys business which impacted the Americas & Asia reportable segment.
Added
The increase in segment profit was primarily due to organic sales growth in higher gross margin product lines, particularly in the Americas, and a decrease in selling expenses from divested businesses, which was partially offset by increased headcount in sales, technology and R&D-related roles.
Removed
The increase in operating income in fiscal 2023 was primarily due to the increase in segment profit in the Americas & Asia segment as a result of organic sales growth, improved gross profit margin primarily due to reductions in freight costs as well as price increases, and operational efficiencies throughout the region.
Added
The increase in segment profit was primarily due to organic sales growth in higher margin product lines, reductions in freight expenses and improvements in inventory management, which was partially offset by increased headcount in sales and technology-related roles Financial Condition Liquidity & Capital Resources The Company's cash balances are generated and held in numerous locations throughout the world.
Removed
Fiscal 2022 Compared to Fiscal 2021 Net sales increased 13.7% to $1,302.1 million in fiscal 2022 compared to $1,144.7 million in fiscal 2021, which consisted of organic sales growth of 9.4% and growth from acquisitions of 6.9%, partially offset by a decrease from foreign currency translation of 2.6%.
Added
The decrease in cash used in financing activities was primarily due to increased net borrowings to fund elevated capital expenditures in fiscal 2024, as well as year-end borrowings to fund the acquisition of Gravotech Holding, which was completed on August 1, 2024. 20 Table of Contents Material Cash Requirements Our material cash requirements for known contractual obligations include capital expenditures, borrowings on credit facilities and lease obligations.
Removed
Organic sales grew 10.3% in the Americas & Asia segment and 7.9% in the Europe & Australia segment. Gross margin increased 12.5% to $631.6 million in fiscal 2022 compared to $561.4 million in fiscal 2021. As a percentage of net sales, gross margin decreased to 48.5% in fiscal 2022 compared to 49.0% in fiscal 2021.
Added
The Company has the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of the reporting unit is greater than its respective carrying value.
Removed
The decrease in gross margin as 17 Table of Contents a percentage of net sales was primarily due to an increase in the cost of materials, labor and freight, which was partially mitigated by pricing actions and operational efficiencies including streamlining manufacturing processes. R&D expenses increased 31.4% to $58.5 million in fiscal 2022 compared to $44.6 million in fiscal 2021.
Added
If the qualitative assessment leads to a determination that the fair value of a reporting unit may be less than its carrying value, or if the Company elects to bypass the qualitative assessment altogether, the Company performs a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with its associated carrying value.
Removed
As a percentage of net sales, R&D expenses increased to 4.5% in fiscal 2022 compared to 3.9% in fiscal 2021.
Added
When the Company performs the quantitative test for goodwill, the Company establishes the fair value for the reporting unit based on the income approach, in which a discounted cash flow model is utilized, the market approach, in which market multiples of comparable companies are utilized, or a combination of both approaches.
Removed
The increase in R&D spending in fiscal 2022 was primarily due to the acquisitions of Code and Nordic ID, as these companies operate with a greater amount of R&D spend as a percentage of net sales compared to Brady's organic business. In addition, the R&D headcount increased in the Americas & Asia segment.
Added
The income approach requires the use of significant estimates and assumptions, including forecasted sales growth, operating income projections, and discount rates and changes in these assumptions may adversely impact the fair value assessments.
Removed
Investments in new printing systems, materials and the build out of a comprehensive industrial track and trace solution were the primary focus of R&D expenditures in fiscal 2022. SG&A expenses increased 8.6% to $380.0 million in fiscal 2022 compared to $349.8 million in fiscal 2021.
Added
On May 1, 2024, the Company performed the qualitative assessment for all three reporting units and determined that it is more likely than not that the fair value exceeds the carrying value for each reporting unit, and as such, goodwill was not considered impaired.
Removed
As a percentage of net sales, SG&A expense decreased to 29.2% in fiscal 2022 compared to 30.6% in fiscal 2021.
Removed
The increase in SG&A expenses in fiscal 2022 was primarily due to the acquisitions of Code, Magicard and Nordic ID, and to a lesser extent an increase in sales personnel, which was partially offset by a decrease due to foreign currency translation.
Removed
The decrease in SG&A expense as a percentage of net sales from the prior year was due to ongoing efficiency activities throughout SG&A. Operating income increased 15.5% to $193.0 million in fiscal 2022 compared to $167.1 million in fiscal 2021.
Removed
The increase in operating income in fiscal 2022 was primarily due to the increase in segment profit in the Americas & Asia segment as a result of organic sales growth and to a lesser extent, positive earnings from the acquisitions completed in the fourth quarter of fiscal 2021.
Removed
Fiscal 2022 Compared to Fiscal 2021 Investment and other income was $0.2 million in fiscal 2022 compared to $4.3 million in fiscal 2021. The decrease in investment and other income in fiscal 2022 was primarily due to a decrease in the market value of securities held in deferred compensation plans.
Removed
Interest expense increased to $1.3 million in fiscal 2022 compared to $0.4 million in fiscal 2021. The increase in interest expense in fiscal 2022 was due to increased borrowing on our credit agreement and an increase in interest rates compared to fiscal 2021. The Company's income tax rate was 21.9% in fiscal 2022.
Removed
Refer to Note 11, "Income Taxes" for additional information on the Company's income tax rates. 18 Table of Contents Equity in losses of unconsolidated affiliate represented the Company's 23% equity interest in React Mobile, Inc. ("React Mobile"), an employee safety software and hardware company based in the United States.

… 27 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−0 removed8 unchanged
Biggest changeThe Company’s currency translation adjustments recorded during the years ended July 31, 2023, 2022, and 2021, as a separate component of stockholders’ equity, were favorable by $16.0 million, unfavorable by $53.4 million, and favorable by $10.3 million, respectively.
Biggest changeThe Company’s currency translation adjustments recorded during the years ended July 31, 2024, 2023, and 2022, as a separate component of stockholders’ equity, were unfavorable by $14.5 million, favorable by $16.0 million, and unfavorable by $53.4 million, respectively.
As a result, the Company’s financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company manufactures, distributes and sells its products.
As a result, the Company’s financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak macroeconomic conditions in the foreign markets in which the Company manufactures, distributes and sells its products.
The interest rate risk management program allows the Company 24 Table of Contents to enter into approved interest rate derivatives if there is a desire to modify the Company’s exposure to interest rates. As of July 31, 2023, the Company had no interest rate derivatives and no fixed rate debt outstanding. 25 Table of Contents
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’s exposure to interest rates. As of July 31, 2024, the Company had no interest rate derivatives and no fixed rate debt outstanding. 24 Table of Contents
The objective of the Company’s foreign currency exchange risk management is to minimize the impact of currency movements on non-functional currency transactions. To achieve this objective, the Company hedges a portion of known exposures using forward contracts. As of July 31, 2023, the notional amount of outstanding forward foreign exchange contracts designated as cash flow hedges was $39.7 million.
The objective of the Company’s foreign currency exchange risk management is to minimize the impact of currency movements on non-functional currency transactions. To achieve this objective, the Company hedges a portion of known exposures using forward contracts. As of July 31, 2024, the notional amount of outstanding forward foreign exchange contracts designated as cash flow hedges was $59.2 million.
The potential decrease in net current assets as of July 31, 2023, from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates would be approximately $20.8 million. This sensitivity analysis assumes a parallel shift in all major foreign currency exchange rates versus the U.S. dollar.
The potential decrease in net current assets as of July 31, 2024, from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates would be approximately $32.5 million. This sensitivity analysis assumes a parallel shift in all major foreign currency exchange rates versus the U.S. dollar.
The Company uses Euro-denominated debt of €24.0 million and British Pound-denominated debt of £8.0 million designated as hedge instruments to hedge portions of the Company’s net investment in its Euro-denominated and British Pound-denominated businesses. The Company's multi-currency revolving credit agreement allows it to borrow up to $200 million in currencies other than U.S. dollars.
The Company uses Euro-denominated debt of €48.7 million and British Pound-denominated debt of £10.3 million designated as hedge instruments to hedge portions of the Company’s net investment in its Euro-denominated and British Pound-denominated businesses. The Company's multi-currency revolving credit agreement allows it to borrow up to $200 million in currencies other than U.S. dollars.
As of July 31, 2023 and 2022, the Company’s foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $207.6 million and $193.6 million, respectively.
As of July 31, 2024 and 2023, the Company’s foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $324.5 million and $207.6 million, respectively.
Currency exchange rates decreased fiscal 2023 net sales by 3.0% compared to fiscal 2022 as the U.S. dollar appreciated, on average, against other major currencies throughout the year. Changes in foreign currency exchange rates for the Company’s foreign subsidiaries reporting in local currencies are generally reported as a component of stockholders’ equity.
Currency exchange rates increased fiscal 2024 net sales by 0.2% compared to fiscal 2023 as the U.S. dollar depreciated, on average, against other major currencies throughout the year. Changes in foreign currency exchange rates for the Company’s foreign subsidiaries reporting in local currencies are generally reported as a component of stockholders’ equity.

Other BRC 10-K year-over-year comparisons