For the Quarterly Period Ended April 30, 2015

OR

For the Transition Period from                     to                     

Commission File Number 1-14959

(414) 358-6600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☑     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ☑    No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ☑

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of May 26, 2015, there were 47,778,684 outstanding shares of Class A Nonvoting Common Stock and 3,538,628 shares of Class B Voting Common Stock. The Class B Voting Common Stock, all of which is held by affiliates of the Registrant, is the only voting stock.

FORM 10-Q

BRADY CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in Thousands, Except Per Share Amounts)

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

See Notes to Condensed Consolidated Financial Statements.

BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended April 30, 2015

(Unaudited)

(In thousands, except share and per share amounts)

NOTE A - Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Brady Corporation and subsidiaries (the "Company," "Brady," "we," or "our") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing statements contain all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of the Company as of April 30, 2015 and July 31, 2014 , its results of operations and comprehensive (loss) income for the three and nine months ended April 30, 2015 and 2014 , and cash flows for the nine months ended April 30, 2015 and 2014 . The consolidated balance sheet as of July 31, 2014 has been derived from the audited consolidated financial statements of that date. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from the estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statement presentation. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form 10-K for the year ended July 31, 2014 .

The Company entered into an agreement with LTI Flexible Products, Inc. (d/b/a Boyd Corporation) on February 24, 2014, for the sale of the Die-Cut business. The first phase of this divestiture closed on May 1, 2014, and included the Die-Cut businesses in Korea, Thailand and Malaysia, and the Balkhausen business in Europe. The remainder of the Die-Cut business was located in China and was divested on August 1, 2014. The assets and liabilities were reclassified in accordance with the authoritative literature on assets held for sale in the consolidated balance sheet as of July 31, 2014 . The results of operations of the Company's Die-Cut business have been reported as discontinued operations within the condensed consolidated statements of earnings for the nine months ended April 30, 2015 and for the three and nine months ended April 30, 2014. In accordance with the authoritative literature, the Company has elected to not separately disclose the cash flows or other comprehensive income related to discontinued operations. Refer to Note K, "Discontinued Operations" for further discussion regarding the business.

NOTE B - Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended April 30, 2015 , were as follows:

Goodwill at April 30, 2015 included $118,637 and $172,280 of accumulated impairment losses within the IDS and WPS segments, respectively, for a total of $290,917 . There were no impairment charges recorded during the nine months ended April 30, 2015 .

Other intangible assets include patents, trademarks, customer relationships, non-compete agreements and other intangible assets with finite lives being amortized in accordance with the accounting guidance for other intangible assets. The Company also has unamortized indefinite-lived trademarks that are classified as other intangible assets. The net book value of these assets was as follows:

There were no impairment charges recorded during the nine months ended April 30, 2015 . The decrease in the gross carrying amount of other intangible assets as of April 30, 2015 compared to July 31, 2014 was due the effect of currency fluctuations during the nine month period.

The gross carrying amount of goodwill and other intangible assets in the condensed consolidated balance sheet at April 30, 2015 differs from the value assigned to them in the original allocation of purchase price due to impairments and the effect of currency fluctuations between the date of acquisition and April 30, 2015 .

Amortization expense on intangible assets was $ 2,900 and $ 4,713 for the three months ended April 30, 2015 and 2014 , respectively, and $9,251 and $14,837 for the nine months ended April 30, 2015 and 2014, respectively. The amortization over each of the next five fiscal years is projected to be $ 11,768 , $ 9,670 , $ 7,388 , $ 6,634 and $ 6,352 for the fiscal years ending July 31, 2015 , 2016 , 2017 , 2018 and 2019 , respectively.

NOTE C - Other Comprehensive (Loss) Income

Other comprehensive (loss) income consists of foreign currency translation adjustments, unrealized gains and losses from cash flow hedges and net investment hedges, and the unamortized gain on post-retirement plans, net of their related tax effects.

The following table illustrates the changes in the balances of each component of accumulated other comprehensive (loss) income, net of tax, for the nine months ended April 30, 2015 :

The decrease in accumulated other comprehensive (loss) income ("AOCI") as of April 30, 2015 compared to July 31, 2014 was primarily due to the appreciation of the U.S. dollar against other currencies, most of which was realized during the six-month period ended January 31, 2015. The decrease was also a result of the accumulated foreign currency translation gains in the China Die-Cut businesses, which were reclassified into net earnings upon the completion of the second phase of the Die-Cut divestiture during the three months ended October 31, 2014. The foreign currency translation adjustments column in the table above includes foreign currency translation, foreign currency translation on intercompany notes and the impact of settlements of net investment hedges, net of tax. Of the total $37,365 in amounts reclassified from accumulated other comprehensive income, the $34,697 gain

was reclassified to the net loss on the sale of the Die-Cut business, the $337 gain on cash flow hedges was reclassified into cost of products sold, and the $2,331 gain due to the curtailment of the postretirement medical benefit plan was reclassified into selling, general and administrative expenses ("SG&A") on the Condensed Consolidated Statement of Earnings for the nine months ended April 30, 2015 .

The changes in accumulated other comprehensive income by component, net of tax, for the nine months ended April 30, 2014 were as follows:

The increase in accumulated other comprehensive income for the nine months ended April 30, 2014 compared to July 31, 2013 was primarily due to the depreciation of the U.S. dollar against other currencies. Of the total $433 in amounts reclassified from accumulated other comprehensive income, the $82 gain on cash flow hedges was reclassified into cost of products sold and the $351 gain on post-retirement plans was reclassified into SG&A on the Condensed Consolidated Statement of Earnings for the nine months ended April 30, 2014 .

The following table illustrates the income tax (expense) benefit on the components of other comprehensive income for the three and nine months ended April 30, 2015 and 2014 :

NOTE D - Net Earnings per Common Share

Reconciliations of the numerator and denominator of the basic and diluted per share computations for the Company's Class A and Class B common stock are summarized as follows:

Options to purchase approximately 2,836,000 and 4,213,000 shares of Class A Nonvoting Common Stock for the three months ended April 30, 2015 and 2014 , respectively, and 3,531,000 and 3,085,000 shares for the nine months ended April 30, 2015 and 2014, respectively, were not included in the computation of diluted net earnings or loss per share because the option exercise price was greater than the average market price of the common shares and, therefore, the effect would have been anti-dilutive.

NOTE E - Segment Information

The Company is organized and managed on a global basis within two business platforms: Identification Solutions ("IDS") and Workplace Safety ("WPS"), which are the reportable segments.

The Company evaluates short-term segment performance based on segment profit or loss and customer sales. Segment profit or loss does not include certain administrative costs, such as the cost of finance, information technology, human resources, legal, and executive leadership, which are managed as global functions. Restructuring charges, impairment charges, equity compensation costs, interest expense, investment and other income (expense) and income taxes are also excluded when evaluating segment performance.

Each business platform has a President that reports directly to the Company's chief operating decision maker, its Chief Executive Officer. Each platform has its own distinct operations, is managed locally by its own management team, maintains its own financial reports and is evaluated based on global segment profit. The Company has determined that these business platforms comprise its operating and reportable segments based on the information used by the Chief Executive Officer to allocate resources and assess performance.

The segment results have been adjusted to reflect continuing operations in all periods presented. The following is a summary of segment information for the three and nine months ended April 30, 2015 and 2014 :

The following is a reconciliation of segment profit to earnings from continuing operations before income taxes for the three and nine months ended April 30, 2015 and 2014 :

NOTE F – Stock-Based Compensation

The Company has an incentive stock plan under which the Board of Directors may grant nonqualified stock options to purchase shares of Class A Nonvoting Common Stock, restricted stock unit awards ("RSUs"), or restricted and unrestricted shares of Class A Nonvoting Common Stock to employees and non-employee directors.

The options issued under the plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Options issued under the plan, referred to herein as "service-based" stock options, generally expire 10 years from the date of grant.

Restricted shares and RSUs issued under the plan have an issuance price equal to the fair market value of the underlying stock at the date of grant. The RSUs granted under the plan generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. The Company also grants restricted shares and RSUs to certain executives and key management employees that vest upon meeting certain financial performance conditions.

As of April 30, 2015 , the Company has reserved 3,925,176 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs, and restricted shares and 3,440,742 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs, and restricted and unrestricted shares under the active plan. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares under the plan.

The Company recognizes the compensation cost of all share-based awards at the time it is deemed probable the award will vest. This cost is recognized on a straight-line basis over the vesting period of the award. If it is determined that it is unlikely the award will vest, the expense recognized to date for the award is reversed in the period in which this is evident and the remaining expense is not recorded. Total stock-based compensation expense recognized by the Company during the three months ended April 30, 2015 and 2014 , was $1,085 ( $673 net of taxes) and $656 ( $407 net of taxes), respectively. Expense recognized during the nine months ended April 30, 2015 and 2014, was $3,556 ( $2,205 net of taxes) and $5,033 ( $3,121 net of taxes), respectively.

As of April 30, 2015 , total unrecognized compensation cost related to stock-based compensation awards was $9,332 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 2.4 years.

The Company has estimated the fair value of its service-based option awards granted during the nine months ended April 30, 2015 and 2014 , using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model are reflected in the following table:

The Company uses historical data regarding stock option exercise behaviors to estimate the expected term of options granted based on the period of time that options granted are expected to be outstanding. Expected volatilities are based on the historical volatility of the Company's stock. The expected dividend yield is based on the Company's historical dividend payments and historical yield. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the length of time corresponding to the expected term of the option. The market value is calculated as the average of the high and the low stock price on the date of the grant.

A summary of stock option activity under the Company's share-based compensation plans for the nine months ended April 30, 2015 is presented below:

There were 2,706,566 and 3,131,418 options exercisable with a weighted average exercise price of $30.84 and $30.97 at April 30, 2015 and 2014 , respectively. The cash received from the exercise of options during the three months ended April 30, 2015 was $744 . No options were exercised during the three months ended April 30, 2014. The cash received from the exercise of options during the nine months ended April 30, 2015 and 2014 was $1,591 and $10,894 , respectively. The tax benefit on options exercised during the three months ended April 30, 2015 was $35 . The tax benefit on options exercised during the nine months ended April 30, 2015 and 2014 was $79 and $788 , respectively.

The total intrinsic value of options exercised during the nine months ended April 30, 2015 and 2014 , based upon the average market price at the time of exercise during the period, was $202 and $2,020 , respectively. The total fair value of stock options vested during the nine months ended April 30, 2015 and 2014 , was $3,909 and $6,565 , respectively.

The following table summarizes the RSU and restricted share activity under the Company's share-based compensation plans for the nine months ended April 30, 2015 :

NOTE G – Employee Benefit Plans

The components of net periodic postretirement benefit cost for the three and nine months ended April 30, 2015 and 2014 were as follows:

In March 2015, the Company announced the elimination of postretirement medical benefits for eligible domestic employees retiring on or after January 1, 2016. This amendment resulted in a decrease in the accumulated postretirement benefit obligation liability of $4,490 and a curtailment gain of $4,296 . The curtailment gain was recognized in SG&A on the Condensed Consolidated Statements of Earnings, during the three months ended April 30, 2015.

NOTE H - Fair Value Measurements

In accordance with fair value accounting guidance, the Company's assets and liabilities measured at fair market value are classified in one of the following categories:

Level 1 - Assets or liabilities for which fair value is based on unadjusted quoted prices in active markets for identical instruments that are accessible as of the reporting date.

Level 2 - Assets or liabilities for which fair value is based on other significant pricing inputs that are either directly or indirectly observable.

Level 3 - Assets or liabilities for which fair value is based on significant unobservable pricing inputs to the extent little or no market data is available, which result in the use of management's own assumptions.

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at April 30, 2015 and July 31, 2014 , according to the valuation techniques the Company used to determine their fair values.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Trading securities: The Company's deferred compensation investments consist of investments in mutual funds. These investments were classified as Level 1 as the shares of these investments trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.

Foreign exchange contracts: The Company's foreign exchange contracts were classified as Level 2 as the fair value was based on the present value of the future cash flows using external models that use observable inputs, such as interest rates, yield curves and foreign exchange rates. See Note J, "Derivatives and Hedging Activities," for additional information.

There have been no transfers of assets or liabilities between the fair value hierarchy levels outlined above during the three or nine months ended April 30, 2015 and 2014 . In addition, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the three and nine months ended April 30, 2015 .

During fiscal 2014, goodwill with a carrying amount of $193,689 in the PeopleID reporting unit was written down to its estimated implied fair value of $93,277 , resulting in a non-cash impairment charge of $100,412 . In order to arrive at the implied fair value of goodwill, the Company calculated the fair value of all of the assets and liabilities of the reporting unit as if it had been acquired in a business combination. After assigning fair value to the assets and liabilities of the reporting unit, the result was the implied fair value of goodwill of $93,277 , which represented a Level 3 asset measured at fair value on a nonrecurring basis subsequent to its original recognition.

The Company evaluates whether events and circumstances have occurred that indicate that the remaining estimated useful life of long-lived and other finite-lived intangible assets may warrant revision or that the remaining balance of an asset may not be recoverable. Management completed an assessment of the customer relationship assets of the PeopleID reporting unit in accordance with ASC 350 - Intangibles - Goodwill and Other, and ASC 360 - Property, Plant, and Equipment, and concluded that the assets were impaired. These assets were primarily associated with the acquisition of Precision Dynamics Corporation ("PDC"). Organic sales in the PDC business declined in the low single-digit percentages from fiscal 2013 to fiscal 2014. U.S. hospital admission rates are a primary driver of PDC's sales under its existing strategy, and there was a decline of approximately 2% in these rates during fiscal 2014. Therefore, management revisited its planned growth and profit for the PDC business and concluded that the growth may not materialize as expected given slower than anticipated industry growth and fewer sales synergies than originally planned.

As a result, the customer relationship assets were evaluated for recoverability in accordance with ASC 360 - Property, Plant, and Equipment. Management completed an undiscounted cash flow analysis for the customer relationship assets, which was less than the carrying value of the customer relationship assets and indicated that the assets were impaired. Therefore, management measured the impairment loss as the amount by which the carrying amount of the customer relationships exceeded their fair value, which represented Level 3 assets measured at fair value on a nonrecurring basis subsequent to their original recognition. This resulted in an impairment charge of $48,139 recognized in fiscal 2014, which was classified within the "Impairment charges" line item on the Condensed Consolidated Statements of Earnings and was part of the IDS reportable segment.

The Company's financial instruments, other than those presented in the disclosures above, include cash and cash equivalents, accounts receivable, notes payable, accounts payable, accrued liabilities and short-term and long-term debt. The fair values of cash and cash equivalents, accounts receivable, notes payable, accounts payable, and accrued liabilities approximated carrying values because of the short-term nature of these instruments.

The estimated fair value of the Company's short-term and long-term debt obligations, excluding notes payable, based on the quoted market prices for similar issues and on the current rates offered for debt of similar maturities was $267,043 and $216,280 at April 30, 2015 and July 31, 2014 , respectively, as compared to the carrying value of $256,353 and $201,810 at April 30, 2015 and July 31, 2014 , respectively.

NOTE I - Restructuring

In fiscal 2014, the Company announced a restructuring plan to consolidate facilities in the Americas, Europe and Asia to enhance customer service, improve efficiency of operations and reduce operating expenses. Facility consolidation activities extended into fiscal 2015.

In connection with this plan, the Company incurred restructuring charges of $4,834 and $13,991 during the three and nine months ended April 30, 2015 , respectively. The three month restructuring charges of $4,834 consisted of $446 of employee separation costs, $2,645 of fixed asset write-offs, $818 of facility closure related costs, and $925 of contract termination costs. Of the $4,834 of restructuring charges, $3,536 was incurred within IDS and $1,298 within WPS.

The restructuring charges of $13,991 for the nine months ended April 30, 2015 consisted of $4,939 of employee separation costs, $3,545 of fixed asset write-offs, $3,844 of facility closure related costs, and $1,663 of contract termination costs. Of the $13,991 of restructuring charges, $9,845 was incurred within IDS and $4,146 within WPS.

In fiscal 2013, the Company implemented a restructuring plan to reduce its global workforce to address its cost structure. The Company incurred restructuring charges of $3,039 and $14,202 during the three and nine months ended April 30, 2014 . The three month restructuring charges related to the fiscal 2014 facility consolidation plan and consisted of $1,782 of employee separation costs, $170 of fixed asset write-offs, $771 of facility closure related costs, and $316 of contract termination costs. Of the $3,039 of restructuring charges, $1,161 was incurred within IDS and $1,878 within WPS.

The restructuring charges of $14,202 for the nine months ended April 30, 2014 related to the fiscal 2013 and fiscal 2014 restructuring plans and consisted of $9,547 of employee separation costs, $267 of fixed asset write-offs, $3,454 of facility closure related costs, and $934 of contract termination costs. Of the $14,202 of restructuring charges, $7,595 was incurred within IDS and $6,607 within WPS.

The charges for employee separation costs consisted of severance pay, outplacement services, medical and other benefits. The costs related to these restructuring activities were recorded on the Condensed Consolidated Statements of Earnings as restructuring charges. The Company expects the majority of the remaining cash payments to be made during the next twelve months.

A reconciliation of the Company's restructuring liability for the nine months ended April 30, 2015 is as follows: