UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

OR

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

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

The aggregate market value of the non-voting common stock held by non-affiliates of the registrant as of January 31, 2015,2018, was approximately $1,174,025,350$1,733,322,847 based on the closing sale price of $26.17$38.25 per share on that date as reported for the New York Stock Exchange. As of September 18, 2015,11, 2018, there were 47,711,83348,465,547 outstanding shares of Class A Nonvoting Common Stock (the “Class A Common Stock”), and 3,538,628 shares of Class B Common Stock. The Class B Common Stock, all of which is held by affiliates of the registrant, is the only voting stock.

Brady Corporation (“Brady,” “Company,” “we,” “us,” “our”) was incorporated under the laws of the state of Wisconsin in 1914. The Company’s corporate headquarters are located at 6555 West Good Hope Road, Milwaukee, Wisconsin 53223, and the telephone number is (414) 358-6600.

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

The Company’s primary objective is to build upon its market position and increase shareholder value by improving inenabling a highly competent and experienced organization to focus on the following key competencies:

The following were key initiatives supporting the strategy in fiscal 2015:2018:

The information required by this Item is provided in Note 98 of the Notes to Consolidated Financial Statements contained in Item 8 - Financial Statements and Supplementary Data.

The Company is organized and managed on a global basis within two reportable segments: Identification Solutions and Workplace Safety.

The IDS segment includes high-performance and innovative identificationindustrial and healthcare identification products that are manufactured under multiple brands, including the Brady brand, andbrand. Industrial identification products are primarily sold through distribution to a broad range of maintenance, repair, and operations ("MRO") and original equipment manufacturing ("OEM") customers and through other channels, including direct sales, catalog marketing, and digital. Healthcare identification products are sold direct and through distribution via group purchasing organizations ("GPO").

The WPS segment includes workplace safety and compliance products, which are sold under multiple brand names primarily through catalog and digital channels to a broad range of MRO customers. Approximately half of the WPS business is derived from internally manufactured productproducts and half is from externally sourced products.

Below is a summary of sales by reportable segmentssegment for the fiscal years ended July 31: 

Approximately 65%67% of ID Solutions products are sold under the Brady brand. In the United States, identification products for the utility industry are marketed under the Electromark brand; spill-control products are marketed under the SPC brand; and security and identification badges and systems are marketed under the B.I.G., Identicard/Identicam,Identicard, PromoVision, and Brady People ID brands. Wire identification products are marketed under the Modernotecnica brand in Italy and lockout/tagout products are offered under the Scafftag brand in the U.K. Custom labels and nameplates are available under the Stickolor brand in Brazil; and; identification and patient safety products in the healthcare industry are available under the PDC Healthcare brand in the U.S. and Europe; and custom wristbands for the leisure and entertainment industry are available under the PDC Innovative brand in the U.S. and the B.I.G. brand in Europe.

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

Within the Workplace Safety segment, the primary product categories include:

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

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

Research and Development

The Company focuses its research and development ("R&D")&D efforts on pressure sensitive materials, printing systems and software, and it mainly supports the IDS segment. Material development involves the application of surface chemistry concepts for top coatings and adhesives applied to a variety of base materials. Systems design integrates materials, embedded software and a variety of printing technologies to form a complete solution for customer applications. In addition, the research and developmentR&D team supports production and marketing efforts by providing application and technical expertise.

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

Operations

The materials used in the products manufactured consist primarily of a variety of plastic and synthetic films, paper, metal and metal foil, cloth, fiberglass, inks, dyes, adhesives, pigments, natural and synthetic rubber, organic chemicals, polymers, and solvents for consumable identification products in addition to electronic components, molded parts and sub-assemblies for printing systems. The Company operates a coating facilityfacilities that manufacturesmanufacture 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, the Company iswe are not dependent upon any single supplier for itsour most critical base materials or components; however, the Company haswe have chosen in certain situations to sole source, or limit the sources of materials, components, or finished items for design or cost reasons. As a result, disruptions in supply could have an impact on results for a period of time, but we believe any disruptions would simply require qualification of new suppliers and the disruption would be modest. In certain instances, the qualification process could be more costly or take a longer period of time and in rare circumstances, such as a global shortage of critical materials or components, the financial impact could be significant.material. The Company currently operates 4239 manufacturing orand distribution facilities globally.

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

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

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

Environment

Employees

The information required by this Item is provided in Note 98 of the Notes to Consolidated Financial Statements contained in Item 8 — Financial Statements and Supplementary Data.

The Company’s Corporate Internet address is http://www.bradycorp.com. The Company makes available, free of charge, on or through its Internet website copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to all such reports as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The Company is not including the information contained on or available through its website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

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

Business Risks

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

In fiscal 2015, the Workplace Safety segment represented 31.2% of our total sales. Organic sales in the WPS segment declined 0.4% in fiscal 2015, 4.6% in fiscal 2014,We actively compete with companies that produce and 7.0% in fiscal 2013, all compared tomarket the same periodsor similar products, and in some instances, with companies that sell different products that are designed for the prior year. During fiscal 2015, we recorded impairment chargessame end user. Competition may force us to reduce prices or incur additional costs to remain competitive in an environment in which business models are changing rapidly. We compete on the basis of $46.9 million primarily relatedseveral factors, including customer support, product innovation, product offering, product quality, price, expertise, digital capabilities, production capabilities, and for multinational customers, our global footprint. Present or future competitors may develop and introduce new and enhanced products, offer products based on alternative technologies and processes, accept lower profit, have greater financial, technical or other resources, or have lower production costs or other pricing advantages. Any of these could put us at a disadvantage by threatening our share of sales or reducing our profit margins, which could adversely impact our business and financial results.

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

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

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

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

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

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

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

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

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

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

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

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

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

We depend on key employees and the loss of these individuals could have an adverse effect on our operations.

Our success depends to a large extent upon the continued services of our key executives, managers and other skilled employees. We cannot ensure that we will be able to retain our key executives, managers and employees. The departure of key personnel without adequate replacement could disrupt our business operations. Additionally, we need qualified managers and skilled employees with technical and industry experience to operate our business successfully. If we are unable to attract and retain qualified individuals or our costs to do so increase significantly, our operationsbusiness and financial results could be materially adversely affected.

We are a global company headquartered inDivestitures, contingent liabilities from divested businesses and the United States. We are subjectfailure to extensive regulations by U.S.properly identify, integrate and non-U.S. governmental and self-regulatory entities at various levels of the governing bodies. Failure to comply with laws and regulationsgrow acquired companies could adversely affect our business sales, results of operations, cash flow and liquidity.

We continually assess the strategic fit of our existing businesses and may divest businesses that we determine do not align with our strategic plan, or that are not achieving the desired return on investment. For example, over the last three fiscal years, we have divested our Brady Medical and Varitronics businesses, and our Asia Die-Cut and European Die-Cut businesses. Divestitures pose risks and challenges that could negatively impact our business. For example, whenWhen we decide to sell a business or assets, we may be unable to do so on satisfactory terms and within our anticipated time-frame, and even after reaching a definitive agreement to sell a business, the sale is typically subject to satisfaction of pre-closing conditions which may not be satisfied. In addition, the impact of the divestiture on our revenue and net earnings may be larger than projected, which could distract management, and disputes may arise with buyers. Also, weWe have retained responsibility for and have agreed to indemnify buyers against somecertain contingent liabilities related to a number of businesses that we have recently sold. The resolution of these contingencies has not had a material adverse impact on our financial results, of operations, cash flow and liquidity, but we cannot be certain that this favorable pattern will continue.

Our historical growth has included acquisitions, and our future growth strategy may include acquisition opportunities. For example, in fiscal 2013 the Company acquired Precision Dynamics Corporation ("PDC"),acquisitions. If our future growth strategy includes a manufacturer of identification products primarily for the healthcare sector, for $301.2 million. We have not met the sales growth synergies identified at the time of the PDC acquisition, which, in addition to other factors, resulted in the Company recording impairment charges of $148.6 million during fiscal 2014, primarily related to the goodwill and other intangible assets in the PeopleID reporting unit, which consists primarily of the PDC business. Failure to achieve these synergies for PDC or other acquired companies may adversely impact our sales, results of operations, cash flow and liquidity. We may not focus on acquisitions, as part of our growth strategy, or if we do, we may not be able to identify acquisition targets or successfully complete acquisitions in the future due to the absence of quality companies in our target markets, economic conditions, or price expectations from sellers. If we do not complete additional acquisitions, our growth may be limited.

acquisitions will operate profitably, or that we will be able to achieve the desired sales growth or operational success. Our sales,business and financial results of operations, cash flow, and liquidity could be adversely affected if we do not successfully integrate the newly acquired businesses, or if our other businesses suffer due to the increased focus on the acquired businesses.

As of July 31, 2015,2018, we had $253.7$52.6 million in outstanding indebtedness. In addition, based on the availability under our credit facilities as of July 31, 2015,2018, we had the ability to incurborrow an additional $194.7$297.0 million under our revolving credit agreement. Our current revolving credit agreement and long-term debt obligations also impose certain restrictions on us. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") within Item 7 for more information regarding our credit agreement and long-term debt obligations. If we breach any of these restrictions or covenants and do not obtain a waiver from the lenders then, subject to applicable cure periods, the outstanding indebtedness (andand any other indebtedness with cross-default provisions)provisions could be declared immediately due and payable, which could adversely affect our assets, results of operations, cash flows and liquidity.financial results.

None.

The Company is, and may in the future be, party to litigation arising in the normal course of business. The Company is not currently a party to any material pending legal proceedings in which management believes the ultimate resolution would have a material effect on the Company’s consolidated financial statements.

Not applicable.

Brady Corporation Class A Nonvoting Common Stock trades on the New York Stock Exchange under the symbol BRC. The following table sets forth the range of high and low daily closing sales prices for the Company’s Class A stock as reported on the New York Stock Exchange for each of the quarters in the fiscal years ended July 31:

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

On September 10, 2015,The following table provides information with respect to the Company's Boardpurchase of Directors authorized an increase in the Company’s share repurchase program, authorizing the repurchase of up to a total of two million shares of the Company’s Class A Nonvoting Common Stock inclusive ofduring the shares in the existing share repurchase program.three months ended July 31, 2018:

The Company has historically paid quarterly dividends on outstanding common stock. Before any dividend may be paid on the Class B Common Stock, holders of the Class A Common Stock are entitled to receive an annual, noncumulative cash dividend of $0.01665 per share (subject to adjustment in the event of future stock splits, stock dividends or similar events involving shares of Class A Common Stock). Thereafter, any further dividend in that fiscal year must be paid on all shares of Class A Common Stock and Class B Common Stock on an equal basis. The Company believes that based on its historic dividend practice, this requirement will not impede it in following a similar dividend practice in the future.

 

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, 2010,2013, in each of Brady Corporation Class A Common Stock, the Standard & Poor’s (S&P) 500 Index, the Standard and Poor’s SmallCap 600 Index, and the Russell 2000 Index.

In fiscal 2015,2018, net sales decreased 4.4%increased 5.4% to $1,171.7$1,173.9 million, compared to $1,225.0$1,113.3 million in fiscal 2014,2017. The increase consisted of organic sales growth of 2.6% and a positive foreign currency impact of 3.0% due to the strengthening of certain currencies when compared to the U.S. dollar during the year, partially offset by a sales decline of 0.2% due to the divestiture of Runelandhs Försäljnings AB (“Runelandhs”), a business based in Kalmar, Sweden. Organic sales grew 3.4% and 0.7% in the IDS and WPS segment, respectively. The IDS segment realized sales growth in the Product ID, Wire ID, and the Safety and Facility ID product lines, partially offset by a sales declines in the Healthcare ID product line. Digital sales in the WPS segment improved, but were partially offset by a sales decline in the traditional catalog and other direct sales channels.

In fiscal 2017, net sales decreased 0.7% to $1,113.3 million, compared to $1,120.6 million in fiscal 2016, which consisted of organic sales growth of 1.0%0.5% and a negative currency impact of 5.4%1.2% due to the strengthening of the U.S. dollar against certain other major currencies during the year. Organic sales grew 1.7%1.6% in the IDS segment while organicand declined 2.0% in the WPS segment. The IDS segment realized sales withingrowth in the Product ID and Wire ID product lines, partially offset by a sales declines in the Healthcare ID product line. Catalog sales in the WPS segment declined, but were partially offset by 0.4%.sales growth in the digital channel.

OPERATING INCOME TO NET INCOMEEARNINGS

Investment and Other Income (Expense)

Interest Expense

Income TaxesTax Expense

The Company’s effective income tax rate was 24.5% in fiscal 2017. The effective income tax rate was further impactedreduced from the applicable U.S. statutory tax rate of 35.0% due to the generation of foreign tax credits from cash repatriations that occurred during the year and geographic profit mix, partially offset by adjustments to the reserve for uncertain tax positions.

The Company’s effective income tax rate was 26.7% in fiscal 2016. The effective income tax rate was reduced from the applicable U.S. statutory tax rate of 35.0% due to certain adjustments to tax accruals and reserves, and fluctuations in geographic profit mix.

Business Segment Operating Results

Workplace Safety

Organic sales in APAC,Australia grew in the low-single digits in fiscal 2018 compared to fiscal 2017. The WPS business has diversified its product offering into many different industries in Australia as sales to the mining industry became less significant over the past several years. Its strategy is continuing to focus on enhancing its expertise in these industries to drive sales growth, while addressing its cost structure to improve profitability.

Liquidity & Capital Resources

Net cash used in investing activities was $325.8$15.3 million during fiscal 2013 primarily due2017, compared to $15.4 million in the acquisition of PDC for $301.2 million.

Net cash used in financing activities was $115.4$136.2 million during fiscal 2014,2017, compared to $33.1$99.6 million during the prior year. InThe increase in cash used in financing activities of $35.1 million was primarily due to an increase of $75.3 million in credit facility and debt repayments in fiscal 2014, the Company used cash to pay dividends of $40.52017, which was partially offset by a $14.5 million purchased common shares for $30.6 million, and made a principal payment of $61.3 million on its private placement debt. This was offset primarily by cashincrease in proceeds of $12.1 million from the issuance of common stock related to stock option exercises in fiscal 2017. The remainder of the change was due to $23.6 million of cash used for share repurchases in the prior year, while no shares were repurchased in fiscal 2017.

The effect of fluctuations in exchange rates increased cash balances by $0.2 million in fiscal 2017, primarily due to cash balances held in certain currencies that appreciated against the U.S. dollar during the year. Incurrent fiscal 2013, the Company used cash of $39.2 million to pay dividends and made a principal payment of $61.3 million on its private placement debt. This was offset by cash proceeds of $20.3 million from the issuance of common stock related to stock option exercises, and by the borrowing activity from the Company's credit revolver and multi-currency line of credit in China, which provided $50.6 million in cash in fiscal 2013.

The Company's cash balances are generated and held in numerous locations throughout the world. At July 31, 2015,2018, approximately 84%54% of the Company's cash and cash equivalents were held outside the United States. The Company's growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash flow from operating activities in addition toand its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, common stock repurchases, scheduled debt repayments, and dividend payments for the next twelve12 months.

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

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

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