In this annual reportAnnual Report on Form 10-K for Brady Corporation ("Brady," "Company," "we," "us," "our"), statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, income, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.

The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project,” "continue,"“project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from:

These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.

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.

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

TheBrady's long-term sales growth and profitability of our segments will depend not only on improved demand in end markets and the overall economic environment and our ability to successfully navigate changes in the macro environment, but also on our ability to continuously improve operational excellence, focus on the customer, develop and market innovative new products, and todeliver a high level of customer service, advance our digital capabilities.capabilities, and continuously improve the efficiency of our global operations. In our Identification Solutions ("ID Solutions" or "IDS") business, our strategy for growth includes an increased focus on certain industries and products, a focus on improving the customer buying experience, and investment in researchthe development of technologically advanced, innovative and development ("R&D") to develop newproprietary products. In our Workplace Safety ("WPS") business, our strategy for growth includes a focus on workplace safety critical industries, innovative newstreamlining our product offerings, compliance expertise, customization expertise, improving the overall customer experience, and improving our digital capabilities.

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 industrialsafety, identification and healthcare identification products manufactured under multiple brands, including the Brady brand. Industrial identification products are 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 directdirectly to customers and through distribution viaand group purchasing organizations ("GPO").organizations.

Within the ID Solutions segment, the primary product categories include:

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

This segmentIDS manufactures differentiated, proprietary products, most of which have been internally developed. These internally developed products include materials,materials; printing, systems,identification and tracking systems; and software. IDS competes for business on several factors, including product innovation, customer service, product innovation,breadth of product offering, product quality, price, expertise, production capabilities, and for multinational customers, our global footprint. Competition is highly fragmented, ranging from smaller companies offering minimal product variety, to some of the world's largest adhesive and electrical product companies offering competing products as part of their overall product lines.

ID Solutions serves customers in many industries, which include industrial manufacturing, electronic manufacturing, healthcare, chemical, oil, gas, automotive, aerospace, governments, mass transit, electrical contractors, education, leisure and entertainment and telecommunications, among others.

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, SafetyShop, Signs & Labels, and Pervaco brands; first aid supplies under the Accidental Health and Safety, Trafalgar, and Securimed brands; wire identification products marketed under the Carroll brand; and labor law and compliance posters under the Personnel Concepts and Clement Communications brands.

The Workplace Safety segment 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. 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. Therefore, to compete effectively, we focus on pricing our products competitively, we continue to build out our e-commerce capabilities, andwe focus on 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. Workplace Safety primarily sells to businesses and serves many industries, including manufacturers, process industries, government, education, construction, and utilities.

The Company focuses its research and development ("R&D&D") efforts on track and trace applications, pressure sensitive materials, identification and printing systems, software, and the development of other workplace safety relatedsafety-related products. Although there is an increasing amountThe Company spent $58.5 million, $44.6 million, and $40.7 million on its R&D activities during the years ended July 31, 2022,

The Company owns patents and tradenames relating to certain products in the United States and internationally. Although the Company believes 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

The materials used in the products manufactured consist 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 molded parts, electronic components, molded partschips, and sub-assemblies for identification and printing systems. The Company operates coating facilities manufacturingthat 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; however,components. However, we 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 certain situations, such as a global shortage of critical materials or components, the financial impact could be material.

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. Average time to fulfill customer orders varies from same-day to one month, depending on the type of product, customer request, and whether the product is stock or custom-designed and manufactured. 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 provides technical training to employees, customers and suppliers who work stoppage duefor or with the Company’s products. Training is provided in a variety of formats to a labor disputeaccommodate the respective learner’s style, pace, location, technical knowledge and considersaccess.

The Company’s Corporate Internet address is www.bradyid.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.

We manufacture certain parts and components of our products and therefore require raw materials from suppliers, which could be interrupted for a variety of reasons, including availability and pricing. Prices and lead times for raw materials and other components necessary for production have fluctuated in the past, including increased raw production costs, increased wage rates, and extended lead times. Significant increases could adversely affect our profit margins and results of operations have been and mayoperations. Changes in the future be adversely impacted bytrade policies; shortages due to the COVID-19 pandemic, other pandemics, or any other reason; the imposition of duties and tariffs and potential retaliatory countermeasures could adversely impact the price or availability of raw materials. In addition, labor shortages or an increase in the cost of labor could adversely affect our profit margins and results of operations. Due to competitive pressures or other pandemics,factors, the Company may not be able to pass along increased raw material and component part costs to its customers in the duration and extentform of price increases or our ability to do so could be delayed, which it willcould adversely impact our business and financial results remains uncertain.results.

The global spreadcosts of COVID-19 has resultedcertain raw materials, components, transportation and energy necessary for our operations and the production and distribution of our products have increased significantly. While we have implemented certain cost containment measures and selective price increases, as well as taken other actions to offset these inflationary pressures in significant economic disruption, has negatively impacted our financial results, and significantly increased future uncertainty. The extentsupply 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 are furtherresults.

The COVID-19 pandemic has disrupted the durationglobal economy and scope of the pandemic; governmental, business and individuals’ actions taken in response; the effect onadversely impacted our customers and customers’businesses, including demand for our servicesproducts across multiple end-markets as well as our supply chain and products;operations. While we have experienced sequentially improving activity in most markets and geographies, the decreasepublic health situation, global response measures and corresponding impacts on various markets remain fluid and uncertain and may lead to sudden changes in healthcare services provided;trajectory and outlook. The COVID-19 pandemic has impacted our business most recently related to supply chain disruptions, labor constraints, inflation, and government-mandated lockdowns. The duration and extent of the effect on our suppliers and disruptions to the global supply chain; our ability to sell and manufacture our products; disruptions to our operations resulting from the illness of any of our employees; restrictions or disruptions to transportation, including reduced availability of ground or air transport; the ability of our customers to pay for our products; and any closures of our facilities, our suppliers’ facilities, and our customers’ facilities. The effectsimpact of the COVID-19 pandemic have resultedon our business, operations and will result in additional expenses, lostfinancial results depends on factors that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the emergence of new variants of the virus, the extent and effectiveness of containment actions, the extent to which vaccines or delayed revenue,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.

Some actions that we have been experiencing disruptionstaken in response to our business and additional expenses as we implement modifications to employee travel, work locations and cancellation of events, among other modifications. In addition, the deterioration of macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, and interest rates. Even after the COVID-19 pandemic subsides,include enabling remote working arrangements, which may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships, disrupt operations, increase costs or decrease revenues, and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others. While we attempt to maintain sufficient inventory levels in order to meet rapidly shifting customer demand patterns and supplier lead time requirements, we cannot be certain we will be able to accurately predict demand or lead times, which may cause us to be unable to service customer demand or expose us to risks of product shortages, or result in excess inventory, which could lead to additional inventory carrying costs and inventory obsolescence.

The conditions caused by COVID-19 have affected, and may continue to experience adverse impactsaffect, the overall demand environment for our products. The level of demand for certain product components has resulted in, and may continue to result in, lengthened lead times and higher input costs, including freight. Additionally, our business and financial results due to any economic recession or depression that has occurred, and due to any major public health crises that may occurbe adversely impacted by challenges in the future.macroeconomic environment, including rapid cost inflation.

Although our current accounting estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of

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.

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 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 several 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

Additionally, throughout our global business, distributors and customers may not accept our price increases or may seek lower cost sourcing opportunities, which could result in a loss of business that may 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 digital channel. While traditional direct marketing channels such as catalogs are an important means of advertising and selling our products, an increasing number of customers are purchasing products on the internet. Our strategy to increase sales through the digital channel is an investment in our internet sales capabilities. There is a risk that we may not continue to successfully implement this strategy, or if successfully implemented, we may not realize its expected benefits due to the continued levels of increased competition and pricing pressure brought about by the internet. Our failure to successfully implement our strategy could adversely impact our business and 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 innovate, or we launch products with quality problems, or if customers do not accept our products, then our business and financial results could be adversely affected.

Our historical growth has included acquisitions and our future growth strategy includes acquisitions. We manufacture certain partscompleted the acquisitions of Code, Magicard and componentsNordic ID in fiscal 2021 for a total purchase price of our products$244.0 million. Acquisitions place significant demands on management, operational, and thereforefinancial resources. Recent and future acquisitions will require raw materials from suppliers,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. We cannot assure that we will be interrupted for a variety of reasons, including availability and pricing. Prices for raw materials necessary for production have fluctuated inable to successfully integrate acquisitions, that these acquisitions will operate profitably, or that we will be able to achieve the past and significant increases could adversely affect our profit margins anddesired sales growth or operational success. Our sales, results of operations. Changes in trade policies, shortagesoperations, cash flow, and liquidity could be adversely affected if we do not successfully integrate the newly acquired businesses, including realizing synergies, or if our other businesses suffer due to the COVID-19increased focus on the acquired businesses.

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 other pandemics,that are not achieving the imposition of dutiesdesired return on investment. Divestitures pose risks and tariffschallenges that could negatively impact our business. When we decide to sell a business or specific assets, we may be unable to do so on satisfactory terms or within our anticipated timeframe, and potential retaliatory countermeasures could adversely impacteven after reaching a definitive agreement to sell a business, the price or availability of raw materials. In addition, labor shortages or an increase in the cost of labor could adversely affect our profit margins and results of operations. Duesale is typically subject to pricing pressure or other factors, the Companypre-closing conditions which may not be able to pass along increased raw materialsatisfied. In addition, the impact of the divestiture on our revenue and component part costs to its customers in the form of price increases or its ability to do so couldnet income may be delayed,larger than projected, which could adverselydistract 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. The resolution of these contingencies has not had a material adverse impact on our business and financial results.results, but we cannot be certain that this favorable pattern will continue.

Our business systems collect, transmit and store data about our customers, vendors and others, including credit card information and personally identifiable 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 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 engage third-party service providers to assist with certain of our website and digital platform upgrades, which may result in a decline in sales when initially deployed, which could have an adverse effect on our business and financial results.

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 to 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 will 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

Approximately 45%50% of our sales are derived outside of the United States. Our operations are subject to the risks of doing business domestically and globally, including the following:

Further, these laws and regulations are constantly evolving and it is difficult to accurately predict the effect they may have upon our business and financial results.

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents or business partners that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import compliance, money laundering and data privacy. Any such improper actions could subject us to civil or criminal investigations in the U.S. and in other jurisdictions, lead to substantial civil or criminal, monetary and non-monetary penalties and related lawsuits by shareholders and others, damage our reputation, and adversely impact our business and financial results.

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 face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in injury or other damage. In addition, we face an inherent risk that our competitors will allege that aspects of our products infringe their intellectual property or that our intellectual property is invalid, such that we could be prevented from manufacturing and selling our products or prevented from stopping others from manufacturing and selling competing products. We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in injury or other damage. To date, we have not incurred material costs related to these types of claims. However, while we currently maintain insurance coverage for certain types of claims that we believe is adequate, we cannot be certain that we will be able to maintain this insurance on acceptable terms or that this insurance will provide sufficient coverage against potential liabilities that may arise. Any claims brought against us, with or without merit, may have an adverse effect on our business, financial results and reputation as a result of potential adverse outcomes. The expenses associated with defending such claims and the diversion of our management’s resources and time may have an adverse effect on our business and financial results.

We have goodwill of $416.0$586.8 million and other intangible assets of $22.3$74.0 million as of July 31, 2020,2022, which represents 38.4%48.3% of our total assets, and we have recognized impairment charges in the past. We evaluate goodwill and other intangible assets for impairment on an annual basis, or more frequently if impairment indicators are present, based upon the fair value of each respective asset. The valuations prepared for the required impairment test include management's estimates of sales, profitability, cash flow generation, capital structure, cost of debt, interest rates, capital expenditures, and other assumptions. Significant negative industry or economic trends, disruptions to our business, inability to achieve sales projections or cost savings, inability to effectively integrate acquired businesses, unexpected changes in the use of the assets, and divestitures may adversely impact the assumptions used in the valuations. 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.

We are subject to income taxes in the U.S. and in many non-U.S. jurisdictions. As such, our income is subject to risk due to changing tax laws and tax rates around the world. Our tax filings are subject to audit by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in payments or assessments that differ from our reserves, our future net income may be adversely impacted.

We review the probability of the realization of our deferred tax assets quarterly based on forecasts of taxable income in both the U.S. and foreign jurisdictions. As part of this review, we utilize historical results, projected future operating results, eligible carry-forward periods, tax planning opportunities, and other relevant considerations. Changes in profitability and financial outlook in both the U.S. and/or foreign jurisdictions, or changes in our geographic footprint may require modifications in the valuation allowance for deferred tax assets. At any point in time, there are a number of tax proposals at various stages of legislation throughout the globe. While 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 Elizabeth P. Bruno, one of our Directors,directors, and William H. Brady III, both of whom are descendants of the Company's founder. All of our publicly traded shares are non-voting. Therefore, the voting shareholders have control in most matters requiring approval or acquiescence by shareholders, including the composition of our Board of Directors and many corporate actions, and their interests may not align with those of the non-voting shareholders. Such concentration of ownership may discourage a potential acquirer from making a purchase offer that our public shareholders may find favorable and it may adversely affect the trading price for our non-voting common stock because investors may perceive disadvantages in owning stock in companies whose voting stock is controlled by a limited number of shareholders. 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.

The Company currently operates 38 manufacturing and distribution facilities across the globe and are split by reporting segment as follows:

The Company believes that its equipment and facilities are modern, well maintained, and adequate for present needs.

The Company is, and may in the future be, named as a defendant in various legal proceedings and claims that arise in the normal course of business in which claims are asserted against the Company. The Company records a liability for these legal actions when a loss is known or considered probable and the amount can be reasonably estimated. 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 ("NYSE") under the symbol BRC. There is no trading market for the Company’s Class B Voting Common Stock.

The Company has a share repurchase program for the Company’s Class A Nonvoting Common Stock. The plan may be implemented by purchasing shares in the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company’s stock-based plans and for other corporate purposes. On February 16, 2016,May 24, 2022, the Company's Board of Directors authorized aan increase in the Company's share repurchase program, authorizing the repurchase of 2,000,000 shares.up to $100.0 million of the Company's Class A Nonvoting Common Stock. As of July 31, 2020,2022, there were 461,796$85.0 million worth of shares authorized to purchase in connection with thisremaining pursuant to the existing share repurchase program.

The following table provides information with respect to the purchasepurchases by the Company of Class A Nonvoting Common Stock during the three months ended July 31, 2020:2022:

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, 2015,2017, in each of Brady Corporation Class A Common Stock, the Standard & Poor’s ("S&P") 500 Index, the S&P SmallCap 600 Index, and the Russell 2000 Index.

A discussion regarding our financial condition and results of operations for fiscal 20192021 compared to fiscal 20182020 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended July 31, 2019,2021, filed with the SEC on September 6, 2019,2, 2021, which is available free of charge on the SEC's website at www.sec.gov and our corporate website at www.bradyid.com/corporate/investors.investors and such information is incorporated by reference herein. References in this Annual Report on Form 10-K to “organic sales” refer to net sales calculated in accordance with U.S. GAAP, excluding the impact of foreign currency translation and divestitures.sales recorded from acquired companies prior to the first anniversary date of their acquisition which, for the periods reported in this Form 10-K, includes each of Magicard, Nordic ID and Code. The Company’s organic sales disclosures exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying sales trends in our businesses and facilitating comparisons of our sales performance with prior periods. All analytical commentary within the Results of Operations section regarding the change in sales when compared to prior periods are in reference to organic sales unless otherwise noted.

The COVID-19 pandemic had a significant impact on organic sales during the second half of 2020, with the impact varying between the IDS and WPS segments. TheIn the first quarter of fiscal 2021, the IDS segment realized reduced demand across all major product lines beginningbusiness began to recover from a decline in sales due to the third quarter which continued throughoutimpacts of both the fourth quarter,COVID-19 pandemic and the overall global economy, while the WPS segment realized essentially flatstrong organic sales in the third quarter, which improved to 10.8% organic sales growth in the fourth quarter primarily due to increased sales of personal protective equipment and other pandemic-related products. In total,As a result, the rate of decline inrecovery from the COVID-19 pandemic had a significant impact on organic sales decreased through fiscal 2022, with the fourth quarterimpact varying between the IDS and WPS businesses due to sales patterns realized during the height of the pandemic in fiscal 2020.2021.

Gross margin decreased 8.7%increased 12.5% to $528.6$631.6 million in fiscal 2020,2022, compared to $578.7$561.4 million in fiscal 2019.2021. As a percentage of net sales, gross margin decreased to 48.9%48.5% in fiscal 2020,2022, compared to 49.9%49.0% in fiscal 2019.2021. The decrease in gross margin as a percentage of net sales was primarily due to an increase in the decline in sales volumes resulting from the economic slowdown causedcost of materials, labor and freight, which was partially mitigated by the COVID-19 pandemic during second halfour ongoing efforts to increase prices, streamline manufacturing processes and drive sustainable operational efficiencies.

R&D expenses decreasedincreased 31.4% to $40.7$58.5 million in fiscal 2020,2022, compared to $45.2$44.6 million in fiscal 2019.2021. As a percentage of net sales, R&D expenses increased to 4.5% in fiscal 2022, compared to 3.9% in fiscal 2021. The decreaseincrease in R&D expensespending in fiscal 2020 compared to the prior year2022 was primarily due to the acquisitions of Code and Nordic ID, as these companies operate with a reductiongreater 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 incentive-based compensation, and to a lesser extent a reduction in project spending and headcount.the IDS business. The Company remains committed to investing in new product development to increase sales within our IDS and WPS businesses. Investments in new printersprinting systems, materials and materials continue to bethe build out of a comprehensive industrial track and trace solution were the primary focus of R&D expenditures along with investment in products specifically designed for the fight against COVID-19.fiscal 2022.

SG&A expenses include selling and administrative costs directly attributed to the IDS and WPS segments, as well as certain other corporate administrative expenses including finance, information technology, human resources and other administrative expenses. SG&A expenses decreased 9.4%increased 8.6% to $336.1$380.0 million in fiscal 20202022 compared to $371.1$349.8 million in fiscal 2019. SG&A expense as2021. As a percentage of net sales, was 31.1%SG&A expense decreased to 29.2% in fiscal 20202022, compared to 32.0%30.6% in fiscal 2019.2021. 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 in the IDS business, which was partially offset by a decrease due to foreign currency translation. The decrease in both SG&A expenses and SG&A expensesexpense as a percentage of net sales from the prior year was due to ongoing efficiency gains and continued effortsactivities throughout SG&A.

Operating income increased 15.5% to reduce selling, general and administrative costs, reduced incentive-based compensation, and a decline in headcount. Increased cost associated with the COVID-19 pandemic during the second half of the fiscal year, including employee severance and other related costs, were effectively offset by reduced incentive-based compensation.

Investment and other income was $5.1$0.2 million in fiscal 20202022 compared to $5.0$4.3 million in fiscal 2019. Reduced interest2021. The decrease in investment and other income in fiscal 20202022 was effectively offset by an increaseprimarily due to a decrease in the market value of securities held in deferred compensation plansplans.

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 facility and an increase in interest rates compared to fiscal 2019.2021.

The Company evaluates short-term segment performance based on segment profit and customer sales. Impairment charges, interest expense, investment and other income, income tax expense, equity in losses of unconsolidated affiliate, and certain corporate administrative expenses are excluded when evaluating segment performance.

The Company's cash balances are generated and held in numerous locations throughout the world. At July 31, 2020,2022, approximately 68%94% 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. 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. 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.

Refer to Item 8, Note 6, "Debt" for information regarding the Company's credit facility.

Refer to Item 8, Note 17,16, "Subsequent Events" for information regarding the Company's subsequent events affecting financial condition.

Essentially all of the Company’s revenue is derived from the sale of its products and services in competitive markets. Because prices are influenced by market conditions, it is not always possible to fully recover cost increases through pricing. Changes in product mix from year to year, timing differences in instituting price changes, and the large amount of part numberscustom products make it impracticable to accurately define the impact of inflation on profit margins.

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company bases these estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgments.

The Company operates in numerous taxing jurisdictions and is subject to regular examinations by U.S. federal, state and non-U.S. taxing authorities. Its income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which the Company does business. Due to the ambiguity of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions, the uncertainty of how underlying facts may be construed and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company's estimates of income tax liabilities may differ from actual payments or assessments.

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 for purchase price allocation purposes.value. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statementsit could result in a possiblean impairment of the intangible assets and goodwill or require acceleration of the amortization expense of finite-lived intangible assets. In addition, accounting guidance requires that goodwill and other indefinite-lived intangible assets must be tested for impairment at least annually for impairment.annually. If circumstances or events prior to the date of the required annual assessment indicate that, in management's judgment, it is more likely than not that there has been a reduction of fair value of a reporting unit below its carrying value, the Company performs an impairment analysis at the time of such circumstance or event. Changes in management's estimates or judgments could result in an impairment charge, and such a charge could have an adverse effect on the Company's financial condition and results of operations.

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. GDP growth, (ii) industry and market factors such as competition and changes in the market for the reporting unit's products, (iii) new product development, (iv) hospital admission rates, (v) competing technologies, (vi) overall financial performance such as cash flows, actual and planned revenue and profitability, and (vii) changes in the strategy of the reporting unit. In the event the fair value of a reporting unit is less than the carrying value, including goodwill, the Company would then performrecognize an additional assessment that would compareimpairment charge for the implied fair value of goodwill withamount by which the carrying amount of goodwill. The determination of the implied fair value of goodwill would require management to compare the fair value of the reporting unit toexceeds the estimated fair value of the assets and liabilities of the reporting unit.value. If necessary, the Company may consult valuation specialists to assist with the assessment of the estimated fair value of assets and liabilities for the reporting unit. If the implied fair value of the goodwill is less than the carrying value, an impairment charge would be recognized.

The Company considers a reporting unit’s fair value to be substantially in excess of its carrying value at 20% or greater. The annual impairment testing performed on May 1, 2020,2022, in accordance with ASC 350, “Intangibles - Goodwill and Other” (“Step One”) indicated that alleach of the reporting units passed Step One of the goodwill impairment test, and each had a fair value substantially in excess of its carrying value.

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. 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. Indicators of impairment primarily in the WPS segment consisted of a decline in sales in certain of its businesses resulting from the economic challenges presented by the COVID-19 pandemic. As a result of the impairment analysesanalysis performed during the fiscal year ended July 31, 2020,on May 1, 2022, all indefinite-lived tradenames with a carrying amount of $9.3 million were written down to their estimatedhad fair value in excess of $0.6 million. Refer to Note 3, "Other Intangible and Long-Lived Assets" for further information regarding impairment charges during fiscal 2020.carrying value.

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.

The Company also faces exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates. Although the Company has a U.S. dollar functional currency for reporting purposes, it has manufacturing sites throughout the world and a significant portion of its sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates in effect during the respective period. As a result, the Company is exposed to movements in the exchange rates of various currencies against the U.S. dollar. In particular, the Company has more sales in European currencies than it has expenses in those currencies. Therefore, when European currencies strengthen or weaken against the U.S. dollar, operating profits are increased or decreased, respectively. Currency exchange rates decreased fiscal 20202022 net sales by 1.4%2.6% compared to fiscal 20192021 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. The Company’s currency translation adjustments recorded induring the fiscal years ended July 31, 2020, 2019,2022, 2021, and 2018,2020, as a separate component of stockholders’ equity, waswere unfavorable by $53.4 million, favorable by $6.6 million, unfavorable by $13.2$10.3 million, and unfavorablefavorable by $13.7$6.6 million, respectively. As of July 31, 20202022 and 2019,2021, the Company’s foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $210.6$193.6 million and $192.9$184.5 million, respectively. The potential decrease in net current assets as of July 31, 2020,2022, from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates would be approximately $21.1$19.4 million. This sensitivity analysis assumes a parallel shift in all major foreign currency exchange rates versus the U.S. dollar. Exchange rates rarely move in the same direction relative to the U.S. dollar due to positive and negative correlations of the various global currencies. This assumption may overstate the impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.

The Company could be exposed to interest rate risk through its corporate borrowing activities. The objective of the Company’s interest rate risk management activities is to manage the levels of the Company’s fixed and floating interest rate exposure to be consistent with the Company’s preferred mix. The interest rate risk management program allows the Company to enter into approved interest rate derivatives if there is a desire to modify the Company’s exposure to interest rates. As of July 31, 2020,2022, the Company had no interest rate derivatives and no variablefixed rate debt outstanding.