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Item 1A. Risk Factors
The Audit Committee of our Board of Directors is responsible for the oversight of risks from cybersecurity threats. Management updates the Audit Committee on a quarterly basis regarding our cybersecurity programs. As part of its oversight responsibilities, the Audit Committee regularly discusses and reviews with management, among other items, Brady’s compliance and cybersecurity programs, and any significant cybersecurity matters and related strategic risk management decisions are escalated to the Board of Directors.
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 risks 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 and financial results.
Business Risks
The acquisition of Honeywell’s PSS business is subject to significant integration risks that may impact the combined company’s financial results.
On August 3, 2026, we completed the acquisition of PSS. The transaction significantly increases the size and complexity of our current operations and exposes us to operational, financial, and other risks associated with integrating a large global business, and there can be no assurance that the business cultures of the two businesses will prove to be compatible.While we have implemented certain cost containment measures and selective price increases, as well as taken other actions to offset recent inflationary pressures in our supply chain, we may not be able to offset all of the increases in our operational costs, which could adversely impact our business and financial results. In addition, in connection with the closing of the transaction, Honeywell completed a global internal reorganization to separate the PSS business from its other operations. Despite completion of this reorganization, we may identify operational, financial, tax, legal or other issues arising from the separation that were not anticipated before closing, which could result in additional costs, liabilities or delays in the integration of the acquired business.
The integration of the PSS business requires significant management attention, resources and expenditures. We may experience difficulties in integrating or coordinating systems, processes, internal controls, product portfolios, operations, sales channels and go-to-market activities, as well as retaining employees and maintaining relationships with customers, distributors, other channel partners and suppliers. The ongoing integration process is subject to a number of uncertainties, and it is possible that the ongoing integration process could take longer than anticipated. Our results of operations could also be adversely affected by any issues attributable to the PSS business’s operations that arose or are based on events or actions that occurred prior to the closing of the transaction. These challenges could disrupt our operations, adversely impact customer or channel partner relationships, or prevent us from realizing the anticipated benefits of the acquisition.
We may not realize the anticipated benefits of the acquisition, including expected growth opportunities and cost synergies, within the anticipated time periods or at all. These expected benefits and cost synergies are based on estimates and assumptions made by us that are inherently uncertain, and are subject to significant business, economic, and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond our control. 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 even after reaching a definitive agreement to sell a business, the sale is typically subject to pre-closing conditions which may not be satisfied. We cannot guarantee that we will achieve the full amount of expected benefits and cost synergies on the schedule anticipated, or at all, that the actual expenses required to achieve these benefits and cost synergies will not materially exceed our current estimates, or that these benefits and cost synergies will not have other adverse effects on our business. If we are unable to successfully integrate PSS or realize the expected benefits of the acquisition, our business, financial condition and results of operations could be adversely affected.
We have incurred and expect to continue to incur a number of non-recurring costs associated with combining the operations of the two businesses, which cannot be fully estimated accurately at this time. We may also incur additional costs to attract, motivate or retain management personnel and other key employees. We have incurred and will continue to incur acquisition fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs.
Our increased indebtedness could limit our financial flexibility and adversely affect our business and financial results.
To fund the acquisition of the PSS business, we incurred indebtedness consisting of $800 million aggregate principal amount of borrowings under our new credit agreement and $800 million aggregate principal amount of senior notes issued in a private placement. The use of debt financing to fund the acquisition increases our indebtedness and creates additional financial risks for our business.
Our increased leverage could have adverse consequences, including reducing our financial flexibility to respond to changing business and market conditions, limiting our ability to pursue strategic opportunities, and requiring us to dedicate a greater portion of our operating cash flows to principal and interest payments. If our cash flows from operations are insufficient to satisfy our debt service requirements, or we are unable to reduce our indebtedness as anticipated, our ability to fund organic growth initiatives, R&D, capital expenditures, acquisitions and other strategic priorities could be limited.
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Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to fund our day-to-day operations or to pay the principal, premium, if any, and interest on our indebtedness. Rising interest rates may also reduce our ability to access the capital markets and/or increase our cost of capital either of which could adversely affect our business, financial condition and results of operations.
Our debt agreements also contain financial and other covenants that may restrict our ability to take certain actions, and failure to comply with these covenants could result in an event of default and accelerate our repayment obligations. In addition, borrowings under our new credit agreement bear interest at variable rates, which exposes us to increases in interest expense if market interest rates rise. These factors could adversely affect our business, financial condition and results of operations.
Raw material, component and other cost inflation, as well as supply shortages, could adversely affect our business and financial results.
We manufacture certain parts and components of our products and rely on third-party suppliers for raw materials, components and finished goods.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. The availability, pricing and lead times of these inputs may be affected by a variety of factors, including supply and demand imbalances, supplier capacity constraints, tariffs and other trade restrictions, geopolitical developments, transportation disruptions and other supply chain constraints. Certain materials and components may be available from a limited number of suppliers, and qualifying alternative suppliers may require significant time and expense.
Following the acquisition of PSS, our exposure to the cost and availability of electronic components, including memory and other semiconductor components, has increased. Significant increases in input costs, shortages of key components or extended lead times could increase our costs, disrupt production, limit our ability to meet customer demand and adversely affect our profit margins and results of operations.
We may take actions to mitigate supply shortages and disruptions, including increasing inventory levels or purchasing components in advance of anticipated demand. These actions may increase our working capital requirements and expose us to greater risk of excess or obsolete inventory, particularly if customer demand, component pricing or technology trends differ from our expectations.
In addition, labor shortages or increases in the cost of labor could adversely affect our profit margins and results of operations. Due to competitive pressures, contractual arrangements or other factors, we may not be able to pass increased raw material, component, labor or other costs to our customers through price increases, or our ability to do so may be delayed. Due to competitive pressures or other factors, we may not be able to pass along increased raw material and component part costs to our customers in the form of price increases or our ability to do so could be delayed, which could adversely impact our business and financial results. Changes in input costs may occur more rapidly than we are able to adjust customer pricing, which could result in periods of reduced profitability.
While we have implemented cost containment measures, selective price increases and other actions intended to mitigate inflationary and supply chain pressures, these actions may not be sufficient to offset increases in our costs or the effects of supply shortages and disruptions.While we have implemented certain cost containment measures and selective price increases, as well as taken other actions to offset recent inflationary pressures in our supply chain, we may not be able to offset all of the increases in our operational costs, which could adversely impact our business and financial results. If we are unable to obtain necessary materials and components on acceptable terms or recover increased costs through pricing, our business, financial condition and results of operations could be adversely affected.
Demand for our products may be adversely affected by numerous factors, some of which we cannot predict or control.7Table of ContentsDemand for our products may be adversely affected by numerous factors, some of which we cannot predict or control. This could adversely affect our business and financial results.
Numerous factors may affect the demand for our products, including:
•Deterioration of economic conditions in major markets served
•Catastrophic events, including epidemics, major health concerns, or natural disasters
•Economic and operational impact of the war between Russia and Ukraine and conflict in the Middle East or other wars
•Consolidation in the marketplace allowing competitors to be more efficient and more price competitive
•Competitors entering the marketplace
•Decreasing product life cycles
•Changes in customer preferences
•Ability to achieve strong operational performance, including the manufacture and sale of high-quality products and the ability to meet customer delivery expectations
If any of these factors occur, the demand for our products could suffer, and this could adversely impact our business and financial results.
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Our global operations are subject to the impact of regional conflict and geopolitical developments, which could adversely affect our business and financial results.
As a global company with approximately 50% of our sales derived outside of the United States, we are subject to risks associated with political and economic instability, regional conflicts and other geopolitical developments in the markets in which we operate. Such developments may result in disruptions to our commercial operations in affected markets.
Current geopolitical conditions have resulted in disruptions within certain global shipping and distribution channels, including extended lead times and reductions in global freight capacity. These disruptions may increase our transportation costs, extend lead times and adversely affect our operational efficiency.
Geopolitical instability and the resulting economic uncertainty may also adversely impact our customers’ demand for our products, including the interruption of established procurement cycles and the deferral of project timelines across our global customer base. Regional conflicts may result in broader economic downturns or currency devaluations in certain markets, which could diminish the purchasing power of our customers or delay operational investments. These factors could reduce or delay customer demand and result in increased volatility in our sales and results of operations.
Additionally, our business is subject to an increasingly complex global trade environment characterized by shifting trade policies and regulatory requirements. This includes the imposition of new tariffs or changes in existing duties, tariffs, and trade agreements. Our business has incurred, and we expect to continue to occur, additional costs related to the imposition of incremental tariffs and related countermeasures. Since the second half of fiscal 2025, we have incurred tariff costs that have remained above historical levels. We are also subject to evolving governmental policies, import and export controls, trade restrictions and economic sanction laws, which may change rapidly in response to global events. Changes in these requirements, or our inability to comply with them, could increase our costs, restrict our ability to conduct business in certain markets, result in competitive disadvantages or subject us to monetary or non-monetary penalties, which could adversely affect our results of operations.Although we have not experienced any material cybersecurity incidents to date, cybersecurity threats could materially affect the implementation of our business strategy, results of operations, or financial condition, as further discussed in our risk factors in Part I, Item 1A of this report.
With the acquisition of PSS, our operational risks are subject to PSS’s global manufacturing operations and footprint. PSS has significant manufacturing operations in China, and a substantial portion of its global inventory is physically located within China and the surrounding regions. As a result, our operations are subject to potential changes in U.S.-China trade relations, shifting regulatory requirements, and local economic or political conditions. Additional tariffs, expanded export controls, trade restrictions, or regulatory shifts by either the U.S. or Chinese governments could increase production and transportation costs, impact output, or restrict our ability to transfer inventory from China to other markets. Additionally, holding a significant level of inventory in the region subjects us to potential customs delays, localized operational disruptions, or logistics constraints, which could disrupt our global shipping and distribution channels. If PSS experiences manufacturing interruptions or delays in distributing inventory internationally, our results of operations could be adversely affected.
Failure to compete effectively or to successfully execute our strategy may have a negative impact on our business and financial results.
We actively compete with companies that produce and market the same or similar products, and in some instances, with companies that sell different products that are designed for the same target markets. Competition may force us to reduce prices or incur additional costs to remain competitive in an environment in which business models, including the development and use of AI technologies, 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 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.
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 online. Our strategy to increase sales through the digital channel is an investment in our e-commerce 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 increased competition and pricing pressure brought about by other e-commerce businesses. Our failure to successfully implement our strategy could adversely impact our business and financial results.
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Furthermore, our recent acquisition of the PSS business is a central component of our strategy to create a comprehensive technology portfolio, complementing Brady’s leading position in printers and specialty adhesive materials portfolio. The success of this strategy is highly dependent on our ability to effectively integrate PSS. As we dedicate significant management attention and resources to product portfolios and go-to-market activities, there is a risk of operational disruption. Present or future competitors may attempt to capitalize on any such disruptions or delays in our integration process to target our customer and channel partner relationships. If we are unable to seamlessly integrate PSS, or if we fail to realize the expected growth opportunities and cost synergies in a timely manner, our ability to execute our broader strategic goals and compete effectively may be compromised, which could adversely impact our business and financial results.
Failure to develop or acquire technologically advanced products that meet customer demands, including price expectations, could adversely impact our business and financial results.
We develop technologically advanced new products to promote 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.
The failure to effectively manage acquisitions, divestitures and other portfolio management activities could adversely affect our business and financial results.
Our historical growth has included acquisitions, including, for instance, the acquisition of the PSS business, and acquisitions may continue to be part of our growth strategy. Acquisitions place significant demands on management, operational, and financial resources and may require the integration of operations, sales and marketing, finance and administrative functions, and information technology, which could decrease the time and resources available to focus on our existing businesses and other growth strategies. We cannot guarantee that we will be able to successfully identify and integrate acquisitions, that acquired businesses will operate profitably, or that we will be able to achieve the anticipated sales growth, synergies or other benefits from acquisitions. We cannot assure that we will be able to successfully integrate acquisitions, that these acquisitions will operate profitably, or that we will be able to achieve the desired sales growth 8Table of Contentsor operational success. Our sales, results of operations, cash flow, and liquidity could be adversely affected if we do not successfully integrate acquired businesses, including realizing synergies, or if our existing businesses are adversely affected by the increased focus on acquired businesses. Our sales, results of operations, cash flow, and liquidity could be adversely affected if we do not successfully integrate acquired businesses, including realizing synergies, or if our other businesses suffer due to the increased 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 are not achieving the desired return on investment. Divestitures pose risks and challenges that could negatively impact our business. We may be unable to complete a divestiture on satisfactory terms or within our anticipated timeframe, and transactions may be subject to pre-closing conditions that may not be satisfied. Separating a business may also require significant management attention and resources and could result in operational disruptions, including challenges associated with separating systems, processes, personnel and other shared functions, providing or receiving transition services, retaining key employees and maintaining customer and supplier relationships. Divestitures may also result in stranded costs or other expenses that are greater than anticipated, and the impact of a divestiture on our revenue, earnings or cash flows may differ from our expectations. Our prices and lead times for raw materials and other components necessary for production have continued to fluctuate over the past year, including increased raw production costs, increased wage rates, and extended lead times. In addition, we may also retain responsibility for and agree to indemnify buyers against certain contingent liabilities related to businesses we sell and the resolution of any contingencies could have a material adverse impact on our financial results. If we are unable to attract and retain qualified individuals, or if our costs to do so increase significantly, or if internal realignment of responsibilities are not executed properly, our business and financial results could be adversely affected.
The use of AI and the failure to effectively integrate AI and automation into our business processes could hinder our operational efficiency and adversely affect our business and financial results.
We have made investments in developing and implementing AI to streamline internal workflows and enhance operational decision-making. We believe that the effective use of AI within our internal business processes, including supply chain management, administrative functions, and data analysis is critical to our ability to maintain a competitive cost structure and achieve long-term success.
Our R&D into these technologies is ongoing, and we are working to incorporate AI capabilities across our internal infrastructure. However, as with many developing innovations, the integration of AI presents significant risks and challenges. Our efforts integrating AI may not produce meaningful operational efficiency improvements or help maintain a competitive cost structure. If our internal AI initiatives fail to operate as intended, or if we are unable to implement these technologies as effectively or as quickly as our competitors, we may experience higher operating costs than our peers. Furthermore, failure to successfully modernize our internal operations through AI could result in a failure to recoup our investments in these technologies, adversely affecting our business and financial results. In addition, AI technologies may produce inaccurate outputs, cause or contribute to the violation of intellectual property rights, and may be prone to cybersecurity incidents or
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service interruptions. Furthermore, the use of AI by us and our employees could increase the risk of exposure of our proprietary, personal and confidential information.
Global Operating Risks
Our failure or the failure of third-party service providers to protect our sites, networks and systems against security breaches, to protect our confidential information, or to facilitate our digital strategy, could adversely affect our business and financial results.
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 and cybersecurity incidents 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. 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. The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape and new technologies and processes intended to detect and prevent these attacks. There can be no assurance that the security measures and systems configurations we choose to implement will be sufficient to protect the data we manage. 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 laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have an adverse effect on our business and financial results.
Furthermore, use of AI by our service providers could increase the risk of exposure of our proprietary, personal and confidential information. The use of AI or machine learning technologies by our service providers in their business activities, whether or not known to us, could also expose us to risks, including use of AI tools in violation of agreements with us, use of unauthorized third-party data, inputting our valuable information into AI tools, or deployment of new AI tools without our approval, any of which may give rise to legal or regulatory violations, loss of intellectual property rights, reputational harm, or issues relating to data privacy and data protection.
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.
Approximately 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:
•Imposition of new or changes in existing duties, tariffs and trade agreements, which could have a direct or indirect impact on our ability to manufacture products, on our customers' demand for our products, or on our suppliers' ability to deliver raw materials.
•Delays or disruptions in product deliveries and payments in connection with international manufacturing and sales.
•Regulations resulting from political and economic instability and disruptions.
•Import, export and economic sanction laws.
•Current and changing governmental policies, regulatory, and business environments.
•Disadvantages from competing against companies from countries that are not subject to U.S. laws and regulations including the Foreign Corrupt Practices Act.
•Local labor regulations.
•Regulations relating to climate change, air emissions, wastewater discharges, handling and disposal of hazardous materials and wastes.
•Regulations relating to product content, health, safety and the protection of the environment.
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•Imposition of trade or travel restrictions as a result of any effects of pandemics or global health crises.
•Specific country regulations where our products are manufactured or sold.
•Regulations relating to compliance with data protection and privacy laws throughout our global business.
•Laws and regulations that apply to companies doing business with the government, including audit requirements of government contracts related to procurement integrity, export control, employment practices, and the accuracy of records and recording of costs.
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 depend on key employees and the loss of these individuals could have an adverse effect on our business and financial results.
Our financial results could be adversely affected by increased competition for employees, difficulty in recruiting employees, higher employee turnover or increased compensation and benefit costs. Our employees are important to our success and we are dependent on our ability to retain the services of our employees in key roles. We have built our business on a set of core values, and we attempt to hire and retain employees who are committed to these values and our culture of providing exceptional service to our customers. In order to compete and to continue to grow, we must attract, retain and motivate our employees. 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 if our costs to do so increase significantly, or if internal realignment of responsibilities are not executed properly, our business and financial results could be adversely affected.
We are subject to litigation that could adversely impact our business, financial results, and reputation.
We are, or may become, a party to litigation that arises in the normal course of our business operations, including product liability and recall (strict liability and negligence) claims, patent and trademark matters, contract disputes and environmental, employment and other litigation matters. 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.
Global climate change and related emphasis on environmental matters by various stakeholders could negatively affect our business and financial results.
Increased public awareness and concern regarding global climate change may result in more regional and/or federal requirements to reduce or mitigate the effects of greenhouse gas emissions. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Further, our customers and the markets we serve may impose emissions or other environmental standards through regulation, market-based emissions policies or consumer preference that we may not be able to timely meet due to the required level of capital investment or technological advancement.
Additionally, the enhanced stakeholder focus on Environmental, Social and Governance (“ESG”) issues relating to our business requires the continuous monitoring of various and evolving standards and the associated reporting requirements. A failure to adequately meet stakeholder expectations may result in the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent.
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Financial and Security Ownership Risks
The global nature of our business exposes us to foreign currency fluctuations that could adversely affect our business and financial results.
Because a significant portion of our business is conducted outside of the United States, our sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar, which may adversely affect our financial results. Increased strength of the U.S. dollar could increase the effective price of our products sold in currencies other than U.S. dollars into other countries. Decreased strength of the U.S. dollar could adversely affect the cost of materials, products, and services purchased overseas. Our sales and expenses are translated into U.S. dollars for reporting purposes, and strengthening of the U.S. dollar could result in unfavorable translation effects. In addition, certain of our subsidiaries may invoice customers in a currency other than its functional currency or may be invoiced by suppliers in a currency other than its functional currency, which could result in unfavorable translation effects on our business and financial results.
Changes in tax legislation or tax rates could adversely affect results of operations and financial statements. Additionally, audits by taxing authorities could result in tax payments for prior periods.
We are subject to income taxes in the U.S. and in many non-U.S. jurisdictions. As such, our 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.
Globally, many countries have enacted, or plan to enact, legislation and other guidance to align with the Organisation for Economic Co-operation and Development’s (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting Pillar Two (“Pillar Two”) model rules, which aim to establish a global minimum tax rate of 15 percent for large multinational enterprise groups. In January 2026, the OECD issued additional guidance, including a safe harbor framework for certain U.S. parented groups that is expected to largely reduce the impact of Pillar Two for the Company. Even with this safe harbor, the Company could still be subject to local minimum tax regimes in countries that have adopted these rules. As of July 31, 2026, Pillar Two has not had a material impact on the Company’s income tax liability, provision for income taxes, or effective tax rate, nor does the Company expect a material impact in the future.
Failure to execute our strategies could result in impairment of goodwill or other intangible assets, which may negatively impact income and profitability.
We have goodwill of $686.0 million and other intangible assets of $97.8 million as of July 31, 2026, which represent 42.3% of our total assets, and we have recognized impairment charges in the past. Additionally, we expect these balances and their percentage of our total assets to increase substantially as a result of the PSS acquisition completed on August 3, 2026. 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. Given the substantial increase in our intangible assets, any failure to successfully integrate PSS or realize its expected benefits could heighten the risk of future impairment. If the estimated fair value of our goodwill or other intangible assets change in future periods, we may be required to record an impairment charge, which would reduce net income in such period.
Substantially all of our voting stock is controlled by two shareholders, while our public investors hold non-voting stock.Substantially all of our voting stock is controlled by Elizabeth P. The interests of the voting and non-voting shareholders could differ, potentially resulting in decisions that affect the value of the non-voting shares.
Substantially all of our voting stock is controlled by Elizabeth P. Bruno, one of our 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
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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. For example, the Company was removed from the Russell 2000 Index in the fourth quarter of fiscal year 2023 for not meeting the minimum voting rights hurdle.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Brady has strategically included cybersecurity risk management into our integrated Company-wide risk management framework, which consists of administrative, operational, physical, and technical processes that we believe are appropriate to the scope and nature of our business. We believe this integrated approach allows cybersecurity considerations to form an integral part of our corporate and strategic decision-making processes. Management works closely with our information technology security team to continuously evaluate and address cybersecurity risks in alignment with our business and operational needs. Our cybersecurity policies and practices follow the cybersecurity framework of the Center for Internet Security Controls.
Our cybersecurity strategy focuses on continued strengthening of our cybersecurity defense model, improvement of cybersecurity operational efficiencies, and preparedness for evolving business and technology needs including the detection, analysis, and response to known, anticipated and unexpected cybersecurity threats, management of material risks related to cybersecurity threats and resilience against cybersecurity incidents. We regularly assess potential threats and make investments to mitigate the risk of these threats against our critical information and assets by implementing a broad set of information security and cybersecurity measures, including comprehensive monitoring and enhancement of our networks and systems, intrusion prevention defense, rapid detection and response, and threat management capabilities. To supplement our internal resources, we engage external consultants to conduct independent assessments, perform penetration testing, and provide other cybersecurity-related services as needed. In addition, we engage external vendors to review and test key controls within our cybersecurity program.
Cybersecurity awareness training is provided to new employees and annually for current Brady employees, which is designed to educate employees on recognizing information security and cybersecurity concerns, how they can help protect the organization and how to inform the information technology security team of potential incidents. In addition, we implement processes to manage risks associated with our third-party providers, including security assessments prior to engagement and monitoring their compliance with our cybersecurity standards on an ongoing basis.
Our information technology security team reports to our Chief Information Officer (the “CIO”) and is headed by our Information Technology Director (the “IT Director”). Our CIO is an experienced information technology professional with extensive cybersecurity and information technology risk management experience. The information technology security team regularly informs our CIO, General Counsel and Chief Financial Officer with regard to cybersecurity risks and incidents, and our executive management team evaluates cybersecurity issues quarterly or as needed.
Brady has a detailed incident response plan that provides the process and workflow of communication for escalation of cybersecurity incidents to executive leadership to determine if there is a breach warranting further action. The information technology security team, in conjunction with various departments, including finance, corporate communications, legal, regional presidents and the CIO, are charged with reviewing any incident under our materiality framework to assess whether further escalation and reporting is required and if an incident could constitute a material cybersecurity incident. The information 12Table of Contentstechnology security team, in conjunction with various departments, including finance, corporate communications, legal, regional presidents and the CIO, are charged with reviewing any incident under our materiality framework to assess whether further escalation and reporting is required and if an incident could constitute a material cybersecurity incident.
Although we have not experienced any material cybersecurity incidents to date, cybersecurity threats could materially affect the implementation of our business strategy, results of operations, or financial condition, as further discussed in our risk factors in Part I, Item 1A of this report.
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| RGS | 2 days, 1 hour ago |
| BMRA | 2 days, 15 hours ago |
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| SMCI | 2 days, 17 hours ago |
| CYDY | 2 days, 23 hours ago |
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| LTRX | 6 days, 14 hours ago |
| AFRM | 6 days, 14 hours ago |
| AOSL | 6 days, 15 hours ago |
| IREN | 6 days, 15 hours ago |
| LFVN | 6 days, 15 hours ago |
| ARAY | 6 days, 16 hours ago |
| PURR | 6 days, 20 hours ago |
| THTG | 6 days, 21 hours ago |
| MBUU | 6 days, 22 hours ago |
| AVNW | 6 days, 23 hours ago |
| LUCK | 1 week ago |
| PAHC | 1 week ago |
| UFI | 1 week ago |
| GEG | 1 week ago |
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| ELMD | 1 week, 1 day ago |
| SLQT | 1 week, 1 day ago |
| MZTI | 1 week, 2 days ago |
| TECH | 1 week, 2 days ago |
| NSSC | 1 week, 2 days ago |
| OSIS | 1 week, 5 days ago |
| KRNY | 1 week, 5 days ago |
| PH | 1 week, 6 days ago |
| UI | 1 week, 6 days ago |
| SYY | 1 week, 6 days ago |
| PSEC | 1 week, 6 days ago |
| COTY | 1 week, 6 days ago |
| WOLF | 1 week, 6 days ago |
| FLUX | 1 week, 6 days ago |
| BILL | 1 week, 6 days ago |
| AX | 1 week, 6 days ago |
| SCSC | 1 week, 6 days ago |
| OPTT | 2 weeks ago |
| KE | 2 weeks ago |
| CHRN | 2 weeks ago |
| FLXS | 2 weeks ago |
| JBSS | 2 weeks ago |
