10-K 1 c58010e10-k.txt FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal Year Ended July 31, 2000 Commission File Number 0-12730 BRADY CORPORATION (Exact name of registrant as specified in charter) Wisconsin 39-0178960 --------- ---------- (State of Incorporation) (IRS Employer Identification No.) 6555 West Good Hope Road Milwaukee, WI 53223 (Address of Principal Executive Offices and Zip Code) (414) 358-6600 (Registrant's Telephone Number) Securities Registered Pursuant to Section 12(b) of the Act: Class A Nonvoting Common Stock, Par Value $.01 per share Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No X As of October 6, 2000, there were outstanding 20,979,298 shares of Class A Nonvoting Common Stock (the "Class A Common Stock"), and 1,769,314 shares of Class B Common Stock. The Class B Common Stock, all of which is held by affiliates of the Registrant, is the only voting stock. DOCUMENTS INCORPORATED BY REFERENCE Brady Corporation 2000 Annual Report, Incorporated into Part II & IV 2 I N D E X

PAGE ---- PART I Item 1. Business General Development of Business....................................................................... I-1 Financial Information About Industry Segments......................................................... I-1 Narrative Description of Business: Overview......................................................................................... I-1 Business Strategy................................................................................ I-2 Growth Strategy.................................................................................. I-2 Products......................................................................................... I-3 Marketing and Sales.............................................................................. I-6 Manufacturing Process and Raw Materials.......................................................... I-7 Technology and Product Development............................................................... I-7 International Operations......................................................................... I-8 Competition...................................................................................... I-8 Backlog.......................................................................................... I-8 Environment...................................................................................... I-9 Employees........................................................................................ I-9 Acquisitions..................................................................................... I-9 Financial Information About Foreign and Domestic Operations and Export Sales................................................................................... I-10 Item 2. Properties..................................................................................... I-11 Item 3. Legal Proceedings.............................................................................. I-11 Item 4. Submission of Matters to a Vote of Security Holders........................................... I-11 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................................................................ II-1 Item 6. Selected Financial Data........................................................................ II-2 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................... II-2 Item 8. Financial Statements and Supplementary Data.................................................... II-2 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure............................................................ II-2

3

PART III PAGE ---- Item 10. Directors and Executive Officers of the Registrant ........................................... III-1 Item 11. Executive Compensation ....................................................................... III-4 Summary Compensation Table ........................................................................ III-4 Stock Options...................................................................................... III-6 Common Stock Price Performance Graph .............................................................. III-9 Compensation of Directors.......................................................................... III-10 Termination of Employment and Change in Control Arrangements....................................... III-10 Restricted Stock................................................................................... III-11 Compensation Committee Interlocks and Insider Participation........................................ III-11 Profit Sharing and Employee Thrift Plan ........................................................... III-11 Deferred Compensation Arrangements................................................................. III-12 Compensation Committee Report on Executive Compensation............................................ III-13 Item 12. Security Ownership of Certain Beneficial Owners and Management................................ III-16 Item 13. Certain Relationships and Related Transactions................................................ III-19 PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K................................ IV-1 SIGNATURES.............................................................................................. IV-6

4 PART I Brady Corporation and Subsidiaries is referred to herein as the "Company" or "Brady". ITEM 1 BUSINESS (a) General Development of Business The Company, a Wisconsin corporation, currently operates 26 manufacturing facilities worldwide. Ten are located in the United States, four in France, two each in Australia and Canada and one each in Belgium, Brazil, China, England, Italy, Japan, Korea and Singapore. The Company sells through subsidiaries or sales offices in Australia, Belgium, Brazil, Canada, China, England, France, Germany, Hong Kong, Italy, Japan, Korea, Malaysia, Mexico, the Philippines, Singapore, Spain, Sweden, Taiwan and the United States. The Company's corporate headquarters are located at 6555 West Good Hope Road, Milwaukee, Wisconsin 53223, and its telephone number is (414) 358-6600. The Company's Internet address is http://www.bradycorp.com. (b) Financial Information About Industry Segments The information required by this Item is incorporated by reference to Note 7 to Notes to Consolidated Financial Statements on Pages 35 through 37 of the Brady Corporation 2000 Annual Report. (c) Narrative Description of Business OVERVIEW Brady Corporation is a leading international manufacturer and marketer of high-performance identification solutions and specialty coated materials. The Company's products consist of over 50,000 stock and custom items as well as complete identification systems that are used by the Company's customers to create a safer work environment for employees, improve production and operating efficiencies and increase the utilization of assets through tracking and inventory process controls. Major product categories include: industrial identification and data collection products; safety and facility identification products; and precision materials. The Company's products are sold in a variety of markets, including electrical, electronic, telecommunication, governmental, public utility, computer, construction, transportation equipment and education. The need for the Company's products is driven by specification of customer engineering departments, by regulatory compliance requirements imposed by agencies such as OSHA and the EPA, or by the need to identify and track assets, or to direct, warn, inform, train and protect people. The Company manufactures and sells its products domestically and internationally through multiple channels including direct sales, distributor sales, mail-order catalog and telemarketing and electronic access through the Internet. The Company has a broad customer base, which in fiscal 2000 consisted of more than 300,000 companies, with the largest customer representing less than 5% of net sales. Sales from international operations represented 44.4%, 44.6% and 43.5% of net sales in fiscal 2000, 1999 and 1998, respectively. I-1 5 BUSINESS STRATEGY Brady's mission is to be the world leader in identification and material solutions that help companies improve productivity, performance, safety and security. The Company expects to accomplish this objective by offering a broad range of high-quality, innovative products to a widely diversified customer base in a prompt and responsive manner. Underlying the Company's business strategy is a Company-wide commitment to enhancing shareholder value. The Company's long-term focus on activities that will create sustainable value for its shareholders drives decision making at all levels of the Company. The Company's employees participate in an incentive plan that is focused upon the creation of shareholder value. This incentive plan serves to motivate employees, foster a team-oriented work environment and maximize the utilization of assets. Key elements of the Company's business strategy include: Product innovation. The Company continually seeks to improve existing products and to develop innovative products to satisfy its customers' requirements and expectations. Brady's commitment to product innovation is reflected in research and development efforts that include approximately 200 employees primarily dedicated to research and development activities in the United States, Canada, Belgium, France and Singapore. Breadth of product line. The Company's products include over 50,000 stock as well as custom items. The number of products offered allows Brady to serve as a one-stop shopping network for its customers. Additionally, management believes that the Company provides a broader range of identification solutions than any of its competitors. Focus on customers. The Company seeks to provide "seamless" customer service and to offer rapid response to customer orders and inquiries. To meet this goal, the Company has streamlined its manufacturing processes to shorten lead-times and has increased its investment in telecommunications and management information systems worldwide. Niche markets. The Company strives to be a major player in niche markets that allow the Company to leverage its capabilities in specialty materials, die-cut parts and printing systems. By focusing on specific markets and value-added product applications, the Company has established leading positions in the electrical and safety markets with certain of its products such as wire markers, pipe markers, safety signs and printing systems. It also is a leader in precision die-cut materials and bar-code label generation software. GROWTH STRATEGY The major elements of the Company's strategy for growth include: New products and new markets. The Company, through its strong product innovation and development activities, seeks continually to introduce new products and explore additional applications for its products in existing and new markets. Increased market penetration. The Company seeks to increase market penetration in existing domestic and international markets through existing distribution channels and strong sales and marketing efforts. To achieve this objective, the Company is aligning more closely with distributors, expanding its current sales force and is pursuing additional niche distribution channels. I-2 6 Geographic expansion. Sales from Brady's international operations have increased from $50,707,000 or 26.5% of net sales in fiscal 1990 to $240,079,000, or 44.4%, of net sales in fiscal 2000. The Company believes that international markets continue to represent a significant growth opportunity. Accordingly, the Company is actively seeking to increase its penetration in established markets in Europe, Asia/Pacific and Canada and to enter new emerging markets elsewhere in the Pacific Rim and in Latin America. Strategic acquisitions and joint ventures. While the Company intends to continue pursuing internal growth through the above strategies, the Company also intends, where practical, to fill product lines or market sectors, open new geographic markets and strengthen its offerings through the pursuit of strategic acquisitions and joint ventures. During the last three years, Brady's growth has occurred through strategic acquisitions, innovative product development and improvement, market expansion and increased market penetration. E-business. E-Business will help support growth as the Company works to make every Brady business an electronic or Internet-enabled business. Brady is striving to do at least 50 percent of the Company's business electronically within the next three to five years. Investments in e-commerce and information technology have been increased to help the Company achieve this goal. PRODUCTS The Company's products consist of over 50,000 stock and thousands of custom items as well as complete identification systems that are used by the Company's customers to create a safer work environment for employees, improve product and operating efficiencies and increase the utilization of assets through tracking and inventory process controls. Major product categories include: industrial identification and data-collection products including wire and cable markers, high-performance labels, stand-alone printing systems, barcode and other software, radio frequency identification tags and readers and other automatic identification and data collection systems; safety and facility identification products including signs, pipe and valve markers, storage markers, asset identification tags, lockout/tagout products, traffic-control products, printing systems and software; and specialty tapes and die-cut materials. Many of the Company's stock products were originally designed, developed and manufactured as custom products for a specific purchaser. However, such products have frequently developed wide industry acceptance and become stock items offered by the Company through mail-order and distributor sales. The Company's most significant types of products are described below. INDUSTRIAL IDENTIFICATION AND DATA-COLLECTION PRODUCTS Wire and Cable Markers Brady manufactures a broad range of wire- and cable-marking products. These products help mark and identify wires, cables and various hazards. Such products may be used in virtually every industrial, electrical and telecommunications market to specify the origination and/or destination of wiring and to facilitate repair or maintenance of equipment and datacommunication and electrical wiring systems. I-3 7 High Performance Labels Brady produces a complete line of label materials to meet customers' needs for identification that performs under harsh or sensitive conditions. Brady prints stock and custom labels and also sells unprinted materials to enable customers to print their own labels on-site, on-demand, using thermal transfer, laser, dot matrix and inkjet printers. Brady labels range from static-dissipative labels for use on electronic components to labels that withstand extreme conditions, such as 1000 degrees Fahrenheit temperatures and harsh chemicals. Software and Printing Systems The Company designs and produces various computer software, industrial thermal-transfer and dot matrix printers and other electromechanical devices to serve the growing and specialized needs of customers. Industrial labeling systems, software, tapes, ribbons and label stocks provide customers with the resources and flexibility to produce signs and labels on demand at their site. Automatic Identification and Data-Collection Systems Brady's automatic identification and data collection solutions include bar-code-label-generating software; bar-code and radio frequency scanners; tags; and labels to enable accurate tracking of manufacturing, warehousing, receiving and shipping data. The Company's software applications, integration services, fixed station terminals, high-speed printers and associated customized consumable products allow its customers to have a higher degree of knowledge and control over production, asset management and all phases of inventory control, including receiving, warehousing, work-in-process, finished goods and shipping. SAFETY AND FACILITY IDENTIFICATION PRODUCTS Signs The Company manufactures safety and informational signs for use in a broad range of industrial, commercial, governmental and institutional applications. These signs are either self-adhesive or mechanically mounted, are designed for both indoor and outdoor use and are manufactured to meet standards issued by the National Safety Council, OSHA and a variety of industry associations in the United States and abroad. The Company's sign products are categorized by type of message to be conveyed, including admittance, directional and exit signs; electrical hazard warnings; energy conservation messages; fire protection and fire equipment signs; hazardous waste labels; hazardous and toxic material warning signs; personal hazard warnings; housekeeping and operational warnings; pictograms; radiation and laser signs; safety practices signs and regulatory markings. Pipe and Valve Markers The Company manufactures both self-adhesive and mechanically applied stock and custom-designed pipe markers and plastic and metal valve tags for the identification of pipes and control valves. These products are designed to help identify and provide information as to the contents, direction of flow and special hazardous properties of materials contained in piping systems, and to facilitate repair or maintenance of the system. I-4 8 Storage Markers The Company produces signs, self-adhesive and self-aligning die cut numbers and letters used for the systematic identification of facilities, bins and shelving. Storage marker products are primarily used by industrial companies in factories, warehouses, stockrooms and other facilities. Asset Identification Markers Brady offers a wide range of asset identification products. These include self-adhesive or mechanically mounted labels or tags made of aluminum, brass, stainless steel, polycarbonate, vinyl, polyester, mylar and paper. These products are also offered in tamper-evident varieties. Lockout/Tagout Products Brady offers a wide variety of lockout/tagout products. Under OSHA regulations, all energy sources must be "locked out" while machines are being serviced or maintained to prevent accidental engagement and injury. The Company's products allow its customers to comply with these regulations and to ensure worker safety for a wide variety of energy and fluid transmission systems and operating machinery. Traffic Control Products The Company offers a wide variety of traffic-control devices, including directional and warning signs, barriers, cones and other devices. Other The Company also offers sign-making kits, stenciling materials, barricading products, visual warning systems, floor-marking products, safety hard-hat labels, safety badges, photo identification kits, ergonomic products, first aid cabinets/kits, body harnesses, anti-slip coatings and alarm security systems, among others. SPECIALTY MATERIALS Specialty Tapes Brady manufactures specialty tapes and related products that are used in a variety of audio, video and computer applications. These specialty tape products are characterized by high-performance adhesives, most of which are formulated by the Company, to meet high-tolerance requirements of the industries in which they are used. Its data-storage products include audio and video cassette splicing tapes. Die-Cut Materials The Company's precision die-cut materials are used to seal, insulate, protect, shield or provide other mechanical performance properties in the assembly of electronic, telecommunications and other equipment, including cellular phones, pagers, computer hard drives, two-way radios, and other devices. I-5 9 Graphics Products Brady serves the identification and information needs of various non-industrial markets with a variety of easy-to-use printing systems and consumable supplies. It provides lettering and labeling systems, poster printers, laminators and supplies to education, and training markets. OTHER PRODUCTS The Company also sells a variety of other products, none of which individually accounts for a material portion of its sales, including: hospital and clinical labels, packing and shipping goods, name plates and quality and production control products, among others. MARKETING AND SALES The Company's products are sold in a wide variety of markets including electrical, electronic, telecommunications, governmental, public utility, computer, construction, transportation equipment and education. Brady has a diverse customer base that consisted of over 300,000 customers in fiscal 2000. No material part of the Company's business is dependent upon a single customer or group of customers, and the loss of a particular customer would not have a material adverse effect upon the Company's business. In fiscal 2000, no single customer accounted for more than 5% of the Company's net sales. The Company seeks to offer the right product with rapid response times and superior service so that it can provide solutions to the customer that are better, faster and more economical than those available from competitors. The Company markets and sells its products domestically and internationally through multiple channels including direct sales, distributor sales, mail-order catalog marketing and electronic access through the Internet. The Company currently has over 4,000 established relationships with a broad range of electrical, safety, industrial and other domestic and international distributors. To support its distributor network, the Company employs a sales force of over 500 people. The Company's sales force seeks to establish and foster ongoing relationships with the end-users (and distributors) by providing technical support and product application advice. The Company direct markets its products and those of other manufacturers by catalog sales in both domestic and international markets. Such products include industrial and facility identification products, safety and regulatory compliance products and OEM component products, among others. Catalog operations are conducted through offices in the U.S., Australia, Brazil, Canada, England, France, Germany, Italy and Japan and include foreign-language catalogs. I-6 10 MANUFACTURING PROCESS AND RAW MATERIALS The Company manufactures the majority of the products it sells, while purchasing certain items from other manufacturers. Products manufactured by the Company generally require a high degree of precision and the application of adhesives with chemical and physical properties suited for specific uses. The Company's manufacturing processes include compounding, coating, converting, software publishing and printer engineering and assembly. The compounding process involves the mixing of chemical batches for primers, top coatings and adhesives, in solvent- or water-based materials. The coatings and adhesives are applied to a wide variety of materials including polyester, polyimide, cloth, paper, metal and metal foil. The converting process may include embossing, perforating, laminating, die cutting or slitting and printing or marking the materials as required. The Company seeks to optimize the performance, quality and durability of its products, while continually improving manufacturing processes, shortening lead times and lowering manufacturing costs. The Company produces the majority of its own adhesive stocks and top-coated materials through an integrated manufacturing process. These integrated manufacturing processes permit it to achieve greater flexibility in product design and manufacture and to improve its ability to provide specialized products designed to meet the needs of specific applications. Brady's "cellular" manufacturing processes and "just-in-time" inventory control allow it to attain profitability in small orders by emphasizing flexibility and the maximization of assets through quick turnaround and delivery. Most of the Company's manufacturing facilities have received ISO 9001 or 9002 certification. The materials used in the products manufactured by the Company consist primarily of plastic sheets and films (primarily polyesters and polycarbonates), paper, metal and metal foil, cloth, fiberglass, inks, dyes, adhesives, pigments, natural and synthetic rubber, organic chemicals, polymers and solvents. The Company purchases its raw materials from many suppliers and is not dependent upon any single supplier for any of its base supply materials. TECHNOLOGY AND PRODUCT DEVELOPMENT The Company focuses its research and development efforts on applications in the science of surface chemistry, such as coatings, adhesives and physical bonding. This dedication to surface chemistry, in combination with a manufacturing technology oriented to adhesives and graphics, has led to the development of many proprietary release coatings, adhesives and products that are adhesively fastened. The Company possesses patents covering various aspects of adhesive chemistry, electronic circuitry, computer-generated wire markers, and systems for aligning letters and patterns. Although the Company believes that its patents are a significant factor in maintaining its market position as to certain products, technology in the areas covered by many of the patents is evolving rapidly and may limit the value of such patents. The Company's business is not dependent on any single patent or group of patents. I-7 11 The Company conducts much of its research and development activities at its approximately 39,600 sq. ft. Frederic S. Tobey Research and Innovation Center in Milwaukee, Wisconsin. The Company spent approximately $21,500,000, $17,700,000 and $20,300,000 in fiscal 2000, 1999 and 1998, respectively, on its research and development activities. In fiscal 2000, approximately 200 employees were engaged in research and development activities for the Company. Additional research projects were conducted under contract with universities, other institutions and consultants. INTERNATIONAL OPERATIONS In Fiscal 2000, 1999, and 1998, sales from international operations accounted for 44.4%, 44.6%, and 43.5%, respectively, of the Company's net sales The Company's global infrastructure includes subsidiaries in Australia, Belgium, Brazil, Canada, China, England, France, Germany, Italy, Japan, Korea, Mexico, Singapore, Spain and Sweden and sales offices in Hong Kong, Malaysia, the Philippines and Taiwan. Several of these locations manufacture or have the capability to manufacture certain of the products they sell. The Company acquired or opened new operations in Australia, Brazil, Canada, China, France and the Philippines in the last three years. The Company expects to continue to expand its international operations as appropriate. COMPETITION The markets for most of the Company's products are competitive. The Company believes that it is the leading domestic producer of self-adhesive wire markers, safety signs, pipe markers, audio and video splicing tapes, precision die-cut materials and bar-code label generating software. The Company competes for business principally on the basis of product quality, performance, range of products offered and to a lesser extent, on price. Product quality is determined by factors such as suitability of component materials for various applications, adhesive properties, graphics quality, durability, product consistency and workmanship. Competition in many of the Company's product markets is highly fragmented, ranging from smaller companies offering only one or a few types of products, to some of the world's major adhesive and electrical product companies offering some competing products as part of their product line. A number of the Company's competitors are larger than the Company and have greater resources. Notwithstanding the resources of these competitors, management believes that the Company provides a broader range of identification solutions than any of its competitors. BACKLOG As of July 31, 2000, the amount of the Company's backlog orders believed to be firm was approximately $27,100,000. This compares with approximately $22,300,000 and $20,400,000 of backlog orders as of July 31, 1999 and 1998, respectively. Average delivery time for the Company's orders varies from one day to 12 weeks, depending on the type of product, and whether the product is stock or custom designed and manufactured. I-8 12 ENVIRONMENT At present, the manufacturing processes for the Company's adhesive-based products utilize certain evaporative solvents which, unless controlled, would be vented into the atmosphere. Emissions of these substances are regulated at the federal, state and local levels. During the past several years, the Company has implemented a number of procedures to reduce atmospheric emissions and/or to recover solvents. Management believes the Company is substantially in compliance with all environmental regulations. EMPLOYEES As of July 31, 2000, the Company employed approximately 3,100 individuals. The Company has never experienced a material work stoppage due to a labor dispute, is not a party to any labor contract and considers its relations with employees to be excellent. To meet present and future labor requirements, the Company maintains an active college recruiting program for sales, technical and administrative personnel. ACQUISITIONS Effective March 9, 1998, the Company acquired the common stock of Techniques Avancees located in Auch, France, a bar-code-labeling-software developer, for cash of $10,735,000 and a payable of $1,030,000. Effective April 30, 1998, the Company acquired the common stock of GrafTek Inc. located in Toronto, Ontario, Canada, a bar-code labeling software developer, for cash of $8,528,000 and a payable of $933,000. Effective August 11, 1998, the Company acquired the common stock of VEB Sistemas de Etiquetas Ltda. located in Sao Paulo, Brazil, an industrial label manufacturer, for cash of approximately $4,400,000. Effective March 25, 1999, the Company acquired the assets of Barcodes West Inc. located in Seattle, Washington, a label manufacturer and software and service provider, for cash of $5,757,000. Effective May 7, 1999, the Company acquired the common stock of Visi Sign Pty. Ltd. located in Victoria, Australia, a manufacturer of identification products, for cash of approximately $1,396,000. Effective July 7, 1999, the Company acquired the common stock of Holman Groupe S.A. located in Rungis, France, an automatic identification and application specialist, for cash of approximately $5,343,000 and a payable of approximately $554,000. Effective July 30, 1999, the Company acquired the common stock of the graphics division of SOFT S.A., located in Lyon, France, a developer and distributor of printing systems, for cash of approximately $14,044,000. Effective September 3, 1999, the Company acquired the brand name, customer list and catalog artwork of Champion America, Inc., located in Chagrin Falls, Ohio, a direct marketer of signs, labels and identification products, for cash of approximately $4,949,000 and a payable of approximately $561,000. I-9 13 Effective March 3, 2000, the Company acquired Data Recognition, Inc., located in Austin, Texas, a systems integrator providing automatic identification and data collection ("AIDC") solutions. Effective March 22, 2000, the Company acquired Imtec, Inc., located in Keene, New Hampshire, a manufacturer of high-performance bar-code labels and labeling systems used in automatic identification applications. The combined price for Data Recognition, Inc. and Imtec, Inc. was cash of approximately $33,422,000 and a payable of approximately $1,490,000. The purchase price is subject to change based on post-closing adjustments. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES See Note 7 to Notes to Consolidated Financial Statements on Pages 35 through 37 of the Brady Corporation 2000 Annual Report. I-10 14 ITEM 2 PROPERTIES The Company currently operates 26 manufacturing facilities. Ten are located in the United States, four in France, two each in Australia and Canada and one each in Belgium, Brazil, China, England, Italy, Japan, Korea and Singapore. The Company's primary research facility of approximately 39,600 square feet is located in Milwaukee, Wisconsin. The Company's present operating facilities contain a total of approximately 1,590,000 square feet of space, of which approximately 833,000 square feet is leased. The Company believes that its equipment and facilities are modern, well-maintained and adequate for its present needs. ITEM 3 LEGAL PROCEEDINGS The Company is, and may in the future be, party to litigation arising in the course of its business. The Company is not currently a party to any material pending legal proceedings. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. I-11 15 PART II ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Market Information Brady Corporation Class A Nonvoting Common Stock trades on the New York Stock Exchange under the symbol BRC. There is no trading market for the Company's Class B Voting Common Stock. Stock price disclosure required by this Item is incorporated by reference to Page 39 of the Brady Corporation 2000 Annual Report. (b) Holders The number of holders of record of the Company's Class A and Class B Common Stock as of September 19, 2000, was 391 and 2, respectively. (c) Dividends The Company has followed a practice of paying quarterly dividends on its outstanding common stock. Before any dividend may be paid on the Class B Common Stock, holders of the Class A Common Stock are entitled to receive an annual, noncumulative cash dividend of $.033 per share (subject to adjustment in the event of future stock splits, stock dividends or similar events involving shares of Class A Common Stock). Thereafter, any further dividend in that fiscal year must be paid on all shares of Class A Common Stock and Class B Common Stock on an equal basis. During its two most recent fiscal years and for the first quarter of the current year, the Company declared the following dividends per share on its Class A and Class B Common Stock:

Year Ending Year Ended 7/31/99 Year Ended 7/31/00 7/31/01 --------------------------------------------- ----------------------------------------------- ------------ 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr --------------------------------------------- ----------------------------------------------- ------------ Class A $.16 $.16 $.16 $.16 $.17 $.17 $.17 $.17 $.18 Class B .13 .16 .16 .16 .14 .17 .17 .17 .15

II-1 16 ITEM 6 SELECTED FINANCIAL DATA The information required by this Item is incorporated by reference to Page 17 of the Brady Corporation 2000 Annual Report. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated by reference to Pages 18 through 22 of the Brady Corporation 2000 Annual Report. From time to time the Company may provide forward-looking information, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking information involves risks and uncertainties, including, but not limited to, domestic and international economic conditions and growth rates; fluctuations in currency exchange rates for international currencies versus the U.S. dollar; the successful implementation of a new enterprise-resource-planning system; the ability of the company to acquire, integrate and achieve anticipated synergies from new businesses; the ability of the company to adjust its cost structure to changes in levels of sales and product mix in a timely manner; variations in the economic or political conditions in the countries in which the company does business; technology changes; and the continued availability of sources of supply. Brady cautions that forward-looking statements are not guarantees, since there are inherent difficulties in predicting future results, and that actual results could differ materially from those expressed or implied in forward-looking statements. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference to Pages 23 through 38 of the Brady Corporation 2000 Annual Report and the table on page III-3. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-2 17 BRADY CORPORATION AND SUBSIDIARIES UNAUDITED QUARTERLY FINANCIAL INFORMATION --------------------------------------------------------------------------------

Quarters First Second Third Fourth Total ----- ------ ----- ------ ----- (Dollars in Thousands, Except Per Share Data) 2000 Net Sales $125,549 $129,222 $142,484 $143,822 $541,077 Gross Margin 72,814 74,309 82,744 81,603 311,470 Operating Income 19,778 15,379 19,102 15,032 69,291 Net Income 12,367 9,832 11,729 13,273 47,201 Net Income Per Class A Common Share: Basic 0.54 0.43 0.51 0.59 2.07 Diluted 0.54 0.43 0.51 0.57 2.05 1999 Net Sales $116,802 $112,309 $121,455 $120,296 $470,862 Gross Margin 65,524 62,308 70,954 69,873 268,659 Operating Income 14,529 13,110 20,728 15,405 63,772 Net Income 8,711 7,974 12,937 9,962 39,584 Net Income Per Class A Common Share: Basic 0.38 0.35 0.57 0.44 1.74 Diluted 0.38 0.35 0.57 0.43 1.73

II-3 18 PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Name Age Title Katherine M. Hudson 53 President, CEO and Director Richard L. Fisk 56 Vice President, Direct Marketing Group David R. Hawke 46 Vice President, Graphics Group Frank M. Jaehnert 43 Vice President & Chief Financial Officer David W. Schroeder 45 Vice President, Identification Solutions & Specialty Tapes Group Conrad G. Goodkind 56 Secretary Peter J. Lettenberger 63 Director Robert C. Buchanan 60 Director Roger D. Peirce 63 Director Richard A. Bemis 59 Director Dr. Frank W. Harris 58 Director Gary E. Nei 56 Director Mary K. Bush 52 Director Frank R. Jarc 58 Director

KATHERINE M. HUDSON - Mrs. Hudson joined the Company in January 1994, as President, Chief Executive Officer and Director. Before joining Brady Corporation, she was a Vice President at Eastman Kodak Company and General Manager of its Professional, Printing and Publishing Imaging Division. Her 24 years at Eastman Kodak Company included positions in finance, communication and public affairs, information systems and the management of instant photography and printing. She is a director of CNH Global N.V. and Charming Shoppes, Inc., and serves on the Alverno College Board of Trustees, the Advisory Board of the University of Wisconsin School of Business, the Advisory Council for the Indiana University School of Business, and the Medical College of Wisconsin Board of Trustees. RICHARD L. FISK - Mr. Fisk joined the Company in 1979 and was appointed to his present position in August 1987. He previously served as General Manager of Seton Name Plate Co., a wholly-owned subsidiary of the Company. DAVID W. HAWKE - Mr. Hawke joined the Company in 1979. He served as General Manager of the Industrial Products Division from 1985 to 1991. From 1991 to February 1995, he served as Managing Director - European Operations. In March 1995, he was appointed to his present position. FRANK M. JAEHNERT - Mr. Jaehnert joined the Company in 1995 as Finance Director of the Identification Solutions & Specialty Tapes Group. He was appointed to his present position in November 1996. Before joining the Company, he held various financial and management positions for Robert Bosch GmbH from 1983 to 1995. DAVID W. SCHROEDER - Mr. Schroeder joined the Company in June 1991 as General Manager of the Industrial Products Division. He was appointed to his present position in March 1995. Before joining the Company, he served as President and Chief Executive Officer of Uniroyal Adhesives & Sealants Co., Inc. from 1988 to May 1991. III-1 19 CONRAD G. GOODKIND - Mr. Goodkind was elected Secretary of the Company in November 1999. He is a partner of Quarles & Brady, general counsel to the Company, which he joined in 1979. PETER J. LETTENBERGER - Mr. Lettenberger has served as a Director of the Company since January 1977. Mr. Lettenberger is a member of the Company's Finance and Corporate Governance Committees. He is a partner of Quarles & Brady, general counsel to the Company, which he joined in 1964. He is also a director of Electronic Tele-Communications, Inc., Waukesha, Wisconsin. ROBERT C. BUCHANAN - Mr. Buchanan has been a Director of the Company since November 1987. Mr. Buchanan is a member of the Company's Finance Committee and chairs its Corporate Governance Committee. Mr. Buchanan is President of Fox Valley Corporation in Appleton, Wisconsin, having assumed that position November 1980. He is also a trustee of The Northwestern Mutual Life Insurance Company, Milwaukee. ROGER D. PEIRCE - Mr. Peirce has served as a Director of the Company since September 1988. Mr. Peirce has been a member of the Compensation Committee of the Company since September 1988, and its chairman since November 1996, and is a member of its Corporate Governance and Finance Committees. Mr. Peirce is a private investor and consultant and is a director and secretary/treasurer of The Jor-Mac Company, Inc. in Grafton, Wisconsin. He was President and CEO of Valuation Research Corporation from April 1995 to May 1996. From September 1988 to December 1993, he was President of Super Steel Products Corp. in Milwaukee, Wisconsin. Prior to that he was a managing partner for Arthur Andersen LLP, independent certified public accountants. RICHARD A. BEMIS - Mr. Bemis has been a Director of the Company since January 1990 and a member of its Compensation Committee since March 1990, and is a member of its Finance and Technology Committees. Mr. Bemis is President and CEO of Bemis Manufacturing Company, a manufacturer of molded plastic products in Sheboygan Falls, Wisconsin. He is also a director of the Wisconsin Public Service Corporation, Green Bay, Wisconsin. FRANK W. HARRIS - Dr. Harris has been a Director of the Company since November 1991, a member of its Audit Committee since May 1999, and is chair of its Technology Committee. Dr. Harris is a Distinguished Professor of Polymer Science and Biomedical Engineering in the Institute of Polymer Science at the University of Akron, and has been on its faculty since 1983. GARY E. NEI - Mr. Nei has been a Director of the Company since November 1992. Mr. Nei is a member of the Company's Technology Committee and chair of its Finance Committee. Mr. Nei is Chairman of B&B Publishing, a publishing company in Walworth, Wisconsin. He is also a director of Uroquest, Inc., Menlo Park, California. MARY K. BUSH - Ms. Bush was elected to the Board of Directors on May 15, 2000. Ms. Bush is president of Bush & Company, Washington, D.C., an international financial advisory firm. She serves on the Audit and Finance Committees. Ms. Bush is also a director of Texaco, Inc., Mortgage Guarantee Insurance Corp., and R.J. Reynolds Tobacco Holdings, Inc. FRANK R. JARC - Mr. Jarc was elected to the Board of Directors on May 15, 2000. Mr. Jarc is a consultant specializing in corporate development and international acquisitions, and the former senior vice president of corporate development at Office Depot. He is chair of Brady's Audit Committee and serves on the Compensation Committee. III-2 20 All directors serve until their respective successors are elected at the next annual meeting of shareholders. Officers serve at the discretion of the Board of Directors. None of the Company's directors or executive officers has any family relationship with any other director or executive officer. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE During fiscal year 2000, with respect to the Company's Class A Common Stock: 1. Richard L. Fisk, an officer of the Company, exercised options to purchase 5,000 shares on November 19, 1999 and sold the shares on the same day. These transactions were reported on a Form 4 filed January 4, 2000. 2. On June 6, 2000, Peter J. Lettenberger, a Director of the Company, donated 1,000 shares to a non-profit institution. This transaction was reported on a Form 4 dated July 12, 2000. III-3 21 ITEM 11 EXECUTIVE COMPENSATION The following table summarizes the compensation paid or accrued by the Company during the three fiscal years ended July 31, 2000, to those persons who, as of the end of fiscal 2000, were the Named Executive Officers. SUMMARY COMPENSATION TABLE

Long-Term Annual Compensation Compensation Awards ------------------- ------------------- Other Restricted All Other Name and Fiscal Salary Bonus Annual Stock Options/SAR Comp Principal Position Year ($) ($) (1) Comp Awards (# of Shares) ($) (4) ------------------ ---- --- ------- ($) (2) ($) (3) ------------- ------- ------- ------- K. M. Hudson 2000 470,308 535,963 6,913 --- 82,000 58,059 (5) President & Chief 1999 441,577 529,892 4,950 --- 34,000 47,589 (5) Executive Officer 1998 449,516 190,145 4,829 1,487,500 24,000 107,066 (5) R. L. Fisk 2000 265,962 206,652 4,668 --- 12,500 241,562 (6) Vice President, 1999 253,654 228,289 3,235 --- 12,500 231,903 (6) Direct Marketing 1998 259,615 82,363 3,560 743,750 8,000 215,180 (6) Group D. W. Schroeder 2000 255,962 238,659 5,631 --- 12,500 6,699 Vice President, 1999 243,573 219,216 5,908 --- 12,500 13,549 ISST Group 1998 247,889 78,643 4,271 743,750 8,000 13,612 D.R. Hawke 2000 245,961 191,112 4,790 --- 12,500 6,735 Vice President, 1999 233,654 210,289 5,191 --- 12,500 13,219 Graphics Group 1998 238,836 75,774 2,813 743,750 8,000 13,527 F.M. Jaehnert 2000 213,269 165,710 5,558 --- 8,600 8,931 Vice President & 1999 190,962 171,866 6,835 --- 83,000 13,280 Chief Financial 1998 185,309 54,870 5,685 --- 6,000 13,225 Officer

(1) Reflects bonus earned during the listed fiscal year which was paid during the next fiscal year. (2) The amounts shown represent costs to the Company for expenses associated with the use of a company car. III-4 22 (3) In August 1997, the Company granted restricted stock awards of 50,000 shares to Mrs. Hudson and 25,000 shares each to Messrs. Fisk, Schroeder and Hawke. These awards are valued at $29.7500/share, the closing price for the Company's Class A Common Stock on the date of issue, in this table. As of July 31, 2000 and 1999, Mrs. Hudson held 50,000 shares and Messrs. Fisk, Schroeder and Hawke held 25,000 shares each of restricted stock. Using the closing price for the Company's Class A Common Stock on July 31, 2000, of $30.4375/share, Mrs. Hudson's holdings were valued at $1,521,875 and the holdings of Messrs. Fisk, Schroeder and Hawke were valued at $760,938 each. The restricted stock awards granted to Mrs. Hudson and Mr. Fisk vest on August 1, 2002. The restricted stock awards granted to Mr. Schroeder and Mr. Hawke vest 75% on August 1, 2002, with the remaining 25% vesting on August 1, 2003. The executives have the right to receive any cash dividends payable on these shares. (4) All other compensation for fiscal 2000 for Mrs. Hudson, and Messrs. Fisk, Schroeder, Hawke and Jaehnert, respectively, includes: (i) matching contributions to the Company's Profit Sharing and Employee Thrift Plan for each named executive officer of $9,600, $5,915, $5,946, $5,977 and $8,580 respectively and (ii) the cost of group term life insurance for each named executive officer of $1,485, $2,286, $753, $758 and $351, respectively. All other compensation for fiscal 1999 for Mrs. Hudson, and Messrs. Fisk, Schroeder, Hawke and Jaehnert, respectively, includes: (i) matching contributions to the Company's Profit Sharing and Employee Thrift Plan for each named executive officer of $12,800, $12,262, $12,800, $12,323 and $12,800 respectively and (ii) the cost of group term life insurance for each named executive officer of $3,434, $2,642, $749, $896 and $480, respectively. All other compensation for fiscal 1998 for Mrs. Hudson, and Messrs. Fisk, Schroeder, Hawke and Jaehnert, respectively, includes: (i) matching contributions to the Company's Profit Sharing and Employee Thrift Plan for each named executive officer of $12,800 each and (ii) the cost of group term life insurance for each named executive officer of $4,669, $2,380, $812, $727 and $425, respectively. (5) Fiscal 2000 includes $46,974 accrued, but not paid, for the current year's portion of a Supplemental Executive Retirement Plan (SERP). Fiscal 1999 includes $31,355 accrued, but not paid, for that year's portion of the SERP. Fiscal 1998 includes club dues and estate planning fees of $61,963 and $27,634 accrued, but not paid, for the that year's portion of the SERP. (6) Fiscal 2000 includes $233,360 accrued, but not paid, for the current year's portion of a Supplemental Executive Retirement Plan (SERP). Fiscal 1999 includes $217,000 accrued, but not paid, for that year's portion of a SERP. Fiscal 1998 includes $200,000 accrued, but not paid, for that year's portion of the SERP. III-5 23 STOCK OPTIONS The following tables summarize option grants and exercises during fiscal 2000 to or by the executive officers named in the Summary Compensation Table above, and the value of unexercised options held by such persons at July 31, 2000. Stock Appreciation Rights are not available under any of the Company's plans. OPTION GRANTS IN FISCAL 2000 Individual Grants --------------------------------------------------------------------------------

% of Total Options Options Granted to Exercise Granted (#) Employees Price ($/share) Name (1) in Fiscal 2000 (2) Expiration Date ---- ----------- -------------- --------------- --------------- K.M. Hudson 50,000 16.5% 33.7500 November 17, 2009 32,000 10.6% 30.5625 October 14, 2009 R.L. Fisk 12,500 4.1% 30.5625 October 14, 2009 D.W. Schroeder 12,500 4.1% 30.5625 October 14, 2009 D.R. Hawke 12,500 4.1% 30.5625 October 14, 2009 F.M. Jaehnert 8,600 2.8% 30.5625 October 14, 2009

Potential Realizable Value at Assumed Rates of Stock Price Appreciation (3) ------------------------------------------- $30.5625 $49.7800 $79.2700 Name 0% ($) 5% ($) (6) 10% ($) (6) ------ ---------- ----------- K.M. Hudson 0 1,676,460 4,248,140 R.L. Fisk 0 240,219 608,844 D.W. Schroeder 0 240,219 608,844 D.R. Hawke 0 240,219 608,844 F.M. Jaehnert 0 165,271 418,885 All Stockholders' Gains (increase in market value of Brady corporation Common Stock at assumed rates of stock price appreciation) (4) (6)....................... $401,030,117 $1,016,426,405 All Optionees' Gains (as a percent of all shareholders' gains) (5) (6).... 1.47% 1.47%

III-6 24 (1) The options granted October 14, 1999, become exercisable as follows: 33 1/3% of the shares on October 14, 2000; 33 1/3% of the shares on October 14, 2001; and 33 1/3% of the shares on October 14, 2002. These options have a term of ten years. The options granted to Mrs. Hudson on November 17, 1999, become exercisable January 01, 2004, and have a term of ten years. (2) The exercise price is the average of the highest and lowest sale prices of the Company's Class A Common Stock as reported by the New York Stock Exchange on the date of the grant. (3) Represents total potential appreciation of approximately 0%, 63% and 159% for assumed annual rates of appreciation of 0%, 5% and 10%, respectively, compounded annually for the ten year option term. (4) Calculated from the $30.5625 exercise price applicable to the options granted on October 14, 1999 and the $33.7500 exercise price applicable to the options granted on November 17, 1999 based on the 20,867,965 shares of Class A Common Stock outstanding on November 17, 1999. (5) Represents potential realizable value for all options granted in fiscal 2000 compared to the increase in market value of Brady Corporation Class A Common Stock at assumed rates of stock price appreciation. (6) The Company disavows the ability of any valuation model to predict or estimate the Company's future stock price or to place a reasonably accurate present value on these options because any model depends on assumptions about the stock's future price movement that the Company is unable to predict. III-7 25 AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND VALUE OF OPTIONS AT END OF FISCAL 2000

Number of Unexercised Options at July 31, 2000 ---------------------------------------------------- Shares Acquired on Value Name Exercise (#) Realized ($) Exercisable (#) Unexercisable (#) ---- ------------ ------------- --------------- ------------------ K.M. Hudson 0 0 198,333 312,667 R.L. Fisk 35,000 601,840 35,501 123,499 D.W. Schroeder 0 0 54,001 123,499 D.R. Hawke 3,000 71,088 48,001 123,499 F.M. Jaehnert 0 0 14,667 93,433

Value of Unexercised In-the-Money Options at July 31, 2000 (1) ---------------------------------------------------- Name Exercisable ($) Unexercisable ($) ---- --------------- ----------------- K.M. Hudson 2,196,934 1,567,504 R.L. Fisk 212,795 749,996 D.W. Schroeder 588,753 749,996 D.R. Hawke 472,753 749,996 F.M. Jaehnert 83,941 836,086

(1) Represents the closing price for the Company's Class A Common Stock on July 31, 2000, of $30.4375 less the exercise price for all outstanding exercisable and unexercisable options for which the exercise price is less than such closing price. III-8 26 COMMON STOCK PRICE PERFORMANCE GRAPH The graph below shows a comparison of the cumulative return over the last five fiscal years had $100 been invested at the close of business on July 31, 1995, in each of Brady Corporation Class A Common Stock, the Standard & Poor's (S&P) 500 Index and the Russell 2000 Index. Prior year graphs compared Brady's performance to the S&P 500 and the National Association of Securities Dealers' Automated Quotation System (NASDAQ) United States Index. In May 1999, Brady listed on the New York Stock Exchange making the comparison to a NASDAQ index obsolete. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Brady Corporation versus Published Indices (S&P 500 and Russell 2000) Fiscal Year Ending July 31,

1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- Brady $100 $193 $228 $193 $256 $240 S&P 500 $100 $114 $170 $199 $236 $255 RUSSELL 2000 $100 $105 $138 $140 $148 $167 NYSE $100 $114 $164 $188 $208 $213

III-9 27 COMPENSATION OF DIRECTORS Each director who is also an employee of the Company receives no additional compensation for service on the Board or on any committee of the Board. Directors who are not also employees of the Company receive an annual retainer of $20,000 plus $1,500 for each committee they chair and $1,250 plus expenses for each meeting of the Board or any committee thereof which they attend and are a member. Directors receive $750 for each meeting they attend of any committee for which they are not a member. TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS In May 1997, the Board approved Change in Control Agreements for certain of its executive officers including Mrs. Hudson, Messrs. Fisk, Schroeder, Hawke and Jaehnert. The agreements call for payment of an amount equal to two times the annual salary for Mrs. Hudson and Messrs. Fisk, Schroeder and Hawke, and payment of one time his annual salary for Mr. Jaehnert in the event of termination or resignation upon a change of control. The agreements also call for reimbursement of any excise taxes imposed and up to $25,000 of attorney fees to enforce the executive's rights under the agreement. Payments under the agreements will be spread over two years for Mrs. Hudson and Messrs. Fisk, Schroeder and Hawke, and over one year for Mr. Jaehnert. In August 1998, the Board amended the Change in Control Agreement for Mr. Jaehnert to call for payment of an amount equal to two times his annual salary in the event of termination or resignation upon a change in control with payments spread over two years. In May 1997, the Company created a Supplemental Executive Retirement Plan (SERP) for Mr. Fisk. The Plan calls for the Company to credit a deferred compensation account with $200,000 on August 1 of each year beginning August 1, 1997, to and including August 1, 2001, provided Mr. Fisk is employed by the Company as of each of those dates. Interest accrues on the balance in the account at the prime rate in effect on August 1 of each year, but not less than 6% nor more than 10% per annum. The Company is required to pay Mr. Fisk the balance in the account over a ten year period beginning on August 1 of the year following his termination of employment with the Company. The first payment, and the nine succeeding payments, will equal one-tenth of the balance in the account. Succeeding payments will include interest credited to the account in the interim. The Company may make payments in some other manner provided the payments are neither smaller nor extend beyond such ten year period. In fiscal 1994 the Company created a Supplemental Executive Retirement Plan (SERP) for Mrs. Hudson. The stated amount of the Plan at January 1, 1999, was $500,000. The Company credited a deferred compensation account with the net present value of the stated amount in January 1994. The account is credited annually with the current year's increase in the net present value calculation. After January 1, 1999, interest accrues quarterly on the balance in the account at the prime rate in effect at the end of each calendar quarter. The Company is required to pay Mrs. Hudson the balance in the account over a ten year period beginning January 2009. The first payment will be one-tenth of the balance in the account; the second one-ninth; and so on. III-10 28 In the event of a change in control of the Company, Mrs. Hudson's SERP may accelerate and become payable in 30 days. RESTRICTED STOCK In August 1997, the Company granted restricted stock awards to certain key executives. Mrs. Hudson was awarded 50,000 shares of authorized, but unissued, Class A Common Stock and Messrs. Fisk, Schroeder and Hawke were awarded 25,000 shares each of authorized, but unissued Class A Common Stock. The restricted stock awards granted Mrs. Hudson and Mr. Fisk vest on August 1, 2002. The restricted stock awards granted Mr. Schroeder and Mr. Hawke vest 75% on August 1, 2002, with the remaining 25% vesting on August 1, 2003. The executives have the right to receive any cash dividends payable on these shares. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During fiscal 2000, the Board's Compensation Committee was composed of Messrs. Bemis, Jarc and Peirce. Mr. Lettenberger serves as a nonvoting advisor to the Committee. None of these persons has at any time been an employee of the Company or any of its subsidiaries. There are no relationships among the Company's executive officers, members of the Compensation Committee or entities whose executives serve on the Board that require disclosure under applicable SEC regulations. MONEY PURCHASE AND 401K PLAN Substantially all Brady employees in the United States and certain expatriate employees working for its international subsidiaries are eligible to participate in the Company's Money Purchase and Employee 401K Plan (the "BradyGold 401K Plan"). Under this plan the Company agrees to contribute certain amounts to the BradyGold 401K Plan. Under the Money Purchase Plan, the Company first contributes 4% of the eligible earnings of each person covered by the Money Purchase Plan. In addition, participants may elect to have their annual pay reduced by up to 4% and have the amount of this reduction contributed to the BradyGold 401K Plan by the Company and matched by an additional, equal contribution by the Company. Participants may also elect to have up to another 8% of their eligible earnings contributed to the BradyGold 401K Plan (without an additional matching contribution by the Company). The assets of the BradyGold 401K and Money Purchase Plans credited to each participant are invested by the BradyGold 401K and Money Purchase Plan trustee as directed in several investment funds as permitted by the BradyGold 401K and Money Purchase Plans. The annual contributions and forfeitures allocated to any participant under all defined contribution plans may not exceed the lesser of $30,000 or 25% of the participant's base compensation and bonuses. Benefits are generally payable upon the death, disability, or retirement of the participant or upon termination of employment before retirement, although benefits may also be withdrawn from the BradyGold 401K Plan and paid to the participant if required for certain emergencies. Under certain specified circumstances, the BradyGold 401K Plan allows loans to be drawn on a participant's account. The participant is immediately fully vested with respect to the contributions attributable to reductions in pay; all other contributions become fully vested after five years of service. III-11 29 DEFERRED COMPENSATION ARRANGEMENTS During fiscal 1998, the Company adopted new deferred compensation plans whereby directors, executive officers, corporate staff officers and certain key management employees of the Company are permitted to defer portions of their fees, salary and bonus into a plan account, the value which is measured by the Company's Class A Common Stock. Participants in the old deferred compensation plan were allowed to convert their balances in the old plan to this new plan. The conversion to the new plan was funded by the issuance of 372,728 shares of Class A Common Stock to a Rabbi Trust (the "Trust") in November 1997. All deferrals into the new plan result in purchases of existing Class A Common Stock by the Trust. No deferrals are allowed into the old plan. Upon the retirement, disability, or death of participant, the Company is required under the new plan to pay, each year for a period of ten years, a portion of the shares held in the participant's name by the Trust. The first payment must be one-tenth of the number of shares held; the second one-ninth; and so on, with the number of shares held in the Trust reduced by each payment. If the participant's employment ends for reasons other than retirement, disability or death, the shares held by the Trust in the participant's name will be distributed over a period of ten years. At the request of the participant and for special situations at the sole discretion of the Compensation Committee, the Company may make distributions in larger installments or in a lump sum or other basis. In the old deferred compensation plan, directors, executive officers, corporate staff officers and certain key management employees of the Company were permitted to defer portions of their fees, salary and bonus into a plan, the value of which was measured in "phantom stock" of the Company. "Phantom Stock" is not actual stock or rights to acquire stock in the Company, but it gives participants the right to share in increases in book value (as defined) of the common stock. At the end of each fiscal year, the deferred compensation balance (with interest) is credited to the purchase of phantom common stock at the then book value of the common stock of the Company, and is thereafter adjusted to reflect stock dividends and other dividends or distributions on the Company's Class A Common Stock. No new deferrals are allowed into this old deferred compensation plan. Upon the retirement, disability, or death of participant, the Company is required to pay, each year for a period of ten years, a portion of the book value of the phantom stock determined by the book value of the corresponding number of common shares as of the end of each fiscal year. The first payment must be one-tenth of the book value; the second one-ninth; and so on, with the number of phantom shares reduced by the equivalent in book value of each payment. At the request of the participant, the Company may make payments in larger installments or in a lump sum on a discounted or other basis. All current directors and executives converted their balances to the new deferred compensation plan. Certain retired participants elected not to transfer their balances into the new plan. They were allowed to remain in the old deferred compensation plan until the end of fiscal 2002. At that point the old plan will terminate and participant's balances will earn simple interest at a rate equal to the yield on a 30-year U.S. Treasury Bond as of July 31 of each year. III-12 30 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Company's Compensation Committee (the "Committee") is composed entirely of outside directors and is responsible for considering and approving compensation arrangements for senior management of the Company, including the Company's executive officers and the chief executive officer. It is the philosophy of the Committee to establish a total executive compensation program which is competitive with a broad range of companies that it considers to be of comparable size and complexity. The primary components of the Company's executive compensation program are (i) base salary, (ii) annual shareholder value enhancement plan cash bonuses and (iii) long term incentive compensation in the form of stock options and/or restricted stock. These are designed to align shareholder and management interests, to balance the achievement of annual performance targets with actions that focus on the long-term success of the Company, and to attract, motivate and retain key executives who are important to the continued success of the Company. Decisions made by the Committee relating to the base salary compensation and the annual cash incentive compensation plan are reviewed and approved by the full Board of Directors. The Committee believes that: - The Company's pay levels are appropriately targeted to attract and retain key executives; - The Company's incentive plan provides strong incentives for management to increase shareholder value; and - The Company's total executive compensation program is a cost-effective strategy to increase shareholder value. Base Salary Consistent with the Committee's philosophy, base salaries are generally maintained at or modestly above competitive base salary levels. Competitive salary level is defined as the average base salary for similar responsibilities in a group of companies selected by the Committee that the Committee considers to be of comparable size and complexity. In setting base salaries for fiscal 2000, the Committee reviewed compensation survey data and was satisfied that the base salary levels set would achieve the Company's objectives. Specific increases reflect the Committee's subjective evaluation of individual performance. Annual Shareholder Value Enhancement Plan The shareholder value enhancement plan (the "Bonus Plan") provides for the annual payment of cash bonuses. When viewed together with the Company's base salary, the purpose of the Bonus Plan is to provide a balance between fixed compensation and variable, results-oriented compensation. The Bonus Plan is 90% objective. It stresses maximization of Company profitability and increasing shareholder value. III-13 31 Stock Options In May 1997, the Company approved the Brady Corporation 1997 Omnibus Incentive Stock Plan and the Brady Corporation 1997 Nonqualified Stock Option Plan for Non-Employee Directors (the "Option Plans") under which 2,000,000 shares and 125,000 shares, respectively, of Class A Common Stock are available for grant. In 1989 the Board approved the Brady Corporation 1989 Non-Qualified Stock Option Plan (the "Option Plan") under which 1,500,000 shares of Class A Common Stock were available for grant. The Option Plans assist directors, executive officers, corporate staff officers and key management employees in becoming shareholders with an important stake in the Company's future, aligning their personal financial interest with that of all shareholders. Stock options are typically granted annually and have a term of ten years. Generally, the options become one-third exercisable one year after the date of the grant and one-third additional in each of the succeeding two years so that at the end of three years after the date of the grant they are fully exercisable. All grants under the Option Plans are at market price on the date of the grant. Compliance with Tax Regulations Regarding Executive Compensation Section 162(m) of the Internal Revenue Code, added by the Omnibus Budget Reconciliation Act of 1993, generally disallows a tax deduction to public companies for compensation over $1 million paid to the corporation's chief executive officer and the other named executive officers. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The Company's executive compensation program, as currently constructed, is not likely to generate nondeductible compensation in excess of these limits. The Compensation Committee will continue to review these tax regulations as they apply to the Company's executive compensation program. It is the Compensation Committee's intent to preserve the deductibility of executive compensation to the extent reasonably practicable and to the extent consistent with its other compensation objectives. III-14 32 Compensation of the Chief Executive Officer Mrs. Hudson received $470,308 in base salary in fiscal 2000, an increase of 6.5% from the prior year's base salary. She was paid a bonus attributable to fiscal 2000 of $535,963, an increase of 1.1%, or $6,071, from the prior year's bonus. The bonus was determined in accordance with the Company's objective Bonus Plan, discussed above. Mrs. Hudson's compensation reflects: (i) an increase of 16.6%, or $6,496,000, in profits (after removing the effects of the nonrecurring items) and 14.9% in sales over similar amounts from the prior year; a decrease of 13%, from $35.00 to $30.44, in the Company's stock price (ii) the successful acquisitions of certain assets of Champion America, Inc., Data Recognition, Inc. and Imtec, Inc. this year and the integration of last year's acquisitions VEB Sistemas de Etiquetas Ltda., Barcodes West Inc., Visi Sign Pty. Ltd., Holman Groupe S.A. and the graphics division of SOFT S.A. (iii) continued improvement in asset utilization (a 9.8% increase in inventory despite the 14.9% increase in sales) (iv) continued efforts to focus the Company's resources on sustainable value-enhancing long-term growth (v) continued improvement in intercompany teamwork. During fiscal 2000, Mrs. Hudson was awarded options to purchase 82,000 shares of Class A Common Stock. The Committee believes these awards are consistent with the objectives of the various plans and with the overall compensation policy of the Board of Directors. * * * * * * * * * * * * * * * * * * * * * * * * The Compensation Committee believes the executive compensation programs and practices described above are competitive. They are designed to provide increased compensation with improved financial results and provide additional opportunity for capital accumulation, but only if shareholder value is increased. Roger D. Peirce, Chairman Richard A. Bemis Frank R. Jarc III-15 33 ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners The following table sets forth the current beneficial ownership of shareholders who are known by the Company to own five percent (5%) of any class of the Company's voting shares on October 06, 2000.

Amount of Title of Name and Address of Beneficial Percent of Class Beneficial Owner Ownership Ownership ----- ---------------- --------- --------- Class B William H. Brady, Jr.(1) 1,574,866 89% Common Marital Trust Stock c/o Quarles & Brady Attn: Peter J. Lettenberger 411 East Wisconsin Avenue Milwaukee, WI 53202 William H. Brady, Jr.(1) 194,448 11% Non-QTIP Marital Trust c/o Quarles & Brady Attn: Peter J. Lettenberger 411 East Wisconsin Avenue Milwaukee, WI 53202

---------------------- (1) The trustees of both trusts are Richard A. Bemis, Robert C. Buchanan, Peter J. Lettenberger, Roger D. Peirce and Gary E. Nei, each of whom shares voting and dispositive power. The vested beneficiary was Irene B. Brady, who died March 26, 1998. The contingent remainder beneficiaries are William H. Brady, III and Elizabeth Brady Lurie. III-16 34 (b) Security Ownership of Management The following table sets forth the current beneficial ownership of each class of equity securities of the Company by each Director or Nominee and by all Directors and Officers of the Company as a group as of October 06, 2000. Except as otherwise indicated, all shares are owned directly.

Title Name of Beneficial Amount of Percent of Owner & Nature of Beneficial of Class Beneficial Ownership Ownership(10) Ownership ----- -------------------- --------- --------- Class A Peter J. Lettenberger (1)(2)(3) 2,529,231 12.1% Common Stock Richard A. Bemis (1)(4) 1,785,205 8.5% Gary E. Nei (1)(5) 1,780,705 8.5% Roger D. Peirce (1)(6) 1,779,205 8.5% Robert C. Buchanan (1)(7) 1,778,305 8.5% Katherine M. Hudson (8) 302,351 1.4% Conrad G.Goodkind 17,382 0.1% Frank W. Harris 7,200 * % All Officers and Directors as a Group (17 persons)(9) 3,280,650 15.6% Class B Peter J. Lettenberger (1) 1,769,314 100% Common Stock Richard A. Bemis (1) 1,769,314 100% Gary E. Nei (1) 1,769,314 100% Roger D. Peirce(1) 1,769,314 100% Robert C. Buchanan (1) 1,769,314 100% All Officers and Directors as a Group 1,769,314 100% 6% Cumulative Peter J. Lettenberger (1)(2) 2,751 69.1% Preferred Stock Richard A. Bemis (1) 1,920 48.2% Gary E. Nei (1) 1,920 48.2% Roger D. Peirce (1) 1,920 48.2% Robert C. Buchanan (1) 1,920 48.2% All Officers and Directors as a Group 2,751 69.1% 10% Cumulative Peter J. Lettenberger (2) 5,529 25.2% 1979 Series All Officers and Directors as a Group 5,529 25.2% Preferred Stock 6% Cumulative Peter J. Lettenberger (2) 2,600 100% 1972 Series All Officers and Directors as a Group (2) 2,600 100% Preferred Stock

* Indicates less than one-tenth of one percent ---------------------------------------------------------- III-17 35 (1) The amount shown includes shares held directly by the William H. Brady, Jr. Marital Trust (the "Marital Trust") and the William H. Brady Jr. Non-QTIP Marital Trust (the "Non-Q-TIP Trust") (collectively, the "Trusts"). The Marital Trust owns 1,771,538 shares of Class A Common Stock, 1,574,866 shares of Class B Common Stock, and 1,709 shares of 6% Cumulative Preferred Stock. The Non-QTIP Trust owns 194,448 shares of Class B Common Stock and 211 shares of 6% Cumulative Preferred Stock. The Trustees of both Trusts are Richard A. Bemis, Robert C. Buchanan, Peter J. Lettenberger, Gary E. Nei and Roger D. Peirce, each of whom shares voting and dispositive power. (2) Peter J. Lettenberger is a director of the W.H. Brady Foundation, Inc. (the "Foundation") which owns 5,529 shares of the 1979 Series 10% Cumulative Preferred Stock, 763 shares of the 6% Cumulative Preferred Stock and 2,600 shares of the 6% Cumulative Preferred Stock, 1972 Series. Mr. Lettenberger is also a trustee of the Irene B. Brady Revocable Trust of 1986 (the "1986 Trust"), which owns 748,718 shares of Class A Common Stock and 68 shares of 6% Cumulative Preferred Stock. He disclaims beneficial ownership of shares held by the Foundation and the 1986 Trust. (3) In addition to shares beneficially owned as a trustee of the Trusts and the 1986 Trust and as a director of the Foundation, Mr. Lettenberger owns directly 4,308 shares of Class A Common Stock and holds vested options to acquire an additional 4,667 shares of Class A Common Stock. (4) In addition to shares beneficially owned as a trustee of the Trusts, Mr. Bemis owns 9,000 shares of Class A Common Stock directly and holds vested options to acquire an additional 4,667 shares of Class A Common Stock. (5) In addition to shares beneficially owned as a trustee of the Trusts, Mr. Nei owns 4,500 shares of Class A Common Stock directly and holds vested options to acquire an additional 4,667 shares of Class A Common Stock. (6) In addition to shares beneficially owned as a trustee of the Trusts, Mr. Peirce owns 1,500 shares of Class A Common Stock directly, 1,500 shares through his Keogh plan and holds vested options to acquire an additional 4,667 shares of Class A Common Stock. (7) In addition to shares beneficially owned as a trustee of the Trusts, Mr. Buchanan owns 600 shares of Class A Common Stock directly, 1,500 additional shares through his Keogh plan and holds vested options to acquire an additional 4,667 shares of Class A Common Stock. (8) Mrs. Hudson owns 57,351 shares of Class A Common Stock directly and holds vested options to acquire an additional 245,000 shares of Class A Common Stock. (9) The amount shown for all officers and directors as a group (17 persons) includes options to acquire a total of 542,791 shares of Class A Common Stock which are currently exercisable or will be exercisable within 60 days of October 6, 2000. It does not include other options for Class A Common Stock which have been granted at later dates. III-18 36 (10) In addition to the shares shown in this table, the officers and directors as a group owned the equivalent of 308,316 shares of the Company's Class A Common Stock in its deferred compensation plans, including 75,733 for Mrs. Hudson, 6,385 for Mr. Jaehnert, 33,297 for Mr. Fisk, 34,418 for Mr. Hawke, 22,608 for Mr. Schroeder, 3,116 for Mr. Oliver and 4,379 for Mr. Rearic. (c) Changes in Control No arrangements are known to the Company which may, at a subsequent date, result in a change in control of the Company. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. III-19 37 PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1) The consolidated financial statements, together with the Independent Auditors' Report thereon of Deloitte & Touche LLP, presented on Pages 23 through 39 of the Company's 2000 Annual Report is incorporated herein by reference. 2) Consolidated Financial Statement Schedule-- Schedule II Valuation and Qualifying Accounts Independent Auditors' Report on Financial Statement Schedule All other schedules are omitted as they are not required, or the required information is shown in the consolidated financial statements or notes thereto. 3) Exhibits - See Exhibit Index at page IV-2 of this Form 10-K. (b) Reports on Form 8-K. No report on form 8-K was filed by the Company during the fourth quarter of fiscal 2000. IV-1 38 EXHIBIT INDEX

Exhibit Number Description ------- ----------- 3.1 Restated Articles of Incorporation of Brady Corporation(1) 3.2 By-laws of Brady Corporation, as amended(2) 10.2 Brady Corporation BradyGold Plan, as amended(2) 10.3 Executive Additional Compensation Plan, as amended(2) 10.4 Form of Executive's Deferred Compensation Agreement, as amended(2) 10.5 Forms of Director's Deferred Compensation Agreement, as amended(2) 10.6 Brady Corporation 1989 Non-Qualified Stock Option Plan(4) 10.7 Shareholder Value Enhancement (SVE) Plan(6) 10.9 Brady Corporation Automatic Dividend Reinvestment Plan(4) 10.10 Supplemental Executive Retirement Plan between Brady Corporation and Katherine M. Hudson(5) 10.12 Brady Corporation 1997 Omnibus Incentive Stock Plan(7) 10.13 Brady Corporation 1997 Nonqualified Stock Option Plan for Non-Employee Directors(7) 10.14 Change of Control Agreement dated May 13, 1997, between Brady Corporation and Katherine M. Hudson(7) 10.15 Change of Control Agreement dated May 13, 1997, between Brady Corporation and David W. Schroeder(7) 10.16 Change of Control Agreement dated May 13, 1997, between Brady Corporation and Richard L. Fisk(7) 10.17 Change of Control Agreement dated May 13, 1997, between Brady Corporation and David R. Hawke(7) 10.19 Supplemental Executive Retirement Plan dated May 14, 1997, between Brady Corporation and Richard L. Fisk(7) 10.20 Restricted Stock Agreement dated August 1, 1997, between Brady Corporation and Katherine M. Hudson(8) 10.21 Restricted Stock Agreement dated August 1, 1997, between Brady Corporation and Richard L. Fisk(8) 10.22 Restricted Stock Agreement dated August 1, 1997, between Brady Corporation and David W. Schroeder(8) 10.23 Restricted Stock Agreement dated August 1, 1997, between Brady Corporation and David R. Hawke(8) 10.24 Amendment to Change of Control Agreement dated August 1, 1998, between Brady Corporation and Frank M. Jaehnert 10.25 Brady Corporation Restoration Plan dated January 1, 2000 13.1 Annual Report to Shareholders for year ended July 31, 2000 18.1 Letter regarding change in accounting method(3) 21.1 Subsidiaries of Brady Corporation 23.1 Consent of Deloitte & Touche LLP, Independent Auditor 27.1 Financial Data Schedule

IV-2 39 (1) Incorporated by reference to Registrant's Registration Statement No. 333-04155 on Form S-3 (2) Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1989 (3) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1989 (4) Incorporated by reference to Registrant's Annual Report on form 10-K for the fiscal year ended July 31, 1992 (5) Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1994 (6) Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1995 (7) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1997 (8) Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1997 IV-3 40 BRADY CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Year ended July 31, ------------------------------------------ 2000 1999 1998 ---- ---- ---- (Dollars in Thousands) Description ----------- Valuation accounts deducted in balance sheet from assets to which they apply -- Accounts receivable-- allowance for losses: Balances at beginning of period $2,339 $2,011 $2,241 Additions -- Charged to expense 1,830 966 970 Due to acquired businesses 45 97 64 Deductions-- Bad debts written off, net of recoveries (1,295) (735) (1,264) ------- ----- ------- Balances at end of period $2,919 $2,339 $2,011 ====== ====== ====== Inventory-- reserve for slow-moving inventory: Balances at beginning of period $5,506 $3,544 $1,766 Additions -- Charged to expense 1,962 3,293 Due to acquired businesses 349 Deductions-- Inventory written off (1,141) ______ (1,515) ------- ------- Balances at end of period $4,714 $5,506 $3,544 ====== ====== ======

IV-4 41 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Brady Corporation: We have audited consolidated financial statements of Brady Corporation and subsidiaries as of July 31, 2000 and 1999, and for each of the three years in the period ended July 31, 2000, and have issued our report thereon dated September 8, 2000; such consolidated financial statements and report are included in your 2000 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Brady Corporation and subsidiaries, listed in Item 14. The consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /S/ Deloitte & Touche LLP Milwaukee, Wisconsin September 8, 2000 IV-5 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this twenty-sixth day of October, 2000. BRADY CORPORATION By /s/ F. M. Jaehnert -------------------------------------------------- F. M. Jaehnert Vice President & Chief Financial Officer (Principal Accounting Officer) (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ K. M. Hudson President and Director October 26, 2000 -------------------------------------------- -------------------- K. M. Hudson (Principal Executive Officer) /s/ P. J. Lettenberger Director October 26, 2000 ------------------------------------------- -------------------- P. J. Lettenberger /s/ R. A. Bemis Director October 26, 2000 --------------------------------------------- -------------------- R. A. Bemis /s/ F. W. Harris Director October 26, 2000 --------------------------------------------- -------------------- F. W. Harris /s/ R. C. Buchanan Director October 26, 2000 --------------------------------------------- -------------------- R. C. Buchanan /s/ R. D. Peirce Director October 26, 2000 --------------------------------------------- -------------------- R. D. Peirce /s/ G. E. Nei Director October 26, 2000 --------------------------------------------- -------------------- G. E. Nei /s/ M. K. Bush Director October 26, 2000 --------------------------------------------- -------------------- M. K. Bush /s/ F. R. Jarc Director October 26, 2000 --------------------------------------------- -------------------- F. R. Jarc