-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SeUovCmaYyX0QFVEiX3ZtIc/OGhPIugMoMrYz5crcK5cuNQv2GTNa6xWzRzrIGoP RPu1nqSPc/y1vZzq8VFQNw== 0000950124-96-002284.txt : 19960620 0000950124-96-002284.hdr.sgml : 19960620 ACCESSION NUMBER: 0000950124-96-002284 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960520 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRADY W H CO CENTRAL INDEX KEY: 0000746598 STANDARD INDUSTRIAL CLASSIFICATION: 3990 IRS NUMBER: 390178960 STATE OF INCORPORATION: WI FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12730 FILM NUMBER: 96570014 BUSINESS ADDRESS: STREET 1: 6555 W GOOD HOPE RD STREET 2: P O BOX 571 CITY: MILWAUKEE STATE: WI ZIP: 53201-0571 BUSINESS PHONE: 4143586600 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 30, 1996 -------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to ------ ------- Commission File Number 0-12730 W. H. BRADY CO. ------------------- (Exact name of registrant as specified in its charter) WISCONSIN 39-0178960 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6555 WEST GOOD HOPE ROAD, MILWAUKEE, WISCONSIN 53223 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) (414) 358-6600 -------------- (Registrant's telephone number, including area code) 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 15, 1996, there were outstanding 20,091,100 (adjusted for the stock dividend discussed in Note B) shares of 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 an affiliate of the Registrant, is the only voting stock. 2 FORM 10-Q W. H. BRADY CO. INDEX Page ---- PART I. Financial Information Item 1. Financial Statements Unaudited Condensed Consolidated Balance Sheets 3 Unaudited Condensed Consolidated Statements of Income and Earnings Retained in the Business 4 Unaudited Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. Other Information Item 5. Other Information 10-11 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
3 W. H. BRADY CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
ASSETS April 30,1996 July 31, 1995 (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 42,787 $ 89,067 Accounts receivable, less allowance for losses ($2,297 and $1,881, respectively) 55,978 42,104 Inventories 40,145 23,099 Prepaid expenses and other current assets 10,852 10,202 -------- -------- TOTAL CURRENT ASSETS 149,762 164,472 OTHER ASSETS 43,300 6,960 PROPERTY, PLANT AND EQUIPMENT: Cost: Land 4,939 4,417 Buildings and improvements 34,682 34,284 Machinery and equipment 78,252 69,278 Construction in progress 2,606 815 -------- -------- 120,479 108,794 Less accumulated depreciation 56,657 50,221 -------- -------- NET PROPERTY, PLANT AND EQUIPMENT 63,822 58,573 -------- -------- TOTAL $256,884 $230,005 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $ 16,166 $ 9,252 Wages and amounts withheld from employees 14,327 14,447 Accrued income taxes 2,712 2,150 Other current liabilities 12,614 8,273 Current maturities on long-term debt 368 412 -------- -------- TOTAL CURRENT LIABILITIES 46,187 34,534 LONG-TERM DEBT, LESS CURRENT MATURITIES 2,031 1,903 OTHER LIABILITIES 25,503 22,745 -------- -------- TOTAL LIABILITIES 73,721 59,182 STOCKHOLDERS' INVESTMENT: Preferred stock 2,855 2,855 Class A nonvoting common stock - Issued and outstanding 20,090,300 and 5,507,341 shares, respectively 201 55 Class B voting common stock - issued and outstanding 1,769,314 shares 18 18 Additional paid-in capital 8,250 8,074 Earnings retained in the business 167,811 154,286 Cumulative translation adjustments 4,028 5,535 -------- -------- TOTAL STOCKHOLDER'S INVESTMENT 183,163 170,823 -------- -------- TOTAL $256,884 $230,005 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 4 W. H. BRADY CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Three Months Ended Nine Months Ended April 30 April 30 1996 1995 1996 1995 -------- ------- -------- -------- NET SALES $ 94,652 $ 83,321 $261,695 $231,217 OPERATING EXPENSES: Cost of products sold 44,710 37,156 122,002 106,215 Research and development 2,494 2,543 7,999 7,790 Selling, general and administrative 34,868 29,899 102,810 85,966 -------- -------- -------- -------- Total operating expenses 82,072 69,598 232,811 199,971 OPERATING INCOME: 12,580 13,723 28,884 31,246 Investment and other income - net 337 2,234 4,009 3,362 Interest expense (64) (101) (181) (293) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 12,853 15,856 32,712 34,315 INCOME TAXES 4,967 6,312 12,616 13,738 NET INCOME $ 7,886 $ 9,544 $ 20,096 $ 20,577 EARNINGS RETAINED IN BUSINESS AT BEGINNING OF PERIOD $162,176 $140,448 $154,286 132,271 LESS DIVIDENDS: Preferred stock (65) (65) (194) (194) Common stock (2,186) (1,455) (6,377) (4,182) -------- -------- -------- -------- EARNINGS RETAINED IN BUSINESS AT END OF PERIOD $167,811 $148,472 $167,811 148,472 ======== ======== ======== ======== NET INCOME PER COMMON SHARE: Net Income - Class A Nonvoting $ 0.36 $ 0.44 $ 0.91 $ 0.94 ======== ======== ======== ======== Net Income - Class B Voting $ 0.36 $ 0.44 $ 0.88 $ 0.91 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements. 4 5 W. H. BRADY CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Nine Months Ended April 30 ----------------------- (Unaudited) 1996 1995 -------- -------- OPERATING ACTIVITIES: Net Income $ 20,096 $ 20,577 Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Depreciation & Amortization 6,973 7,120 Loss (Gain) on Sale of Equipment (1,899) (557) Loss (Gain) on Sale of Business 0 (700) Provision for Losses on Accounts Receivable 612 519 Changes in Operating Assets & Liabilities (Excluding sale of businesses in 1995 and purchases of businesses in 1996) (Increase) Decrease in Accounts Receivable (4,362) (12,788) (Increase) Decrease in Inventory (5,755) 1,920 (Increase) Decrease in Prepaid Expense 1,596 (1,569) Increase (Decrease) in Accounts Payment and Other Liabilities (317) 4,755 Increase (Decrease) in Income Taxes 1,859 3,548 -------- -------- Net Cash Provided by Operating Activities 18,803 22,825 INVESTING ACTIVITIES: Purchases of Businesses (53,963) 0 Purchases of Property, Plant and Equipment (7,494) (5,704) Proceeds from Sale of Property, Plant and Equipment - Net 3,458 4,035 Proceeds from Sale of Business 0 8,375 Purchase of Other Long-Term Investment 0 (750) -------- -------- Net Cash Provided by (Used in) Investing Activities (57,999) 5,956 FINANCING ACTIVITIES: Principal Payments on Long-Term Debt (537) (383) Payment of Dividends (6,571) (4,376) Proceeds from Issuance of Common Stock 322 914 -------- ------- Net Cash Used in Financing Activities (6,786) (3,845) Effect of exchange rate changes on cash (298) 2,653 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (46,280) 27,589 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 89,067 66,107 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42,787 $ 93,696 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid During the Year For: Interest $ 257 112 Income Taxes 10,500 9,752
See Notes to Condensed Consolidated Financial Statements. 5 6 W.H. BRADY CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Nine Months Ended April 30, 1996 NOTE A - Basis of Presentation The condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing statements contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position of the Company as of April 30, 1996, and July 3l, 1995, and its results of operations and its cash flows for the three months and nine months ended April 30, 1996, and l995. The consolidated balance sheet at July 31, l995, has been taken from the audited financial statements of that date and condensed. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report. It is not practical to segregate the amounts of raw material, work in process or finished goods at the respective interim balance sheet dates. NOTE B - Capital Stock and Share Data On November 17, 1995, at a Special Meeting of Shareholders, the Company's shareholders approved a proposal to amend the Company's Restated Articles of Incorporation to increase the number of authorized shares of Class A Common Stock from 10,000,000 shares to 100,000,000 shares. Also on November 17, 1995, the shareholders approved, and the Board of Directors declared, a common stock dividend of two shares of Class A Common Stock on each outstanding share of Class A Common Stock and Class B Common Stock. The common stock dividend was paid on December 15, 1995, to shareholders of record at the close of business on December 1, 1995. Accordingly, amounts per share and number of shares included in the condensed consolidated financial statements have been adjusted to reflect the common stock dividend. In connection with the common stock dividend, $146,000 was transferred from additional paid in capital to Class A Nonvoting Common Stock, reflecting the par value of the new shares issued. NOTE C - Net Earnings Per Common Share Net earnings per common share were computed by dividing net earnings (after deducting the applicable preferred stock and preferential Class A Common Stock dividends) by the weighted average number of shares of Class A and Class B Common Stock outstanding (adjusted for the stock dividend discussed in Note B) of 21,842,145 for the three months and nine months ended April 30, 1996, and 21,790,988 for the same period in 1995. The preferential dividend on the Class A Common Stock of $0.0333 per share (adjusted for the stock dividend discussed in Note B) declared on September 19, 1995, has been added to the net earnings per Class A Common Stock for the nine months ended April 30, 1996. The net earnings per share of Class A Common Share for the nine months ended April 30, 1995, includes $0.0333 per share (adjusted for the stock dividend discussed in Note B) relating to preferential dividends declared in that period. 6 7 W.H. BRADY CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Nine Months Ended April 30, 1996 NOTE D - Acquisitions Effective November 15, 1995, the Company acquired the common stock of Techpress II Limited located in Middlesex, England, a marketer of printing and labeling systems, for cash of $4,277,000 and a payable of $389,000. Effective January 2, 1996, the Company acquired the common stock of The Hirol Company located in Fort Lauderdale, Florida, a manufacturer of die-cut parts for the electronic, telecommunications and medical testing markets, for cash of $10,800,000. On April 8, 1996, the Company completed its acquisition of Varitronic Systems, Inc. located in Minneapolis, Minnesota, for cash of approximately $40,700,000. Varitronic Systems, Inc. manufactures and markets supply-consuming lettering, labeling, signage and presentation systems and supplies. The puchase prices of these acquisitions are subject to change based on the final determination of net worth of the respective companies. The above acquisitions have been accounted for using the purchase method of accounting and accordingly the results of operations have been included since the dates of acquisition in the accompanying financial statements. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations For the three months ended April 30, 1996, revenues of $94,652,000 were 13.6% higher than the same quarter of the previous year. For the nine months ended April 30, 1996 revenues of $261,695,000 were 13.2% higher than the same period last year. Sales of the Company's international operations increased 17.9% for the quarter and 25.4% for the nine months as a result of real growth through continued market penetration in Europe and the Far East, the acquisition of Techpress II Limited, and fluctuations in the exchange rates used to translate financial results into U.S. currency. Sales of the Company's U.S. operations increased 11.1% for the quarter and 5.0% for the nine months primarily from the acquisition of Varitronic Systems, Inc. and The Hirol Company. The cost of products sold as a percentage of sales was 47.2% for the quarter and 46.6% for the nine months ended April 30, 1996. For the same periods last year, these percentages were 44.6% and 45.9%. These increases from period to period were caused by changes in product mix and the acquisitions. Selling, general and administrative expenses as a percentage of sales were 36.8% for the quarter compared to 35.9% for the same quarter of the previous year. For the nine months ended April 30, 1996, this percentage was 39.3% compared to 37.2% for the same period last year. These increases reflect the Company's on-going investment in sales and marketing activities and in building its global information-technology infrastructure. Research and development expenses decreased 1.9% for the quarter and increased 2.7% for the nine months ended April 30, 1996, over the same periods last year. Operating income was $12,580,000 for the quarter and $28,884,000 for the nine months ended April 30, 1996, compared to $13,723,000 and $31,246,000 for the same periods last year as a result of the increased selling, general and administrative expenditures and the increased cost of products sold mentioned above. Investment and other income for the nine months ended April 30, 1996, included $1,750,000 ($950,000 after tax) representing the gain on sale of a building in Germany during the first fiscal quarter. Last year's investment and other income for the quarter and the nine months included approximately $1,500,000 ($900,000 after tax) from the sale of two businesses and two buildings. Income before income taxes decreased 18.9% for the quarter and 4.7% for the nine months ended April 30, 1996. Net income for the quarter decreased 17.4% to $7,886,000 compared to $9,544,000 for the same quarter of the previous year. For the nine months ended April 30, 1996, net income decreased 2.3% to $20,096,000 from $20,577,000 for the same period last year. Financial Condition The Company's liquidity remains strong. Cash and cash equivalents decreased to $42,787,000 at April 30, 1996, from $89,067,000 at July 31, 1995, mainly due to the acquisitions of Techpress II Limited, The Hirol Company, and Varitronic Systems, Inc. Primarily because of the acquisition of Varitronics Systems, Inc., working capital decreased to $103,575,000 at April 30, 1996, from $129,938,000 at July 31, 1995. 8 9 The Company has maintained significant cash balances due in large part to its strong operating cash flow, which totaled $18,803,000 for the nine months ended April 30, 1996. Capital expenditures were $7,494,000 in the nine months ended April 31, 1996. Financing activities, primarily the payment of dividends to the Company's shareholders, consumed $6,786,000 of cash in the first nine months of fiscal 1996. Long-term debt as a percentage of long-term debt plus stockholders' investment was 1.1% at April 30, 1996, and July 31, 1995. The Company believes that its cash and cash equivalents and the cash flow it generates from operating activities are adequate to meet the Company's current investing and financing needs. 9 10 PART II ITEM 5. Other Information The Company makes the following CAUTIONARY STATEMENTS FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. These statements may be referred to during verbal presentation of forward-looking information by authorized representatives of the Company The Company wishes to caution readers that the following factors, among others, sometimes have affected, and in the future could affect, the Company's actual results and could cause the Company's actual consolidated results to differ materially from those expressed in any forward-looking statements made by, or on behalf of the Company: INTERNATIONAL OPERATIONS AND EXCHANGE RATES The Company realized approximately 41.1%, 37.1% and 32.0% of its net sales in fiscal 1995, 1994 and 1993, respectively, from operations outside the United States. Variations in the economic or political conditions in the countries with which the Company does international business may impact the level of the Company's international sales and profitability. Further, as a result of the Company's significant international sales, a significant portion of the Company's revenues and expenses are denominated in currencies other than U.S. dollars. As a result, fluctuations in currency exchange rates can adversely affect the Company's sales, profitability and financial position. The Company engages in limited foreign currency hedging and does not speculate in such currencies. TECHNOLOGY CHANGES As technological advancements are made in the product requirements of the Company's customers, the Company must continue to develop new products to keep pace with such advancements. If the Company were unable to develop new products, its ability to continue to serve existing customers would be impaired. Additionally, the direct marketing industry may be affected by ongoing technological developments in distribution and marketing methods such as on-line catalogs and Internet shopping. As a result, the Company's future success will depend on its ability to keep pace with technological developments and respond to new customer requirements. SOURCES OF SUPPLY The Company is, in part, dependent upon the continuing availability of products and raw materials provided by single source suppliers. The inability of the Company to obtain products or raw materials on a timely basis or the termination of such relationships would have an adverse effect on the Company. 10 11 STATUS OF ECONOMY The Company's products are sold to a wide range of customers in many industries. Thus, any general downturn in domestic or international economic conditions or rates of growth could impact the Company's sales and levels of profitability. EXPENSE STRUCTURE The Company's expense structure for certain costs is based on the Company's expected level of sales and growth. To the extent that the Company's actual level of sales or growth is different from that which it expects, the Company's ability to timely adjust its cost structure to those levels will impact the Company's results of operations. PRODUCT MIX The Company's profitability is impacted by the mix of products it sells. Certain of the Company's products have lower profit margins than others. If the Company's actual mix of products sold is different from the expected mix, the Company's expected profit margins would be affected by such changes. BACKLOG Because of the nature of the products sold by the Company and the delivery requirements of customers, most of the Company's orders are filled on a current basis, and the Company has relatively short production cycles and low levels of order backlog. This low level of long-term orders and backlog makes it more difficult to predict accurately future sales than would be the case if the Company had a higher level of long-term orders and backlog. ACQUISITIONS The Company has in the past expanded through both internal growth and acquisitions. The extent to which the Company varies its rate of acquisitions and the profitability of the companies it acquires will impact the Company's overall profitability. 11 12 ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K. (1) A report on form 8-K dated February 27, 1996, was filed relating to the Company entering into an Agreement and Plan of Merger with Varitronic Systems, Inc., Minneapolis, MN, to acquire all the outstanding common stock of Varitronics for $17.50 per share in cash. (2) A report on form 8-K dated April 18, 1996, was filed relating to the consummation of the Company's acquisition of Varitronic Systems, Inc., filing the required audited financial statements of Varitronics and presenting the required unaudited consolidated pro forma condensed financial statements. 12 13 Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIGNATURES W.H. BRADY CO. Date: May 20, 1996 /s/ K. M. Hudson -------------------------------- K. M. Hudson President Date: May 20, 1996 /s/ D. P. DeLuca -------------------------------- D. P. DeLuca Senior Vice President and Assistant Secretary (Principal Accounting Officer) 13 EX-27 2 FDS
5 9-MOS JUL-31-1996 AUG-01-1995 APR-30-1995 42,787 0 58,275 2,297 40,145 149,762 120,479 56,657 256,884 46,187 2,031 2,855 0 219 180,089 256,884 261,695 261,695 122,002 122,002 110,809 0 181 32,712 12,616 20,96 0 0 0 20,096 0.91 0.91
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