-----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, VeGg1SoX5HRMxNc3DuFd0DEL7jaFIy/4eGjzvdaADCukUrnzOBkAFxTo2ErYJX4g 2RT1Rm4toKkPBoKU1IloVw== 0000950124-98-003125.txt : 19980528 0000950124-98-003125.hdr.sgml : 19980528 ACCESSION NUMBER: 0000950124-98-003125 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980527 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRADY W H CO CENTRAL INDEX KEY: 0000746598 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 390178960 STATE OF INCORPORATION: WI FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12730 FILM NUMBER: 98631819 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 FORM 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, 1998 -------------- 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 22, 1998, there were outstanding 20,726,863 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 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10 3 W. H. BRADY CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
ASSETS April 30, 1998 July 31, 1997 ------ -------------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 59,820 $ 65,329 Accounts receivable, less allowance for losses ($2,061 and $2,241 respectively) 68,389 65,450 Inventories 45,871 44,605 Prepaid expenses and other current assets 13,905 12,585 ---------- --------- Total current assets 187,985 187,969 Other assets: Intangibles - net 54,491 36,015 Other 5,716 5,236 Property, plant and equipment: Cost: Land 4,975 5,162 Buildings and improvements 39,366 39,159 Machinery and equipment 82,776 79,497 Construction in progress 9,524 2,560 ---------- --------- 136,641 126,378 Less accumulated depreciation 71,140 63,936 ---------- --------- Net property, plant and equipment 65,501 62,442 ---------- --------- Total $ 313,693 $ 291,662 ========== ========= LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable $ 18,426 $ 17,656 Wages and amounts withheld from employees 18,628 16,925 Taxes, other than income taxes 2,694 1,960 Accrued income taxes 8,158 8,453 Other current liabilities 9,279 11,687 Current maturities on long-term debt 553 564 ---------- --------- Total current liabilities 57,738 57,245 Long-term debt, less current maturities 3,459 3,890 Other liabilities 29,129 23,980 ---------- --------- Total liabilities 90,326 85,115 Stockholders' investment: Preferred stock 2,855 2,855 Class A nonvoting common stock - Issued and outstanding 20,725,663 207 202 and 20,171,853 shares, respectively Class B voting common stock - issued and outstanding 1,769,314 shares 18 18 Additional paid-in capital 25,768 9,573 Earnings retained in the business 208,874 193,602 Deferred compensation and unearned portion of restricted stock (14,755) 0 Cumulative translation adjustments 400 297 ---------- --------- Total stockholders' investment 223,367 206,547 ---------- --------- Total $ 313,693 $ 291,662 ========== =========
See Notes to Condensed Consolidated Financial Statements 3 4 W. H. BRADY CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EARNINGS RETAINED IN THE BUSINESS (Dollars in Thousands, Except Per Share Amounts)
(Unaudited) Three Months Ended Nine Months Ended April 30 April 30 1998 1997 1998 1997 ------- ------- ----- ----- Net sales $ 118,784 $ 108,254 $ 341,236 $ 315,373 Operating expenses: Cost of products sold 51,673 47,846 151,897 143,265 Research and development 5,170 4,284 14,943 11,834 Selling, general and administrative 45,329 41,723 133,450 124,079 --------- --------- --------- --------- Total operating expenses 102,172 93,853 300,290 279,178 Operating income 16,612 14,401 40,946 36,195 Other (expense) and income: Investment and other income - net (156) 463 1,069 908 Interest expense (90) (66) (229) (209) --------- --------- --------- --------- Income before income taxes 16,366 14,798 41,786 36,894 Income taxes 6,339 5,360 16,380 14,084 --------- --------- --------- --------- Net income 10,027 9,438 25,406 22,810 Earnings retained in business at beginning of period 202,267 181,097 193,602 173,491 Less dividends: Preferred stock (65) (65) (194) (194) Common stock (3,355) (2,849) (9,940) (8,486) --------- --------- --------- --------- Earnings retained in business at end of period $ 208,874 $ 187,621 $ 208,874 $ 187,621 ========= ========= ========= ========= Net Income - Class A Nonvoting Common Share: Basic $ 0.44 $ 0.43 $ 1.13 $ 1.04 ========= ========= ========= ========= Diluted $ 0.44 $ 0.43 $ 1.12 $ 1.03 ========= ========= ========= ========= Net Income - Class B Voting Common Share: Basic $ 0.44 $ 0.43 $ 1.10 $ 1.01 ========= ========= ========= ========= Diluted $ 0.44 $ 0.43 $ 1.09 $ 1.00 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements. 4 5 W. H. BRADY CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited) Nine Months Ended April 30 1998 1997 -------- -------- Operating Activities: Net Income $ 25,406 $ 22,810 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation & Amortization 9,766 10,539 Loss (Gain) on Sale of Property, Plant & Equipment 144 (133) Provision for Losses on Accounts Receivable 737 585 Changes in Operating Assets & Liabilities: (Increase) Decrease in Accounts Receivable (2,580) (11,640) (Increase) Decrease in Inventory (1,323) (7,094) (Increase) Decrease in Prepaid Expense (2,861) 235 Increase (Decrease) in Accounts Payable and Other Liabilities 5,338 6,879 Increase (Decrease) in Income Taxes (1,465) 228 ------------ ----------- Net Cash Provided by Operating Activities 33,162 22,409 ------------ ----------- Investing Activities: Purchases of Property, Plant and Equipment (12,030) (6,694) Proceeds from Sale of Property, Plant and Equipment - Net 224 983 Purchases of Businesses (19,332) (7,884) Other Investments 0 297 ------------ ----------- Net Cash (Used in) Investing Activities (31,138) (13,298) ------------ ----------- Financing Activities: Payment of Dividends (10,134) (8,680) Proceeds from Issuance of Common Stock 927 595 Stock Released from Restriction 518 0 Principal Payments on Long-Term Debt (409) (458) Proceeds from Issuance of Long-Term Debt 855 1,387 ------------ ----------- Net Cash (Used in) Financing Activities (8,243) (7,156) ------------ ----------- Effect of Exchange Rate Changes on Cash 710 813 ------------ ----------- Net Increase (Decrease) in Cash and Cash Equivalents (5,509) 2,768 Cash and Cash Equivalents at Beginning of Period 65,329 49,281 ------------ ----------- Cash and Cash Equivalents at End of Period $ 59,820 $ 52,049 ============ =========== Supplemental Disclosures of Cash Flow Information: Cash Paid During the Period For: Interest $ 208 $ 172 Income Taxes 19,238 15,146
See Notes to Condensed Consolidated Financial Statement 5 6 W.H. BRADY CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Nine Months Ended April 30, 1998 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, 1998, and July 3l, 1997, and its results of operations and its cash flows for the three months and nine months ended April 30, 1998, and l997. The consolidated balance sheet at July 31, l997, has been taken from the audited consolidated 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 - Net Income Per Common Share For the quarter ended January 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share," which established new standards for the calculation of net income per share effective for interim and annual periods ending after December 15, 1997. Reconciliation's of the numerator and denominator of the basic and diluted per share computations for the Company's Class A and Class B common stock are summarized as follows:
Fiscal 1998 Fiscal 1997 --------------------------------- --------------------------------- 3rd Quarter 9-Month 3rd Quarter 9-Month Numerator: Net income $10,027,000 $25,406,000 $9,438,000 $22,810,000 Less: Preferred stock dividends (64,784) (194,351) (64,784) (194,351) ---------------- --------------- -------------- ------------ Numerator for basic and diluted Class A earnings per share $ 9,962,216 $25,211,649 $9,373,217 $22,615,650 Less: Preferential dividends -- (676,298) -- (670,454) Preferential dividends on dilutive stock options -- (9,140) -- (3,843) ---------------- --------------- -------------- ------------ Numerator for basic and diluted Class B earnings per share $ 9,962,216 $24,526,211 $9,373,217 $21,941,352 ================ =============== ============== ============
6 7
Fiscal 1998 Fiscal 1997 --------------------------------- --------------------------------- 3rd Quarter 9-Month 3rd Quarter 9-Month Denominator: Denominator for basic earnings per share for both Class A and B 22,484,642 22,311,063 21,916,063 21,900,017 Plus: Effect of dilutive stock options 274,747 268,268 133,719 121,778 ---------------- --------------- -------------- ------------ Denominator for diluted earnings per share for both Class A and B 22,759,389 22,579,331 22,049,782 22,021,795 ================ =============== ============== ============ Class A common stock earnings per share calculation: Basic $0.44 $1.13 $0.43 $1.04 Diluted $0.44 $1.12 $0.43 $1.03 Class B common stock earnings per share calculation: Basic $0.44 $1.10 $0.43 $1.01 Diluted $0.44 $1.09 $0.43 $1.00
Options to purchase 18,550 and 271,200 shares of Class A common stock were not included in the computations of diluted earnings per share for the quarters ending April 30, 1998, and 1997, respectively, because the option exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. Options to purchase 230,350 and 271,200 shares of Class A common stock were not included in the computations of diluted earnings per share for the nine months ending April 30, 1998, and 1997, respectively, because the option exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. NOTE C - Acquisitions Effective March 9, 1998, the Company acquired the common stock of Techniques Avancees located in Auch, France, a software developer, for cash of $11,765,000. Effective April 30, 1998, the Company acquired the common stock of GrafTek Inc., located in Toronto, Ontario, Canada, a software developer, for cash of $9,328,000. The purchase prices of these acquisitions are subject to change based on post-closing adjustments. These 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. The pro-forma results assuming the acquisitions had been consumated as of the beginning of the periods presented are not significant. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations For the three months ended April 30, 1998, revenues of $118,784,000 were 9.7% higher than the same quarter of the previous year. For the nine months ended April 30, 1998, revenues of $341,236,000 were 8.2% higher than the same period last year. With the Company's change to calendar month ends from fiscal month ends this fiscal year, there were two more shipping days this quarter and two fewer shipping days in the nine month period. Adjusting for the difference in shipping days, revenues were 6.3% higher for the quarter and 9.4% higher for the nine months ended April 30, 1998, compared to prior year results. Sales of the Company's international operations increased 13.5% for the quarter and 10.9% for the nine months ended April 30, 1998. Adjusting for the difference in shipping days, international sales increased 10.0% for the quarter and 12.2% for the nine months. Of those increases, real growth through continued market penetration in Europe and the Far East increased international sales 11.5% for the quarter and 16.6% for the nine months. The acquisition of Signals S.A. and Techniques Avancees increased international sales 5.3% for the quarter and 4.6% for the nine months. These increases were partially offset by the negative effect of fluctuations in the exchange rates used to translate financial results into U.S. currency, which reduced international sales growth by 6.8% for the quarter and 9.0% for the nine months. Sales of the Company's U.S. operations increased 7.0% for the quarter and 6.3% for the nine months ended April 30, 1998. Adjusting for the difference in shipping days, sales of the Company's U.S. operations increased 3.6% for the quarter and 7.4% for the nine months ended April 30, 1998, due primarily to growth in the sales of the Company's core products. The cost of products sold as a percentage of sales was 43.5% for the quarter and 44.5% for the nine months ended April 30, 1998, compared to 44.2% and 45.4% for the same periods last year. Cost of products sold for the nine months ended April 30, 1997, included a charge in the second quarter of $1,200,000 ($715,000 after tax) for restructuring the Company's European operations and consolidating the Hirol Division's production operations into the Company's existing operations in the United States and in the United Kingdom. Excluding this charge, last year's cost of goods sold as a percentage of sales was 45.0% for the nine months. The slight decreases this year resulted from changes in the mix of products sold. Selling, general and administrative expenses as a percentage of sales were 38.2% for the quarter compared to 38.5% for the same quarter of the previous year. For the nine months ended April 30, 1998, this percentage was 39.1% compared to 39.3% for the same period last year. Last year's nine months included a charge of $300,000 ($180,000 after tax) in the second quarter for the restructuring mentioned above. Excluding this charge, last year's selling, general and administrative expenses as a percentage of sales was 39.2% for the nine months. Research and development expenses increased 20.7% for the quarter and 26.3% for the nine months ended April 30, 1998, over the same periods last year as a result of the Company's commitment to new product development. Research and development expenses were 4.4% of sales for the three and nine months ended April 30, 1998, compared to 4.0% and 3.8% for the same periods in the prior year. Operating income was $16,612,000 for the quarter and $40,946,000 for the nine months ended April 30, 1998, compared to $14,401,000 and $36,195,000 for the same periods last year, repesenting increases of 15.4% and 13.1%, respectively, because of the factors cited above. Investment and other income for the three months ended April 30, 1998, decreased $619,000 from the same period last year. This decrease was the result of foreign exchange losses. Income before income taxes increased 10.6% for the quarter and 13.3% for the nine months ended April 30, 1998, compared to prior year results. Excluding the restructuring charge in the second quarter, income before income taxes increased 8.8% for the nine months ended April 30, 1998, compared to the prior year. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net income for the three months ended April 30, 1998, increased 6.2% to $10,027,000 compared to $9,438,000 for the same quarter of the previous year. For the nine months ended April 30, 1998, net income increased 11.4% to $25,406,000 from $22,810,000 for the same period last year. Excluding the $895,000 restructuring charge in the second quarter, net income increased 7.2% for the nine months ended April 30, 1998. On a per share basis, fully diluted net income for the three and nine month periods was $0.44 and $1.12 for the current year and $0.43 and $1.03 for the prior year. Financial Condition The Company's liquidity remains strong. The current ratio as of April 30, 1998, was 3.3 to 1. Cash and cash equivalents were $59,820,000 at April 30, 1998, compared to $65,329,000 at July 31, 1997. The decrease in fiscal 1998 was primarily due to the acquisitions of Techiques Avancees and GrafTek Inc. Primarily because of the use of cash and cash equivalents to fund the acquisitions, working capital decreased $477,000 during the nine months and equaled $130,247,000 as of April 30, 1998. The Company continues to maintain significant cash balances due in large part to its strong operating cash flow, which totaled $33,162,000 for the nine months ended April 30, 1998, compared to $22,409,000 for the same period last year. Capital expenditures were $12,030,000 in the nine months ended April 30, 1998, compared to $6,694,000 in the first nine months last year. The increase in capital expenditures resulted primarily from progress payments made on the Company's new coating line. Financing activities, primarily the payment of dividends to the Company's stockholders, consumed $8,243,000 of cash in the first nine months of fiscal 1998, compared to $7,156,000 for the same period last year. Long-term debt as a percentage of long-term debt plus stockholders' investment was 1.5% at April 30, 1998, compared to 1.8% at July 31, 1997. 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. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K. The Company was not required to file and did not file a report on form 8-K during the quarter ended April 30, 1998. 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 27, 1998 /s/ K. M. Hudson --------------------- ------------------------------ K. M. Hudson President Date: May 27, 1998 /s/ F. Jaehnert --------------------- ------------------------------ F. M. Jaehnert Vice President & Chief Financial Officer (Principal Accounting Officer) 10 EX-27 2 EXHIBIT 27
5 1,000 9-MOS JUL-31-1998 AUG-01-1997 APR-30-1998 59,820 0 70,450 2,061 45,871 187,985 136,641 71,140 313,693 57,738 3,459 2,855 0 225 220,287 313,693 341,236 341,236 151,897 151,897 148,393 0 229 41,786 16,380 25,406 0 0 0 25,406 1.13 1.12
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