-----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, Cr2jP5P0We4sH6+jHb98arZ+9w4NYk2JMJRdRiqfxL2eutQo0H7Lr01q3K9s3ekt 1vR6yqXppb+KAIOHiEay3A== 0000950124-00-000902.txt : 20000228 0000950124-00-000902.hdr.sgml : 20000228 ACCESSION NUMBER: 0000950124-00-000902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRADY CORP 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: 001-14959 FILM NUMBER: 552881 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 FORMER COMPANY: FORMER CONFORMED NAME: BRADY W H CO DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT ENDED 1-31-2000 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 January 31, 2000 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 BRADY CORPORATION ----------------- (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 February 21, 2000, there were outstanding 20,915,368 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 BRADY CORPORATION INDEX
Page ---- PART I. Financial Information Item 1. Financial Statements Unaudited Condensed Consolidated Balance Sheet 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 10 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
3 BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
ASSETS January 31, 2000 July 31, 1999 ------ ---------------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 66,801 $ 75,466 Accounts receivable, less allowance for losses ($2,851 and $2,339 respectively) 81,164 73,290 Inventories 36,892 37,527 Prepaid expenses and other current assets 21,057 16,886 --------- --------- Total current assets 205,914 203,169 Other assets: Intangibles - net 75,265 72,941 Other 8,463 8,026 Property, plant and equipment: Cost: Land 5,027 5,008 Buildings and improvements 42,406 41,417 Machinery and equipment 103,159 101,324 Construction in progress 4,658 2,229 --------- --------- 155,250 149,978 Less accumulated depreciation 88,750 82,994 --------- --------- Net property, plant and equipment 66,500 66,984 --------- --------- Total $ 356,142 $ 351,120 ========= ========= LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable $ 24,513 $ 19,378 Wages and amounts withheld from employees 17,121 23,186 Taxes, other than income taxes 2,546 2,290 Accrued income taxes 8,639 12,516 Other current liabilities 11,409 13,289 Current maturities on long-term debt 106 2,626 --------- --------- Total current liabilities 64,334 73,285 Long-term debt, less current maturities 1,009 1,402 Other liabilities 15,066 15,869 --------- --------- Total liabilities 80,409 90,556 Stockholders' investment: Preferred stock 2,855 2,855 Class A nonvoting common stock - issued 20,919,916 and 20,839,841 shares, respectively 209 208 Class B voting common stock - issued and outstanding 1,769,314 shares 18 18 Additional paid-in capital 29,958 28,383 Earnings retained in the business 248,126 233,521 Treasury stock - 4,548 shares of Class A nonvoting common stock, at cost (132) (132) Cumulative other comprehensive income (3,317) (1,958) Other (1,984) (2,331) --------- --------- Total stockholders' investment 275,733 260,564 --------- --------- Total $ 356,142 $ 351,120 ========= =========
See Notes to Condensed Consolidated Financial Statements. 3 4 BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EARNINGS RETAINED IN THE BUSINESS (Dollars in Thousands, Except Per Share Amounts)
(Unaudited) Three Months Ended Six months Ended January 31 January 31 2000 1999 2000 1999 --------- --------- --------- ---------- Net sales $ 129,222 $ 112,309 $ 254,771 $ 229,111 Operating expenses: Cost of products sold 54,913 50,001 107,648 101,279 Research and development 5,535 4,362 9,823 9,008 Selling, general and administrative 53,395 44,836 102,143 91,185 --------- --------- --------- --------- Total operating expenses 113,843 99,199 219,614 201,472 Operating income 15,379 13,110 35,157 27,639 Other income and (expense): Investment and other income - net 556 172 1,058 186 Interest expense (38) (103) (119) (248) --------- --------- --------- --------- Income before income taxes 15,897 13,179 36,096 27,577 Income taxes 6,065 5,205 13,897 10,892 --------- --------- --------- --------- Net income 9,832 7,974 22,199 16,685 Earnings retained in business at beginning of period 242,126 213,437 233,521 208,254 Less dividends: Preferred Stock (65) (65) (130) (130) Common Stock (3,767) (3,529) (7,464) (6,992) --------- --------- --------- --------- Earnings retained in business at end of period $ 248,126 $ 217,817 $ 248,126 $ 217,817 ========= ========= ========= ========= Net income per Class A Nonvoting Common Share Basic $ 0.43 $ 0.35 $ 0.97 $ 0.74 ========= ========= ========= ========= Diluted $ 0.43 $ 0.35 $ 0.96 $ 0.73 ========= ========= ========= ========= Net income per Class B Voting Common Share Basic $ 0.43 $ 0.35 $ 0.94 $ 0.70 ========= ========= ========= ========= Diluted $ 0.43 $ 0.35 $ 0.93 $ 0.70 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements. 4 5 BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
(Unaudited) Six Months Ended January 31 2000 1999 ---------- --------- Operating activities: Net income $ 22,199 $ 16,685 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 6,107 5,560 Amortization 2,560 1,864 Loss on sale of property, plant and equipment 29 30 Provision for losses on accounts receivable 951 521 Other 347 347 Changes in operating assets and liabilities (net of effects of business acquisitions): Accounts receivable (9,548) (3,324) Inventory 450 889 Prepaid expenses and other assets (6,378) 4,415 Accounts payable, accrued expenses and other liabilities (2,616) (4,274) Income taxes (4,199) (2,792) -------- -------- Net cash provided by operating activities 9,902 19,921 Investing activities: Acquisitions of businesses, net of cash acquired (4,949) (4,214) Purchases of property, plant and equipment (5,839) (6,298) Proceeds from sale of property, plant and equipment 102 173 Other 16 (175) -------- -------- Net cash (used in) investing activities (10,670) (10,514) Financing activities: Payment of dividends (7,594) (7,122) Proceeds from issuance of Common Stock 1,577 667 Principal payments on long-term debt (2,958) (246) Proceeds from long-term borrowings 0 343 -------- -------- Net cash (used in) financing activities (8,975) (6,358) Effect of exchange rate changes on cash 1,078 894 -------- -------- Net (decrease) increase in cash and cash equivalents (8,665) 3,943 Cash and cash equivalents, beginning of period 75,466 65,609 -------- -------- Cash and cash equivalents, end of period $ 66,801 $ 69,552 ======== ======== Supplemental disclosures: Cash paid during the period for: Interest $ 311 $ 325 Income taxes, net of refunds 15,609 12,029
See Notes to Condensed Consolidated Financial Statements. 5 6 BRADY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended January 31, 2000 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 January 31, 2000, and July 3l, 1999, and its results of operations for the three months and six months ended January 31, 2000, and 1999 and its cash flows for the six months ended January 31, 2000, and 1999. The consolidated balance sheet at July 31, l999, 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 Reconciliations 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 2000 Fiscal 1999 ----------- ----------- 2nd Quarter 6-Month 2nd Quarter 6-Month ----------- ------- ----------- ------- Numerator: Net income $9,832,000 $22,199,000 $7,974,000 $16,685,000 Less: Preferred stock dividends (64,784) (129,567) (64,784) (129,567) -------- --------- -------- --------- Numerator for basic and diluted Class A earnings per share 9,767,216 22,069,433 7,909,216 16,555,433 Less: Preferential dividends -- (694,492) -- (690,541) Less: Preferential dividends on dilutive stock options -- (10,410) -- (2,739) -- -------- -- ------- Numerator for basic and diluted Class B earnings per share $9,767,216 $21,364,531 $7,909,216 $15,862,937 ========== =========== ========== ===========
6 7
Fiscal 2000 Fiscal 1999 ----------- ----------- 2nd Quarter 6-Month 2nd Quarter 6-Month ----------- ------- ----------- ------- Denominator: Denominator for basic earnings per share for both Class A and Class B 22,660,321 22,663,973 22,529,702 22,514,567 share for both Class A and Class B Plus: Effect of dilutive stock options 269,034 287,962 185,864 115,104 ------- ------- ------- ------- Denominator for diluted earnings per share for both Class A and Class B 22,929,355 22,951,935 22,715,566 22,629,671 ========== ========== ========== ========== Class A common stock earnings per share: Basic $0.43 $0.97 $0.35 $0.74 Diluted $0.43 $0.96 $0.35 $0.73 Class B common stock earnings per share: Basic $0.43 $0.94 $0.35 $0.70 Diluted $0.43 $0.93 $0.35 $0.70
Options to purchase 526,000 and 238,317 shares of Class A common stock were not included in the computations of diluted earnings per share for the quarters ending January 31, 2000, and 1999, 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 254,167 and 1,024,418 shares of Class A common stock were not included in the computations of diluted earnings per share for the six months ending January 31, 2000, and 1999, 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 - Comprehensive Income Total comprehensive income, which was comprised of net income and foreign currency adjustments, amounted to approximately $7,922,000 and $5,154,000 for the three months ended January 31, 2000, and 1999, respectively, and $20,840,000 and $17,962,000 for the six months ended January 31, 2000, and 1999, respectively. NOTE D - Acquisition 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 $5,600,000. The purchase price of this acquisition is subject to change based on post-closing adjustments. This acquisition has been accounted for using the purchase method of accounting and accordingly the results of operations have been included since the date of acquisition in the accompanying financial statements. The pro-forma results assuming the acquisition had been consummated as of the beginning of the periods presented are not significant. 7 8 NOTE E - Segment Information The Company's reportable segments are business units that are each managed separately because they manufacture and/or distribute distinct products using different processes. The Company has three reportable segments: the Identification Solutions & Specialty Tapes Group, the Graphics Group and the Direct Marketing Group. Following is a summary of segment information for the three months ended January 31, 2000, and 1999:
Identification Solutions & Corporate Specialty Direct and Tapes Graphics Marketing Eliminations Totals ----- -------- --------- ------------ ------ Three months ended January 31, 2000: Revenues from external customers $58,251 $29,810 $41,161 $129,222 Intersegment revenues 756 885 200 ($1,841) -- Profit (loss) 11,759 2,671 6,461 (3,982) 16,909 Three months ended January 31, 1999: Revenues from external customers $43,862 $29,717 $38,730 $112,309 Intersegment revenues 1,486 494 219 ($2,199) -- Profit (loss) 6,030 2,208 6,509 (675) 14,072
Following is a summary of segment information for the six months ended January 31, 2000, and 1999:
Identification Solutions & Corporate Specialty Direct and Tapes Graphics Marketing Eliminations Totals ----- -------- --------- ------------ ------ Six months ended January 31, 2000: Revenues from external customers $112,681 $61,682 $80,408 $254,771 Intersegment revenues 1,400 1,567 494 ($3,461) -- Profit (loss) 21,842 8,779 13,322 (6,064) 37,879 Six months ended January 31, 1999: Revenues from external customers $89,268 $62,373 $77,470 $229,111 Intersegment revenues 2,243 1,042 447 ($3,732) -- Profit (loss) 12,761 6,908 12,760 (2,640) 29,789
8 9 Following is a reconciliation of profit for the three and six months ended January 31, 2000, and 1999:
Fiscal 2000 Fiscal 1999 ----------- ----------- 2nd Quarter 6-Month 2nd Quarter 6-Month ----------- ------- ----------- ------- Total profit from reportable segments $20,891 $43,943 $14,747 $32,429 Corporate and eliminations (3,982) (6,064) (675) (2,640) Unallocated amounts: Goodwill (1,116) (2,249) (850) (1,668) Interest-net 560 1,102 490 717 Foreign exchange (61) (200) (375) (770) Other (395) (436) (158) (491) ---- ----- ----- ----- Income before income taxes $15,897 $36,096 $13,179 $27,577 ======= ======= ======= =======
NOTE F - Restructuring During the fourth quarter of fiscal 1998, the Company recorded a nonrecurring charge of $5,390,000 related primarily to a provision for severance costs associated with a reduction in workforce at its operations around the world. The workforce reduction of 7.5%, approximately 200 people, was essentially completed in August 1998. A reconciliation of activity with respect to the Company's restructuring is as follows: Provision, July 31, 1998 $5,390,000 Fiscal 1999 activity: Noncash asset write-offs (366,000) Cash payments associated with severance (4,150,000) Amounts taken to income (611,000) --------- Ending balance, July 31, 1999 263,000 Fiscal 2000 activity: Cash payments associated with severance (199,000) --------- Ending balance, October 31, 1999 64,000 Cash payments associated with severance (64,000) -------- Ending balance, January 31, 2000 $0 ==
9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations For the three months ended January 31, 2000, revenues of $129,222,000 were 15.1% higher than the same quarter of the previous year. For the six months ended January 31, 2000, revenues of $254,771,000 were 11.2% higher than the same period last year. Sales of the Company's international operations increased 12.6% for the quarter and 9.9% for the six months ended January 31, 2000. Of that increase, continued market penetration of existing base products in Brady's operations outside the United States increased international sales by 10.5% for the quarter and 6.9% for the six month period. The acquisitions of VisiSign. Ltd., Holman Groupe S.A. and Soft S.A. increased international sales by 9.2% for the quarter and 8.6% for the six month period. These increases were somewhat 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 7.1 percentage points in the quarter and 5.5 percentage points in the six month period. Sales of the Company's U.S. operations increased17.3% in the quarter and 12.3% for the six months ended January 31, 2000. Of that increase, base business increased 11.0% in the quarter and 6.9% for the six month period. The acquisitions of Barcodes West, Inc. and the Champion America, Inc. brand name increased U.S. sales by 6.3% in the quarter and 5.4% for the six month period. The cost of products sold as a percentage of sales decreased from 44.5% to 42.5% for the quarter and from 44.2% to 42.3% for the six months ended January 31, 2000, due to reduced costs from changes in product mix towards products with higher margins, reduced expenses as a result of last year's workforce reduction and manufacturing efficiencies from the Company's continuous improvement efforts. Selling, general and administrative expenses as a percentage of sales were 41.3% for the quarter compared to 39.9% for the same quarter of the previous year. For the six months ended January 31, 2000, this percentage was 40.1% compared to 39.8% for the same period last year. These increases were due primarily to the Company's investment in process improvements discussed in the Financial Condition section below. Research and development expenditures increased 26.9% for the quarter and 9.0% for the six months ended January 31, 2000, over the same periods last year reflecting the Company's commitment to new product development. As a percentage of sales, research and development expenses increased from 3.9% to 4.3% for the quarter and equaled 3.9% for both six month periods. Operating income was $15,379,000 for the quarter and $35,157,000 for the six months ended January 31, 2000, compared to $13,110,000 and $27,639,000 for the same periods last year because of the factors cited above. Investment and other income increased $384,000 for the quarter and $872,000 for the six months ended January 31, 2000, over the same periods last year. These increases were the result of lower foreign exchange transaction losses and higher investment income because of higher interest rates. Income before income taxes increased 20.6% for the quarter and 30.9% for the six months ended January 31, 2000, compared to the prior year results. The Company's effective tax rate was 38.2% for the quarter compared to 39.5% for the same quarter of the previous year. For the six months ended January 31, 2000, this percentage was 38.5% compared to 39.5% for the same period last year. These decreases were the result of profitability changes in the Company's international operations. 10 11 Net income for the three months ended January 31, 2000, increased 23.3% to $9,832,000 compared to $7,974,000 for the same quarter of the previous year. For the six months ended January 31, 2000, net income increased 33.1% to $22,199,000 from $16,685,000 for the same period last year. On a per share basis, diluted net income for the three months ended January 31, 2000, was $0.43 compared to $0.35 for the same quarter of the previous year. For the six months ended January 31, 2000, diluted net income per share was $0.96 compared to $0.73 for the same period last year. Business Segment Operating Results Identification Solutions & Specialty Tapes (ISST) Group: ISST sales increased 32.8% for the three months ended January 31, 2000. For the six months ended January 31, 2000, ISST sales were 26.2% higher than the same period last year. The increases were primarily the result of a growth of base business, particularly with global customers in the telecommunications and electronics markets. The acquisitions of Barcodes West, Inc. and Holman Groupe, S.A. also contributed to the sales increase compared to last year. Sales were up significantly in Latin America, Australia and Asia. Profit as a percentage of sales increased from 13.7% to 20.2% for the quarter and from 14.3% to 19.4% for the six months ended January 31, 2000. The increases were primarily the result of product mix, operating leverage from the increased volume and manufacturing efficiencies. Graphics Group: Graphics sales increased 0.3% for the three months ended January 31, 2000. For the six months ended January 31, 2000, Graphics sales were 1.1% lower than the same period last year. Sales generated by the acquisitions of VisiSign Pty. Ltd. And Soft S.A. offset weakness in the industrial and safety markets in the United States and Europe and the decrease in sales of Colorpix wide-format color inkjet printers and related materials. Sales were up in Asia, Australia and Canada and down in Europe and the United States. Profit as a percentage of sales increased from 7.4% to 9.0% for the quarter and from 11.1% to 14.2% for the six months ended January 31, 2000. These increases were primarily the result of the group's refocusing resources on products with higher profit margins. Direct Marketing Group: Direct Marketing sales increased 6.3% for the three months ended January 31, 2000. For the six months ended January 31, 2000, Direct Marketing sales were 3.8% higher that the same period last year. For the quarter, sales in Brazil, Italy, Australia and Canada were up significantly, while sales in France and Germany were below last year's totals. For the six month period, Australian and Canadian sales were up significantly, while sales in the U.K. and Germany were down. Profit as a percentage of sales decreased from 16.8% to 15.7% for the quarter and increased from 16.5% to 16.6% for the six months ended January 31, 2000. The quarterly decrease was primarily the result of increased advertising expenditures. 11 12 Financial Condition The Company's liquidity remains strong. The current ratio as of January 31, 2000, was 3.2 to 1. Cash and cash equivalents were $66,801,000 at January 31, 2000, compared to $75,466,000 at July 31, 1999. The decrease was primarily due to the purchase of certain assets of Champion America, Inc. and the paydown of Korean bank debt. Working capital increased $11,696,000 during the six months and equaled $141,580,000 as of January 31, 2000. Cash flow from operations totaled $9,902,000 for the six months ended January 31, 2000, compared to $19,921,000 for the same period last year. The decrease was primarily the result of the increase in accounts receivable and prepaid assets more than offsetting the Company's increased profitability. Capital expenditures were $5,839,000 in the six months ended January 31, 2000, compared to $6,298,00 in the first six months last year. Financing activities, primarily the payment of dividends to the Company's stockholders and payments of Korean bank debt, consumed $8,975,000 of cash in the first six months of fiscal 2000, compared to $6,358,000 for the same period last year. Long-term debt as a percentage of long-term debt plus stockholder's investment was 0.4% at January 31, 2000, compared to 0.5% at July 31, 1999. In September 1999, the Company entered into a $150,000,000 revolving loan agreement with six banks. In January 2000, the agreement was amended to increase the available amount to $200,000,000. On January 27, 2000, the Company commenced an unsolicited cash tender offer for Critchley Group plc, a British company, at 575 pence per Critchley share. Purchase of all of Critchley's shares at this price would require approximately $155,000,000 of cash plus expenses of the transaction. On February 15, 2000, the Company announced that it would not match a competing offer of 750 pence per Critchley share made by a competing offeror. Both offers are subject to a number of conditions, including anti-trust clearance in the U.K. and other countries. During the second quarter of fiscal 2000 a Company-wide process improvement initiative was begun. This initiative will improve and standardize processes throughout the Company and install new technology to support those processes. The Company estimates this initiative will take approximately three years to complete with total cash outlay of approximately $30,000,000. The Company estimates that about 60% of that cash outlay will be capital expenditures. The Company believes that its cash and cash equivalents, the cash flow from operating activities and available line of bank credit are adequate to meet the Company's current and anticipated investing and financing needs. Year 2000 Compliance The Company did not experience any significant Year 2000 issues with its in-house computers, software or other equipment. The Company estimates that it spent approximately $2,500,000 over a multi-year period in preparation for Year 2000. All costs associated with this issue were expensed as incurred and did not have a material effect on the results of operations, cash flows or financial condition of the Company. 12 13 Forward-Looking Statements Matters in this Quarterly Report may contain forward-looking information, as defined in the Private Securities Litigation Reform Act of 1995. All such forward-looking information in this report involves risks and uncertainties, including, but not limited to, unknown information with respect to non-negotiated acquisitions; variations in the economic or political conditions in the countries with which the Company does business; fluctuations in currency exchange rates for international currencies versus the U.S. dollar; technology changes; the continued availability of sources of supply; domestic and international economic conditions and growth rates; the ability of the Company to timely adjust its cost structure to changes in levels of sales, product mix and low levels of order backlog; and the ability of the Company to acquire new businesses. The Company 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. 13 14 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K. A report on form 8-K dated January 27, 2000, was filed relating the Company's offer to purchase all the outstanding shares of Critchley Group plc for 575 pence (approximately $9.49) per share, or a total of 94 million pounds (approximately $155 million), in cash. 14 15 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 BRADY CORPORATION Date: February 25, 2000 /s/ K. M. Hudson ----------------- ------------------- K. M. Hudson President Date: February 25, 2000 /s/ F. M. Jaehnert ----------------- ------------------- F. M. Jaehnert Vice President & Chief Financial Officer (Principal Accounting Officer) 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JUL-31-2000 AUG-01-1999 JAN-31-2000 66,801 0 84,015 2,851 36,892 205,914 155,250 88,750 356,142 64,334 1,009 2,855 0 227 272,651 356,142 254,771 254,771 107,648 107,648 111,966 0 119 36,096 13,897 22,199 0 0 0 22,199 0.97 0.96
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