-----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, GDz36hes7m29OqCLCn1DBQeqj1dt3cpfwqb41FhZ2qCknmnIuH96iTwBC2BXnNoM ORuY3u9m1yWd0TrFntSe4g== 0000950137-04-001357.txt : 20040302 0000950137-04-001357.hdr.sgml : 20040302 20040302134436 ACCESSION NUMBER: 0000950137-04-001357 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040131 FILED AS OF DATE: 20040302 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: 1934 Act SEC FILE NUMBER: 001-14959 FILM NUMBER: 04642023 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 c83332e10vq.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended January 31, 2004 ---------------- 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 1-14959 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 --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 16, 2004, there were outstanding 21,873,849 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. FORM 10-Q BRADY CORPORATION INDEX
Page ---- PART I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income and Income Retained in the Business 4 Condensed 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 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 Item 4. Controls and Procedures 18 PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19 Signatures 20
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
(UNAUDITED) JANUARY 31, 2004 JULY 31, 2003 ---------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 58,211 $ 76,088 Accounts receivable, less allowance for losses ($3,764 and $3,166, respectively) 94,428 80,162 Inventories 45,302 36,564 Prepaid expenses and other current assets 20,434 22,343 ---------------- ------------- TOTAL CURRENT ASSETS 218,375 215,157 OTHER ASSETS: Goodwill 162,504 130,667 Other 23,978 24,455 ---------------- ------------- 186,482 155,122 PROPERTY, PLANT AND EQUIPMENT: Cost: Land 5,252 5,172 Buildings and improvements 53,767 51,471 Machinery and equipment 146,441 139,007 Construction in progress 5,880 3,245 ---------------- ------------- 211,340 198,895 Less accumulated depreciation 130,207 119,655 ---------------- ------------- NET PROPERTY, PLANT AND EQUIPMENT 81,133 79,240 ---------------- ------------- TOTAL $ 485,990 $ 449,519 ================ ============= LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $ 31,075 $ 28,470 Wages and amounts withheld from employees 30,003 30,619 Taxes, other than income taxes 3,633 2,492 Accrued income taxes 13,206 11,449 Other current liabilities 21,988 17,320 Short-term borrowings and current maturities on long-term debt 21 929 ---------------- ------------ TOTAL CURRENT LIABILITIES 99,926 91,279 LONG-TERM DEBT, LESS CURRENT MATURITIES 48 568 OTHER LIABILITIES 19,917 18,711 ---------------- ------------ TOTAL LIABILITIES 119,891 110,558 STOCKHOLDERS' INVESTMENT: Class A nonvoting common stock -- Issued and outstanding 21,873,849 219 216 and 21,558,265 shares, respectively Class B voting common stock -- Issued and outstanding 1,769,314 shares 18 18 Additional paid-in capital 57,213 47,464 Income retained in the business 299,563 290,805 Cumulative other comprehensive income 10,615 1,595 Treasury stock -- 34,657 and 18,262 class A common shares, respectively, at cost (1,074) (509) Other (455) (628) ---------------- ------------ TOTAL STOCKHOLDERS' INVESTMENT 366,099 338,961 ---------------- ------------ TOTAL $ 485,990 $ 449,519 ================ ============
See Notes to Condensed Consolidated Financial Statements 3 BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND INCOME RETAINED IN THE BUSINESS (Dollars in Thousands, Except Per Share Amounts)
(Unaudited) Three Months Ended January 31, Six Months Ended January 31, 2004 2003 2004 2003 --------- --------- --------- --------- Net Sales $ 152,948 $ 129,565 $ 304,854 $ 268,227 Operating expenses: Cost of products sold 74,718 65,909 147,861 134,354 Research and development 5,606 4,572 10,470 8,643 Selling, general and administrative 60,495 54,535 116,883 108,307 Restructuring Charge - net 66 - 1,819 - --------- --------- --------- --------- Total operating expenses 140,885 125,016 277,033 251,304 Operating income 12,063 4,549 27,821 16,923 Other income and (expense): Investment and other income (expense) 18 (275) (141) (189) Interest expense (1) (8) (31) (43) --------- --------- --------- --------- Income before income taxes 12,080 4,266 27,649 16,691 Income taxes 4,047 1,449 9,263 5,675 --------- --------- --------- --------- Net income 8,033 2,817 18,386 11,016 Income retained in business at beginning of period 296,388 291,231 290,805 287,674 Less: Redemption premium on preferred stock - - - (171) Common stock dividends (4,858) (4,540) (9,628) (9,011) --------- --------- --------- --------- Income retained in business at end of period $ 299,563 $ 289,508 $ 299,563 $ 289,508 ========= ========= ========= ========= Net income per Class A Nonvoting Common Share Basic $ 0.34 $ 0.12 $ 0.78 $ 0.47 ========= ========= ========= ========= Diluted $ 0.34 $ 0.12 $ 0.77 $ 0.46 ========= ========= ========= ========= Net income per Class B Voting Common Share Basic $ 0.34 $ 0.12 $ 0.75 $ 0.44 ========= ========= ========= ========= Diluted $ 0.34 $ 0.12 $ 0.74 $ 0.43 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements 4 BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
(Unaudited) Six Months Ended January 31, 2004 2003 -------- -------- Operating activities: Net income $ 18,386 $ 11,016 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,989 8,102 Loss on sale or disposal of property, plant & equipment 104 41 Provision for losses on accounts receivable 764 671 Amortization of restricted stock 173 123 Net restructuring charge accrued liability 1,742 - Changes in operating assets and liabilities (net of effects of business acquisitions): Accounts receivable (3,908) 1,320 Inventory (3,806) 730 Prepaid expenses and other assets 2,720 787 Accounts payable and accrued liabilities (6,627) (4,145) Income taxes 2,561 2,008 -------- -------- Net cash provided by operating activities 22,098 20,653 Investing activities: Acquisition of businesses, net of cash acquired (30,652) (12,817) Termination of capital lease - (791) Purchases of property, plant and equipment (6,621) (7,621) Proceeds from sale of property, plant and equipment 255 16 Other (933) (295) -------- -------- Net cash used in investing activities (37,951) (21,508) Financing activities: Payment of dividends (9,982) (9,182) Proceeds from issuance of common stock 7,919 1,620 Principal payments on debt (1,534) (162) Payment for redemption of preferred stock - (2,855) Purchase of treasury stock (564) (377) Proceeds from short-term borrowings-net - 75 -------- -------- Net cash used in financing activities (4,161) (10,881) Effect of exchange rate changes on cash 2,137 1,393 -------- -------- Net decrease in cash and cash equivalents (17,877) (10,343) Cash and cash equivalents, beginning of period 76,088 75,969 -------- -------- Cash and cash equivalents, end of period $ 58,211 $ 65,626 ======== ======== Supplemental disclosures: Cash paid during the period for: Interest $ 64 $ 38 Income taxes, net of refunds 6,502 3,942 Acquisitions: Fair value of assets acquired, net of cash $ 14,594 $ 5,277 Liabilities assumed (9,040) (2,009) Goodwill 25,098 9,549 -------- -------- Net cash paid for acquisitions $ 30,652 $ 12,817 ======== ======== Termination of Capital Lease: Disposition of capital assets $ - $ (2,574) Settlement of capital lease liability - 3,365 -------- -------- Net cash paid for termination of capital lease $ - $ 791 ======== ========
See Notes to Condensed Consolidated Financial Statements 5 BRADY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended January 31, 2004 (Unaudited) 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, 2004 and July 3l, 2003, its results of operations for the three and six months ended January 31, 2004 and 2003, and its cash flows for the six months ended January 31, 2004 and 2003. The condensed consolidated balance sheet at July 31, 2003 has been derived from the audited consolidated financial statements of that date and condensed. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from the estimates. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form 10-K for the year ended July 31, 2003. 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 -- New Accounting Pronouncements On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") was signed into law. The Act introduced a prescription drug benefit program under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans. Certain accounting issues raised by the Act, such as how to account for the federal subsidy, are not explicitly addressed by Financial Accounting Standards Board ("FASB") Statement No. 106,"Employers' Accounting for Postretirement Benefits Other Than Pensions." The FASB issued FASB Staff Position ("FSP") No. FAS 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003", ("FSP No.106-1") which allows sponsors to elect to defer recognition of the effects of the Act to await guidance from various governmental and regulatory agencies concerning the requirements that must be met to obtain these cost reductions as well as the manner in which such savings should be measured. In accordance with FSP No. 106-1, the Company has elected to defer recognition of the effects of the Act. Accordingly, the financial statements do not reflect the effects of the Act. 6 NOTE C -- Goodwill Changes in the carrying amount of goodwill for the six months ended January 31, 2004, are as follows:
Americas Europe Asia Total ------------ ------------ -------- -------- Balance as of July 31, 2003 $ 84,267 $ 43,820 $2,580 $130,667 Goodwill acquired during the period 17,496 7,602 - 25,098 Translation adjustments and other 817 5,448 474 6,739 ------------ ------------ -------- -------- Balance as of January 31, 2004 $ 102,580 $ 56,870 $3,054 $162,504 ============ ============ ======== ========
Goodwill increased by $31,837,000 during the six months ended January 31, 2004, including an increase of $6,739,000 attributable to translation adjustments and other. The preliminary allocation of the purchase price for the acquisitions of Brandon International, Prinzing Enterprises and B.I.G resulted in $25,098,000 of additional goodwill. NOTE D - Comprehensive Income Total comprehensive income, which was comprised of net income, foreign currency adjustments and net unrealized gains and losses from cash flow hedges, amounted to $12,809,000 and $9,029,000 for the three months ended January 31, 2004 and 2003, respectively, and $27,406,000 and $17,183,000 for the six months ended January 31, 2004 and 2003, respectively. 7 NOTE E - 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 2004 Fiscal 2003 ----------- ----------- (Amounts in thousands, except per share amounts) 2nd Quarter Six Months 2nd Quarter Six Months ----------- ---------- ----------- ---------- Numerator: Net income $ 8,033 $18,386 $ 2,817 $11,016 Less: Premium on redemption of preferred stock - - - (171) ------- ---------- ------- ------- Numerator for basic and diluted Class A net income per share 8,033 18,386 2,817 10,845 Less: Preferential dividends - (721) - (711) Less: Preferential dividends on dilutive stock options - (9) - (7) ------- ---------- ------- ------- Numerator for basic and diluted Class B net income per share $ 8,033 $17,656 $ 2,817 $10,127 ======= ========== ======= ======= Denominator: Denominator for basic net income per share for both Class A and Class B 23,544 23,493 23,155 23,155 Plus: Effect of dilutive stock options 347 294 230 215 ------- ---------- ------- ------- Denominator for diluted net income per share for both Class A and Class B 23,891 23,787 23,385 23,370 ======= ========== ======= ======= Class A Common Stock net income per share: Basic $0.34 $0.78 $0.12 $0.47 Diluted $0.34 $0.77 $0.12 $0.46 Class B Common Stock net income per share: Basic $0.34 $0.75 $0.12 $0.44 Diluted $0.34 $0.74 $0.12 $0.43
Options to purchase 18,000 and 657,000 shares of Class A Common Stock were not included in the computations of diluted net income per share for the quarter ended January 31, 2004 and 2003, respectively, because the option exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. Options to purchase 18,000 and 794,000 shares of Class A Common Stock were not included in the computations of diluted net income per share for the six months ended January 31, 2004 and 2003, respectively, because the option exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. 8 NOTE F -- Restructuring During the fourth quarters of fiscal 2003 and 2002, the Company recorded restructuring charges of $10,215,000 and $3,030,000, respectively, related primarily to facilities consolidations and workforce reductions. The Company continued its restructuring actions that were announced in the fourth quarter of fiscal 2003, resulting in a restructuring charge of $1,819,000 during the six months ended January 31, 2004. The charge consists primarily of a provision for severance of terminated employees. The Company expects to incur total pre-tax restructuring charges in fiscal 2004 of $2,000,000 to $3,000,000. Reconciliations of activity with respect to the Company's restructuring actions are as follows:
Fiscal 2003 and 2004 Fiscal 2002 Restructuring Restructuring ------------- ------------- Ending balance, July 31, 2003 $6,926,000 $130,000 Fiscal 2004 first quarter activity: Additional restructuring charges 1,753,000 - Cash payments associated with severance and other (2,997,000) (100,000) ---------- --------- Ending balance, October 31, 2003 $5,682,000 $30,000 ========== ========= Fiscal 2004 second quarter activity: Additional restructuring charges 66,000 - Non-cash asset write-off (76,000) Cash payments associated with severance and other (2,642,000) (30,000) ---------- -------- Ending balance, January 31, 2004 $3,030,000 - ========== ========
NOTE G -- Acquisitions In September 2003, the Company acquired Brandon International, Inc. ("Brandon") headquartered in Baldwin Park, California, with international operations in Mexico and Singapore. Brandon is a manufacturer of die-cut products. In October 2003, the Company acquired Prinzing Enterprises, Inc. located in Warrenville, Illinois. Prinzing is a manufacturer of lockout/tagout products, signs and other safety devices. In November 2003, the Company acquired B.I.G, headquartered in the United Kingdom, a provider of badging and business card solutions. The combined purchase price for these acquisitions was approximately $30,700,000 in cash and $1,000,000 in notes payable. The Prinzing acquisition agreement includes provisions for contingent payments up to a maximum $1,500,000 based on certain performance criteria during fiscal year 2004. The purchase price allocation is preliminary and pending the outcome of final valuations of the acquired entities, which are in progress. Of the combined purchase price, $25,098,000 was assigned to goodwill in the preliminary allocation of the purchase price. The results of the operations of the acquired businesses have been included since their respective dates of acquisition in the accompanying condensed consolidated financial statements. 9 NOTE H - Segment Information The Company's reportable segments are geographical regions that are each managed separately. Due to the change to a regional management structure at the beginning of fiscal 2004, the Company has restated the corresponding segment information from its previous group based structure for the prior year. The Company has three reportable segments: Americas, Europe and Asia. It is impracticable to present total assets by segment on an interim basis. Following is a summary of segment information for the three and six months ended January 31, 2004 and 2003:
Corporate (Dollars in Thousands) and Americas Europe Asia Eliminations Totals -------- ------- ------- ------------ -------- Three months ended January 31, 2004: Revenues from external customers $74,196 $60,360 $18,392 $152,948 Intersegment revenues 9,234 620 1,378 ($11,232) - Segment profit (loss) 9,498 15,346 4,905 (1,200) 28,549 Three months ended January 31, 2003: Revenues from external customers $68,432 $47,880 $13,253 $129,565 Intersegment revenues 8,515 500 1 ($9,016) - Segment profit (loss) 5,879 10,876 3,093 (1,127) 18,721 Six months ended January 31, 2004: Revenues from external customers $154,288 $113,625 $36,941 $304,854 Intersegment revenues 19,224 1,183 2,373 ($22,780) - Segment profit (loss) 24,614 28,795 10,329 (1,970) 61,768 Six months ended January 31, 2003: Revenues from external customers $148,363 $92,963 $26,901 $268,227 Intersegment revenues 17,043 1,125 13 ($18,181) - Segment profit (loss) 19,860 21,294 6,780 (1,656) 46,278
Following is a reconciliation of profit for the three and six months ended January 31, 2004 and 2003:
(Dollars in Thousands) Fiscal 2004 Fiscal 2003 ----------- ----------- 2nd Quarter Six Months 2nd Quarter Six Months ----------- ---------- ----------- ---------- Total profit from reportable segments $29,749 $63,738 $19,848 $47,934 Corporate and eliminations (1,200) (1,970) (1,127) (1,656) Unallocated amounts: Administrative costs (15,365) (30,537) (13,292) (27,627) Interest-net 134 225 253 380 Foreign exchange (117) (397) (536) (612) Restructuring charge, net (66) (1,819) - - Other (1,055) (1,591) (880) (1,728) ------- ------- ------ ------- Income before income taxes $12,080 $27,649 $4,266 $16,691 ======= ======= ====== =======
10 NOTE I -- Pro Forma Stock-Based Compensation The Company has stock-based compensation plans under which stock options are granted to various officers, directors and other employees of the Company with exercise prices equal to the fair market value at the date of grant. Stock options were issued during the six months ended January 31, 2004 under stock-based compensation plans previously approved by shareholders. Generally, these options are not exercisable until one year after the grant date, and will be exercisable thereafter, to the extent of one-third per year, and have a maximum term of ten years. During fiscal 2004, certain executives and key management employees were issued stock options that vest upon meeting certain financial performance conditions in addition to the vesting schedule described above and have a term of five years. Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has elected to account for its employee stock option plans under APB Opinion No. 25, "Accounting for Stock Issued to Employees," which recognizes expense based on the intrinsic value at date of grant. As stock options have been issued with exercise prices equal to grant date fair value, no compensation cost has resulted, with the exception of certain options issued during fiscal 2004 that contain a performance condition ("performance options"). The performance options require the company to record compensation expense for changes in the market value of the underlying common stock. The assumptions used to calculate the fair value of new options granted are evaluated and revised, as necessary, to reflect market conditions and experience. Had compensation cost for all options granted been determined based on the fair value at grant date consistent with SFAS No. 123, the Company's net income and income per share would have been as follows:
Three Months Ended Six Months Ended (In thousands, except per share amounts) January 31, January 31, 2004 2003 2004 2003 ---- ---- ---- ---- Net income As reported $8,033 $2,817 $18,386 $11,016 Stock-based compensation expense recorded 195 - 277 Pro forma expense (549) (497) (1,037) (994) ------ ------ ------- ------- Pro forma net income $7,679 $2,320 $17,626 $10,022 ====== ====== ======= ======= Net income per class A common share Basic As reported $ 0.34 $ 0.12 $ 0.78 $ 0.47 Pro forma adjustments (0.02) (0.02) (0.03) (0.04) ------ ------ ------- ------- Pro forma net income per share $ 0.32 $ 0.10 $ 0.75 $ 0.43 ====== ====== ======= ======= Diluted As reported $ 0.34 $ 0.12 $ 0.77 $ 0.46 Pro forma adjustments (0.02) (0.02) (0.03) (0.04) ------ ------ ------- ------- Pro forma net income per share $ 0.32 $ 0.10 $ 0.74 $ 0.42 ====== ====== ======= ======= Net income per class B common share Basic As reported $ 0.34 $ 0.12 $ 0.75 $ 0.44 Pro forma adjustments (0.02) (0.02) (0.03) (0.04) ------ ------ ------- ------- Pro forma net income per share $ 0.32 $ 0.10 $ 0.72 $ 0.40 ====== ====== ======= ======= Diluted As reported $ 0.34 $ 0.12 $ 0.74 $ 0.43 Pro forma adjustments (0.02) (0.02) (0.03) (0.04) ------ ------ ------- ------- Pro forma net income per share $ 0.32 $ 0.10 $ 0.71 $ 0.39 ====== ====== ======= =======
11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Brady is an international manufacturer and marketer of identification and materials solutions, with products including labels, signs, precision die-cut materials, printing systems, software, and label-application and data-collection systems for electronics, telecommunications, manufacturing, electrical, and a variety of other markets. The Company operates manufacturing facilities and sales offices in Australia, Belgium, Brazil, Canada, China, England, France, Germany, Italy, the United States, Malaysia, Singapore and operates sales offices in Hong Kong, Hungary, Japan, Korea, Mexico, the Philippines, Sweden and Taiwan. Sales for the quarter ended January 31, 2004 were up 18.0 percent to $152.9 million, compared to $129.6 million in the same period of fiscal 2003. Net income for the quarter was $8.0 million or $0.34 per diluted Class A Common Share, up 183 percent from $2.8 million or $0.12 per share reported in the second quarter of last year. The Company's efforts to streamline its organization and invest in strategic acquisitions and key geographic markets such as Asia have contributed to the Company's improved earnings, despite only moderate improvement in the manufacturing sector in the United States and Europe. Compared to fiscal 2003's second quarter, the Company experienced some improvement in key markets in the United States and Europe, while Asian markets, particularly telecommunications and electronics, continue to be strong. This, along with a positive foreign currency exchange, helped improve the Company's results. Sales from recent acquisitions also contributed more than 10 percent to the Company's sales growth in the second quarter, and despite the investment costs associated with integrating these acquisitions, the Company's net income continued to improve in the quarter. The Company expects improvement in its key markets and further growth through acquisitions, as well as the effects of a weaker dollar, to continue in the second half of fiscal 2004, and has increased its guidance range to $615 to $645 million in sales with net income of $37 to $41 million for the full fiscal year. Looking long term, the Company intends to continue with its growth strategies of developing proprietary products; making acquisitions which expand its product range, technical expertise or market penetration; and further improving processes to best serve customers. Going forward, business and market uncertainties may affect results. For a discussion of key factors that could impact results, please refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2003. Results of Operations For the three months ended January 31, 2004, net sales of $152,948,000 were 18.0% higher than the same quarter of the previous year. For the six months ended January 31, 2004, sales of $304,854,000 were 13.7% higher than the same period of the previous year. The sales increase was aided by the positive effect of fluctuations in the exchange rates used to translate financial results into the United States Dollar, which increased sales growth by 8.2% in the quarter and 7.1% for the six months ended January 31, 2004. The acquisitions of TISCOR, Inc., Brandon International and Prinzing Enterprises, Inc. in the United States, Etimark in Germany, and Cleere Advantage Ltd, Aztec, Ltd and B.I.G in the United Kingdom added 10.5% to sales in the quarter and 8.2% to sales for the six months ended January 31, 2004. These increases were offset by a decline in base sales of 0.7% for the quarter and 1.6% for the six-month period compared to the prior year. 12 The cost of products sold as a percentage of sales decreased from 50.9% to 48.9% for the quarter and from 50.1% to 48.5% for the six months ended January 31, 2004 compared to the same periods of the previous year. The cost of products sold as a percentage of sales was higher during the same periods last year due to the impact of lower sales volumes within the United States direct marketing business due to its SAP implementation in December 2002. Selling, general and administrative (SG&A) expenses as a percentage of sales decreased to 39.6% from 42.1% for the quarter and to 38.3% from 40.4% for the six months ended January 31, 2004 compared to the same periods of the prior year due to savings from restructuring actions taken in the fourth quarter of fiscal 2003. In dollars, SG&A increased due to foreign currency translation and SG&A expenses associated with acquired businesses, which was partially offset by savings from our restructuring program. As a percentage of sales, research and development expenses increased from 3.5% to 3.7% for the quarter and from 3.2% to 3.4% for the six months ended January 31, 2004 compared to the same periods of the previous year. The increase was primarily due to research and development activities associated with acquired businesses. Fiscal 2004 included a restructuring charge of $66,000 for the quarter and $1,819,000 for the six months ended January 31, 2004, which was primarily due to consolidation of operating facilities in Europe. The Company expects to incur total pre-tax restructuring charges in fiscal 2004 of $2,000,000 to $3,000,000. There were no restructuring charges in the first six months of the prior year. Operating income was $12,063,000 for the quarter and $27,821,000 for the six-month period ended January 31, 2004 compared to $4,549,000 and $16,923,000 for the same periods last year, due to the factors cited above. Investment and other income increased $293,000 for the quarter and $48,000 for the six-month period ended January 31, 2004 compared to the same periods last year due to the net effect of foreign exchange, primarily on intercompany transactions. The Company's effective tax rate was 33.5% for the quarter and for the six-month period ended January 31, 2004 and 34.0% for the same periods of the previous year. The reduction was due to a more favorable mix of regional profits and long-term tax planning strategies. Net income for the three months ended January 31, 2004, increased 185.2% to $8,033,000 compared to $2,817,000 for the same quarter of the previous year. For the six months ended January 31, 2004, net income increased 66.9% to $18,386,000 from $11,016,000 for the same period last year. On a Class A Common Share basis, diluted net income for the three months ended January 31, 2004, was $0.34 compared to $0.12 per share for the same quarter of the previous year. For the six months ended January 31, 2004, Class A Common Share diluted net income was $0.77 compared to $0.46 for the same period last year. Net income included the after-tax effect of restructuring charges of $44,000 in the quarter ended January 31, 2004 and $1,210,000 in the six-month period ended January 31, 2004. 13 Business Segment Operating Results Effective August 1, 2003, the Company's organization was restructured from a product focused organization to geographic regions. Management of the Company now evaluates results based on the following geographic regions: Americas, Europe, and Asia.
(Unaudited, dollars in thousands) Americas Europe Asia Corporate Total SALES TO EXTERNAL CUSTOMERS Three months ended: January 31, 2004 $ 74,196 $ 60,360 $ 18,392 $ 152,948 January 31, 2003 68,432 47,880 13,253 129,565 Six months ended: January 31, 2004 $ 154,288 $ 113,625 $ 36,941 $ 304,854 January 31, 2003 148,363 92,963 26,901 268,227 SALES GROWTH INFORMATION Three months ended January 31, 2004: Base (4.2)% (3.3)% 26.6% (0.7)% Currency 2.1 % 16.0 % 12.2% 8.2 % Acquisitions 10.5 % 13.4 % 0.0% 10.5 % Total 8.4 % 26.1 % 38.8% 18.0 % Six months ended January 31, 2004: Base (5.4)% (3.8)% 26.3% (1.6)% Currency 1.8 % 14.4 % 11.0% 7.1 % Acquisitions 7.6 % 11.6 % 0.0% 8.2 % Total 4.0 % 22.2 % 37.3% 13.7 % SEGMENT PROFIT (LOSS) Three months ended: January 31, 2004 $ 9,498 $ 15,346 $ 4,905 $ (1,200) $ 28,549 January 31, 2003 5,879 10,876 3,093 (1,127) 18,721 Percentage increase 61.6 % 41.1 % 58.6 % 6.5 % 52.5 % Six months ended: January 31, 2004 $ 24,614 $ 28,795 $ 10,329 $ (1,970) $ 61,768 January 31, 2003 19,860 21,294 6,780 (1,656) 46,278 Percentage increase 23.9 % 35.2 % 52.3 % 19.0 % 33.5 %
The Company evaluates performance and allocates resources based on segment profit or loss. Segment profit or loss does not include certain administrative costs, interest, foreign exchange gain or loss, restructuring charges, other expenses not allocated to a segment and income taxes. Please refer to Note H "Segment Information" for a reconciliation of segment profit to income before income taxes. 14 Americas: Americas sales increased 8.4% for the quarter and 4.0% for the six months ended January 31, 2004, compared to the same periods last year. Base sales in local currency decreased 4.2% in the quarter and 5.4% for the six-month period, more than offset by acquisitions, which increased sales in the region by 10.5% in the quarter and 7.6% for the six-month period. The positive effect of fluctuations in the exchange rates used to translate financial results into U.S. currency increased sales in the region by 2.1% in the quarter and 1.8% for the six-month period ended January 31, 2004. The decline in base business was due to continued United States market softness, particularly in the maintenance, repair and operations (MRO) and non-residential construction end markets. Some improvement has been noted in the electrical, industrial and electronics markets. Profit for the region increased 61.6% to $9,498,000 from $5,879,000 for the three-month period and 23.9% to $24,614,000 from $19,860,000 for the six months ended January 31, 2004, compared to the same periods in the prior year. Increased profitability in the Americas can be attributed to improved gross margins due to increased sales of higher margin products and continuing cost controls. As mentioned above, the prior year second quarter results were reduced by the disruption in the United States direct marketing business in conjunction with SAP go-live. Europe: Europe sales increased 26.1% for the quarter and 22.2% for the six months ended January 31, 2004 compared to the same periods in the prior year. Base sales in local currency decreased 3.3% in the quarter and 3.8% in the six-month period. The decline was primarily due to the loss of a low margin die cut customer in fiscal 2003. Sales were positively affected by fluctuations in the exchange rates used to translate financial results into United States currency, which increased sales within the region by 16.0% in the quarter and 14.4% in the six-month period. Sales were also aided by acquisitions, which increased sales 13.4% for the quarter and 11.7% for the six-month period. Profit for the region increased 41.1% in the quarter to $15,346,000 from $10,876,000 in the prior year and 35.2% in the six-month period to $28,795,000 from $21,294,000 in the prior year, due to benefits from restructuring activities, foreign currency translation and improved gross margins due to a more favorable mix of product sales. Asia: Asia sales increased 38.8% for the quarter and 37.3% for the six-month period ended January 31, 2004, compared to the same periods in the prior year. Base sales in local currency increased 26.6% in the quarter and 26.3% for the six-month period compared to the same periods last year. Base growth was concentrated in sales of high-performance identification and die cut products in the telecommunications and electronics markets. Sales were positively affected by fluctuations in the exchange rates used to translate financial results into U.S. currency, which increased sales within the region by 12.2% in the quarter and 11.0% for the six-month period. China and Malaysia both more than doubled sales for the quarter and the six-month period compared to the same periods in the prior year. Investments in infrastructure in China and Malaysia over the past two years are beginning to yield significant growth. Profit for the region was up 58.6% for the quarter to $4,905,000 from $3,093,000 in the prior year second quarter. Profit for the six-month period was up 52.3% to $10,329,000 from $6,780,000 in the prior year. The increase in profit was due primarily to increased sales volume, foreign currency translation and also to improved margins due to improved use of manufacturing capacity. 15 Financial Condition The Company's liquidity remained strong. Its current ratio as of January 31, 2004, was 2.2, down from the current ratio at July 31, 2003 of 2.4. Cash and cash equivalents were $58,211,000 at January 31, 2004, compared to $76,088,000 at July 31, 2003. The decrease was primarily due to the $30,652,000 net cash paid for the acquisitions of Brandon International, Prinzing Enterprises, Inc. and B.I.G in the first six months of the year. Working capital decreased $5,429,000 during the six months ended January 31, 2004, to $118,449,000 from $123,878,000 at July 31, 2003. Inventories increased $8,738,000 for the six-month period due primarily to the effects of acquisitions and foreign currency translation. Accounts receivable increased $14,266,000 for the quarter due to acquisitions and foreign currency translation. Current liabilities increased $8,647,000 for the six months due to the timing of income tax payments and increased liabilities associated with acquisitions and foreign currency translation. Cash flow from operations totaled $22,098,000 for the six months ended January 31, 2004, compared to $20,653,000 for the same period last year. The increase was the result of higher net income offset by an increase in accounts receivable balances, increased inventory balances and lower accrued liabilities. Capital expenditures were $6,621,000 in the six months ended January 31, 2004, compared to $7,621,000 in the same period last year. Net cash used in financing activities was $4,161,000 for the six-month periods ended January 31, 2004, due primarily to payments of dividends to the Company's stockholders, payments on long term debt, and purchase of treasury stock offset by proceeds from the issuance of common stock due to stock option exercises. Cash flows used in financing activities for the same period last year were $10,881,000 related to payment of dividends, redemption of preferred stock, and purchase of treasury stock. Long-term debt as a percentage of long-term debt plus stockholders' investment was 0.01% at January 31, 2004 and 0.2% at July 31, 2003. The Company maintains a maximum $100 million line of credit (based on certain financial ratios of the Company) with a group of six banks, none of which was being utilized as of January 31, 2004. No borrowings were made under the line of credit during the six months ended January 31, 2004. At January 31, 2004, approximately $86 million of the line of credit was available to the Company. The Company is in compliance with the covenants of the line of credit agreement. The Company continues to seek opportunities to invest in new products, new markets and strategic acquisitions and joint ventures, which fit its growth strategy. Management believes that its cash and cash equivalents, the cash flow it generates from operating activities, available line of credit and other borrowing alternatives will be adequate to meet the Company's current and anticipated investing and financing needs. The strong liquidity of the Company and its continued strong cash flow enable the Company to execute a long-term strategic plan. This strategic plan includes investments, which expand our current market share, open new markets and geographies, develop new products and distribution channels and continue to improve our processes. This strategic plan also includes executing key acquisitions and joint ventures. Even in uncertain economic times, the Company's strong liquidity allows it to continue with investments for the future. Should the Company remain in an unleveraged position during expansionary times, the Company may experience a less rapid rate of growth compared to some of its competitors. The Company does not have material off-balance sheet arrangements or related party transactions. The Company is not aware of factors that are reasonably likely to adversely affect liquidity trends, other than the risk factors described in other Company filings. However, the following additional information is provided to assist financial statement users. Operating Leases - These leases generally are entered into only for non-strategic investments (e.g., warehouses, office buildings, computer equipment) where the economic profile is favorable. 16 Purchase Commitments - The Company has purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of business. In the aggregate, such commitments are not in excess of current market prices. Due to the proprietary nature of many of the Company's materials and processes, certain supply contracts contain penalty provisions for early termination. The Company does not believe a material amount of penalties will be incurred under these contracts based upon historical experience and current expectations. Other Contractual Obligations - The Company does not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity. Related Party Transactions - The Company does not have any related party transactions that materially affect the results of operations, cash flow or financial condition. Forward-Looking Statements Except for historical information, the Company's reports to the Securities and Exchange Commission on Form 10-K and Form 10-Q and periodic press releases, as well as other public documents and statements, may contain "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by words such as "intend," "anticipate," "assume," "believe," "estimate," "expect," "plan," "project," "will," and other expressions, which refer to future events and trends. The ability of the Company to attain management's goals and objectives is materially dependent on numerous factors. These factors, which include economic conditions, currency fluctuations, cost of raw materials, reliance on suppliers, new products, acquisitions, intellectual property, environmental issues, political considerations and others, are more fully described in the Company's 2003 Form 10-K filed with the Securities and Exchange Commission. These factors could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's business operations give rise to market risk exposure due to changes in foreign exchange rates. To manage that risk effectively, the Company enters into hedging transactions, according to established guidelines and policies, that enable it to mitigate the adverse effects of this financial market risk. The global nature of the Company's business requires active participation in the foreign exchange markets. As a result of investments, production facilities and other operations on a global scale, the Company has assets, liabilities and cash flows in currencies other than the U.S. Dollar. The primary objective of the Company's foreign-exchange risk management is to minimize the impact of currency movements on intercompany transactions and foreign raw-material imports. To achieve this objective, the Company hedges a portion of known exposures using forward contracts. Main exposures are related to transactions denominated in the British Pound, the Euro, Canadian Dollar, Japanese Yen and Australian Dollar. The risk of these hedging instruments is not material. The Company could be exposed to interest rate risk through its corporate borrowing activities. The objective of the Company's interest rate risk management activities is to manage the levels of the Company's fixed and floating interest rate exposure to be consistent with the Company's preferred mix. The interest rate risk management program consists of entering into approved interest rate derivatives when there is a desire to modify the Company's exposure to interest rates. As of January 31, 2004, the Company has not entered into any interest rate derivatives. ITEM 4. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ""Exchange Act") as of the end of the period covered by this report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company required to be included in the Company's periodic filings under the Exchange Act. There have not been any changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company's most recently completed fiscal quarter or subsequent to the Evaluation Date that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 18 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of shareholders was held on November 20, 2003. At the meeting the following persons were elected to serve as the Company's directors by the affirmative vote of 100% of the 1,769,314 shares of Class B Common Voting Stock until the next annual meeting of shareholders and until their successors have been elected: Richard A. Bemis Robert C. Buchanan Mary K. Bush Frank W. Harris Frank M. Jaehnert Frank R. Jarc Peter J. Lettenberger Gary E. Nei Roger D. Pierce Elizabeth I. Pungello ITEM 5. OTHER INFORMATION On December 15, 2003, the Company announced that David Mathieson was named Vice President and Chief Financial Officer. A report on Form 8-K was filed regarding this leadership change on December 16, 2003. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Rule 13a-14(a)/15d-14(a) Certification of Frank M. Jaehnert 31.2 Rule 13a-14(a)/15d-14(a) Certification of David Mathieson 32.1 Section 1350 Certification of Frank M. Jaehnert 32.2 Section 1350 Certification of David Mathieson (b) Reports on Form 8-K. During the quarter ended January 31, 2004, the Company filed a Current Report on Form 8-K pursuant to Item 5 ("Other Events") dated December 15, 2003, announcing that David Mathieson was named Vice President and Chief Financial Officer. Also during the quarter ended January 31, 2004, the Company furnished a Current Report on Form 8-K containing information pursuant to Item 12 ("Results of Operations and Financial Condition") dated November 18, 2003, relating to the announcement of earnings for the Company's fiscal 2004 first quarter. 19 Pursuant to the requirements 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. SIGNATURES BRADY CORPORATION Date: March 1, 2004 /s/ F. M. Jaehnert - -------------------- ------------------ F. M. Jaehnert President & Chief Executive Officer Date: March 1, 2004 /s/ D. Mathieson - -------------------- ---------------- D. Mathieson Vice President & Chief Financial Officer (Principal Accounting Officer) (Principal Financial Officer) 20 EX-31.1 3 c83332exv31w1.txt CERTIFICATION EXHIBIT 31.1 RULE 13A-14(a)/15D-14(a) CERTIFICATION I, Frank M. Jaehnert, certify that: (1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 1, 2004 /s/ FRANK M. JAEHNERT - ----------------------- Frank M. Jaehnert President and Chief Executive Officer EX-31.2 4 c83332exv31w2.txt CERTIFICATION EXHIBIT 31.2 RULE 13A-14(a)/15D-14(a) CERTIFICATION I, David Mathieson, certify that: (1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 1, 2004 /s/ DAVID MATHIESON - ------------------------ David Mathieson Vice President and Chief Financial Officer EX-32.1 5 c83332exv32w1.txt CERTIFICATION EXHIBIT 32.1 SECTION 1350 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Brady Corporation (the "Company") certifies to his knowledge that: (1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended January 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in that Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company. Date: March 1, 2004 /s/ FRANK M. JAEHNERT - ----------------------- Frank M. Jaehnert President and Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-32.2 6 c83332exv32w2.txt CERTIFICATION EXHIBIT 32.2 SECTION 1350 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Brady Corporation (the "Company") certifies to his knowledge that: (1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended January 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in that Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company. Date: March 1, 2004 /s/ DAVID MATHIESON - ------------------------ David Mathieson Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----