<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended July 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the Transition Period from __________ to __________
Commission File Number 0-12730
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W.H. BRADY CO
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(Exact name of registrant as specified in charter)
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Wisconsin 39-0178960
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(State of Incorporation) (IRS Employer Identification No.)
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6555 West Good Hope Road
Milwaukee, WI 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant's Telephone Number)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Class A Nonvoting Common Stock, Par Value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No ___
As of September 30, 1995, there were outstanding 5,507,599 shares of Class A
Nonvoting Common Stock (the "Class A Common Stock"), and 1,769,314 shares of
Class B Common Stock. The Class B Common Stock, all of which is held by
affiliates of the Registrant, is the only voting stock.
DOCUMENTS INCORPORATED BY REFERENCE
W.H. Brady Co. 1995 Annual Report, Incorporated into Part II & IV
<PAGE> 2
I N D E X
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PART I PAGE
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 1
General Development of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 1
Financial Information About Industry Segments . . . . . . . . . . . . . . . . . . . . . . . . I - 1
Narrative Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 1
International Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 7
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 8
Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 8
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 8
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 9
Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 9
Financial Information About Foreign and
Domestic Operations and Export Sales . . . . . . . . . . . . . . . . . . . . . . . . . . I - 9
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 9
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I - 9
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II - 1
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II - 2
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . II - 2
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . II - 2
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . II - 2
PART III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III - 1
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I N D E X
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PART III (Continued)
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Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III - 4
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III - 4
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III - 6
Common Stock Price Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III - 9
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -10
Termination of Employment Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -10
Compensation Committee Interlocks and
Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -11
Profit Sharing and Employee Thrift Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -11
Deferred Compensation Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -12
Compensation Committee Report on
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -12
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -15
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III -18
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV - 1
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV - 5
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PART I
W.H. Brady Co. and Subsidiaries is hereinafter referred to as the Company or
Brady.
ITEM 1 BUSINESS
(a) General Development of Business
Brady is a Wisconsin corporation. It presently operates 12
manufacturing facilities in the United States and six foreign countries. The
Company operates through seven subsidiaries with operations in two states and
in Australia, Belgium, Canada, England, France, Germany, Hong Kong, Italy,
Japan, Korea, New Zealand, Singapore, Spain and Sweden. The Company's
principal office is located at 6555 West Good Hope Road, Milwaukee, Wisconsin
53223 and its telephone number is (414) 358-6600.
(b) Financial Information About Industry Segments
Not applicable.
(c) Narrative Description of Business
General
The Company develops, manufactures and sells a broad range of stock and
customized products employing its knowledge of surface chemistry, principally
in adhesives, coatings and graphics technologies. Brady's products include
over 20,000 stock items and a wide variety of custom items, which are used
primarily to identify, inform or instruct, including pressure-sensitive
identification, labeling and marking systems for electrical wires and pipes;
self-bonding nameplates; safety and instructional signs and specialized tapes
used in audio, video and computer applications. The Company's products are
sold domestically and internationally through a network of distributors, a
direct sales force and mail order sales, and are used in a variety of
industrial, commercial, governmental, public utility, medical equipment,
computer and consumer product markets, including original equipment
manufacturers.
The Company operates 12 manufacturing facilities in the United States and
six foreign countries. Domestic and international operations are conducted
through its Identification Systems and Specialty Tapes Group, Signmark Group,
and Seton Group. Domestic operations are located in Connecticut and Wisconsin.
International operations are located in Australia, Belgium, Canada, England,
France, Germany, Hong Kong, Italy, Japan, Korea, New Zealand, Singapore, Spain
and Sweden.
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Technology and Product Development
The Company focuses its research and development efforts on
applications in the science of surface chemistry, i.e., coatings, adhesives and
physical bonding. This dedication to surface chemistry, in combination with a
manufacturing technology oriented to adhesives and graphics, has led to the
development of many proprietary release coatings, adhesives and products which
are adhesively fastened. Most of the Company's products are adhesively
fastened to customers' products, equipment or buildings, but a portion of the
products are mechanically fastened.
Adhesive based products are characterized by their ability to adhere
to another surface merely by application of pressure. The adhesive materials
generally consist of a face stock, which is coated with an adhesive, and a
removable protective backing coated with a release-coating. The stock may be
paper, metal or metal foil, plastic film or cloth. The release-coated
removable backing is laminated to the adhesive side of the face stock and
protects the pressure-sensitive adhesive from premature contact with other
surfaces, thus allowing the material to be printed and/or die-cut, as required.
The backing paper also serves as the carrier for supporting and dispensing the
products. When the products are to be used, the backing is removed to expose
the adhesive, and the product is pressed or rolled into place manually or
applied automatically.
New product and process development and product improvements are a
significant part of the Company's business plan. Although it is difficult to
accurately measure, the Company has a goal that a significant portion of its
sales be of products introduced within the past five years. These products
included bar code labels, computer printable wire marking sleeves and
application systems, Bradywriter, Bradylabel Software, Bradymarker & labels,
Lasertabs, Brady snap-on and mechanically applied pipemarkers, lockout
compliance products, parts for micro discs, surface mount carrier and cover
tape, outdoor weatherable graphic arts adhesive coated films, laser printable
nameplates, and abrasive and solvent resistant coatings for polyester and
polycarbonates.
The Company conducts most of its research and development activities
at its 30,000 sq. ft. Frederic S. Tobey Research and Innovation Center in
Milwaukee, Wisconsin and through a small research center in Belgium which
services its European subsidiaries. The Company spent approximately $10.4
million, $10.3 million, and $12.1 million in fiscal 1995, 1994 and 1993,
respectively, on its research and development activities, all of which were
Company sponsored. In fiscal 1995, approximately 100 employees were engaged in
research and development activities for the Company. Additional research
projects were conducted under contract with universities, other institutions
and consultants. The Company owns patents covering various aspects of adhesive
chemistry, electronic circuitry, computer generated wire markers, and systems
for aligning letters and patterns. While the
I - 2
<PAGE> 6
Company believes that its patents are a significant factor in maintaining its
market position as to certain products, technology in the areas covered by many
of the patents is evolving rapidly and may limit the value of the Company's
patents. The Company's business is not dependent on any single patent or group
of patents.
Manufacturing Processes
The Company's manufacturing processes require application of coatings
and adhesives to a variety of materials, including paper, metal and metal foil,
plastic film and cloth, and the use of various graphic techniques to print or
mark the materials. Products manufactured by the Company generally require a
high degree of precision and the application of adhesives with chemical and
physical properties suited for specific usages.
The Coated Products Division of Brady USA, Inc. produces adhesive
coated materials and printable top coated materials mainly for use by other
divisions and subsidiaries. The Company's production of the majority of its
own adhesive stocks and top coated materials permits an integrated
manufacturing process which the Company believes, when combined with its
emphasis on quality control, provides the basis for high quality, uniform
products. The Company's integrated manufacturing processes also permit it to
achieve greater flexibility in product design and manufacture, and improve its
ability to provide specialized products designed to meet the needs of specific
applications.
Products
Brady's products are used in a wide variety of industrial
applications, including markers that identify electrical circuits and piping
systems; safety and accident prevention signs that warn of health and accident
hazards; nameplates that identify consumer, scientific, medical and electrical
products; specialized tapes for audio, video and computer applications;
products for the marking and identification of buildings, equipment, and
storage facilities; products for the aerial and ground location and
identification of utility lines; products for floor safety, aisle and barricade
marking. The Company's most significant products are described below.
I - 3
<PAGE> 7
WIRE MARKERS
Since 1945, the Company has been the leading domestic producer of
labeling and identification products for electrical wires and wiring devices.
Virtually all industrial products, medical equipment, computers, large
buildings, transportation equipment and vehicles contain a complex network of
electrical wiring and circuits. The wires and wiring devices that comprise
these networks must be identified at the time of manufacture or installation.
Many of the Company's products have become standard in the industry, with
applications in both manufacturing and distribution.
The Company manufactures both self-adhesive and non-adhesive wire
marking products and labels in a wide variety of styles and materials. The
markers may be printed with a single number or letter, or with a multi-line
"address" that indicates the origination and termination of the wire, the
device or devices to which it transmits current, engineering drawings and part
numbers, or other information that facilitates the location of the source of
trouble and repair in case of malfunction of the system.
Brady wire markers and labels are designed for application by a
variety of means and for use in specialized environments, including temperature
ranges of -85F to more than 1,200F and chemical or other corrosive exposures
including radiation, moisture, ozone, acid, alkalis, oils, and solvents. These
products are constructed from various materials designed to meet engineers'
specifications, ranging from general purpose cloth to materials for more
specialized uses such as aluminum, vinyls, polyesters and polyvinylflourides.
Such markers and labels and their chemically appropriate adhesives provide
resistance to various environmental hazards such as heat, abrasion, solvents,
and chemical corrosion.
The Company's self-adhesive wire markers and labels are either
preprinted or blank. The blank wire markers and labels can be computer printed
by the customer using Brady developed software. Preprinted wire markers and
labels are mounted on relatively thick release-coated card stock from which
individual adhesive markers are removed manually or by machine and wrapped
around the wire to provide permanent identification. Computer printable wire
markers and labels are mounted on pin-fed rolls or backing sheets. An
important feature of the Brady computer printable products is the proprietary
ink-receptive, nonerasable, heat and solvent resistant coating on the surface
of the marker.
The Company's non-adhesive wire marking sleeves are being used
increasingly in industrial applications. These sleeve markers are produced in
a variety of forms, ranging from simple slip-on or clip-on preprinted molded
plastic pieces which are applied manually or through the use of a simple
tubular device, to highly automated application systems for computer printed
wire marking sleeves. These computer printed sleeves may be applied using
Brady developed equipment at rates
I - 4
<PAGE> 8
up to 1,800 markers per hour. Wire marking sleeves may also be heat shrunk
onto the wire using equipment designed for that purpose.
This product line includes indelible ink ribbons and portable,
self-contained printing systems able to withstand the rigors of an industrial
environment.
SPECIALIZED TAPE PRODUCTS
The Company's specialized tapes and related products are used in a
variety of audio, video and computer applications, as well as surface mount
technology products. These specialized tape products are characterized by high
performance adhesives, most of which are formulated by the Company, to meet
high tolerance requirements of the industries in which they are used. The
Company's computer application products include reinforcing rings for floppy
discs and components of micro-discs. Its audio industry products include
cassette leader and splicing tapes and conductive splicing tapes. Video
products include splicing and leader tapes, conductive/reflective sensing
tapes, and other specialty components used in video cassettes. The Company's
surface mount carrier and cover tapes are compatible with the products of all
major surface-mounted-device electronic component manufacturers.
PIPE MARKERS
The Company manufactures both self-adhesive and non-adhesive
mechanically applied stock and custom designed pipe markers and plastic and
metal valve tags for the identification of piping systems in chemical plants,
refineries, pipelines, utilities, ships, hospitals, food processing plants,
institutions, and other buildings and facilities in a variety of temperature
and chemical environments. These products are designed to legibly identify and
provide information as to the contents, direction of flow and special hazardous
properties of materials contained in the piping systems. The Company's
products are designed to meet standards established by the American National
Standards Institute for the identification of piping systems. The Company
formulates its own adhesives for its pipe marking products to withstand
demanding climatic conditions encountered by facilities ranging from the Alaska
pipeline to Middle East refineries, as well as exposure to various chemical
environments. The products are also designed for application to a variety of
pipe surfaces and sizes.
SAFETY AND ACCIDENT PREVENTION SIGNS
The Company manufactures safety and accident prevention signs for use
in a broad range of industrial, commercial, governmental and institutional
applications. These signs are either self-adhesive or mechanically mounted,
are designed for both indoor and outdoor use, and are manufactured to meet
standards promulgated by the National Safety Council, the Occupational Safety
and Health Administration and a variety
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<PAGE> 9
of industry associations. The Company manufactures products with both stock
and custom legends. Safety and accident prevention signs are constructed from
materials designed to meet specific industry and environmental requirements,
including self-adhesive vinyl coated cloth, subsurface printed polyester,
reflective sheeting and phosphorescent polyester, metal, and fiberglass
reinforced panels. The Company's sign products are categorized by type of
message to be conveyed, including admittance, directional and exit signs;
electrical hazard warnings and energy conservation messages; fire protection
and fire equipment signs; hazardous waste labels; hazardous and toxic material
warning signs; vehicle placards for the transportation industry; personal
hazard warnings; housekeeping and operational warnings; pictograms; radiation
and laser signs; safety practices signs; traffic signs; and regulatory
markings. This product line includes printing systems that enable customers to
print signs on-demand, on-site using Brady software and Brady materials. The
Company believes that no other supplier offers as broad a range of safety and
accident prevention sign products.
NUMBERS AND LETTERS
The Company produces self-adhesive numbers and letters used for the
systematic identification of bins and shelving in factories, warehouses,
stockrooms and other facilities where alphanumeric labeling is desired. It
produces card mounted numbers and letters in a variety of sizes and types of
adhesive-backed printed material. Numbering and lettering systems are
constructed of vinyl-coated cloth and indoor/outdoor vinyl. The Brady Bintab
(R) labeling system provides custom computer printed labels for specialized
storage identification needs. The Company also manufactures self-adhesive and
self-aligning die-cut numbers and letters and sign making kits.
OTHER PRODUCTS
The Company also sells a variety of other products, none of which
individually accounts for a material portion of its sales. These products
include non-skid safety tapes, warning posts and cones, die cut masks, adhesive
backed felt, lockout/tag-out devices, temperature indicating labels, and
hospital and clinical labels.
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Marketing and Sales
Brady markets its stock products primarily through a network of
domestic distributors, mail order sales, and foreign distributors. The
Company's custom designed products are marketed directly to end users,
primarily through domestic and foreign full-time sales representatives. As
part of its marketing program, the Company encourages distributors to maintain
adequate inventories of its stock products to permit prompt delivery, and
maintains such inventories itself.
Many of the Company's stock products were originally designed,
developed and manufactured as custom products for a specific purchaser.
However, such products have frequently developed wide industry acceptance and
become stock items offered by the Company through mail order and distributor
sales. The Company's products are designed to specifications established by
industrial, commercial and military customers for specific applications. The
Company seeks also to have its products specified by the engineering
departments of manufacturers, constructors and contractors to which it sells.
The Company's products are sold in a wide variety of industrial,
commercial, governmental, public utility, medical equipment, computer and
consumer product markets, including original equipment manufacturers. No
material part of the Company's business is dependent upon a single customer or
group of customers, and the loss of a particular customer would have no
material adverse effect upon the Company's business. In fiscal 1995, no single
customer accounted for more than 2.0% of Company sales. Although sales of
certain of the Company's products experience recurring seasonal variations,
management does not consider the Company's overall sales to be seasonal in
nature.
International Operations
The Company's international operations consist both of direct export sales
and operations conducted by its eighteen international locations (Australia,
Belgium, Canada (2), England (2), France (2), Germany (2), Hong Kong, Italy,
Japan, Korea, New Zealand, Singapore, Spain and Sweden). Six of these
international locations manufacture or have the capability to manufacture
certain of the Brady products they sell. In fiscal 1995, 1994, and 1993,
international sales accounted for 41.1%, 37.1%, and 32.0%, respectively, of
Brady's sales. Other than for the risks normally attending foreign operations,
such as currency fluctuations, exchange control regulations and the effect of
international relations or the domestic affairs of foreign countries on the
conduct of business, the nature of the Company's international operations and
the countries in which they are conducted do not present unusual business risks
over those encountered by the Company's domestic activities.
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Backlog
As of July 31, 1995, the amount of the Company's backlog orders
believed to be firm was $14.6 million. This compares with approximately $17.4
million and $15.2 million of backlog orders as of July 31, 1994 and 1993,
respectively. Average delivery time for the Company's orders varies from one
day to twelve weeks, depending on the type of product, and whether the product
is stock or custom designed and manufactured.
Raw Materials
Base materials used in the Company's products consist primarily of
paper, plastic sheets and films (primarily polyesters and polycarbonates),
metal and metal foil, cloth, fiberglass, inks, dyes, adhesives, pigments,
natural and synthetic rubber, organic chemicals, polymers and solvents. The
Company purchases its raw materials from many suppliers and is not dependent
upon any single supplier for any of its base supply materials.
Competition
The markets for most of the Company's products are highly competitive.
Although no industry statistics are available, the Company believes, on the
basis of its knowledge and experience in its various product markets, that it
is the leading domestic producer of self-adhesive wire markers, pipe markers,
audio and video leader and splicing tapes, reinforcing rings for floppy discs,
and adhesive numbers and letters, and believes that it is a leading domestic
producer of safety signs. The Company competes for business principally on the
basis of quality and performance, and to a lesser extent on price. Product
quality is determined by factors such as suitability of component materials for
various applications, adhesive properties, graphics quality, durability,
product consistency and workmanship. Competition in many of the Company's
product markets is highly fragmented, ranging from smaller companies offering
only one or a few types of products to some of the world's major adhesive and
electrical product companies offering a wide range of competing products. A
number of the Company's competitors are larger than the Company and have
substantially greater resources.
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Employees
As of July 31, 1995, Brady employed approximately 2,000 persons. The
Company has never experienced a work stoppage due to a labor dispute, is not a
party to any labor contracts, and considers its relations with employees to be
excellent. To meet present and future manpower requirements, the Company
maintains an active college recruiting program for sales, technical and
administrative personnel.
Environment
At present, the manufacturing processes for the Company's
adhesive-based products utilize certain evaporative organic solvents which,
unless controlled, would be vented into the atmosphere. Emissions of these
substances are regulated at the federal, state and local levels. During the
past several years, the Company has implemented a number of procedures to
reduce atmospheric emissions and/or to recover solvents. These efforts have
included the reformulation of certain adhesives to water-based emulsions,
rather than solvent-based products. During the past three years, Brady also
installed incineration equipment to control emissions of organic solvents at a
cost of approximately $393,000.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales
See Note 7 to Notes to Consolidated Financial Statements
ITEM 2 PROPERTIES
The Company and its subsidiaries have 12 manufacturing facilities,
five of which are located in Wisconsin, and one each in Connecticut, Australia,
Belgium, Canada, England, Japan and Singapore. The Company's primary research
facility of approximately 30,000 square feet is located in Milwaukee,
Wisconsin. The Company's present operating facilities contain a total of
approximately 840,000 square feet of space. All of the Company's facilities
are owned by it, except for a total of approximately 180,000 square feet of
leased space. The Company believes that its equipment and facilities are
modern, well maintained, and adequate for its present needs.
ITEM 3 LEGAL PROCEEDINGS
The Company and its subsidiaries are not parties to any material
pending legal proceedings.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's Class A Common Stock is principally traded on the
Over-the-Counter market and is quoted on NASDAQ under the symbol
BRCOA. There is no established public trading market for the
Company's Class B Common Stock.
Stock price disclosure required by this item is incorporated by
reference to Page 36 of the W.H. Brady Co. 1995 Annual Report.
(b) Holders
The number of holders of record of the Company's Class A and Class B
Common Stock as of October 3, 1995, was 336 and 2, respectively.
(c) Dividends
The Company has followed a practice of paying quarterly dividends on
its outstanding common stock. Before any dividend may be paid on the
Class B Common Stock, holders of the Class A Common Stock are entitled
to receive an annual, non-cumulative cash dividend of $.10 per share
(subject to adjustment in the event of future stock splits, stock
dividends or similar event involving shares of Class A Common Stock).
Thereafter, any further dividend in that fiscal year must be paid on
all shares of Class A Common Stock and Class B Common Stock on an
equal basis.
During its two most recent fiscal years and for the first quarter of
the current year, the Company declared the following dividends per
share on its Class A and Class B Common Stock:
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<CAPTION>
Year
Ending
Year Ended 7/31/94 Year Ended 7/31/95 7/31/96
------------------------------ --------------------------- -------
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
--- --- --- --- --- --- --- --- ---
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Class A $.17 $.17 $.17 $.17 $.20 $.20 $.20 $.20 $.30
Class B .07 .17 .17 .17 .10 .20 .20 .20 .20
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ITEM 6 SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to Page 18
and 19 of the W.H. Brady Co. 1995 Annual Report.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to Pages 20
and 21 of the W.H. Brady Co. 1995 Annual Report.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to Pages 22
through 34 of the W.H. Brady Co. 1995 Annual Report.
ITEM 9 CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
II - 2
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PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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Name Age Title
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Katherine M. Hudson 48 President, CEO and Director
Donald P. DeLuca 55 Senior Vice President, Treasurer,
Assistant Secretary, and Director
Mary T. Arnold 52 Vice President, Research and Development
Richard L. Fisk 51 Vice President, Seton Group
David R. Hawke 41 Vice President, Signmark Group
Peter J. Lettenberger 58 Secretary and Director
David W. Schroeder 40 Vice President, ISST Group
James M. Sweet 42 Vice President, Human Resources
William H. Brady III 53 Director
Elizabeth B. Lurie 50 Director
Robert C. Buchanan 55 Director
Roger D. Peirce 58 Director
Richard A. Bemis 54 Director
Frank W. Harris 53 Director
Gary E. Nei 51 Director
</TABLE>
KATHERINE M. HUDSON - Mrs. Hudson joined the Company in January 1994, as
President, Chief Executive Officer and Director. Prior thereto she was a Vice
President at Eastman Kodak Company and General Manager of its Professional,
Printing and Publishing Image Division. She is also a director of Apple
Computer.
DONALD P. DELUCA - Mr. DeLuca joined the Company as Vice President-Finance and
Chief Financial Officer in May 1990. He was promoted to Senior Vice President
in August 1994. Before joining Brady, he served as Executive Vice
President-Finance and Administration of CSC Industries, Inc. from 1987 to
April 1990. Prior to that he served as Vice President, Treasurer and Secretary
of Copperweld Corp. from 1974 to 1987. He is also a director of GAN North
American Insurance Company, GAN National Insurance Company and Fugitive
Emissions Control, Inc..
MARY T. ARNOLD - Dr. Arnold joined the Company in February 1993. In March
1995, she was appointed to her present position. Prior to joining Brady, Dr.
Arnold served in various capacities at G. E. Appliances.
RICHARD L. FISK - Mr. Fisk joined the Company in 1979 and was appointed to his
present position in August 1987. He previously served as General Manager of
Seton Name Plate Co., a wholly-owned subsidiary of the Company.
III - 1
<PAGE> 16
DAVID W. HAWKE - Mr. Hawke joined the Company in 1979. He served as General
Manager of the Industrial Products Division from 1985 to 1991. From 1991 to
February 1995, he served as Managing Director - European Operations. In March
1995, he was appointed to his present position.
PETER J. LETTENBERGER - Mr. Lettenberger has served as a Director and Secretary
of the Company since January 1977. Mr. Lettenberger has been a member of the
Company's audit and compensation committees since April, 1977 and October 1978,
respectively, and has been chairman of the compensation committee since June
1985. He is a partner of Quarles & Brady, general counsel to Company, which
firm he joined in 1964. He is also a director of Electronic
Tele-Communications, Inc.
DAVID W. SCHROEDER - Mr. Schroeder joined the Company in June 1991 as General
Manager of the Industrial Products Division. He was appointed to his present
position in March 1995. Before joining the Company, he served as President and
Chief Executive Officer of Uniroyal Adhesives & Sealants Co., Inc. from 1988 to
May 1991.
JAMES M. SWEET - Mr. Sweet joined the Company in 1985. In November of 1987 he
was appointed Director, Personnel. In August of 1989 he was appointed Vice
President, Human Resources.
WILLIAM H. BRADY III - Mr. Brady has been a director of the Company since
January of 1979. Mr. Brady is a private investor.
ELIZABETH B. LURIE - Mrs. Lurie has been a director of the Company since
January of 1979. Mrs. Lurie is President and Administrator, W. H. Brady
Foundation. Until June 1, 1984, Mrs. Lurie was a Vice President of Chase
Federal Savings & Loan Association, Miami, Florida, and had been employed by
that firm since November 1973, except for the period from October 1979 to
November 1980, when she was Financial Manager for the University of Miami Law &
Economic Center. Prior to November 1994, she was the principal owner of an art
gallery in Maggie Valley, North Carolina.
ROBERT C. BUCHANAN - Mr. Buchanan has been a director of the Company since
November 1987 and a member of its audit committee since June 1988 (chairman
since June 1990). Mr. Buchanan is President and CEO of the Fox Valley
Corporation in Appleton, Wisconsin, having assumed that position November 1,
1980. He is also a director of The Northwestern Mutual Life Insurance Company
and Firstar Corporation.
ROGER D. PEIRCE - Mr. Peirce has served as a director and a member of the
compensation committee of the Company since September, 1988. Mr. Peirce is
President of Valuation Research Corporation, having assumed that position in
April 1995. From September 1986 to December 1993, he was President of Super
Steel Products Corp. in Milwaukee, Wisconsin. Prior to that he was a managing
partner for Arthur Andersen & Co., independent certified public accountants.
III - 2
<PAGE> 17
RICHARD A. BEMIS - Mr. Bemis has been a director of the Company since January
1990 and a member of its compensation committee since March 1990. Mr. Bemis is
President and CEO of Bemis Manufacturing Company, a manufacturer of molded
plastic products in Sheboygan Falls, Wisconsin. He is also a director of
Wisconsin Public Service Corporation.
FRANK W. HARRIS - Dr. Harris has been a Director of the Company since November
1991. Dr. Harris is a Professor of Polymer Science and Biomedical Engineering
in the Institute of Polymer Science at the University of Akron, and has been on
its faculty since 1983.
GARY E. NEI - Mr. Nei has been a Director of the Company since November 1992,
and a member of its audit committee since November 1994. Mr. Nei is Chairman
of B&B Publishing, a publishing company in Walworth, Wisconsin. He is also a
director of DIFCO Inc. and Uroquest, Inc..
All directors serve until their respective successors are elected at
the next annual meeting of shareholders. Officers serve at the discretion of
the Board of Directors. None of the Company's directors or executive officers
has any family relationship with any other director or executive officer,
except that William H. Brady III is the brother of Elizabeth B. Lurie.
III - 3
<PAGE> 18
ITEM 11 EXECUTIVE COMPENSATION
- ------------------------------
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended July 31, 1995 to those persons who,
as of the end of fiscal 1995, were the Named Executive Officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term
Annual Compensation Compensation
--------------------------- ------------
Awards
Name and Other Annual --------- All Other
Principal Fiscal Salary Bonus Compensation Options/SAR Compensation
Position Year ($) ($) (1) ($) (2) (# of Shares) ($) (3)
- -------- ------ ------- ------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
K.M. Hudson 1995 315,000 369,914 4,163 10,000 87,333(4)
President 1994 175,000 175,000 - 25,000 400,366(4)
& Chief 1993 - - - - -
Executive Officer
D.P. DeLuca 1995 217,875 175,273 4,480 4,000 64,349(5)
Senior Vice 1994 182,750 127,925 2,825 2,500 18,161(5)
President, 1993 174,000 69,426 2,340 2,500 32,151(5)
Treasurer &
Chief Financial
Officer
R.L. Fisk 1995 189,954 156,861 3,425 3,000 13,691
Vice President, 1994 182,577 127,804 3,097 2,500 15,462
Seton Group 1993 173,846 63,280 2,375 2,500 14,421
D.W. Schroeder 1995 170,449 124,446 2,979 2,000 12,394
Vice President, 1994 157,279 90,404 2,887 1,750 12,775
ISST Group 1993 149,780 60,212 2,893 1,750 14,172(6)
D.R. Hawke 1995 160,939 112,497 - 2,000 202,113(7)
Vice President, 1994 147,468 95,855 - 1,250 62,459(7)
Signmark Group 1993 141,341 39,871 - 1,250 39,802(7)
</TABLE>
(1) Reflects bonus earned during the fiscal year which was paid during the
next fiscal year.
(2) The amounts shown represent costs to the Company for expenses
associated with the use of a company car.
(3) All other compensation for fiscal 1995 for Mrs. Hudson, and Messrs.
DeLuca, Fisk, Schroeder and Hawke, respectively, includes: (i)
matching contributions to the Company's Profit Sharing and Employee
Thrift (i.e. "BradyGold") Plan for each named executive officer of
$12,000, $12,000, $12,000, $12,000, and $12,000 and (ii) the cost of
group term life insurance for each named executive officer of $1,544,
$2,349, $1,691, $394 and $480.
III - 4
<PAGE> 19
All other compensation for fiscal 1994 for Mrs. Hudson, and Messrs.
DeLuca, Fisk, Schroeder and Hawke, respectively, includes: (i)
matching contributions to the Company's Profit Sharing and Employee
Thrift (i.e. "BradyGold") Plan for each named executive officer of
$13,000, $14,620, $14,606, $12,582 and $11,798 and (ii) the cost of
group term life insurance for each named executive officer of $660,
$1,022, $856, $193 and $246.
All other compensation for fiscal 1993 for Messrs. DeLuca, Fisk,
Schroeder, and Hawke, respectively, includes: (i) matching
contributions to the Company's Profit Sharing and Employee Thrift
(i.e. "BradyGold") Plan for each named executive officer of $13,920,
$13,858, $11,982, $10,620 and (ii) the cost of group term life
insurance for each named executive officer of $931, $563, $184, and
$171.
(4) Fiscal 1995 includes relocation expenses of $50,586 and $23,203
accrued, but not paid, for the current year portion of a Supplemental
Executive Retirement Plan. Fiscal 1994 includes $386,706 accrued, but
not paid, for that year's portion of the same plan.
(5) Fiscal 1995 includes $50,000 accrued, but not paid, for the current
year portion of a Supplemental Executive Retirement Plan. Fiscal 1994
includes relocation expenses of $2,519. Fiscal 1993 includes
relocation expenses of $17,300.
(6) Includes relocation expenses of $2,006 in fiscal 1993.
(7) Fiscal 1995 includes relocation expenses of $25,282 and expatriation
expenses of $164,351 related to Mr. Hawke's Belgium assignment.
Fiscal 1994 includes relocation expenses of $1,104 and expatriation
expenses of $49,311. Fiscal 1993 includes relocation expenses of
$16,599 and expatriation expenses of $12,412.
III - 5
<PAGE> 20
STOCK OPTIONS
The following tables summarize option grants and exercises during
fiscal 1995 to or by the executive officers named in the Summary Compensation
Table above, and the value of unexercised options held by such persons at July
31, 1995. Stock Appreciation Rights are not available under any of the
Company's plans.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------
% of Total
Options
Granted to
Options Employees Exercise
Granted in Price (2) Expiration
Name (#) (1) Fiscal 1995 ($/Sh) Date
- ---- ------- ----------- ------ ----
<S> <C> <C> <C> <C>
K.M. Hudson 10,000 26.1% 47.000 10/21/2004
D.P. DeLuca 4,000 10.5% 47.000 10/21/2004
R.L. Fisk 3,000 7.8% 47.000 10/21/2004
D.W. Schroeder 2,000 5.2% 47.000 10/21/2004
D.R. Hawke 2,000 5.2% 47.000 10/21/2004
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Rates of
Stock Price Appreciation (3)
----------------------------------------------
0% 5% 10%
$47 $76-5/8 $121-5/8
Name ($) ($) (6) ($) (6)
- ---- --- ------- -------
<S> <C> <C> <C>
K.M. Hudson 0 296,250 748,750
D.P. DeLuca 0 118,500 299,500
R.L. Fisk 0 88,875 224,625
D.W. Schroeder 0 59,250 149,750
D.R. Hawke 0 59,250 149,750
</TABLE>
<TABLE>
<S> <C> <C>
All Shareholders' Gains
(increase in market value of W.H. Brady Co.
Common Stock at assumed rates of stock price
appreciation) (4) (6)................................ $162,477,661 $410,650,290
All Optionees' Gains
(as a percent of all shareholders' gains) (5) (6)... 0.70% 0.70%
</TABLE>
(1) The options granted were dated October 21, 1994 and become exercisable as
follows: 33 1/3% of the shares on October 21, 1995; 33 1/3% of the shares
in October 21, 1996; and 33 1/3% of the shares on October 21, 1997. All
these options have a term of ten years.
III - 6
<PAGE> 21
(2) The exercise price is the average of the highest and lowest sale prices of
the Company's Class A Common Stock as reported by NASDAQ on the date of
the grant.
(3) Represents total potential appreciation of approximately 0%, 63% and 159%
for assumed annual rates of appreciation of 0%, 5% and 10%, respectively,
compounded annually for the ten year option term.
(4) Calculated from the $47.00 exercise price applicable to the options
granted in fiscal 1995 based on the 5,484,478 shares of Class A Common
Stock outstanding on October 21, 1994.
(5) Represents potential realizable value for all options granted in fiscal
1995 as compared to the increase in market value of W.H. Brady Co. Class
A Common Stock at assumed rates of stock price appreciation.
(6) The Company disavows the ability of any valuation model to predict or
estimate the Company's future stock price or to place a reasonably
accurate present value on these options because any model depends on
assumptions about the stock's future price movement that the Company is
unable to predict.
III - 7
<PAGE> 22
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND VALUE OF OPTIONS AT END OF FISCAL 1995
<TABLE>
<CAPTION>
Number of Unexercised
Options at
Shares July 31, 1995
Acquired -------------------------
on Value
Exercise Realized Exercisable Unexercisable
Name (#) ($) (#) (#)
- ---- -------- -------- ----------- -------------
<S> <C> <C> <C> <C>
K.M. Hudson 0 0 28,333 6,667
D.P. DeLuca 0 0 13,000 3,500
R.L. Fisk 0 0 8,667 2,833
D.W. Schroeder 0 0 5,584 1,916
D.R. Hawke 0 0 8,750 1,750
</TABLE>
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money Options
at July 31, 1995 (1)
------------------------------
Exercisable Unexercisable
Name ($) ($)
- ---- ----------- -------------
<S> <C> <C>
K.M. Hudson 790,617 162,508
D.P. DeLuca 525,223 94,059
R.L. Fisk 313,606 77,801
D.W. Schroeder 200,020 52,824
D.R. Hawke 352,560 47,035
</TABLE>
(1) Represents the closing price for the Company's Class A Common Stock
on July 31, 1995 of $71-3/8 less the exercise price for all
outstanding exercisable and unexercisable options for which the
exercise price is less than such closing price.
III - 8
<PAGE> 23
COMMON STOCK PRICE PERFORMANCE GRAPH
The graph below shows a comparison of the cumulative return over the
last five fiscal years had $100 been invested at the close of business on July
31, 1990 in each of W.H. Brady Co. Class A Common Stock, the Standard & Poor's
(S&P) 500 Index and the National Association of Securities Dealers' Automated
Quotation System (NASDAQ) United States Index.
[graph]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
BRADY $100 $150 $133 $137 $188 $281
S&P 500 $100 $113 $127 $138 $145 $183
NASDAQ US $100 $118 $139 $169 $174 $243
</TABLE>
* $100 invested on 31 July 1990 in stock or index
Includes reinvestment of dividends
Fiscal year ending 31 July
III - 9
<PAGE> 24
COMPENSATION OF DIRECTORS
Each director who is also an employee of the Company receives no
additional compensation for service on the Board or on any committee of the
Board. Directors who are not also employees of the Company receive an annual
retainer of $15,000 in addition to $1,250 ($1,000 prior to December, 1994) plus
expenses for each meeting of the Board or any committee thereof which they
attend.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
In fiscal 1994 the Company created a Supplemental Executive Retirement
Plan (SERP) for Mrs. Hudson. The stated amount of the Plan until January 1,
1999 is $500,000. The Company credited a deferred compensation account with
the net present value of the stated amount in January 1994. The account will
be credited annually with the current year's increase in the net present value
calculation. No interest accrues on the balance in the account until January
1, 1999. After that date, interest will accrue quarterly on the balance in the
account at the prime rate in effect at the end of each calendar quarter.
The Company is required to pay Mrs. Hudson the balance in the account
over a ten year period beginning January 2009. The first payment will be
one-tenth of the balance in the account; the second one-ninth; and so on.
In the event of a change in control of the Company, Mrs. Hudson's SERP
may accelerate and become payable in thirty days.
In September 1994, the Company created a Supplemental Executive
Retirement Plan (SERP) for Mr. DeLuca. The Plan calls for the Company to
credit a deferred compensation account with $50,000 on July 31 of each year
beginning July 31, 1995 to and including July 31, 1999, provided Mr. DeLuca is
employed by the Company as of each of those dates. Interest accrues on the
balance in the account at the prime rate in effect on July 31 of each year, but
not less than 6% nor more than 10% per annum.
The Company is required to pay Mr. DeLuca the balance in the account
over a ten year period beginning on August 1 of the year following his
termination of employment with the Company. The first payment will be 1/10th
of the balance in the account; the second payment will be 1/9th; and so on.
The Company may make payments in some other manner provided the payments are
neither smaller nor extend beyond such ten year period.
In fiscal 1992 the Company created a Supplemental Executive Retirement
Plan (SERP) for Mr. Gengler, retired President, CEO and Director. The Plan
credits a deferred compensation account with $125,000 each year provided Mr.
Gengler is in the employment of the Company as of July 31, 1992, July 31, 1993
and July 31, 1994. If Mr. Gengler is in the employment of the Company as of
July 31, 1994 an additional $100,000 will be credited to this account on July
31, 1995, July 31, 1996 and July 31, 1997. Mr. Gengler met these requirements.
Interest accrues on the balance in the account at the rate of 8% per year.
III - 10
<PAGE> 25
The Company is required to pay Mr. Gengler the balance in the account
over a ten year period beginning August 1, 1997. That payment, and the nine
succeeding payments, will equal one-tenth of the account balance at August 1,
1997. Additionally, the payments in succeeding years will include interest
credited to the account in the interim. The Company may make payments in some
other manner provided the payments are neither smaller nor extend beyond August
1, 2006.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, the Board's Compensation Committee was composed of
Messrs. Bemis, Lettenberger and Peirce. None of these persons has at any time
been an employee of the Company or any of its subsidiaries, although Mr.
Lettenberger has been and remains Secretary of the Company. Mr. Lettenberger
is a partner of Quarles & Brady, which is general counsel to the Company.
There are no other relationships among the Company's executive officers,
members of the Compensation Committee or entities whose executives serve on the
Board that require disclosure under applicable SEC regulations.
PROFIT SHARING AND EMPLOYEE THRIFT PLAN
All Brady employees in the United States and certain expatriate
employees working for its international subsidiaries are eligible to
participate in the Company's Profit Sharing and Employee Thrift Plan (the
"BradyGold Plan"). Under this plan the Company agrees to contribute certain
amounts to the BradyGold Plan to the extent of current earnings and profits,
or, under certain circumstances, accumulated earnings of the Company. Under
the BradyGold Plan, the Company first contributes 4% of the eligible earnings
of each person covered by the BradyGold Plan. In addition, participants may
elect to have their annual pay reduced by up to an additional 4% and to have
the amount of this reduction contributed to the BradyGold Plan by the Company
and matched by an additional, equal contribution by the Company. Participants
may also elect to have their annual pay reduced by up to an additional 4% and
to have the amount of this reduction contributed to the BradyGold Plan by the
Company (without an additional matching contribution by the Company). The
assets of the BradyGold Plan credited to each participant are invested by the
BradyGold Plan trustee as directed in several investment funds as permitted by
the BradyGold Plan. The annual contributions and forfeitures allocated to any
participant under all defined contribution plans may not exceed the lesser of
$30,000 or 25% of the participant's base compensation and bonuses. Benefits
are generally payable upon the death, disability, or retirement of the
participant or upon termination of employment before retirement, although
benefits may also be withdrawn from the BradyGold Plan and paid to the
participant if required for certain emergencies. Under certain specified
circumstances, the BradyGold Plan allows loans to be drawn on a participant's
account. The participant is immediately fully vested with respect to the
contributions attributable to reductions in pay; all other contributions become
fully vested after five years of service.
III - 11
<PAGE> 26
DEFERRED COMPENSATION ARRANGEMENTS
Directors, executive officers, corporate staff officers and certain
key management employees of the Company are permitted to defer portions of
their fees, salary and bonus and to invest the deferred amounts in "phantom
stock" of the Company. "Phantom Stock" is not actual stock or rights to
acquire stock in the Company, but it gives participants the right to share in
increases in book value (as defined) of the common stock. At the end of each
fiscal year, the deferred compensation balance (with interest) is credited to
the purchase of phantom common stock at the then book value of the common stock
of the Company, and is thereafter adjusted to reflect stock dividends and other
dividends or distributions on the Company's Class A Common Stock.
Upon the retirement, disability, or death of participant, the Company
is required to pay, each year for a period of ten years, a portion of the book
value of the phantom stock determined by the book value of the corresponding
number of common shares as of the end of each fiscal year. The first payment
must be one-tenth of the book value; the second one-ninth; and so on, with the
number of phantom shares reduced by the equivalent in book value of each
payment.
If the participant's employment ends for reasons other than his
retirement, disability or death, the book value of his phantom stock will be
determined as of the end of the fiscal year following his termination of
employment and he will receive one-tenth of such amount each year for a period
of ten years, plus interest at a rate 2% less than the Company's short-term
borrowing rate. At the request of the participant, the Company may make
payments in larger installments or in a lump sum on a discounted or other
basis.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed
entirely of outside directors and is responsible for considering and approving
compensation arrangements for senior management of the Company, including the
Company's executive officers and the chief executive officer. It is the
philosophy of the Committee to establish a total executive compensation program
which is competitive with a broad range of companies that it considers to be of
comparable size and complexity.
The primary components of the Company's executive compensation program
are (i) base salary, (ii) annual shareholder value enhancement plan cash
bonuses and (iii) long term incentive compensation in the form of stock
options. These are designed to align shareholder and management interests, to
balance the achievement of annual performance targets with actions that focus
on the long-term success of the Company, and to attract, motivate and retain
key executives who are important to the continued success of the Company.
Decisions made by the Committee relating to the base salary compensation and
the annual cash incentive compensation plan are reviewed and approved by the
full Board of Directors.
III - 12
<PAGE> 27
The Committee believes that:
- The Company's pay levels are appropriately targeted to attract and retain
key executives;
- The Company's incentive plan provides strong incentives for management
to increase shareholder value; and
- The Company's total executive compensation program is a cost-effective
strategy to increase shareholder value.
BASE SALARY
Consistent with the Committee's philosophy, base salaries are
generally maintained at or modestly above competitive base salary levels.
Competitive salary level is defined as the average base salary for similar
responsibilities in a group of companies selected by the Committee that the
Committee considers to be of comparable size and complexity. In setting base
salaries for fiscal 1995, the Committee reviewed compensation survey data and
was satisfied that the base salary levels set would achieve the Company's
objectives. Specific increases reflect the Committee's subjective evaluation
of individual performance.
ANNUAL SHAREHOLDER VALUE ENHANCEMENT PLAN
The shareholder value enhancement plan (the "Bonus Plan") provides for
the annual payment of cash bonuses. When viewed together with the Company's
base salary, the purpose of the Bonus Plan is to provide a balance between
fixed compensation and variable, results-oriented compensation. The Bonus Plan
has both an objective (90%) and a subjective (10%) element. Components of the
objective element include maximizing the Company's profitability and
shareholder value. Components of the subjective element include the
achievement of certain agreed upon goals.
STOCK OPTIONS
In 1989 the Board approved the W.H. Brady Co. 1989 Non-Qualified Stock
Option Plan (the "Option Plan") under which 500,000 shares of Class A
Non-Voting Common Stock are available for grant. The Option Plan assists
executive officers, corporate staff officers and key management employees in
becoming shareholders with an important stake in the Company's future, aligning
their personal financial interest with that of all shareholders. Stock options
are typically granted annually and have a term of ten years. Generally the
options become one-third exercisable one year after the date of the grant and
one-third additional in each of the succeeding two years so that at the end of
three years after the date of the grant they are fully exercisable. All grants
under the Option Plan are at market price on the date of the grant and have
value only if the price of W.H. Brady Co. Class A Common Stock, after the
vesting requirement passes, has increased to a greater value than at the grant
date.
III - 13
<PAGE> 28
COMPLIANCE WITH TAX REGULATIONS REGARDING EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code, added by the Omnibus
Budget Reconciliation Act of 1993, generally disallows a tax deduction to
public companies for compensation over $1 million paid to the corporation's
chief executive officer and the other named executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company's executive compensation program, as
currently constructed, is not likely to generate non-deductible compensation in
excess of these limits. The Compensation Committee will continue to review
these evolving tax regulations as they apply to the Company's executive
compensation program. It is the Compensation Committee's intent to preserve
the deductibility of executive compensation to the extent reasonably
practicable and to the extent consistent with its other compensation
objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mrs. Hudson received $315,000 in base salary in fiscal 1995, an
increase of 6.7% over the prior year's annualized amount. She was paid a bonus
attributable to fiscal 1995 of $369,914. Mrs. Hudson's bonus reflects:
(i) sales increased $58,521,000, or 22.9%, and profits increased
$9,371,000, or 50.5%, over similar amounts from the prior year
(ii) stock price increased from $41.50 to $71.375, increasing
shareholder value by approximately $174,000,000
(iii) successful divestiture of the Nameplate Division of BUSA, Inc.,
Brady Medical Products Co., and certain real estate
(iv) facilitated continued improvement in intercompany teamwork
(v) focused the Company's resources on value-enhancing growth
During fiscal 1995, Mrs. Hudson was awarded options to purchase 10,000
shares of Class A Common Stock.
The Committee believes these awards are consistent with the objectives
of the various plans and with the overall compensation policy of the Board of
Directors.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
The Compensation Committee believes the executive compensation
programs and practices described above are competitive. They are designed to
provide increased compensation with improved financial results and provide
additional opportunity for capital accumulation, but only if shareholder value
is increased.
Peter J. Lettenberger, Chairman
Richard A. Bemis
Roger D. Peirce
III - 14
<PAGE> 29
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth the current beneficial ownership of
shareholders who are known by the Company to own five percent (5%) of any class
of the Company's voting shares on September 30, 1995.
<TABLE>
<CAPTION>
Amount of
Title of Name and Address of Beneficial Percent of
Class Beneficial Owner Ownership Ownership
- -------- ---------------- ---------- ----------
<S> <C> <C> <C>
Class B William H. Brady, Jr.(1) 1,574,866 89%
Common Marital Trust
Stock c/o Quarles & Brady
Attn: Peter J. Lettenberger
411 East Wisconsin Avenue
Milwaukee, WI 53202
William H. Brady, Jr.(1) 194,448 11%
Non-QTIP Marital Trust
c/o Quarles & Brady
Attn: Peter J. Lettenberger
411 East Wisconsin Avenue
Milwaukee, WI 53202
</TABLE>
___________________________________________
The trustees of both trusts are Robert C. Buchanan, Irene B.
Brady, Roger D. Pierce, Peter J. Lettenberger, and Richard A. Bemis, each of
whom shares voting and dispositive power. The vested beneficiary is Irene B.
Brady; the contingent remainder beneficiaries are William H. Brady, III and
Elizabeth B. Lurie.
III - 15
<PAGE> 30
(b) Security Ownership of Management
The following table sets forth the current beneficial ownership of
each class of equity securities of the Company by each Director or
Nominee and by all Directors and Officers of the Company as a group as
of September 30, 1995. Except as otherwise indicated, all shares are
owned directly.
<TABLE>
<CAPTION>
Title Name of Beneficial Amount of Percent
of Owner & Nature of Beneficial of
Class Beneficial Ownership Ownership Ownership
- ----- -------------------- --------- ---------
<S> <C> <C> <C>
Class A Peter J. Lettenberger (1)(2)(3) 1,109,963 20.2%
Common Richard A. Bemis (1)(4) 849,431 15.4%
Stock Robert C. Buchanan (1)(5) 849,231 15.4%
Roger D. Peirce (1)(6) 848,931 15.4%
Elizabeth B. Lurie (2)(7) 559,290 10.2%
William H. Brady III (8) 345,824 6.3%
Katherine M. Hudson (9) 30,370 0.6%
Donald P. DeLuca (10) 13,500 0.2%
Gary R. Nei 1,500 * %
Frank W. Harris 500 * %
All Officers and Directors
as a Group (17 persons)(11) 1,842,186 33.0%
Class B Peter J. Lettenberger (1) 1,769,314 100%
Common Robert C. Buchanan (1) 1,769,314 100%
Stock Roger D. Peirce (1) 1,769,314 100%
Richard A. Bemis (1) 1,769,314 100%
All Officers and Directors
as a Group 1,769,314 100%
6% Peter J. Lettenberger (1)(2) 2,751 69.1%
Cumulative Robert C. Buchanan (1) 1,920 48.2%
Preferred Roger D. Peirce (1) 1,920 48.2%
Richard A. Bemis (1) 1,920 48.2%
Stock Elizabeth B. Lurie (2)(7) 1,066 26.8%
William H. Brady III (8)(6) 235 5.9%
All Officers and Directors
as a Group 3,221 80.8%
1979 Series Elizabeth B. Lurie (2)(7) 8,071 36.7%
Cumulative Peter J. Lettenberger (2) 5,529 25.2%
Preferred William H. Brady III (8) 2,542 11.6%
Stock All Officers and Directors
as a Group 10,613 48.3%
6% Peter J. Lettenberger (2) 2,600 100%
Cumulative Elizabeth B. Lurie (2) 2,600 100%
Preferred All Officers and Directors
Stock, as a Group (2) 2,600 100%
1972 Series
</TABLE>
* Indicates less than one-tenth of one percent
_______________________________________________________________________
III - 16
<PAGE> 31
(1) The amount shown includes shares held directly by the William
H. Brady, Jr. Marital Trust (the "Marital Trust") and the
William H. Brady, Jr. Non-QTIP Marital Trust (the "Non-QTIP
Trust")(collectively, the "Trusts"). The Marital Trust owns
687,781 shares of Class A Common Stock, 1,574,866 shares of
Class B Common Stock, and 1,709 shares of 6% Cumulative
Preferred Stock. The Non-QTIP Trust owns 160,650 shares of
Class A Common Stock, 194,448 shares of Class B Common Stock,
and 211 shares of 6% Cumulative Preferred Stock. The Trustees
of both Trusts are Irene B. Brady, Robert C. Buchanan, Roger
D. Peirce, Peter J. Lettenberger, and Richard A. Bemis, each
of whom shares voting and dispositive power. All of the
Trustees except Mrs. Brady disclaim beneficial ownership of
these shares. Irene B. Brady is the widow of William H.
Brady, Jr. and the vested beneficiary of the Marital Trust;
she is the parent of William H. Brady, III and Elizabeth Brady
Lurie (who are contingent remainder beneficiaries of the
Trusts) and the grandparent of Elizabeth Irene Pungello. See
also note (7).
(2) Elizabeth B. Lurie and Peter J. Lettenberger are among the
directors of the W.H. Brady Foundation, Inc. (the
"Foundation") which owns 5,529 shares of the 1979 Series,
Cumulative Stock, 763 shares of the 6% Cumulative Preferred
Stock and 2,600 shares of the 6% Cumulative Preferred Stock,
1972 Series. Mr. Lettenberger and Mrs. Lurie are also
trustees of the Irene B. Brady Revocable Trust of 1986 (the
"1986 Trust"), which owns 259,941 shares of Class A Common
Stock and 68 shares of 6% Cumulative Preferred Stock. All
such persons disclaim beneficial ownership of shares held by
the Foundation and the 1986 Trust.
(3) In addition to shares beneficially owned as a trustee of the
Trusts and the 1986 Trust and as a director of the Foundation,
Mr. Lettenberger owns directly 1,590.93 shares of Class A
Common Stock.
(4) In addition to shares beneficially owned as a trustee of the
Trusts, Mr. Bemis owns 1,000 shares of Class A Common Stock
directly.
(5) In addition to shares beneficially owned as a trustee of the
Trusts, Mr. Buchanan owns directly 600 shares of Class A
Common Stock, and 200 shares through his Keogh plan.
(6) In addition to shares beneficially owned as a trustee of the
Trusts, Mr. Peirce owns 500 shares of Class A Common Stock
directly.
(7) In addition to the shares owned as a trustee of the 1986 Trust
and as a director of the Foundation, Mrs. Lurie owns directly
141,615 shares of Class A Common Stock, or 2.3% of the number
of such shares outstanding, 235 shares of 6% Cumulative
Preferred Stock and 2,542 shares of 1979 Series Preferred
Stock. She is the mother of Elizabeth Irene Pungello, who is
the beneficiary of the Elizabeth Irene Pungello Irrevocable
Trust (the trustees of which are Nicholas M. Daniels and Shy
Lurie, Mrs. Lurie's husband) which owns 157,734
III - 17
<PAGE> 32
shares of the Class A Common Stock, or 2.9% of the number of
such shares outstanding. She disclaims ownership of these
shares.
(8) Mr. Brady owns 345,824 shares of Class A Common Stock, 235
shares of 6% Cumulative Preferred Stock, and 2,542 shares of
1979 Series Cumulative Stock.
(9) Mrs. Hudson owns 2,036.42 shares of Class A Common Stock
indirectly through an employee benefit plan and holds a vested
option to acquire an additional 28,333.3 shares of Class A
Common Stock.
(10) Mr. DeLuca owns 500 shares of Class A Common Stock direclty
and holds vested options to acquire an additional 13,000
shares of Class A Common Stock.
(11) The amount shown for all officers and directors as a group (17
persons) includes options to acquire a total of 79,268 shares
of Class A Common Stock which are currently exercisable or
will be exercisable within 60 days. It does not include other
options for Class A Common Stock which have been granted, but
vest over the next three years.
(c) Changes in Control
No arrangements are known to the Company which may, at a subsequent
date, result in a change in control of the Company.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
III - 18
<PAGE> 33
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1) The consolidated financial statements, together with the
Independent Auditors' Report thereon of Deloitte & Touche LLP,
presented on Pages 22 through 34 of the Company's 1995 Annual
Report is incorporated herein by reference.
2) Consolidated Financial Statement Schedules--
Schedule VIII Valuation and Qualifying Accounts
Independent Auditors' Report on Financial Statement Schedules
All other schedules are omitted as they are not required, or
the required information is shown in the consolidated
financial statements or notes thereto.
3) Exhibits
3.1(1) Restated Articles of Incorporation of W.H. Brady Co.
3.2(2) By-laws of W.H. Brady Co., as amended.
10.2(2) W.H. Brady Co. Four Square Plan, as amended.
10.3(2) Executive Additional Compensation Plan, as amended.
10.4(2) Form of Executive's Deferred Compensation Agreement,
as amended.
10.5(2) Forms of Director's Deferred Compensation Agreement,
as amended.
10.6(4) W.H. Brady Co. 1989 Non-Qualified Stock Option Plan.
10.7 Shareholder Value Enhancement (SVE) Plan.
10.8(4) Supplemental Executive Retirement Plan dated March 27, 1992
between W.H. Brady Co. and Paul Gengler.
10.9(4) W.H. Brady Co. Automatic Dividend Reinvestment Plan.
10.10(5) Supplemental Executive Retirement Plan between W.H. Brady Co.
and Katherine M. Hudson
10.11(5) Supplemental Executive Retirement Plan dated September 23,
1994 between W.H. Brady Co. and Donald P. DeLuca.
IV - 1
<PAGE> 34
13.1 Annual Report to Shareholders for year ended July 31, 1995.
18.1(3) Letter regarding change in accounting method.
21.1 Subsidiaries of W.H. Brady Co.
23.1 Consent of Deloitte & Touche LLP, Independent Auditor.
___________________
(1) Incorporated by reference to Registrant's Registration
Statement No. 2-91287 on Form S-1.
(2) Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1989.
(3) Incorporated by reference to Exhibit 18 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1989.
(4) Incorporated by reference to Registrant's Annual Report on
form 10-K for the fiscal year ended July 31, 1992.
(5) Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1994.
IV - 2
<PAGE> 35
W.H. BRADY CO. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
_______________________________________________________________________________
<TABLE>
<CAPTION>
Year ended July 31,
---------------------------------------
1995 1994 1993
---- ---- ----
Description (Dollars in Thousands)
<S> <C> <C> <C>
Valuation accounts deducted in balance
sheet from assets to which they apply--
Accounts receivable--allowance for losses:
Balances at beginning of period $1565 $1247 $1320
Additions--Charged to expense 463 725 758
Deductions--Bad debts written off, net of
recoveries (147) (407) (831)
----- ----- -----
Balances at end of period $1881 $1565 $1247
===== ===== =====
</TABLE>
IV - 3
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
W.H. Brady Co.:
We have audited the consolidated financial statements of W.H. Brady Co. and
subsidiaries as of July 31, 1995 and 1994 and for each of the three years in
the period ended July 31, 1995, and have issued our report thereon dated
September 12, 1995; such consolidated financial statements and report are
included in your 1995 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of W.H. Brady Co. and subsidiaries, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ Deloitte & Touche LLP
Milwaukee, Wisconsin
September 12, 1995
IV - 4
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized this thirteenth day
of October, 1995.
W.H. BRADY CO.
By /s/ D. P. DeLuca
---------------------------
D.P. DeLuca,
Senior Vice President,
Treasurer, and Assistant
Secretary
(Principal Accounting Officer)
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ K. M. Hudson President and Director 10/13/95
- ------------------------- (Principal Executive Officer) ----------
K.M. Hudson
/s/ P. J. Lettenberger Director 10/13/95
- ------------------------- ----------
P.J. Lettenberger
/s/ R. A. Bemis Director 10/13/95
- ------------------------- ----------
R.A. Bemis
Director
- ------------------------- ----------
W.H. Brady III
Director
- ------------------------- ----------
E.B. Lurie
Director
- ------------------------- ----------
F.W. Harris
</TABLE>
IV - 5
<PAGE> 38
<TABLE>
<S> <C> <C>
/s/ R. C. Buchanan Director 10/13/95
- ------------------------- ----------
R.C. Buchanan
/s/ R.D. Peirce Director 10/13/95
- ------------------------- ----------
R.D. Peirce
/s/ D. P. DeLuca Director 10/13/95
- ------------------------- ----------
D.P. DeLuca
Director
- ------------------------- ----------
G.E. Nei
</TABLE>
IV - 6
<PAGE> 1
EXHIBIT.10.7
W. H. BRADY CO.
Shareholder Value Enhancement (SVE) Plan
----------------------------------------
Adopted August 1, 1994
I. Purpose
-------
The purpose of this Shareholder Value Enhancement Plan (the "Plan") is to
provide incentive and reward to those employees of W. H. Brady Co. and its
subsidiaries (the "Company") responsible for directing functions where the
decisions involved have a significant bearing on the success and
profitability of the Company, and who have a demonstrated exceptional
ability, industry and service. The Plan is to motivate the individuals to
maximize profitability and shareholder value through group performance. The
incentive reward is to be in the form of supplemental compensation in
addition to the individual's regular base compensation and will vary based
upon the individual's ability to influence or impact at the Company, Group,
and Division levels.
II. Definitions
-----------
A. "Base Salary" means the gross salary paid during the fiscal
year while in the position eligible for incentive compensation on
account of which incentive compensation is payable (before any
reduction for amounts voluntarily deferred under Company-sponsored
deferred compensation plans) and does not include the value of
fringe benefits, directors' fees, sales incentives, additional
compensation under this Plan, or amounts paid in lieu of other
benefits earned as, for example, amounts paid in lieu of vacation
benefits.
B. "Capital" means the Company's annual month end average
operating capital for the Plan Year, calculated as follows:
Total Assets
+ Bad Debt Reserve
+ LIFO Reserve
- Construction in Progress
+/- Other capital items as determined by the
Compensation Committee.
C. "Capital Charge" means the deemed opportunity cost of employing
Capital in the Company's businesses, determined as follows:
Capital Charge = Capital x Cost of Capital
1
<PAGE> 2
D. "Compensation Committee" means a committee as determined by the
W. H. Brady Co. Board of Directors to oversee all matters related to
compensation practices of the Company.
E. "Cost of Capital" means the weighted average of the cost of
equity and the after tax cost of debt for the relevant Plan Year
plus adjustments to cover non-allocated investments and
non-allocated costs. The Cost of Capital will be determined by the
Company (to the nearest tenth of a percent) and approved by the
Compensation Committee prior to each Plan Year, consistent with the
following methodology:
a) Cost of Equity = Risk Free Rate + (Business Risk Index x
Market Risk Premium)
b) Cost of Debt = Debt Yield x (1 - Tax Rate)
c) The weighted average of the Cost of Equity and the Debt
Cost of Capital is determined by reference to the actual
debt-to-capital ratio.
The Risk Free Rate is the closing yield rate on 30 year U. S.
Treasury Bonds for the month of July immediately preceding the
relevant Plan Year, the Business Risk Index is determined by
reference to the Beta shown in the most recent available data base
report on the Company from a recognized authoritative source (as
approved by the Compensation Committee), the Market Risk Premium is
6%, the Cost of Debt is the weighted average yield of all borrowing
included in the Company's permanent capital, and the tax rate is the
combination of the projected relevant federal, state and foreign
income tax rates for the year immediately preceding the Plan Year.
F. "Division" means any unit of operations as determined by the
Compensation Committee.
G. "Divisional Value Added" means the Value Added calculated in
the same manner as set forth in the Value Added definition, except
that NOPAT, Capital, Capital Charge, Company's Cost of Capital and
other relevant terms shall be defined by reference to the particular
division, not by reference to the entire Company.
H. "Earned Bonus" means the bonus, which may be negative or
positive, which is calculated in the manner set forth in Section V.
I. "Group" means any collection of divisions as determined by the
Compensation Committee that are combined for purposes of determining
Value Added on a collective basis.
2
<PAGE> 3
J. "Group Value Added" means the Value Added calculated in the same manner as
set forth in the Value Added definition, except that NOPAT, Capital,
Capital Charge, Cost of Capital and other relevant terms shall be defined
by reference to the particular group, not by reference to the entire
Company.
K. "NOPAT" means adjusted net operating profits after taxes for the Plan
Year, calculated as follows:
Net Income Before Taxes
+/- Changes in Reserves
+/- Other Income & Expense on Non-Operating
Investments
+/- Other Unusual Income or Expense Items
+/- Amortization of Unusual Income or Expense
Items
- Modified Cash Taxes on the Above
+/- Other items as determined by the Compensation
Committee.
L. "Plan Year" means the one year period coincident with the Company's fiscal
year.
M. "Value Added" means the NOPAT that remains after subtracting the Capital
Charge, expressed as follows:
NOPAT
Less: Capital Charge
Equals: Value Added
Value Added may be positive or negative.
III. Eligibility and Participation
A. General. Participation in this Plan is determined by the Chief Executive
Officer (CEO) of the Company, approved by the Compensation Committee, and
communicated to the Plan participants prior to the Plan Year, except as
provided in Section VI.A. In recommending such participation, the CEO
will consider the potential contribution and impact each employee may have
on the Company's ability to create value for its shareholders. Employees
eligible for participation in the Plan will generally be selected from
Company Officers, Division General Managers (GMs), and Operating
Management Team (OMT) members.
B. Basis for Determining Incentive Compensation. In general, the Plan will be
based on a two part evaluation system to determine the incentive
compensation. In general, earned bonuses by Plan participants will be
based on Corporate, Group, and/or Divisional Value Added, and upon the
Senior
3
<PAGE> 4
Officer's or Manager's subjective evaluation of the
individual's performance against specific individual goals and
accomplishments. The Compensation Committee will determine the
relevant percentages that each of the respective parts are weighted
for each Plan participant prior to the Plan Year.
C. Target Incentive Awards. The Target Incentive Awards will be
determined according to the following schedule, or other schedule as
determined by the Compensation Committee prior to the beginning of
the Plan Year:
Target
------
Chief Executive Officer 100%
Senior Vice President 75%
Vice Presidents 70%
Director-Group Operations 65%
General/Venture Managers 60%
Department Heads 50%
Operating Management Members 40%
Other Key Individuals 25%
D. Determination of Subjective Performance. All of the subjective
determinations will be subject to approval by the CEO and the
appropriate Senior Manager, except that the CEO's subjective
performance will be determined and evaluated by the Compensation
Committee.
IV. Calculation of the Incentive Compensation Fund
The Company shall add a predetermined percentage of the Value Added to
the Company, along with a predetermined percentage of the change in Value
Added to the Company, into an Incentive Compensation Fund for purposes of
accumulating bonus amounts for all Plan participants. In addition, the
Company shall add a predetermined percentage of the Group Value Added and
Division Value Added to each designated Group and Division, along with a
predetermined percentage of the change in Group Value Added and change in
Division Value Added, to each designated Group and Division into similar
Incentive Compensation Funds for purposes of accumulating bonus amounts
for members of the respective Group or Division.
4
<PAGE> 5
The said percentages will be at the sole discretion of the Compensation
Committee and shall be determined prior to each Plan Year. For the Plan's
initial year the following percentages will be utilized:
Corporate Total Value Added: 5.0%
Corporate Change in Value Added: 25.0%
Group Total Value Added: 1.0%
Group Change in Value Added: 5.0%
Division Total Value Added: 1.0%
Division Change in Value Added: 5.0%
V. Plan Distribution
The Company shall set up an individual account for each of the participants
in the Plan for purposes of accumulating each participant's interest in the
Plan. All amounts added to the Incentive Compensation Funds will be
allocated to each of the participants' accounts based on their interest in
the Plan as defined below.
Allocations to the individual participant accounts shall be made in the
following manner. Each participant will share in the Corporate, Group, and
Divisional proceeds in that proportion that his Target Incentive Award
bears to the total Target Incentive Awards of all participants who are
members of the respective Company, Group, or Division as determined by the
Compensation Committee prior to the Plan Year. This calculation will be
conducted in U.S. dollars with applicable amounts converted into U.S.
dollars at the weighted average exchange rate (as approved by the CEO) for
the Plan Year.
For those non-U.S. Company employees, the individual participant accounts
shall be translated from U.S. dollars into their home country local
currency at the weighted average exchange rate (as approved by the CEO) for
the Plan Year.
For the Plan Year the Company will distribute to each participant
thirty-three and one-third percent (33-1/3%) of their individual account.
In the Plan's initial year, a start-up amount equal to 2 times each
individual's actual 1994 bonus will be credited to their respective
individual participant account to offset the effects of the 3 year payout
deferral. All start-up amounts remain the property of the Company and must
be returned to the Company in the event of termination. The individual
participant accounts are not assignable by the Plan participant.
5
<PAGE> 6
VI. Change in Employment Status During the Plan Year
A. New Hire, Transfer, Promotion, Demotion.A newly hired employee
or an employee transferred, promoted, or demoted during the Plan
Year to a position qualifying for participation (or leaving the
participating class) may accrue (subject to discretion of the
Compensation Committee) a pro rata Accrued Bonus based on the
percentage of the Plan Year (participant's Target Incentive Award is
multiplied by a factor equal to actual weeks participating/52) the
employee is in each participating position. Any amounts (less
start-up amount) previously credited to a participant who is
terminated from the Plan by reason of transfer or demotion shall be
paid to the participant at the next normally scheduled payout
period.
B. Discharge and Resignation. An employee who resigns or is
discharged from the Company during the Plan Year shall not be
eligible for an Accrued Bonus, even though his or her service
arrangement or contract extends past year-end, unless the
Compensation Committee determines that the conditions of the
termination indicate that a prorated Accrued Bonus is appropriate.
The Compensation Committee shall have full and final authority in
making such a determination, including the timing of payouts, if
any, of any amounts credited to the participant's individual account
(less start-up amount).
C. Death, Disability, Retirement. If a participant's employment
is terminated during a Plan Year by reason of death, disability, or
normal or early retirement under the Company's retirement plan, a
pro rata Accrued Bonus based on the percentage of the Plan Year the
employee participated (pro rate amount to be calculated similar to
Section VI, A. above) shall accrue for the benefit of the
participant. Any amounts (less start-up amount) previously credited
to a participant who is terminated from the Plan by reason of death,
disability, or retirement shall be paid to the participant at the
next normally scheduled payout period.
D. Beneficiary Designation. An individual may designate in writing
in a form satisfactory to the Company a beneficiary or beneficiaries
to receive incentive compensation in the event of the individual's
death, and payment by the Company in accordance with such
designation shall fully discharge the Company from all liability for
the amount so paid. The Company may refuse
6
<PAGE> 7
to accept any designation which contains unacceptable
contingencies. If no such designation is on file with the Company,
any incentive compensation amounts which are payable will be paid to
the individual's personal representative.
VII. Administration
A. The Plan shall be administered by the Compensation Committee
whose decision shall be final and binding on all parties.
B. The Plan shall continue for each fiscal year following the
effective date of the Plan unless modified or revoked by the
Compensation Committee. The right is expressly reserved by the
Compensation Committee to modify, repeal or to discontinue this
Plan.
C. Neither the establishment of the Plan, nor any modification or
amendment hereof, nor the payment of awards hereunder shall be
construed as giving any Participant or other person whomsoever any
legal or equitable right against the Company, the Compensation
Committee, or their respective members; or the right to payment of
any awards hereunder (unless the same shall be specifically provided
herein); or as giving any participant the right to be retained in
the service of the Company.
D. Bonuses which are payable shall be paid within 60 days after
the end of the fiscal year.
VII. Effective Date
The Plan shall be effective as to the fiscal year beginning August 1,
1994.
7
<PAGE> 1
W.H. BRADY CO.
1995 ANNUAL REPORT
[PHOTO]
Teamwork for Global Success
Doing More Where We Are
New Products New Markets
Global Expansion
[BRADY LOGO]
<PAGE> 2
W.H. BRADY CO.
FISCAL 1995 ANNUAL REPORT
TO SHAREHOLDERS:
TEAMWORK FOR GLOBAL SUCCESS
[PHOTO]
The cover of our annual report depicts our commitment to reaching the world
with W.H. Brady Co. products. But, more importantly, it illustrates how we will
make it happen. At Brady, we'll make it happen together--as a team--as 2,000
worldwide employees bring their skills and creativity to their jobs each day.
In the pages that follow you will see how teamwork has enabled Brady to become
a more dominant global competitor. You will see a very successful fiscal 1995,
with sales and net income reaching record levels. You will see a company
creating value worldwide. You will see a steadfast commitment to premier
products, superior service and rapid response.
Most of all, you will see a world-class manufacturer of industrial
identification products and coated materials embracing teamwork. Teamwork for
global success!
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Financial Highlights 1
Letter to Shareholders 2
Teamwork for Global Success 6
Financial Review, 1995 17
Corporate Data 35
Shareholder Services 36
</TABLE>
Graph: 1995 SALES BY GEOGRAPHIC AREA
(in $ thousands)
Europe 88,723
USA 185,123
Other 40,516
<PAGE> 3
[PHOTO]
Corporate Profile
W.H. Brady Co. develops, manufactures and markets industrial identification
products and coated materials. Headquartered in Milwaukee, Wisconsin, the
81-year-old company has operations worldwide. Driving Brady is its focus on
quality, innovation and performance in all it does. Using
total-quality-assurance methods, extensive research and development resources
and people committed to doing their best and improving their best, Brady is a
leader in its markets.
Identification Systems and Specialty Tapes Group:
BRADY PRECISION TAPE CO. develops and manufactures precision die-cut and slit
tapes for data storage, semi-conductor, audio/video and other industries.
COATED PRODUCTS DIVISION develops and manufactures specialized adhesive and
topcoated materials for graphics, medical, industrial and other markets.
INDUSTRIAL PRODUCTS DIVISION develops and manufactures high-performance
industrial identification products including wire markers, automatic
data-collection and management systems and industrial printing systems.
Signmark(R) Group:
SIGNMARK develops and manufactures safety and facility identification products,
including signs, regulatory labeling and reporting systems, pipe markers,
lockout /tagout devices and portable printing systems.
Seton Group:
THE SETON COMPANIES are global direct marketers of a wide range of
custom-manufactured and standard identification and safety-related products.
<PAGE> 4
[PHOTO]
Service Operations:
BRADY SERVICE CO. provides accounting, benefits, communication, information
systems, training and other services to W.H. Brady Co. operations.
BRADY FINANCIAL CO. provides treasury, insurance, credit, collection and other
services to W.H. Brady Co. operations.
- BRADY LOCATION
- SETON LOCATION
Locations
AUSTRALIA
- -W.H. Brady Pty. Ltd.
2 Pat Devlin Close
Chipping Norton, NSW 2170
Australia
- -Seton Australia Pty. Ltd.
2 Pat Devlin Close
Chipping Norton, NSW 2170
Australia
BELGIUM
- -W.H. Brady, N.V.
Industriepark Lindestraat 20
B9240 Zele, Belgium
CANADA
- -W.H. Brady, Inc.
10 Marmac Drive
Rexdale, Ontario M9W 1E6
Canada
- -Seton, Inc.
150 Steelcase Road, West
Markham, Ontario L3R 3J9
Canada
ENGLAND
- -W.H. Brady Co. Ltd.
Wildmere Industrial Estate
Banbury, Oxfordshire, OX16 7JU
England
- -Seton Limited
Canada Close
Banbury, Oxon OX16 7RT
England
FRANCE
- -W.H. Brady S.A.R.L.
2, Place Marcel Rebuffat
BP 362 Parc de Villejust
F-91959 Les Ulis Cedex
France
- -Seton S.A.
113, Rue Horace Vernet BP 181
59054 Roubaix, France
GERMANY
- -W.H. Brady GmbH
Odenwaldstrasse 71
63322 Rodermark, Germany
- -Seton GmbH
Otto-Hahn-Str. 5-7
63222 Langen, Germany
HONG KONG
- -W.H. Brady Co.
Sales Office
Room 702, 7/F
Bank of Communications Bldg.
No. 563 Nathan Road
Kowloon, Hong Kong
ITALY
- -W.H. Brady, N.V.
Sales Office
Via Lazzaroni 7
21047 Saronno VA
Italy
- -Seton Italia Srl
Via Lazzaroni 7
21047 Saronno VA
Italy
JAPAN
- -Nippon Brady K.K.
Sumitomo Fudosan Shin
Yokohama Bldg. 8F
2-5-5 Shin Yokohama
Kohoku-ku, Yokohama
Kanagawa 222, Japan
NEW ZEALAND
- -W.H. Brady Pty. Ltd.
Sales Office
P.O. Box 100868
North Shore Mail Centre
Auckland, New Zealand
SINGAPORE
- -W.H. Brady Pte Ltd.
55 Ayer Rajah Crescent #03-25
Ayer Rajah Industrial Estate
Singapore 139949
SOUTH KOREA
- -W.H. Brady Co.
Sales Office
Hanaro B/D 609
194-4 Insadong
Jongro-Ku
Seoul, South Korea
SWEDEN
- -Brady AB
Karins Vag 5
194 54 Upplands Vasby
Sweden
UNITED STATES
- -W.H. Brady Co. Headquarters
6555 W. Good Hope Road
P.O. Box 571
Milwaukee, WI 53201-0571
Brady USA, Inc.
2221 W. Camden Road
Glendale, WI 53209
2230 W. Florist Avenue
Glendale, WI 53209
3328 W. Cameron Avenue
Milwaukee, WI 53209
Brady Financial Co.
5150 N. Port Washington Road
Glendale, WI 53217
Brady Precision Tape Co.
N144 W5690 Pioneer Road
Cedarburg, WI 53012
- -Seton
20 Thompson Road
Branford, CT 06405
[ISO LOGO]
W.H. Brady Co. operations in the United Kingdom and Belgium along with the
Signmark(R) Division, Industrial Products Division, Coated Products Division
and Brady Precision Tape Co. in the United States are registered to the
International Organization for Standardization 9000 series standards. Other
operations are expected to be registered in the future.
<PAGE> 5
Financial Highlights
W.H. Brady Co. and Subsidiaries
<TABLE>
<CAPTION>
Percent
Increase
(Dollars in Thousands, Except Per Share Amounts) 1995 1994 (Decrease)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $314,362 $255,841 22.9
INCOME BEFORE INCOME TAXES $ 44,639 $ 29,902 49.3
Pre-tax profit margin 14.2% 11.7%
NET INCOME $ 27,911 $ 18,540 50.5
After-tax profit margin 8.9% 7.2%
Return on average stockholders' investment 17.7% 13.6%
NET INCOME PER COMMON SHARE
Class A Nonvoting $ 3.83 $ 2.55
Class B Voting $ 3.73 $ 2.45
WORKING CAPITAL $129,938 $100,023 29.9
STOCKHOLDERS' INVESTMENT $170,823 $145,129 17.7
RESEARCH AND DEVELOPMENT $ 10,426 $ 10,318 1.1
CAPITAL EXPENDITURES $ 8,114 $ 6,466 25.5
DEPRECIATION AND AMORTIZATION $ 9,159 $ 9,435 (2.9)
- ----------------------------------------------------------------------------------------------
</TABLE>
Charts:
<TABLE>
<CAPTION>
NET SALES
(in $ millions)
<S> <C>
1991 $211
1992 236
1993 243
1994 256
1995 315
<CAPTION>
INTERNATIONAL SALES
as percent of total sales
<S> <C>
1991 29%
1992 30
1993 32
1994 37
1995 41
<CAPTION>
STOCKHOLDERS' INVESTMENT
(in $ millions)
<S> <C>
1991 $115
1992 120
1993 128
1994 145
1995 171
<CAPTION>
NET INCOME
(in $ millions)
<S> <C>
1991 $ 15
1992 5
1993 17
1994 19
1995 28
</TABLE>
*Net income in 1992 was affected by $8.8 million in one time accounting
charges.
W.H. BRADY CO. 1995 Annual Report 1
<PAGE> 6
Letter to Shareholders
Fiscal 1995 was a terrific year for W.H. Brady Co. Net income rose 50.5 percent
on sales growth of 22.9 percent for the year. We introduced profitable new
products, launched new operations internationally and created significant value
for our shareholders. And, as you will see in the pages that follow, we did it
as a team--a team fully committed to managing your investment and building your
Company.
FINANCIAL HIGHLIGHTS
Our sales for the year ending July 31, 1995, were $314,362,000, up 22.9 percent
from last year's sales of $255,841,000.
And profitability was even better. Net income in fiscal 1995 was $27,911,000 or
$3.83 per share, up 50.5 percent over last year's net income of $18,540,000 or
$2.55 per share.
Sales for the fourth quarter ending July 31, 1995, were $83,145,000, up 25.6
percent from $66,209,000 in sales during the fourth quarter of fiscal 1994.
Net income for the fourth quarter was $7,334,000 or $1.00 per share, up 48.6
percent from net income of $4,936,000 or $0.67 per share during the same period
last year.
Our success resulted from employee efforts in doing more where we are,
introducing new products and entering new markets around the world.
Our Automatic Identification and Data Collection Team, which we formed in
fiscal 1994, performed beyond expectations, proving successful in serving
companies worldwide with tools for improving efficiency, ensuring quality and
implementing just-in-time environments. The group provides software; labels;
printing, data-collection and label-application systems; systems integration;
and project management services.
New products, introduced within the last five years, brought in significant
sales for us in fiscal 1995. These products include the I.D. Pro(TM) Wire
Marker Printer; thermal-transfer-printable labels and ribbons; lockout/tagout
devices; aluminum and plastic signs; Ultrathin(TM) Labels for PCMCIA cards;
leadframe tape for use in semiconductors; and various other tapes, labels and
printing systems.
Seton-Australia was launched this year and performed well beyond our
expectations in both response rate from mailings and in average order value.
And Seton-Italy is off to a good start as well.
In fiscal 1995, W.H. Brady Co. accomplished a great deal. Here are just some of
the highlights:
Seton begins marketing in Australia 9/94
Industrial Products Division introduces Labelmark(TM) Software 10/94
Seton-France begins marketing to the Netherlands 10/94
Brady-Canada sells label applicator for Ultrathin(TM) Labels 11/94
Signmark Division introduces plastic and aluminum signs 11/94
Seton achieves 24-hour shipping goal 11/94
Brady Precision Tape Co. sells a record 174 million adhesive rings in a month
11/94
W.H. BRADY CO. 1995 Annual Report 2
<PAGE> 7
Letter from Shareholders cont.
[PHOTO]
Caption: The W.H. Brady Co. executive team (from left): Identification Systems
and Specialty Tapes Group Vice President Dave Schroeder, Vice President of
Research and Development Mary Arnold, Senior Vice President and Chief Financial
Officer Don DeLuca, Signmark(R) Group Vice President Dave Hawke, President and
CEO Katherine Hudson, Seton Group Vice President Richard Fisk and (seated) Vice
President of Human Resources Jim Sweet.
Our performance in 1995 was strengthened by favorable exchange rates on foreign
currency. But even without this we are seeing international sales as an
ever-growing part of Brady's business. There is tremendous potential for us
globally.
Our net income increase of more than 50 percent in 1995 was due in large part
to the efforts of employees to control costs and improve efficiencies.
Operating expenses declined as a percentage of sales. While increasing sales
22.9 percent, we reduced inventory by more than 2.7 percent. And we decreased
our total investment in property, plant and equipment by 9 percent while making
significant investments in equipment, facility expansions and information
systems for improved production and customer service.
Also this year, we had $2 million in pretax income representing the gain on the
divestiture of Brady Medical Products Co., the Nameplate Division and two of
our Milwaukee-area facilities.
A YEAR OF ACHIEVEMENT, RECOGNITION AND REORGANIZATION
There were many highlights in fiscal 1995 for us (see timeline below). Our
operation in Singapore expanded its operations to include custom label
manufacturing in addition to production of semiconductor carrier and cover
tape. Seton began a separate catalog to market more effectively to healthcare
agencies. We won several honors, including being named Wisconsin Manufacturer
of the Year and a Grainger CFQ1 Supplier.
In February 1995, divisions and international subsidiaries were realigned into
three global groups, each headed by a newly appointed group vice president. The
groups are the Signmark(R) Group, the Seton Group and the Identification
Systems and Specialty Tapes Group. The reorganization is enhancing teamwork and
spurring global thinking by all employees as it brings together multiple units
into three distinct global groups.
Signmark Division markets LeakTracker(TM)
Emission-Detection and Reporting System 11/94
Brady-Belgium begins cellular manufacturing 1/95
Brady introduces tape products for hard disk drives 1/95
Brady-Sweden moves to a larger facility 1/95
Brady sells woundcare division to B. Braun Medical Inc. 1/95
Seton-UK expands facility, nearly doubling its size 1/95
Singapore begins producing labels for custom orders 2/95
Brady becomes Wisconsin Manufacturer of the Year--large company category 2/95
W.H. BRADY CO. 1995 Annual Report 3
<PAGE> 8
Letter to Shareholders cont.
[PHOTO]
Caption: The LeakTracker(TM) system helps petrochemical companies comply with
EPA emission-reporting requirements.
Cross-group teamwork is increasing too, with groups teaming up to enter new
geographies quickly and efficiently. Several significant projects are underway
as a result of the reorganization and improved communication and teamwork.
GOING FOR IT
While 1995 was an outstanding year for the Brady team, we are more excited
about the future.
We believe that we have only scratched the surface in many of the countries in
which we operate. We'll be doing more where we are by increasing sales and
marketing efforts in 1996. This will include adding additional salespeople at
our current locations worldwide and capitalizing on technological advances to
expand and accelerate global marketing efforts. A seamless customer service
team is further integrating our systems to improve turnaround and the ease of
doing business with Brady.
During fiscal 1995 we introduced many new products which we expect to help
drive sales growth in the years ahead. These include adhesive products for hard
disk drives; laser-printable signs; the LeakTracker(TM) Emission Detection
System and radio-frequency
FIVE YEAR CUMULATIVE TOTAL RETURN*
W.H. Brady Co. vs. Published Indices in $
<TABLE>
<CAPTION>
W.H. Brady Co. NASDAQ S&P 500
-------------- ------ -------
<S> <C> <C> <C>
1991 $150 $118 $113
1992 138 139 127
1993 137 169 138
1994 188 174 145
1995 281 243 183
</TABLE>
*$100 invested on July 31, 1990, in stock or index with reinvestment of
dividends.
Brady reorganizes into Seton, Signmark and Identification Systems and Specialty
Tapes groups 2/95
Brady purchases a 10-percent share in Fugitive Emissions Control, Inc., the
maker of LeakTracker(TM) system 3/95
Brady sells corporate headquarters facility in Glendale, Wis., to Emjay Corp.
3/95
Brady sells Nameplate Division to Fred B. Johnston Co. 3/95
Seton-Germany begins marketing into Switzerland and Austria 3/95
Coated Products Division produces electrostatic-printable Excelar(TM) graphics
3/95
Brady- and Seton-Canada merge 4/95
Seton begins marketing in Italy 4/95
W.H. BRADY CO. 1995 Annual Report 4
<PAGE> 9
[PHOTO]
Caption: KATHERINE M. HUDSON, President and Chief Executive Officer
tags; a universal ball-valve lockout/tagout device; the Excelar(TM) EDIS
(Electrostatic Digital Imaging System) Graphic System for high-performance
outdoor graphics; high-temperature labels for circuit boards; the Ultrathin(TM)
Label Applicator; and a system for use in customers' manufacturing lines that
both prints and applies labels. Through coordinated global research and
development efforts, we expect to be introducing many more new products in the
future.
In fiscal 1996 we will be actively pursuing acquisitions that will leverage our
core competencies and bring us opportunities for value-enhancing growth. And we
have employee teams working on many global expansion projects. Latin America,
Brazil, South Korea, Spain, China and India are just some of the areas we are
targeting for the future.
TEAMWORK FOR GLOBAL SUCCESS
We had a great year in fiscal 1995 resulting from the teamwork and talent of
Brady employees worldwide. Read on to learn about several of the team successes
in fiscal 1995.
As we continue to strive for value-enhancing growth in fiscal 1996 and beyond,
W.H. Brady Co. will be doing more where we are, developing new products,
entering new markets and geographies, and seeking potential acquisitions and
joint ventures. And we'll do it the same way we did it this year--as a team. A
team committed to global success.
/s/ KATHERINE M. HUDSON
KATHERINE M. HUDSON
President and Chief Executive Officer
October 1995
Brady-UK expands facility, more than doubling its size 5/95
Nippon Brady introduces Japanese CodeSoft(TM) Software 5/95
Italian operations move into larger facility 5/95
Signmark Division is named 1994 Grainger CFQ1 Supplier 5/95
Seton begins marketing through the Internet 6/95
Brady-Belgium begins expansion project 7/95
W.H. Brady Co. has a record year
1996 -->
W.H. BRADY CO. 1995 Annual Report 5
<PAGE> 10
Our strategies for value-enhancing growth include doing more where we are,
introducing new products and expanding globally. By working together across
functional, divisional and geographic lines, our 2,000 employees are
capitalizing on opportunities worldwide.
DOING MORE
Today it isn't enough to merely meet your customers' expectations--you must
exceed them, daily! Quality is a given and partnerships are as important as
products.
But a partnership is much more than a "supplier-customer relationship." It's a
call to commitment--a commitment to help your partner become a more complete
global competitor by providing nothing less than premier products, personal
service and on-time delivery.
PARTNERING FOR SUCCESS
W.H. Brady Co. and W.W. Grainger, Inc. redefine partnership.
It is that kind of focus that has led the Signmark(R) Division of W.H. Brady
Co. to earn accolades from Grainger and other distributors.
In fiscal 1995, Signmark was named one of Grainger's CFQ1 (Customer-Focused
Quality 1) Suppliers for outstanding performance in product quality, sales,
shipping performance and invoicing accuracy. Grainger is a leading U.S.
distributor of maintenance, repair and operating supplies and related
information to commercial, industrial, contractor and institutional customers.
"We're pleased to honor W.H. Brady Co. as a Grainger CFQ1 Supplier for
outstanding performance in 1994 and the willingness to go the extra mile in
helping us deliver solutions that meet or exceed our customers' expectations,"
said John Slayton, Grainger senior vice president-product management.
[PHOTO]
Caption: Stephen Allen and Karen Langer pick and ship products to Grainger
locations. Grainger sells a broad range of products, including Brady signs,
pipe markers, labels and portable printing systems. Brady meets or exceeds the
expectations of customers by focusing on quality and service.
W.H. BRADY CO. 1995 Annual Report 6
<PAGE> 11
WHERE WE ARE
Grainger selects suppliers for this distinguished award based on a formal
supplier-evaluation process. Here is how Signmark came through in 1994:
. Signmark sales through Grainger increased more than 30 percent.
. Signmark achieved 98.1 percent shipping accuracy.
. Signmark achieved 99.5 percent invoicing accuracy.
. Signmark delivered 95 percent of all Grainger orders on time (2 percent were
shipped early and 3 percent were shipped late).
While the award was a significant achievement, things have only just begun for
the Signmark team. It will now be working as a strategic supplier to Grainger.
Grainger has defined three types of supplier partners--"traditional,"
"alliance" and "strategic." A traditional supplier does most of its business
with Grainger via phone or mail and supplies a limited product line. The
alliance supplier (Signmark's previous category) does a significant amount of
business with Grainger, yet Grainger carries only a portion of the supplier's
product line.
"The strategic supplier has its entire product offering carried on Grainger's
system, complete with Grainger part numbers and pricing," said Julie Malek,
Signmark business development manager. "Beginning in the fall of 1995, Grainger
will list all of our 20,000 stock products on its system. So when a customer
wants any of them, Grainger can simply place the order with Signmark and have
the product shipped in less than 24 hours. The setup will make it easier for
Grainger and its customers to order products from Signmark--something which has
positive benefits for all of us."
[PHOTO]
Caption: Brady's Labelizer(R) Plus Industrial Labeling System enables customers
to create their own signs or labels on site using Brady materials.
W.H. BRADY CO. 1995 Annual Report 7
<PAGE> 12
Doing More Where We Are
[PHOTO]
Caption: While on tour, Brady's Big Rig stopped at Grainger's branch in
Timonium, Maryland. Inside the mobile training center, Grainger employees and
customers learned about products such as the I.D. Pro(TM) Wire Marker Printer.
Brady took its show on the road by converting a 48-foot semi truck into a
mobile safety lab and product training center. From June to December 1995,
Brady sales representatives toured with the mobile lab and demonstrated new
Brady printing systems, lockout/tagout devices, pipe markers and signs to more
than 100 distributor and customer locations throughout the United States.
"BIG RIG" SHOWCASES BRADY PRODUCTS
The outside of the "Big Rig" features brilliant, full-color fleet graphics
using Brady's new Excelar(TM) EDIS Graphics System, a graffiti-proof,
ultraviolet-light-resistant coated material. Inside the trailer are a variety
of safety and identification products.
The "Big Rig" enables distributors and customers alike to get hands-on
experience with the latest in safety and identification products. It's just one
more way we are "doing more where we are."
W.H. Brady Co. is a vertically integrated company, with coated materials
produced by one division being converted into labels, tapes or other die-cut
products at other divisions. This enables the Company to have the experts
in-house to develop and manufacture products of the highest quality and
performance levels and also to continuously improve operating efficiencies.
JUST-IN-TIME EFFORTS FOCUS ON ADDING VALUE
In fact, a Brady Interdivisional Just In Time (IDJIT) Team was formed in March
1995 specifically to eliminate non-value-added activity between the divisions.
The team, using just-in-time concepts, is focused on reducing interdivisional
inventory while providing high-quality service and products.
"Inventory creates waste because it covers up problems, takes up space, ties up
money and requires effort to manage," said Mike Stommel, Coated Products
Division manufacturing manager.
The IDJIT Team has found several ways to reduce cycle time and inventory, such
as eliminating duplicate testing procedures, reducing test cycles to 24 hours
and streamlining its interdivisional order system. The work completed by the
IDJIT Team has reduced Milwaukee inventory on the top 10 "A" item products
(products most frequently ordered) by more than $600,000 in just four months.
"The real success is the interdivisional cooperation and teamwork," Stommel
said. "As we develop new relationships, trust and the ability to work with one
another, we will create other opportunities as well."
W.H. BRADY CO. 1995 Annual Report 8
<PAGE> 13
As competitive efforts grow more fierce and the economy becomes more global,
it's more important than ever to take customer service to the next level. That
is why Brady-Belgium launched initiatives in rapid response, cellular
manufacturing and Just In Time.
BRADY-BELGIUM TAKES CUSTOMER SERVICE TO THE NEXT LEVEL
Brady-Belgium takes customer service to new heights with cellular manufacturing
and rapid response.
"Our 'rapid response' effort is simply an initiative to achieve good, fast
customer service in every way possible," said Brigitte De Decker, Brady-Belgium
customer service manager. "And excellent service is one of the most crucial
elements of long-term business success!"
One of the ways Brady-Belgium is improving service is through cellular
manufacturing, something which proved effective at Brady's U.S. operations.
Cellular manufacturing organizes employee groups or "cells" into independent
manufacturing units. Each cell is empowered to manage a specific product line,
a line in which it becomes an expert. The cell orders raw materials; schedules,
performs and improves production; ensures product quality; and manages
inventory.
Brady-Belgium implemented its first manufacturing cell, the
Pressure-Sensitive-Adhesive (PSA) Safety Sign Cell, in January 1995, and
additional cells in the months that followed. The PSA cell worked diligently to
enhance service by improving turnaround time on stock orders and reducing lead
time on custom orders. Other departments pitched in to help, such as Belgium's
Information Systems Department which upgraded and linked computer systems to
enable interchange of data such as artwork and orders.
The PSA cell has already achieved outstanding results, reducing lead time on
custom orders from two weeks to two days! And stock orders are now processed
and shipped in 24 hours.
"Cellular manufacturing is very important to the rapid response effort," said
Pascal Catteeuw, rapid response coach. "Customer service representatives must
be able to rely on the lead times and quality that cells promise."
Since implementing cellular manufacturing, the PSA Safety Sign Cell has not
only significantly reduced lead times, but also has reduced throughput time and
scrap, adding value not only to customers but also to Brady's shareholders.
[PHOTO]
Caption: Brady uses manufacturing cells or teams to ensure manufacturing
efficiency and continuous improvement. The Pressure-Sensitive-Adhesive Safety
Sign Cell, which includes Alain Van De Weghe, Sofie Van Kerckhove, Robby
Gyssens and Steve De Decker, processes and ships stock orders in 24 hours. And
it fulfills custom orders in two days. Other cells are getting involved, too,
to effect similar results.
In keeping with its vision to be easy and enjoyable to conduct business with,
Seton, the direct-marketing arm of W.H. Brady Co., went live on the Internet in
June 1995.
CONNECTING WITH THE CUSTOMER
The World Wide Web is a user-to-user graphical interface which operates within
the Internet network of networks. Seton was one of the first in its industry to
design and construct a Web site for its catalog pages.
The Seton site features more than 5,000 identification and safety products. It
enables customers to quickly learn about Seton products, services and related
topics. In fiscal 1996, customers will also be able to order through the
Internet site.
Through a team effort, Seton-Canada, Seton-United Kingdom and other Seton
operations will be added to the Internet in fiscal 1996. The Seton address on
the Web is http://www.seton.com. And http://www.whbrady.com is W.H. Brady Co.'s
Internet site, containing general information about the Company.
W.H. BRADY CO. 1995 Annual Report 9
<PAGE> 14
New products are the lifeblood of W.H. Brady Co. In 1995, we positioned the
Company for future growth by capturing new markets with innovative new products
such as high-performance tapes for hard disk drives.
NEW PRODUCTS
Since the Company's inception in 1914, W.H. Brady has embraced a simple
precept. Destiny is not a matter of chance, it's a matter of choice. So, for
the last 81 years Brady has chosen to control its destiny by launching new
products and initiatives in both its core markets and fertile new markets. And
1995 was no exception.
BREAKING NEW GROUND
GLOBAL TEAMWORK HELPS BRADY BREAK INTO THE HARD-DISK-DRIVE MARKET.
This year a worldwide Brady team broke new ground by supplying components to
the hard-disk-drive market. And, as in former endeavors, the Company began by
thinking big! Brady entered the market in Singapore, the world leader in
hard-disk-drive manufacturing.
When the Singapore subsidiary of California-based Connor Peripherals needed
high-performance tapes to permanently seal the seam between the top and bottom
halves of its hard disk drives, Brady answered the call.
Jeffrey Hoe, Brady's sales manager in Singapore, put together an international
team of Brady employees--including employees of Brady Precision Tape Co.,
Coated Products Division and the Tobey Research and Innovation Center in
Milwaukee, Wisconsin. The project team of chemists, product and business
development managers and a chief engineer developed a strategic approach and
went to work.
While some team members procured an aluminum tape seal and poly-ester material
for the liner, engineering and manufacturing employees designed the
manufacturing process to precisely die cut the products to Connor's unique
specifications.
[PHOTO]
Caption: Gary Wirth, chief engineer; Michael Savagian, new product development
manager; Malcolm Hoth, senior development chemist; and Rick Stoegbauer,
business development manager, were the core team in the United States who
answered the call from Jeffrey Hoe in Singapore to develop precision tape
products for hard disk drives.
W.H. BRADY CO. 1995 Annual Report 10
<PAGE> 15
NEW MARKETS
Meanwhile, Brady chemists broke new ground of their own, developing a liner
without silicone in its release coating (silicone can contaminate the magnetic
media in the hard disk drive).
"Other products on the market use silicone," Hoe explained. "Our proprietary
silicone-free release system for pressure-sensitive hard-disk-drive parts is a
major breakthrough."
But this Brady team didn't stop there. They have also developed several other
precision die-cut products for the market, including a filter cover, a
track-write seal and a clock-write seal, which seal openings in the disk-drive
casing. What's more, this team collaborated to develop a printed-circuit-board
insulator to reduce noise and it is currently developing a new Brady adhesive
and other precision die-cut products.
[PHOTO]
Caption: Jeffrey Hoe
"Quick response, technical competency and teamwork are crucial in this
fast-paced, high-tech industry," said Rick Stoegbauer, business development
manager. "Through global teamwork, Brady broke new ground in this new market."
[PHOTO]
Caption: Brady products developed for the hard-disk-drive market include an
aluminum tape which seals together the top and bottom halves of a hard disk
drive; a filter cover; and a printed-circuit-board insulator, shown at left.
W.H. BRADY CO. 1995 Annual Report 11
<PAGE> 16
New Products New Markets
[PHOTO]
Caption: The core team that came up with a new solution for labeling printed
circuit boards includes Mark Schlagenhaft, business development manager (left);
Vicki Heideman, development engineer; Bill Hammann, senior process engineer;
Wayne Kelley, senior development chemist; and Dennis Polinski, product manager.
Where do you find high-quality circuit-board labels that will withstand heat
up to 300 degrees Celsius, molten solder and harsh chemical environments?
That's the question the printed-wiring-assembly industry, manufacturers of more
than four billion circuit boards per year, was asking. Fortunately, Brady had
an answer.
NEW BRADY CIRCUIT-BOARD LABELS BEAT THE HEAT...AND THE COMPETITION
"A Brady team of chemists, engineers and marketing professionals began
answering that question in March 1994 by looking at why other label materials
were failing," said Wayne Kelley, senior development chemist. "Then we worked
on formulating a new topcoat and adhesive for the heat- and chemical-resistant
polyimide material currently in use."
This team effort resulted in the development of a high-quality printed label
(the Brady XB457 label) especially for circuit-board manufacturing. It's a
label that stands up to high temperatures and chemical fluxes through superior
print durability, color stability and also shrink-resistance. Later the team
developed a low-cost, less heat-resistant label requested for the European
market and it introduced a new thermal-transfer ribbon material for imprinting
both label varieties.
"The key to the successful product launch of these two labels in June 1995 was
excellent communication within the project team, among Brady's support staff
and with our customers," said Dave Dreifus, research and development director
for the Identification Systems and Specialty Tapes Group. "Team visits to
customers' locations in Texas, Colorado, Maryland, Singapore and Europe to test
the labels on their equipment ensured swift product development and effective
solutions to each customer's needs."
Today, Brady is not only beating the heat with these new high-performance
circuit-board labels, we're beating the competition.
When Brady's Industrial Products Division prelaunched its I.D. Pro(TM) Wire
Marker Printer to distributors in March 1994, it couldn't anticipate it would
be so successful--so soon! It couldn't anticipate the high demand or the
supplier delays in key component manufacturing and assembly.
STICKING TOGETHER
BRADY'S INDUSTRIAL PRODUCTS DIVISION STICKS TOGETHER TO DELIVER I.D. PRO(TM)
PRINTERS.
A special team of marketing and engineering employees worked with suppliers for
five months--training, establishing component specifications to get production
to meet quality requirements and demand, and procuring key components through
multiple sources. A team of inspectors was also assembled to ensure the highest
product quality.
In November 1994, Industrial Products Division began shipping I.D. Pro printers
in quantity to customers. And, in June 1995, the team initiated a full-scale
product launch, highlighting the product's computerization, portability,
capability to use multiple label materials, and other key features.
W.H. BRADY CO. 1995 Annual Report 12
<PAGE> 17
New Products New Markets
[PHOTO]
Caption: A specialized Seton catalog to market safety, identification and other
products to the healthcare industry was the result of a team effort by Heidi
Matteo, marketing programs manager (left); Christopher Karam, graphic designer;
Deborah Scirpo, Art Department production assistant; Dave Giroux, special
markets manager; Edward Fletcher, senior graphic designer, and several other
employees. The specialized catalog enables Seton to market to healthcare
organizations more effectively.
[PHOTO]
Caption: The 1994 prelaunch of the versatile and affordable I.D. Pro(TM) Wire
Marker Printer brought about an overwhelming customer response. The team
getting production and shipping of the printer to meet the demand included
(back row, from left) Robert Behlmer, senior project engineer; Bob Quinn,
mechanical research and development manager; Brent Bandholz, product engineer;
Charles Phelan, then purchasing manager; and (front row) Charlie Check,
marketing manager; and Robert Stout Jr., project engineer.
"We stuck together when things got tough," said Charlie Check, marketing
manager for the product. "By sticking together we solved problems and scaled up
production to deliver this high-quality product."
Healthcare. It's one of the most explosive growth industries today! To capture
new opportunities and continue to posture the Company for the future, Seton has
developed a product catalog targeted to the special needs of the healthcare
market.
CAPTURING NEW OPPORTUNITIES
SETON CREATES CATALOG TARGETING HEALTHCARE INDUSTRY.
Today Seton is going beyond the hospital parking lot into the heart of
healthcare facilities. It is expanding its offerings from traffic and safety
signs, OSHA signs, pipe markers and Setonguard(R) property-identification
labels to include products related to patient services.
A Seton team developed and mailed an 80-page catalog in February 1995 featuring
products most often purchased by healthcare organizations. The first 60 pages
feature standard labels, tapes and signs repositioned from Seton's full-line
catalog, while the remaining 20 pages feature new products targeted to
healthcare safety. These products include biohazardous-waste identification,
environmental regulation signs and labels and containers for blood-borne
pathogen disposal.
But Seton isn't stopping there. It plans to introduce an updated catalog in the
fall of 1995. And to enhance catalog sales, Seton has set up contracts with
healthcare group purchasing organizations together covering more that 5,000
healthcare facilities.
W.H. BRADY CO. 1995 Annual Report 13
<PAGE> 18
W.H. Brady Co.'s mission is to be the global leader in unique identification
solutions. Around the world we mark it, tag it, scan it, lock it, protect it,
fasten it and stick to it.
GLOBAL
Seton, W.H. Brady Co.'s direct-marketing business acquired in 1981, has
traditionally operated independently. But in August 1994, Seton expanded into
Australia and later into Italy by teaming up with Brady operations already
there.
SHARING SUCCESS
SETON TEAMS UP WITH BRADY TO EXPAND INTO NEW COUNTRIES.
To launch the Australian operation, a Seton team from Branford, Connecticut,
assisted in setting up Seton sales, customer service, marketing, financial and
information system functions in a Brady manufacturing facility. Teammates from
Brady-Australia and Seton operations in the United Kingdom and France also
helped get this new venture off the ground.
"The team brought great expertise to the project due to its global experience,"
said Deborah Saporito, Seton global business development manager, who spent
seven months living in Australia while leading the setup efforts. "We also
found we had a lot to share--the facility, accounting, information systems,
warehousing functions and even a general manager. Teamwork helped us to enter
this market at the lowest cost and highest expertise level."
"Both units are learning from each other," said Bill Gill, general manager of
Australian operations. "Together we can become unstoppable in this market."
Seton Australia Pty. Ltd., Chipping Norton, released its first product mailing
in September 1994 and a 68-page catalog in February 1995. And the response has
been tremendous.
Italy is looking good, too! In October 1994, Seton Italia Srl began operations
within an established Brady operation in Milan, Italy. Seton's entry into
Italy, the world's fifth largest economy, occurred through a team
approach--this one led by Peter Cnudde, director of Signmark Group sales and
marketing in Europe, and Greg Burke, catalog manager at Seton-United Kingdom.
Seton's first mailing in Italy was a promotion of Setonguard(R)
property-identification labels in April 1995. An Italian catalog featuring
safety and facility identification products followed in June.
In May, the Italian operation outgrew its office and moved to a larger,
9,000-square-foot facility in Saronno.
By sharing facilities, information and expertise, Seton and Brady are also
sharing something else--success.
[PHOTO]
Caption: The Customer Service Department, including Melinda Gates and Paula
Bailey, receives hundreds of inquiries each day about Seton's safety and
identification products.
[PHOTO]
Caption: Seton Australia is performing above expectations under the direction
of Bill Gill, its general manager, and the continued support of
direct-marketing experts from the U.S. and Europe.
W.H. BRADY CO. 1995 Annual Report 14
<PAGE> 19
EXPANSION
[PHOTO]
Caption: Seton-Australia is a fine example of Teamwork for Global Success.
Leslie Massa, general manager of Seton U.S.; Guy Marhewka, Seton vice
president-international; Deborah Saporito, global business development manager;
Vincent Prigitano, finance director; and Cathy Allen, senior project analyst,
were some of the many individuals that helped launch Seton operations in
Australia.
COMING SOON
We are going for value-enhancing growth in the businesses of identification and
taping solutions throughout the world. In fact, W.H. Brady Co. teams are
currently exploring opportunities in areas such as Latin America, Brazil, South
Korea, Spain, China and India.
In May 1994, Seton-France began marketing property-identification products to
the Netherlands through promotional mailings, while Seton-Germany began
marketing to Austria and Switzerland. Product catalogs were developed and
distributed in October 1994 and March 1995 respectively.
REACHING OUR WORLD
SETON SELLS TO NEW MARKETS.
Seton-France continued to penetrate the European Community by beginning
marketing efforts in Belgium in September 1995. Catalogs in French and Dutch
are part of its strategy.
"We see great opportunities to build on our success by reaching out to these
markets," said Seton Group Vice President Richard Fisk. "The key is to
customize our product line and our services to meet the specific needs of each
customer."
This method of cross-border marketing allows W.H. Brady Co. to gain a presence
in smaller markets--a presence the Company will build on in the future.
[PHOTO]
Caption: Seton-Germany markets to companies in Austria and Switzerland as well
as in Germany.
W.H. BRADY CO. 1995 Annual Report 15
<PAGE> 20
As we grow W.H. Brady Co. by doing more where we are, introducing innovative
new products, entering new markets and penetrating geographic areas, we are
ever-focused on creating shareholder value.
SHAREHOLDER VALUE ENHANCEMENT
We are maximizing our value for shareholders by leveraging our assets and
controlling costs--using our teams, equipment, facilities, systems and other
assets to their full potential. For example, in fiscal 1995 we reduced
inventory while increasing sales 22.9 percent. We divested divisions and assets
which would not create long-term value for the Company. We decreased our total
investment in property, plant and equipment by 9 percent while continuing to
invest in productive assets, such as additional manufacturing equipment in
Singapore and the United States.
The Brady team was very successful in value enhancement in fiscal 1995. As our
stock price rose from $47.50 to $71.38 during the year, we created nearly $174
million in value for shareholders.
In fiscal 1996 we will continue to invest in new product development; sales and
marketing; systems to improve efficiency and service; geographic expansions;
and acquisitions to further improve our long-term value to shareholders.
Graph: Stock Price vs. Book Value
<TABLE>
<CAPTION>
Stock Price Book Value
----------- ----------
<S> <C> <C>
1991 $39.25 $15.66
1992 34.25 16.26
1993 34.75 17.35
1994 47.50 19.61
1995 71.38 23.06
</TABLE>
Value-enhancement efforts at Brady are evident in our stock performance.
W.H. BRADY CO. 1995 Annual Report 16
<PAGE> 21
FINANCIAL
REVIEW, 1995
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Selected Financial Information 18
Management's Discussion and Analysis of
Results of Operations & Financial Condition 20
Consolidated Balance Sheets 22
Consolidated Statements of Income 24
Consolidated Statements of
Stockholders' Investment 25
Consolidated Statements of Cash Flows 26
Notes to Consolidated Financial Statements 27
Independent Auditors' Report 34
Corporate Data 35
Shareholder Services 36
</TABLE>
W.H. BRADY CO. 1995 Annual Report 17
<PAGE> 22
Selected Financial Information
<TABLE>
<CAPTION>
Years Ended July 31, 1986 through 1995
(Dollars in Thousands, Except Per Share Amounts) 1995 1994 1993
----------------------------------
<S> <C> <C> <C>
Operating Data
Net sales........................................................... $314,362 $255,841 $242,970
Operating expenses:
Cost of products sold............................................. 143,634 118,116 114,301
Research and development.......................................... 10,426 10,318 12,132
Selling, general and administrative............................... 119,717 97,932 92,449
Nonrecurring charge (credit)...................................... -- (1,236)
----------------------------------
Total operating expenses........................................ 273,777 226,366 217,646
----------------------------------
OPERATING INCOME.................................................... 40,585 29,475 25,324
OTHER INCOME AND (EXPENSE):
Investment and other income - net................................. 4,609 837 559
Interest expense.................................................. (555) (410) (54)
----------------------------------
Net other income................................................ 4,054 427 505
Income before income taxes, extraordinary item and cumulative ----------------------------------
effect of changes in accounting principles.......................... 44,639 29,902 25,829
INCOME TAXES........................................................ 16,728 11,362 8,973
Income before extraordinary item and cumulative effect of ----------------------------------
changes in accounting principles.................................... 27,911 18,540 16,856
Extraordinary item: ----------------------------------
Gain on proceeds of officer's life insurance policies, net........ -- -- --
----------------------------------
Income before cumulative effect of changes in accounting principles. 27,911 18,540 16,856
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES FOR:
Postretirement benefits (net of income taxes of $2,663)........... -- -- --
Income taxes...................................................... -- -- --
Catalog costs..................................................... -- -- --
----------------------------------
NET INCOME.......................................................... $ 27,911 $ 18,540 $ 16,856
==================================
NET INCOME PER COMMON SHARE:
Class A Nonvoting................................................. $ 3.83 $ 2.55 $ 2.33
Class B Voting.................................................... $ 3.73 $ 2.45 $ 2.23
CASH DIVIDENDS ON:
Class A Common Stock.............................................. $ .80 $ .68 $ .60
Class B Common Stock.............................................. $ .70 $ .58 $ .50
Balance Sheet (at period end)
Working capital..................................................... $129,938 $100,023 $ 77,943
Total assets........................................................ 230,005 202,509 179,901
Long-term debt, less current maturities............................. 1,903 1,855 1,978
Stockholders' investment............................................ 170,823 145,129 128,068
</TABLE>
W.H. BRADY CO. 1995 Annual Report 18
<PAGE> 23
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$235,965 $211,063 $191,161 $174,174 $153,016 $126,420 $108,364
110,130 96,797 84,952 75,620 67,302 56,284 49,385
10,001 9,176 7,355 6,168 5,879 5,383 5,004
93,931 84,936 76,596 71,292 63,986 50,108 38,019
6,562 -- -- 6,465 -- -- --
- ------------------------------------------------------------------------------
220,624 190,909 168,903 159,545 137,167 111,775 92,408
- ------------------------------------------------------------------------------
15,341 20,154 22,258 14,629 15,849 14,645 15,956
239 2,845 4,004 2,380 1,901 2,082 1,764
(219) (548) (646) (356) (477) (348) (400)
- ------------------------------------------------------------------------------
20 2,297 3,358 2,024 1,424 1,734 1,364
- ------------------------------------------------------------------------------
15,361 22,451 25,616 16,653 17,273 16,379 17,320
6,972 7,054 10,606 6,778 6,968 7,535 7,873
- ------------------------------------------------------------------------------
8,389 15,397 15,010 9,875 10,305 8,844 9,447
-- -- -- 4,625 -- -- --
- ------------------------------------------------------------------------------
8,389 15,397 15,010 14,500 10,305 8,844 9,447
(3,995) -- -- -- -- -- --
661 -- -- -- -- -- --
-- -- -- 1,233 -- -- --
- ------------------------------------------------------------------------------
$ 5,055 $ 15,397 $ 15,010 $ 15,733 $ 10,305 $ 8,844 $ 9,447
==============================================================================
$ .69 $ 2.14 $ 2.09 $ 2.10 $ 1.36 $ 1.17 $ 1.26
$ .59 $ 2.04 $ 1.99 $ 2.00 $ 1.26 $ 1.07 $ 1.16
$ .56 $ .48 $ .40 $ .28 $ .24 $ .20 $ .10
$ .46 $ .38 $ .30 $ .18 $ .14 $ .10 --
$ 66,093 $ 70,883 $ 67,797 $ 53,056 $ 42,492 $ 44,176 $ 40,701
173,054 156,812 147,197 129,890 117,201 104,398 94,477
2,524 1,982 3,298 3,637 3,086 3,851 4,548
119,771 115,260 103,784 89,443 84,987 76,044 66,791
</TABLE>
W.H. BRADY CO. 1995 Annual Report 19
<PAGE> 24
Management's Discussion and Analysis of
Results of Operations & Financial Condition
YEAR ENDED JULY 31, 1995, COMPARED TO YEAR END JULY 31, 1994
Sales for fiscal 1995 increased by $58,521,000 or 22.9% over fiscal 1994. Sales
of the Company's international subsidiaries increased 36.3%, 24.3% as a result
of real growth through continued market penetration in Europe and the Far East
and new Seton subsidiaries in Australia and Italy. Translation into U.S.
currency resulted in an additional 12.0% increase in international sales due to
favorable exchange rates during the year. Sales of the Company's U.S.
operations increased 15.0%, primarily from new product introductions such as
the I.D. Pro(TM) Wire Marker Printer. This U.S. sales increase was achieved
despite the divestiture of two businesses during the year that had sales of
$7,943,000 in fiscal 1995 and $10,901,000 in fiscal 1994.
The cost of products sold decreased from 46.2% of sales to 45.7% of
sales as a result of changes in product mix and manufacturing efficiencies from
the Company's continuous-improvement efforts. Selling, general and
administrative expenses as a percentage of sales decreased slightly from 38.3%
to 38.1% of sales, as the Company's continuing cost-control efforts more than
offset the costs associated with new product introductions and the new Seton
start-ups. Research and development increased 1.1% over fiscal 1994, but
declined as a percentage of sales.
Investment and other income for fiscal 1995 included $2,033,000
representing the gain on the divestiture of two domestic manufacturing
operations and the sale of certain real estate. Interest income increased by
$1,190,000 over fiscal 1994 because of increased levels of investment and
higher rates.
Income before income taxes for the two businesses divested in fiscal
1995 was a loss of $1,098,000 compared to fiscal 1994's full year loss of
$4,283,000.
The Company's income before income taxes increased to $44,639,000, an
increase of 49.3% compared to fiscal 1994's $29,902,000.
Net income was positively impacted by a decrease in the effective tax
rate from 38.0% for fiscal 1994 to 37.5% for fiscal 1995. This was primarily
caused by a lower effective state tax rate.
Net income for the year increased 50.5% to $27,911,000 for fiscal 1995,
compared to $18,540,000 for fiscal 1994, because of the factors cited above.
YEAR ENDED JULY 31, 1994, COMPARED TO YEAR END JULY 31, 1993
Sales for fiscal 1994 increased by $12,871,000 or 5.3% over fiscal 1993. Sales
of the Company's international subsidiaries increased 22.1% as a result of real
growth through continued market penetration in Europe and the Far East offset
by changes in the exchange rates used to translate financial results into
U.S. currency. Foreign exchange effect resulted in a 6.5% overall decrease in
international sales. Sales of its U.S. operations decreased 2.6% because of the
divestiture of three businesses last year. Comparing only continuing
operations, sales of the Company's U.S. operations increased 6.1% as a result
of the introduction of new products.
The cost of products sold decreased from 47.0% of sales to 46.2% of
sales as a result of changes in product mix, the divestiture of three
businesses last year and increased manufacturing efficiencies from the
Company's continuous-improvement efforts. Selling, general and administrative
expenses as a percentage of sales increased from 38.1% to 38.3% of sales as a
result of costs attributable to the introduction of new products. The
completion of certain product development projects last year caused research
and development expenses to decrease 15.0% this year compared to fiscal 1993.
In fiscal 1993 the Company recorded a nonrecurring credit of $1,236,000
($742,000 after tax) primarily representing the gain on the divestiture of
three domestic operations.
Income before income taxes increased to $29,902,000 in fiscal 1994, an
increase of 15.8% compared to fiscal 1993's $25,829,000, largely as a result of
improved performance in the Company's international operations.
Net income was negatively impacted by an increase in the effective tax
rate from 34.7% in fiscal 1993 to 38.0% in fiscal 1994. The lower effective tax
rate in fiscal 1993 was due to the reversal of a $730,000 provision for future
settlement relating to the amortization of customer lists which was established
in fiscal 1992 and favorably resolved in fiscal 1993. Eliminating the effect of
this adjustment, the effective tax rate for fiscal 1993 would have been 37.6%
compared to 38.0% for the current fiscal year.
Net income was $18,540,000 for fiscal 1994, compared to $16,856,000 for
fiscal 1993, because of the factors cited above.
W.H. BRADY CO. 1995 Annual Report 20
<PAGE> 25
YEAR ENDED JULY 31, 1993, COMPARED TO YEAR END JULY 31, 1992
Sales for fiscal 1993 increased by $7,005,000 or 3.0% over fiscal 1992.
Sales of the Company's international subsidiaries increased 9.6% as a
result of real growth partially offset by changes in the exchange rates
used to translate financial results into U.S. currency. Sales of its
U.S. operations increased slightly compared to the prior year despite
the divestiture of three businesses during the year.
The cost of products sold increased from 46.7% of sales to 47.0% of
sales as a result of increased material costs resulting from a change in
products sold and because of additional depreciation from the Company's
expansion projects. Capital expenditures of $12,280,000 in fiscal 1993
and $24,074,000 in fiscal 1992 gave rise to the increased depreciation.
Selling, general and administrative expenses as a percentage of sales
decreased from 39.8% to 38.1% as a result of the Company's continuing
cost-control efforts. Research and development expenses increased 21.3%
over the prior year, reflecting the Company's continued commitment to
process improvements and new product development.
The Company recorded a nonrecurring charge of $6,562,000 ($3,757,000
after tax) during fiscal 1992, representing a writedown of a portion of
its investment in two domestic operations and a loss on the sale of a
foreign manufacturing operation. The writedown related primarily to the
carrying value of certain inventories and machinery and equipment.
During fiscal 1993, the Company recorded a nonrecurring credit of
$1,236,000 ($742,000 after tax) primarily representing the gain on the
divestiture of three domestic operations.
Income before income taxes and cumulative effect of changes in
accounting principles increased to $25,829,000 in fiscal 1993, compared
to fiscal 1992's $15,361,000.
Net income was positively impacted by a decrease in the effective tax
rate from 45.5% in fiscal 1992 to 34.7% in fiscal 1993. The lower
effective tax rate in fiscal 1993 was due to the reversal of a $730,000
provision for future settlement relating to the amortization of customer
lists which was established in fiscal 1992 and favorably resolved in
fiscal 1993. Eliminating the effect of this adjustment, the effective
tax rate for fiscal 1993 would have been 37.6% compared to 40.6% for the
prior fiscal year.
The $3,995,000 cumulative after-tax effect of adopting SFAS-106
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
was included as a charge against earnings in fiscal 1992. The $661,000
cumulative effect of adopting SFAS-109 "Accounting for Income Taxes" was
included as income in fiscal 1992.
Net income was $16,856,000 for fiscal 1993, compared to $5,055,000 for
fiscal 1992, because of the factors cited above.
LIQUIDITY
The Company's liquidity remains strong. Cash and cash equivalents were
$89,067,000 at July 31, 1995, compared to $66,107,000 at July 31, 1994,
and $42,366,000 at July 31, 1993. Working capital was $129,938,000 at
July 31, 1995, compared to $100,023,000 at July 31, 1994, an increase of
$29,915,000. Of this amount $12,175,000 represented proceeds from the
divestitures and real estate sales and the balance was from the profits
of the Company.
Cash flow generated by operating activities was $21,552,000 for fiscal
1995, $33,068,000 for fiscal 1994, and $21,582,000 for fiscal 1993.
Capital expenditures were $8,114,000 in fiscal 1995, $6,466,000 in
fiscal 1994, and $12,280,000 in fiscal 1993. Financing activities,
primarily the payment of dividends to the Company's stockholders,
consumed $4,659,000 of cash in fiscal 1995, $4,214,000 in fiscal 1994
and $4,326,000 in fiscal 1993.
Long-term debt as a percentage of long-term debt plus stockholders'
investment was 1.1% at July 31, 1995, compared to 1.3% at July 31, 1994,
and 1.5% at July 31, 1993.
Management believes the Company's cash and cash equivalents and the cash
flow it generates from its operating activities are adequate to meet its
current investing and financing needs.
INFLATION
Over the last three fiscal years, inflation has had a minimal effect on
reported results of operations and the Company s financial condition.
W.H. BRADY CO. 1995 Annual Report 21
<PAGE> 26
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, 1995 and 1994
(Dollars in Thousands) 1995 1994
----------------------
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents (Note 1)..................................... $ 89,067 $ 66,107
Accounts receivable, less allowance for losses
($1,881 and $1,565, respectively).................................... 42,104 32,308
Inventories (Note 1):
Finished products.................................................... 16,866 16,717
Work-in-process...................................................... 1,987 2,534
Raw materials and supplies........................................... 4,246 4,486
----------------------
Total inventories.................................................. 23,099 23,737
Prepaid expenses and other current assets (Notes 1, 3 and 4)........... 10,202 9,611
----------------------
Total current assets............................................... 164,472 131,763
OTHER ASSETS (Note 4).................................................... 6,960 6,403
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 5):
Cost:
Land................................................................. 4,417 4,689
Buildings and improvements........................................... 34,284 38,431
Machinery and equipment.............................................. 69,278 72,576
Construction in progress............................................. 815 939
----------------------
108,794 116,635
Less accumulated depreciation......................................... 50,221 52,292
----------------------
Net property, plant and equipment................................. 58,573 64,343
----------------------
TOTAL................................................................... $230,005 $202,509
======================
See Notes to Consolidated Financial Statements.
</TABLE>
W.H. BRADY CO. 1995 Annual Report 22
<PAGE> 27
<TABLE>
<CAPTION>
July 31, 1995 and 1994
(Dollars in Thousands) 1995 1994
------------------------
<S> <C> <C>
Liabilities and Stockholder's Investment
CURRENT LIABILITIES:
Accounts payable........................................................ $ 9,252 $ 9,678
Wages and amounts withheld from employees............................... 14,447 10,479
Taxes, other than income taxes.......................................... 1,361 1,962
Accrued income taxes.................................................... 2,150 2,999
Other current liabilities (Note 3)...................................... 6,912 6,217
Current maturities on long-term debt (Note 5)........................... 412 405
------------------------
Total current liabilities........................................... 34,534 31,740
LONG-TERN DEBT, less current maturities (Note 5).......................... 1,903 1,855
OTHER LIABILITIES (Note 3)................................................ 22,745 23,785
------------------------
Total liabilities.................................................. 59,182 57,380
------------------------
STOCKHOLDER'S INVESTMENT (Notes 1 and 6):
Preferred Stock (aggregate liquidation preference of $3,026 at July
31, 1995)........................................................... 2,855 2,855
Common Stock:
Class A Nonvoting - Issued and outstanding 5,507,341 and 5,476,812
shares, respectively, (aggregate liquidation preference of $27,537
at July 31, 1995)................................................... 55 54
Class B Voting - Issued and outstanding 1,769,314 shares............. 18 18
Additional paid-in capital............................................. 8,074 6,768
Earnings retained in the business...................................... 154,286 132,271
Cumulative translation adjustments..................................... 5,535 3,163
------------------------
Total stockholder's investment..................................... 170,823 145,129
------------------------
TOTAL.................................................................... $230,005 $202,509
------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
W.H. BRADY CO. 1995 Annual Report 23
<PAGE> 28
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands, Except Per Share Amounts) 1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
NET SALES................................................... $314,362 $255,841 $242,970
OPERATING EXPENSES:
Cost of products sold..................................... 143,634 118,116 114,301
Research and development.................................. 10,426 10,318 12,132
Selling, general and administrative....................... 119,717 97,932 92,449
Nonrecurring (credit) (Note 2)............................ -- -- (1,236)
---------------------------------------
Total operating expenses................................ 273,777 226,366 217,646
----------------------------------------
OPERATING INCOME............................................ 40,585 29,475 25,324
OTHER INCOME AND (EXPENSE):
Investment and other income - net (Note 2) ............... 4,609 837 559
Interest expense.......................................... (555) (410) (54)
---------------------------------------
Net other income........................................ 4,054 427 505
---------------------------------------
Income before income taxes................................. 44,639 29,902 25,829
INCOME TAXES (Notes 1 and 4)............................... 16,728 11,362 8,973
NET INCOME................................................. $ 27,911 $ 18,540 $ 16,856
========================================
NET INCOME PER COMMON SHARE (Notes 6 and 8):
Class A Nonvoting........................................ $ 3.83 $ 2.55 $ 2.33
Class B Voting........................................... $ 3.73 $ 2.45 $ 2.23
----------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
W.H. BRADY CO. 1995 Annual Report 24
<PAGE> 29
Consolidated Statements of Stockholder's Investment
<TABLE>
<CAPTION>
Additional Earnings Cumulative
Years Ended July 31, 1993, 1994 and 1995 Preferred Common Paid-In Retained in Translation
(Dollars in Thousands, Except Per Share Amounts) Stock Stock Capital the Business Adjustments
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES AT AUGUST 1, 1992............................ $2,855 $72 $4,836 $106,274 $5,734
Net income.......................................... -- -- -- 16,856 --
Net currency translation adjustment................. -- -- -- -- (4,894)
Issuance of 26,000 shares of Class A Common Stock
under stock option plan........................... -- -- 646 -- --
Tax benefit from exercise of stock options.......... -- -- 89 -- --
Cash dividends on Preferred Stock:
1979 series - $10 a share......................... -- -- -- (220) --
6% and 1972 series - $6 a share................... -- -- -- (39) --
Cash dividends on Common Stock:
Class A - $.60 a share............................ -- -- -- (3,256) --
Class B - $.50 a share............................ -- -- -- (885) --
-----------------------------------------------------------------------
BALANCES AT JULY 31, 1993............................. 2,855 72 5,571 118,730 840
Net income.......................................... -- -- -- 18,540
Net currency translation adjustment................. -- -- -- -- 2,323
Issuance of 39,650 shares of Class A Common Stock
under stock option plan........................... -- -- 1,063 -- --
Tax benefit from exercise of stock options.......... -- -- 134 -- --
Cash dividends on Preferred Stock:
1979 series - $10 a share......................... -- -- -- (220) --
6% and 1972 series - $6 a share................... -- -- -- (39) --
Cash dividends on Common Stock:
Class A - $.68 a share............................ -- -- -- (3,714) --
Class B - $.58 a share............................ -- -- -- (1,026) --
-----------------------------------------------------------------------
BALANCES AT JULY 31, 1994............................. 2,855 72 6,768 132,271 3,163
Net income.......................................... -- -- -- 27,911 --
Net currency translation adjustment................. -- -- -- -- 2,372
Issuance of 30,529 shares of Class A Common Stock
under stock option plan........................... -- 1 999 -- --
Tax benefit from exercise of stock options.......... -- -- 307 -- --
Cash dividends on Preferred Stock:
1979 series - $10 a share......................... -- -- -- (220) --
6% and 1972 series - $6 a share................... -- -- -- (39) --
Cash dividends on Common Stock:
Class A - $.80 a share........................... -- -- -- (4,398) --
Class B - $.70 a share........................... -- -- -- (1,239) --
-----------------------------------------------------------------------
BALANCES AT JULY 31, 1995............................ $2,855 $73 $8,074 $154,286 $5,535
-----------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
W.H. BRADY CO. 1995 Annual Report 25
<PAGE> 30
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands) 1995 1994 1993
-------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $27,911 $18,540 $16,856
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 9,049 9,325 9,848
Amortization . . . . . . . . . . . . . . . . . . . . . . . 110 110 325
Loss/(Gain) on sale of businesses . . . . . . . . . . . . 413 --- (1,963)
(Gain)/Loss on sale of property, plant and equipment . . . (2,209) 194 51
Provision for losses on accounts receivable . . . . . . . 463 725 758
Changes in operating assets and liabilities
(net of effects of business disposals in 1995 and 1993):
Accounts receivable . . . . . . . . . . . . . . . . . (12,564) (2,169) (2,917)
Inventory . . . . . . . . . . . . . . . . . . . . . . . 473 (928) (3,583)
Prepaid expenses and other assets. . . . . . . . . . . . (1,385) 1,305 1,981
Accounts payable and accrued liabilities . . . . . . . . 1,361 3,325 (890)
Income taxes . . . . . . . . . . . . . . . . . . . . . . (1,605) 1,852 2,139
Deferred income taxes. . . . . . . . . . . . . . . . . . 212 (413) (608)
Other liabilities . . . . . . . . . . . . . . . . . . . (687) 1,202 (415)
-------------------------
Net cash provided by operating activities. . . . . . . . . . . 21,552 33,068 21,582
-------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment . . . . . . . . . (8,114) (6,466) (12,280)
Proceeds from sale of property, plant and equipment. . . . . 6,227 458 570
Proceeds from sale of businesses . . . . . . . . . . . . . . 6,315 10,327
Purchase of other long-term investment . . . . . . . . . . . (750)
-------------------------
Net cash provided by (used in) investing activities. . . . . . 3,678 (6,008) (1,383)
-------------------------
FINANCING ACTIVITIES:
Payment of dividends . . . . . . . . . . . . . . . . . . . . (5,896) (4,999) (4,400)
Proceeds from issuance of Common Stock . . . . . . . . . . . 1,306 1,063 646
Proceeds from long-term borrowings . . . . . . . . . . . . . --- 217 139
Principal payments on long-term debt . . . . . . . . . . . . (69) (495) (711)
-------------------------
Net cash used in financing activities . . . . . . . . . . . . (4,659) (4,214) (4,326)
-------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . . . . 2,389 895 (2,026)
-------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . 22,960 23,741 13,847
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . 66,107 42,366 28,519
-------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . $89,067 $66,107 $42,366
=========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 116 $ 237 $ 436
Income taxes, net of refunds . . . . . . . . . . . . . . . 17,174 10,601 9,110
-------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
W.H. BRADY CO. 1995 Annual Report 26
<PAGE> 31
Notes to Consolidated Financial Statements
Years Ended July 31, 1995, 1994 and 1993
Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of W.H. Brady Co. and its subsidiaries,
all of which are wholly-owned. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash Equivalents - The Company considers all highly liquid investments
with maturities of three months or less when acquired to be cash
equivalents. The carrying amounts of cash equivalents approximate fair
value because they mature in three months or less.
Inventories - Inventories are stated at the lower of cost or market.
Cost has been determined using the last-in, first-out (LIFO) method for
domestic inventories (approximately 62% and 65% of total inventories at
July 31, 1995 and 1994, respectively) and the first-in, first-out method
for other inventories. The difference between the carrying value of
domestic inventories stated at LIFO cost and the value of such
inventories stated at replacement cost was $5,204,000 at July 31, 1995,
and $5,777,000 at July 31, 1994.
Depreciation - The cost of buildings and improvements and machinery and
equipment is being depreciated over their estimated useful lives using
the straight-line method for financial reporting purposes.
Catalog Costs - Catalog costs are initially capitalized and amortized
over the estimated useful lives of the publications (generally eight
months). At July 31, 1995 and 1994, $4,436,000 and $2,325,000,
respectively, of prepaid catalog costs were included in prepaid expenses
and other current assets.
Foreign Currency Translation - Foreign currency assets and liabilities
are translated into United States dollars at end of period rates of
exchange, and income and expense accounts are translated at the weighted
average rates of exchange for the period. Resulting translation
adjustments are included as a separate component of stockholders
investment.
Hedging - The Company enters into forward foreign exchange contracts to
hedge committed intercompany foreign currency transactions. Such
exchange contracts generally have maturities of six months or less. At
July 31, 1995, exchange contracts aggregating approximately $4,500,000
were outstanding.
Income Taxes - Effective August 1, 1991, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Note 2
DISPOSITIONS AND NONRECURRING (CREDIT)
During fiscal 1995, the Company sold two businesses and certain real
estate which resulted in a gain of $2,033,000 which is included in other
income in the accompanying financial statements.
During fiscal 1993, the Company sold two domestic manufacturing
operations and a direct-marketing subsidiary. The nonrecurring credit of
$1,236,000 in 1993 represents the excess of proceeds over the net
carrying amounts of net assets disposed of, offset by provision for
severance and other related disposition expenses.
Note 3
EMPLOYEE BENEFIT PLANS
The Company provides postretirement medical, dental and vision benefits
for all regular full- and part-time domestic employees (including
spouses) who retire on or after attainment of age 55 with 15 years of
credited service. Credited service begins accruing at the later of age
40 or date of hire. All active employees first eligible to retire after
July 31, 1992, will be covered by an unfunded, contributory
postretirement healthcare plan where employer contributions will not
exceed a Defined Dollar Benefit amount, regardless of the cost of the
program. Employer contributions to the plan are based on an employee s
age and service at retirement.
Effective August 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS No. 106), "Employers Accounting for
Postretirement Benefits Other than Pensions." In connection with the
adoption of SFAS No. 106, the Company elected to recognize as expense
the entire accumulated postretirement benefit obligation (transition
obligation) rather than amortizing such amount to expense over a 20-year
period. The Company funds benefit costs on a pay-as-you-go basis. During
the years ended July 31, 1995 and 1994, the Company made benefit
payments totalling $165,000 and $185,000, respectively.
W.H. BRADY CO. 1995 Annual Report 27
<PAGE> 32
The following table sets forth the plan s status reconciled with amounts
recognized in the accompanying consolidated balance sheets at July 31,
1995 and 1994:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1995 1994
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . $3,387 $2,607
Fully eligible active plan participants. . . . . 1,077 2,225
Other active plan participants . . . . . . . . . 1,790 1,448
------ ------
6,254 6,280
Unrecognized net gain . . . . . . . . . . . . . . 1,882 1,543
------ ------
Accrued postretirement benefit cost. . . . . . . . $8,136 $7,823
====== ======
</TABLE>
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands) 1995 1994 1993
<S> <C> <C> <C>
Net periodic postretirement benefit cost included the following
components:
Service cost - benefit attributed to service during the period . . $230 $209 $210
Interest cost on accumulated postretirement benefit obligation . . 469 469 462
Amortization of (gain) . . . . . . . . . . . . . . . . . . . . . . (103) (64) (58)
---- ---- ----
Periodic postretirement benefit cost prior to curtailment. . . . . 596 614 614
Effective curtailment (gain) due primarily
to disposition of operations . . . . . . . . . . . . . . . . (93) -- (185)
---- ---- ----
Net periodic postretirement benefit cost . . . . . . . . . . . . . . . $503 $614 $429
==== ==== ====
</TABLE>
The assumed healthcare cost trend rates used in measuring the
accumulated postretirement benefit obligation were 8% in 1995 and
gradually declining to 5.5% by the year 2000.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% in 1995 and 1994.
If the healthcare cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of July 31, 1995, would
be increased by $90,000. The effect of this change on the sum of service
cost and interest cost would not be material.
During 1995 and 1993, the Company had curtailment gains which represent
the accumulated postretirement benefit obligation of employees who were
employed at operations disposed of in those years.
The Company has retirement and profit-sharing plans covering
substantially all full-time domestic employees and certain of its
foreign subsidiaries. Contributions to the plans are determined annually
based on earnings of the respective companies and employee
contributions. At July 31, 1995 and 1994, $397,000 and $3,109,000,
respectively, of accrued profit-sharing contributions were included in
other current liabilities.
The Company also has deferred compensation plans for directors, officers
and key executives utilizing the phantom stock plan concept. At July 31,
1995 and 1994, $17,015,000 and $15,795,000, respectively, of deferred
compensation was included in current and other long-term liabilities.
The amounts charged to income for the plans described above were
$6,188,000 in 1995, $5,660,000 in 1994 and $4,443,000 in 1993.
The Company has a voluntary employee benefit trust for the purpose of
funding employee medical benefits and certain other employee benefits.
At July 31, 1995 and 1994, $2,738,000 and $4,145,000, respectively, of
payments to the trust to fund such benefits were included in prepaid
expenses and other current assets.
Note 4
INCOME TAXES
Income taxes consist of the following:
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands) 1995 1994 1993
<S> <C> <C> <C>
Currently payable:
Federal . . . . . . . . . . . . . . . . . . $10,194 $ 6,987 $6,612
Foreign . . . . . . . . . . . . . . . . . . 4,518 2,755 1,869
State . . . . . . . . . . . . . . . . . . 1,804 2,033 1,100
------- ------- ------
16,516 11,775 9,581
------- ------- ------
Deferred (credit):
Federal . . . . . . . . . . . . . . . . . . (382) (448) (376)
Foreign . . . . . . . . . . . . . . . . . . 662 112 (165)
State . . . . . . . . . . . . . . . . . . (68) (77) (67)
------- ------- ------
212 (413) (608)
------- ------- ------
Total . . . . . . . . . . . . . . . . . . $16,728 $11,362 $8,973
======= ======= ======
</TABLE>
Deferred income taxes result from timing differences in the recognition
of revenues and expenses for financial statement and income tax
purposes. These differences relate principally to depreciation and
certain expenses not deductible for tax reporting until paid.
W.H. BRADY CO. 1995 Annual Report 28
<PAGE> 33
Pre-tax income consists of the following:
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands) 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
United States .............................. $32,074 $21,565 $22,220
Foreign .................................... 12,565 8,337 3,609
-------------------------
Total .................................... $44,639 $29,902 $25,829
=========================
</TABLE>
The approximate tax effects of temporary differences are as follows:
<TABLE>
<CAPTION>
July 31, 1995
(Dollars in Thousands) Assets Liabilities Total
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Inventories ................................ $ 1,724 -- $1,724
Prepaid catalog costs ...................... -- $ (944) (944)
Employee benefits .......................... -- (100) (100)
Tax loss carryforwards ..................... 105 -- 105
Allowance for doubtful accounts ............ 307 -- 307
Other, net ................................. 272 -- 272
-------------------------
Current .................................. 2,408 (1,044) 1,364
Excess of tax over book -------------------------
depreciation ............................. -- (3,695) (3,695)
Deferred compensation ...................... 5,383 -- 5,383
Postretirement benefits .................... 3,316 -- 3,316
Tax loss carryforwards ..................... 1,563 -- 1,563
Less valuation allowance ................... (1,563) -- (1,563)
Other, net ................................. 199 -- 199
-------------------------
Noncurrent ............................... 8,898 (3,695) 5,203
-------------------------
Total ...................................... $11,306 $(4,739) $6,567
=========================
<CAPTION>
July 31, 1994
(Dollars in Thousands) Assets Liabilities Total
<S> <C> <C> <C>
Inventories ............................... $ 1,659 -- $1,659
Prepaid catalog costs ..................... -- $ (612) (612)
Employee benefits ......................... -- (505) (505)
Tax loss carryforwards .................... 397 -- 397
Allowance for doubtful accounts ........... 324 -- 324
Other, net ................................ 644 -- 644
-------------------------
Current ................................. 3,024 (1,117) 1,907
Excess of tax over book -------------------------
depreciation ............................ -- (4,517) (4,517)
Deferred compensation ..................... 6,001 -- 6,001
Postretirement benefits ................... 3,129 -- 3,129
Tax loss carryforwards .................... 1,550 -- 1,550
Less valuation allowance .................. (1,550) -- (1,550)
Other, net ................................ 259 -- 259
-------------------------
Noncurrent ............................. 9,389 (4,517) 4,872
-------------------------
Total ..................................... $12,413 $(5,634) $6,779
=========================
</TABLE>
At July 31, 1995 and 1994, $1,364,000 and $1,907,000, respectively, of
net deferred tax assets were included in prepaid expenses and other current
assets. At July 31, 1995 and 1994, $5,203,000 and $4,872,000, respectively, of
net deferred tax assets were included in other assets.
A reconciliation of the tax computed by applying the statutory U.S.
Federal income tax rate to income before income taxes to the total income tax
provision is as follows:
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Tax at statutory rate . . . . . . . . . . . . $15,624 $10,466 $8,782
State income taxes, net of Federal
tax benefit . . . . . . . . . . . . . . . 1,177 1,271 841
International losses with no related
tax benefits . . . . . . . . . . . . . . . 613 175 351
International rate differential . . . . . . . 169 (226) 126
Rate variances arising from foreign
subsidiary distributions . . . . . . . . . (558) 174 157
Provision for future settlements. . . . . . . -- -- (730)
Other, net . . . . . . . . . . . . . . . . . (297) (498) (554)
------------------------
Total income tax provision . . . . . . . . . $16,728 $11,362 $8,973
========================
Effective tax rate . . . . . . . . . . . . . 37.5% 38.0% 34.7%
========================
</TABLE>
The Company's policy is to remit earnings from foreign subsidiaries only
to the extent any resultant foreign income taxes are creditable in the United
States. Accordingly, the Company does not currently provide for the additional
United States and foreign income taxes which would become payable upon remission
of undistributed earnings of foreign subsidiaries.
The cumulative undistributed earnings of such companies at July 31,
1995, amounted to approximately $14,000,000. If all such undistributed earnings
were remitted, an additional provision for foreign income taxes of approximately
$200,000 would be required.
W.H. BRADY CO. 1995 Annual Report 29
<PAGE> 34
Notes to Consolidated Financial Statements
Years Ended July 31, 1995, 1994 and 1993 (continued)
NOTE 5
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
July 31, 1995 and 1994
(Dollars in Thousands) 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
6.25% Industrial Development Revenue Bonds
payable on December 1, 2001 ................. $1,000 $1,000
6.75% Industrial Development Revenue Bonds
payable in annual installments of $125,000
in 1996 and $140,000 in 1997 ................ 265 385
Other ......................................... 1,050 875
---------------
2,315 2,260
Less current maturities ....................... 412 405
---------------
$1,903 $1,855
===============
</TABLE>
The Industrial Development Revenue Bonds and the covering mortgage and
loan agreements require, among other provisions, that the Company maintain
minimum net working capital of $5,000,000 and a defined net worth of
$10,000,000. The bonds are collateralized by first mortgages on certain
property with a net carrying amount of approximately $5,657,000 at July 31,
1995. The Company's Industrial Development Revenue Bonds approximate fair
value.
Maturities on long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
(Dollars in Thousands)
- ---------------------------------------------------
<S> <C>
1996 .................................... $ 412
1997 .................................... 349
1998 .................................... 231
1999 .................................... 255
2000 .................................... 68
Thereafter .............................. 1,000
</TABLE>
NOTE 6
STOCKHOLDERS' INVESTMENT
Information as to the Company's capital stock at July 31, 1995, is as
follows:
<TABLE>
<CAPTION>
Shares Shares
(Dollars in Thousands) Authorized Outstanding Amount
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock, $.01 par value ........ 5,000,000 0 $ 0
Cumulative Preferred Stock,
6% Cumulative ........................ 5,000 3,984 $ 399
1972 Series ........................ 10,000 2,600 260
1979 Series ........................ 30,000 21,963 2,196
-------------------------------
$2,855
Common Stock, $.01 par value: ===============================
Class A Nonvoting 10,000,000 5,507,341 $ 55
Class B Voting 10,000,000 1,769,314 18
-------------------------------
$ 73
===============================
</TABLE>
Each share of $100 par value Cumulative Preferred Stock is entitled to
receive cumulative cash dividends and may be redeemed, under certain
circumstances, by the Company at par value plus accrued dividends plus a
premium of 6% of the par value. Such shares, which are held by the initial
holder thereof, are subject to redemption only if the holder consents thereto.
Before any dividend may be paid on the Class B Common Stock, holders of
the Class A Common Stock are entitled to receive an annual, noncumulative cash
dividend of $.10 per share. Thereafter, any further dividend in that fiscal
year must be paid on each share of Class A Common Stock and Class B Common
Stock on an equal basis.
Holders of the Class A Common Stock are not entitled to any vote on
corporate matters, unless, in each of the three preceding fiscal years, the
$.10 preferential dividend described above has not been paid in full. Holders
of the Class A Common Stock are entitled to one vote per share for the entire
fiscal year immediately following the third consecutive fiscal year in which
the preferential
W.H. BRADY CO. 1995 Annual Report 30
<PAGE> 35
dividend is not paid in full. Holders of Class B Common Stock are
entitled to one vote per share for the election of directors and for all
other purposes.
Upon liquidation, dissolution or winding up of the Company, and after
distribution of any amounts due to holders of Cumulative Preferred Stock,
holders of the Class A Common Stock are entitled to receive the sum of $5.00
per share before any payment or distribution to holders of the Class B Common
Stock. Thereafter, holders of the Class B Common Stock are entitled to receive
a payment or distribution of $5.00 per share. Thereafter, holders of the Class
A Common Stock and Class B Common Stock share equally in all payments or
distributions upon liquidation, dissolution or winding up of the Company.
The preferences in dividends and liquidation rights of the Class A
Common Stock over the Class B Common Stock will terminate at any time that the
voting rights of Class A Common Stock and Class B Common Stock become equal.
The Company has a Nonqualified Stock Option Plan (the Plan) under which
500,000 shares of Class A Nonvoting Common Stock were made available for grant.
Options are issued at an option price equal to the market price at the grant
date. Options granted prior to 1992 become exercisable once the employees have
been continuously employed for six months after the grant date. Generally,
options granted in 1992 and thereafter will not be exercisable until one year
after the date of grant, to the extent of one-third per year. Transactions with
respect to the Plan are summarized as follows:
<TABLE>
<CAPTION>
Option Options
Price Outstanding
- -------------------------------------------------------------------------
<S> <C> <C>
Balance, August 1, 1992 . . . . . . . . . $20.50-$29.8125 142,550
Options granted . . . . . . . . . . . . . 37.125 40,750
Options exercised . . . . . . . . . . . . 20.50-29.8125 (26,000)
Options cancelled . . . . . . . . . . . . 20.50-29.8125 (7,500)
-------------------------------
Balance, July 31, 1993. . . . . . . . . . 20.50-37.125 149,800
Options granted . . . . . . . . . . . . . 36.50-43.00 78,400
Options exercised . . . . . . . . . . . . 20.50-37.125 (39,650)
Options cancelled . . . . . . . . . . . . 28.125-37.125 (9,750)
-------------------------------
Balance, July 31, 1994. . . . . . . . . . 20.50-43.00 178,800
Options granted . . . . . . . . . . . . . 47.00 38,250
Options exercised . . . . . . . . . . . . 20.50-37.125 (30,529)
Options cancelled . . . . . . . . . . . . 29.8125-47.00 (13,802)
Balance, July 31, 1995 ===============================
(98,009 options exercisable) . . . . 20.50-47.00 172,719
-------------------------------
Available for grant after July 31, 1995 . 200,902
</TABLE> ===============================
NOTE 7
DOMESTIC AND FOREIGN OPERATIONS
The Company operates predominantly in a single industry as a
manufacturer and distributor of identification products. Operations are
conducted in the United States and through subsidiaries located in
Canada, Europe, Australia, Japan and Singapore. Transfers between
geographic areas primarily represent intercompany export sales of goods
produced in the U.S. and are based on established sales prices between
the related corporations. In computing operating income for non-U.S.
subsidiaries, no allocations of general corporate expenses, interest or
income taxes have been made.
Identifiable assets of subsidiaries are those assets related to the
operations of those subsidiaries. Corporate assets consist primarily of cash
and cash equivalents.
W.H. BRADY CO. 1995 Annual Report 31
<PAGE> 36
Notes to Consolidated Financial Statements
Years Ended July 31, 1995, 1994 and 1993 (continued)
<TABLE>
<CAPTION>
Corporate
Assets and
(Dollars in Thousands) United States Europe Other Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1995:
Sales to unaffiliated customers. . $185,123 $88,723 $ 40,516 -- $314,362
Transfers between geographic
areas . . . . . . . . . . . . . 20,975 197 100 $(21,272) --
----------------------------------------------------------------------
Net sales . . . . . . . . . . . . $206,098 $88,920 $ 40,616 $(21,272) $314,362
======================================================================
Operating . . . . . . . . . . . $ 27,693 $12,509 $ 545 $ (162) $ 40,585
======================================================================
Identifiable assets. . . . . . . . $106,371 $36,586 $ 16,259 $ 70,789 $230,005
======================================================================
--
YEAR ENDED JULY 31, 1994:
Sales to unaffiliated customers. . $161,024 $64,634 $ 30,183 -- $255,841
Transfers between geographic
areas . . . . . . . . . . . . . 18,965 159 128 $(19,252) --
----------------------------------------------------------------------
Net sales . . . . . . . . . . . . $179,989 $64,793 $ 30,311 $(19,252) $255,841
======================================================================
Operating income . . . . . . . . . $ 20,318 $ 7,605 $ 2,091 $ (539) $ 29,475
======================================================================
Identifiable assets. . . . . . . . $112,161 $26,921 $ 11,855 $ 51,572 $202,509
======================================================================
--
YEAR ENDED JULY 31, 1993:
Sales to unaffiliated customers. . $166,017 $53,912 $ 23,041 -- $242,970
Transfers between geographic --
areas . . . . . . . . . . . . . 14,266 169 81 $(14,516)
----------------------------------------------------------------------
Net sales . . . . . . . . . . . . $180,283 $54,081 $ 23,122 $(14,516) $242,970
======================================================================
Operating income . . . . . . . . . $ 21,292 $ 5,117 $ (479) $ (606) $ 25,324
======================================================================
Identifiable assets. . . . . . . . $134,453 $23,152 $ 11,329 $ 10,967 $179,901
======================================================================
</TABLE>
Information with respect to operations located outside
the United States which have been translated into U.S. dollars
are as follows:
<TABLE>
<CAPTION>
Years Ended July 31, 1995, 1994 and 1993
(Dollars in Thousands) 1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Current assets . . . . . . . . . . . . . $ 51,727 $41,702 $38,497
Other assets . . . . . . . . . . . . . . 8,805 4,833 3,949
Property, plant and equipment. . . . . . 11,656 8,474 8,070
----------------------------
Total assets . . . . . . . . . . . . . . $ 72,188 $55,009 $50,516
============================
Current liabilities. . . . . . . . . . . $ 44,575 $38,645 $34,081
Long-term debt . . . . . . . . . . . . . 763 590 492
Other liabilities. . . . . . . . . . . . 743 66 197
Stockholders' investment . . . . . . . . 26,107 15,708 15,746
----------------------------
Total liabilities and
stockholders investment . . . $ 72,188 $55,009 $50,516
============================
Net sales . . . . . . . . . . . . . . . $129,267 $95,104 $77,203
============================
W.H. Brady Co. equity in
net income . . . . . . . . . . . . . . $ 7,385 $ 5,470 $ 1,666
============================
</TABLE>
W.H. Brady Co. 1995 Annual Report 32
<PAGE> 37
NOTE 8
NET INCOME PER COMMON SHARE
Net income per Common Share is computed by dividing net income (after
deducting the applicable Preferred Stock dividends and preferential
Class A Common Stock dividends) by the weighted average Common Shares
outstanding of 7,266,643 for 1995; 7,226,038 for 1994; and 7,194,545 for
1993. The preferential dividend on the Class A Common Stock of $.10 per
share has been added to the net income per Class A Common Share for all
years presented.
NOTE 9
COMMITMENTS
The Company has entered into various noncancellable operating lease
agreements. Rental expense charged to operations was $3,057,000 for
1995; $2,788,000 in 1994; and $2,871,000 in 1993. Future minimum lease
payments required under such leases in effect at July 31, 1995, are as
follows (by fiscal year):
<TABLE>
<S> <C>
1996............................... $4,014,000
1997............................... 3,231,000
1998............................... 1,492,000
1999............................... 641,000
2000............................... 596,000
Thereafter......................... 1,439,000
</TABLE>
W.H. BRADY CO. 1995 Annual Report 33
<PAGE> 38
Independent Auditors' Report
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF W.H. BRADY CO.:
We have audited the accompanying consolidated balance sheets of W.H. Brady Co.
and subsidiaries as of July 31, 1995 and 1994, and the related statements of
income, stockholders' investment and cash flows for each of the three years in
the period ended July 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the companies at July 31,
1995 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended July 31, 1995, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Milwaukee, Wisconsin
September 12, 1995
W.H. BRADY CO. 1995 Annual Report 34
<PAGE> 39
Corporate Data
W.H. BRADY CO. OPERATIONS
Brady AB
Upplands-Vasby, Sweden
Brady Financial Co.
Glendale, Wisconsin, USA
Brady International Co.
Milwaukee, Wisconsin, USA
Brady Precision Tape Co.
Cedarburg, Wisconsin, USA
Brady USA, Inc.
Milwaukee, Wisconsin, USA
Brady Service Co.
Milwaukee, Wisconsin, USA
W.H. Brady Co. Ltd.
Banbury, Oxon, England
W.H. Brady Co. sales office
Kowloon, Hong Kong
W.H. Brady Co. sales office
Seoul, South Korea
W.H. Brady GmbH
Rodermark, Germany
W.H. Brady, Inc.
Rexdale, Ontario, Canada
W.H. Brady Pte. Ltd.
Singapore
W.H. Brady Pty. Ltd.
Chipping Norton, Australia
W.H. Brady Pty. Ltd. sales office
Auckland, New Zealand
W.H. Brady, N.V.
Zele, Belgium
W.H. Brady, N.V. sales office
Saronno, Italy
W.H. Brady S.A.R.L.
Paris, France
Nippon Brady K.K.
Yokohama, Japan
Seton Australia Pty. Ltd.
Chipping Norton, Australia
Seton
Branford, Connecticut, USA
Seton, Inc.
Markham, Ontario, Canada
Seton GmbH
Langen, Germany
Seton Italia Srl
Saronno, Italy
Seton Limited
Banbury, Oxon, England
Seton S.A.
Roubaix, France
OFFICERS
Katherine M. Hudson
President, Chief Executive Officer
Donald P. DeLuca
Senior Vice President,
Chief Financial Officer and Treasurer
Mary T. Arnold
Vice President
Research and Development
Richard L. Fisk
Vice President
Seton Group
David R. Hawke
Vice President
Signmark(R) Group
David W. Schroeder
Vice President
Identification Systems
and Specialty Tapes Group
James M. Sweet
Vice President
Human Resources
Donald E. Rearic
President
Brady Financial Co.
Thomas E. Scherer
Controller
Peter J. Lettenberger
Secretary
Partner, Quarles & Brady
BOARD OF DIRECTORS
Richard A. Bemis
President
Bemis Manufacturing Company
William H. Brady, III
Investor
Robert C. Buchanan
President and CEO
Fox Valley Corporation
Donald P. DeLuca
Senior Vice President, CFO and Treasurer
W.H. Brady Co.
Frank W. Harris
Professor of Polymer Science
University of Akron
Katherine M. Hudson
President and CEO
W.H. Brady Co.
Peter J. Lettenberger
Partner
Quarles & Brady
Elizabeth Brady Lurie
President and Administrator
W.H. Brady Foundation
Gary E. Nei
Chairman
B & B Publishing
Roger D. Peirce
President and CEO
Valuation Research Corp.
W.H. BRADY CO. 1995 Annual Report 35
<PAGE> 40
Shareholder Services
COMMON STOCK LISTING
As of September 8, 1995, there were 324 Class A Nonvoting Common Stock
shareholders of record and two Class B Voting Common Stock shareholders.
W.H. Brady Co. Class A Nonvoting Common Stock trades on the
over-the-counter market under the symbol BRCOA. Trading information is
carried by the National Association of Securities Dealers Automated
Quotation System (NASDAQ).
SHAREHOLDER ACCOUNT RECORDS
Shareholder account records are maintained in the corporate general
office. Shareholder inquiries should be directed to Donald P. DeLuca,
senior vice president and chief financial officer, W.H. Brady Co., 6555
W. Good Hope Road, P.O. Box 571, Milwaukee, Wisconsin 53201-0571, (414)
358-6600.
QUARTERLY STOCK DATA
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------
High Low High Low High Low
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4th Quarter $71-1/2 $52-3/4 $49 $44-3/4 $36-1/2 $34-3/4
3rd Quarter 53 47 48 43-1/2 37-3/4 34
2nd Quarter 48-1/2 47 46-1/2 36 37-3/4 35-1/2
1st Quarter 49 47 37 34-1/2 37-1/4 33-1/4
</TABLE>
DIVIDEND POLICY
Dividends are normally paid on the last day of October, January, April
and July. The Board of Directors voted a quarterly dividend of 30 cents per
share of Class A Nonvoting Common Stock to shareholders of record on
October 6, 1995.
Shareholders may have their dividends reinvested in Brady stock.
Brochures about this program are available through the Investor Services
Unit of the stock transfer agent, Firstar Trust Company, by calling
(800) 637-7549.
STOCK TRANSFER AGENT
Firstar Trust Company
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ADDITIONAL INFORMATION AVAILABLE
If your stock is held in a street name and you wish to receive
shareholder publications directly from the Company, please contact
Donald P. DeLuca at W.H. Brady Co., P.O. Box 571, Milwaukee, Wisconsin
53201-0571, (414) 358-6600. Your name will be added to the mailing list.
COMPANY NEWS
W.H. Brady Co. issues many of its corporate news releases through PR
Newswire. You can obtain faxed copies of recent news releases by calling
Company News On-Call at (800) 758-5804. This electronic, menu-driven
system will request a six-digit code (952350) which will enable you to
request specific Brady releases to be sent to your fax machine.
Brady information, including the corporate brochure, is also available
at http//www.whbrady.com on the Internet World Wide Web.
FORM 10-K
A copy of the W.H. Brady Co. 1995 Annual Report on Form 10-K, to be
filed with the Securities and Exchange Commission, is also available
without charge upon written request.
ANNUAL MEETING
The annual meeting of W.H. Brady Co. will be held at 9 a.m. on Friday,
November 17, 1995, at the Wyndham Milwaukee Center Hotel, 139 E.
Kilbourn Avenue, Milwaukee, Wisconsin 53202.
W.H. BRADY CO. 1995 Annual Report 36
<PAGE> 41
PLEASE RESPOND
TO OUR SHAREHOLDERS: W.H. Brady Co. is reviewing its shareholder communication
to ensure that it meets your needs and that it is timely and cost-effective.
Please take a minute to complete and return the card below. Your opinion is
important. We will be formulating our future communications based on your
response. Thank you for your help.
W.H. BRADY CO.
CORPORATE COMMUNICATIONS DEPARTMENT
- -------------------------------------------------------------------------------
WHAT IS YOUR MAIN SOURCE OF INFORMATION ABOUT W.H. BRADY CO.?
/ / Annual Reports / / Interim Reports / / Annual Meeting / / News Media
/ / Stock Broker/Investment Advisor / / Other (Please name) _________________
DO YOU FEEL THAT YOU RECEIVE ENOUGH INFORMATION ABOUT THE COMPANY?
/ / Yes / / No If not, what information do you feel is missing? ____________
_______________________________________________________________________________
IS THE INFORMATION TIMELY? / / Yes / / No
If not, please explain. _______________________________________________________
PLEASE RATE HOW UNDERSTANDABLE THE INFORMATION IS THAT YOU RECEIVE.
/ / Very Understandable / / Understandable
/ / Difficult to understand Indicate specific area ___________________________
DO YOU RECEIVE INTERIM REPORTS? (Issued first through third quarters)
/ / Yes / / No
If yes, do you: / / Only read the letter / / Only review the financials
/ / Read the entire report / / Skim the report / / Discard without reviewing
/ / Find the report useful
WOULD YOU PREFER TO RECEIVE A NEWS RELEASE:
/ / Instead of the report / / In addition to the report / / Not necessary
HOW CAN WE IMPROVE OUR COMMUNICATION? _________________________________________
_______________________________________________________________________________
ADDITIONAL COMMENTS. __________________________________________________________
_______________________________________________________________________________
ABOUT YOU
HOW MANY YEARS HAVE YOU BEEN A SHAREHOLDER? ___________________________________
INDICATE HOW THE STOCK IS OWNED: (Check all that apply.)
/ / Individual (including joint tenant) / / In my (our) own name(s)
/ / Through my (our) broker / / W.H Brady Co. Employee Investment Program
/ / Institutional Investor
DO YOU PARTICIPATE IN OUR AUTOMATIC DIVIDEND REINVESTMENT PROGRAM?
/ / Yes / /No
/ / I would like to receive information about the program
Name___________________________________________________________________________
Street Address_________________________________________________________________
City/State/Zip_________________________________________________________________
<PAGE> 1
EXHIBIT 21.1
SCHEDULE OF SUBSIDIARIES OF W.H. BRADY CO.
<TABLE>
<CAPTION>
Percentage
of Voting
State (Country) Securities
Name of Company of Incorporation Owned
- --------------- ---------------- ----------
<S> <C> <C>
W. H. Brady Co. Wisconsin Parent
Brady Financial Co. Delaware 100%
Tricor Direct Inc.- Delaware 100%
Doing business As
Seton
Seton Name Plate Company
D&G Sign and Label Co.
Worldmark of Wisconsin Inc. Delaware 100%
Brady International Sales, Inc. U.S. Virgin Islands 100%
Brady International Co. Wisconsin 100%
Brady Precision Tape Co. Wisconsin 100%
Brady Service Co. Wisconsin 100%
Brady USA, Inc. Wisconsin 100%
W.H. Brady, Pty. Ltd. Australia 100%
Seton Australia Pty. Ltd. Australia 100%
W.H. Brady, N.V. Belgium 100%
W.H. Brady Identification Solutions, Inc. Canada 100%
W.H. Brady, Ltd. England 100%
Seton, Ltd. England 100%
W.H. Brady, S.A.R.L. France 100%
Seton S.A. France 100%
W.H. Brady, GmbH Germany 100%
Seton, GmbH Germany 100%
Seton Italia SRL Italy 100%
Nippon Brady K.K. Japan 100%
W.H. Brady, Pte. Ltd. Singapore 100%
Brady AB Sweden 100%
NYBYGGAREN 29:782 AB Sweden 100%
</TABLE>
IV - 7
<PAGE> 1
EXHIBIT.23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
W.H. Brady Co.:
We consent to the incorporation by reference in Registration Statement No.
33-30258 of W.H. Brady Co. on Form S-8 of our reports dated September 12, 1995,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
W.H. Brady Co. for the year ended July 31, 1995.
/S/ Deloitte & Touche LLP
Milwaukee, Wisconsin
October 13, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 89,067
<SECURITIES> 0
<RECEIVABLES> 43,985
<ALLOWANCES> 1,881
<INVENTORY> 23,099
<CURRENT-ASSETS> 164,472
<PP&E> 108,794
<DEPRECIATION> 50,221
<TOTAL-ASSETS> 230,005
<CURRENT-LIABILITIES> 34,534
<BONDS> 1,903
<COMMON> 73
2,855
0
<OTHER-SE> 167,895
<TOTAL-LIABILITY-AND-EQUITY> 230,005
<SALES> 314,362
<TOTAL-REVENUES> 314,362
<CGS> 143,634
<TOTAL-COSTS> 143,634
<OTHER-EXPENSES> 130,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 555
<INCOME-PRETAX> 44,639
<INCOME-TAX> 16,728
<INCOME-CONTINUING> 27,911
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,911
<EPS-PRIMARY> 3.83
<EPS-DILUTED> 3.83
</TABLE>
