<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 8, 1996
______________
W.H. BRADY CO.
(Exact name of registrant as specified in its charter)
Wisconsin 0-12730 39-0178960
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification
Number)
6555 West Good Hope Road,
Milwaukee, WI 53223
(Address of principal executive offices)
(414) 358-6600
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On April 8, 1996, W.H. Brady Co. ("Brady" or the "Company")
consummated its previously announced acquisition of Varitronic Systems, Inc., a
Minnesota corporation ("VSI") in accordance with the Agreement and Plan of
Merger, dated February 27, 1996 (the "Merger Agreement") by and between Brady,
Brady USA, Inc., a Wisconsin corporation and wholly-owned subsidiary of Brady
("BUSA"), VSI Acquisition Co., a Minnesota corporation and wholly-owned
subsidiary of BUSA ("VSI Acquisition"), and VSI.
The Merger Agreement is incorporated herein by reference to Exhibit
(c)(1) to Brady's Schedule 14D-1, as filed with the Securities and Exchange
Commission (the "SEC") on February 29, 1996. The description of the Merger
Agreement set forth herein does not purport to be complete and is qualified in
its entirety by the provisions of the Merger Agreement.
The Merger Agreement provided for a merger of VSI Acquisition and VSI
(the "Transaction") as soon as practicable after the purchase of shares
pursuant to Brady's offer to purchase all of the shares of VSI's outstanding
common stock ("VSI Common Stock") (upon the terms and conditions of the offer
to purchase and in the related letter of transmittal, which together constitute
the "Offer"). The Transaction was approved by the Boards of Directors of the
constituent companies.
Pursuant to the Offer, VSI Acquisition acquired 2,297,532 shares of
VSI Common Stock, representing approximately 99% of the outstanding shares of
the VSI Common Stock on February 27, 1996, as computed in accordance with Rule
13d-3(d)(1)(i) under the Securities Exchange Act of 1934. The Company
incorporates information on its acquisition of VSI Common Stock pursuant to the
Offer from its Amendment No. 1 to Schedule 13D filed on April 5, 1996.
Pursuant to the Merger Agreement, and in accordance with the Minnesota
Business Corporations Act, VSI Acquisition was merged with and into VSI when,
on April 8, 1996, Articles of Merger were filed with, and accepted by, the
Secretary of State for the State of Minnesota. Following the merger, the
separate corporate existence of VSI Acquisition ceased and VSI continued as the
surviving corporation and succeeded to and assumed all the rights and
obligations of VSI Acquisition in accordance with the Minnesota Business
Corporations Act and the Merger Agreement. The cash that was paid to VSI
shareholders was funded through the use of available working capital. Cash
paid for the VSI Common Stock totalled approximately $40.6 million.
VSI will take a charge against its third quarter earnings in the amount
of approximately $2.9 million as a result of expenses incurred in connection
with the Transaction.
VSI, headquartered in Minneapolis, Minnesota, develops, manufactures
and markets supply-consuming lettering, labeling, signage and presentation
systems that enhance the quality, professionalism and effectiveness of a wide
range of communications. It also offers a broad range of consumable supplies
and accessories that are used with all of its products. Its manufacturing
facilities are located in the Minneapolis area. VSI has previously supplied
the Company with the Labelizer(R) PLUS and the LabelLite(TM) printers and
related supplies. These items accounted for approximately $16.8 million or
5.3% of the Company's fiscal 1995 net sales.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The audited financial statements of VSI required by this Item
7(a) are incorporated herein by reference from the financial statements of VSI
which are incorporated by reference in the Annual Report on Form 10-K of VSI
for the year ended July 31, 1995. The six month unaudited financial
information for VSI is incorporated herein by reference to the financial
statements of VSI set forth in the Quarterly Report on Form 10-Q of VSI for the
quarter ended January 31, 1996. The financial statements are included herewith
as Exhibit 99.7 and 99.8, respectively.
(b) Pro Forma Financial Information.
CONSOLIDATED PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Effective November 15, 1995, the Company (Brady) acquired the common stock of
Techpress II Limited (Tech Press) located in Middlesex, England, a marketer of
printing and labeling systems, for cash of $4,277,000 and a payable of
$389,000. Effective January 2, 1996, the Company acquired the common stock of
The Hirol Company (Hirol) located in Fort Lauderdale, Florida, a manufacturer
of die-cut parts for the electronic, telecommunications and medical testing
markets, for cash of $10,800,000. The final purchase price of these
acquisitions are subject to change based on the final determination of net
worth of the respective companies.
On April 8, 1996, the Company, by merger, completed its acquisition of all of
the outstanding capital stock of Varitronic Systems, Inc. ("VSI") for cash
aggregating $40,590,000. VSI develops, manufactures and markets
supply-consuming lettering, labeling, signage and presentation systems. It also
offers a broad range of consumable supplies and accessories that are used with
its products.
The following unaudited consolidated pro forma condensed balance sheet combines
the consolidated condensed balance sheet of Brady as of January 31, 1996 and
the consolidated condensed balance sheet of VSI as of January 31, 1996. The
following unaudited consolidated pro forma condensed statements of income
combine the consolidated condensed statements of income of Brady for the year
ended July 31, 1995 and for the six months ended January 31, 1996, with the
condensed statements of income of VSI, Tech Press and Hirol for the year ended
July 31, 1995 and the six months ended January 31, 1996 as if the transactions
had occurred at the beginning of the respective periods. The pro forma
information is based on the historical financial statements of Brady and the
acquired companies, giving effect to the transactions under the purchase method
of accounting, and the assumptions and adjustments in the accompanying notes to
the pro forma consolidated condensed financial statements.
The unaudited pro forma consolidated condensed balance sheet and the pro forma
consolidated condensed statements of income have been prepared by Brady
management based upon the financial statements of Brady and acquired companies
for the periods indicated, including an estimated preliminary allocation of the
purchase price. Brady is in the process of having appraisals performed of the
assets acquired for the purpose of determining their fair values at the date of
acquisition. The allocations of the purchase price assigned to the assets
acquired and liabilities assumed and their related amortizations in the
accompanying pro forma financial statements are based upon preliminary
estimates and will be revised (possibly materially) when the final fair value
allocations are determined, as will the related income tax effects of the pro
forma adjustments.
The pro forma net income per common share, the pro forma consolidated condensed
income statements and the pro forma consolidated condensed balance sheet data
are presented for informational purposes only and are not necessarily
indicative either of what the Company's actual results of operations would have
been after giving effect to the assumptions referred to above or of the
Company's future consolidated financial position or results of operations.
W. H. BRADY CO.
UNAUDITED CONSOLIDATED PRO FORMA CONDENSED BALANCE SHEET
(IN THOUSANDS)
JANUARY 31, 1996
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<TABLE>
<CAPTION>
HISTORICAL BRADY
----------------------- PRO FORMA PRO FORMA
BRADY VSI ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 72,890 $ 2,906 $(40,590)a $ 35,206
Accounts receivable 53,220 7,339 60,559
Inventories 27,976 11,648 39,624
Prepaid expenses 10,935 1,556 1,824 e 14,315
-------- ------- -------- --------
Total current assets 165,021 23,449 (38,766) 149,704
Other assets 18,555 24,305 d 42,590
500 b
(770)e
Net property, plant and equipment 58,556 3,975 1,500 b 64,031
-------- ------- -------- --------
Total assets $242,132 $27,424 $(13,231) $256,325
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Current liabilities:
Accounts payable and other
current liabilities $ 38,228 $ 3,756 $ 6,737 c $ 48,721
Current maturities on long-term debt 239 900 1,139
-------- ------- -------- --------
Total current liabilities 38,467 4,656 6,737 49,860
Long-term debt 1,944 2,800 4,744
Other liabilities 24,896 24,896
-------- ------- -------- --------
Total liabilities 65,307 7,456 6,737 79,500
Stockholders' investment:
Preferred stock 2,855 2,855
Common stock:
Class A nonvoting 201 201
Class B voting 18 18
Common stock 23 23 f
Additional paid-in capital 8,139 115 (115)f 8,139
Earnings retained in the business 162,176 19,830 (19,830)f 162,176
Cumulative translation adjustment 3,436 3,436
-------- ------- -------- --------
Total stockholders' investment 176,825 19,968 (19,968) 176,825
-------- ------- -------- --------
Total liabilities and stockholders'
investment $242,132 $27,424 $(13,231) $256,325
======== ======= ======== ========
</TABLE>
W. H. BRADY CO.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA CONDENSED BALANCE SHEET
- --------------------------------------------------------------------------------
The pro forma balance sheet includes the effect of VSI as though the
acquisition had occurred on January 31, 1996.
a) To reflect the cash paid to acquire all of the outstanding common stock
of VSI at $17.50 per share.
b) The allocation of the purchase price of VSI has not been finally
determined. Such amount represents estimated amounts to be allocated to
property, plant and equipment and other intangibles.
c) To reflect the estimated liabilities related to VSI employee stock
options and stock purchase plans, employee severance accruals and direct
merger expenses.
d) To reflect the estimated amount to be allocated to goodwill relating to
the VSI acquisition.
e) Net effect of tax temporary differences.
f) Net effect of adjustments relating to the VSI acquisition.
W. H. BRADY CO.
UNAUDITED CONSOLIDATED PRO FORMA CONDENSED STATEMENT OF INCOME
(IN THOUSANDS)
YEAR ENDED JULY 31, 1995
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<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------- BRADY
TECH PRO FORMA PRO FORMA
BRADY VSI f PRESS HIROL ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 314,362 $ 49,525 $ 12,605 $ 7,412 $(13,155)a $ 370,749
Operating expenses:
Cost of products sold 143,634 33,457 8,093 3,778 (13,155)a 176,178
371 b
Research and development 10,426 2,528 12,954
Selling, general and administrative 119,717 12,609 3,378 2,072 1,105 c 138,881
----------- -------- -------- ------- -------- -----------
Total operating expenses 273,777 48,594 11,471 5,850 (11,679) 328,013
----------- -------- -------- ------- -------- -----------
Operating income 40,585 931 1,134 1,562 (1,476) 42,736
Other income and (expense):
Investment and other income 4,609 (37) 26 (2,361)d 2,237
Interest expense (555) (313) (2) (27) (897)
----------- -------- -------- ------- -------- -----------
Net other income 4,054 (313) (39) (1) (2,361) 1,340
----------- -------- -------- ------- -------- -----------
Income before taxes 44,639 618 1,095 1,561 (3,837) 44,076
Income taxes 16,728 75 396 458 e 17,657
----------- -------- -------- ------- -------- -----------
Net income $ 27,911 $ 543 $ 699 $ 1,561 $ (4,295) $ 26,419
=========== ======== ======== ======= ======== ===========
Net income per common share -
Class A nonvoting $ 1.27 $ 1.20
=========== ===========
Weighted average shares 21,799,930 21,799,930
=========== ===========
</TABLE>
W. H. BRADY CO.
UNAUDITED CONSOLIDATED PRO FORMA CONDENSED STATEMENT OF INCOME
(IN THOUSANDS)
SIX MONTHS ENDED JANUARY 31, 1996
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<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------- BRADY
TECH PRO FORMA PRO FORMA
BRADY VSI PRESS HIROL ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 167,043 $25,504 $3,574 $3,429 $(6,035)a $ 193,515
Operating expenses:
Cost of products sold 77,292 16,304 2,319 1,803 (6,035)a 91,869
186 b
Research and development 5,505 948 6,453
Selling, general and administrative 67,942 5,968 848 876 553 c 76,187
----------- ------- ------ ------ ------- -----------
Total operating expenses 150,739 23,220 3,167 2,679 (5,296) 174,509
----------- ------- ------ ------ ------- -----------
Operating income 16,304 2,284 407 750 (739) 19,006
Other income and (expense):
Investment and other income 3,672 18 15 (666)d 3,039
Interest expense (117) (113) (1) (7) (238)
----------- ------- ------ ------ ------- -----------
Net other income 3,555 (113) 17 8 (666) 2,801
----------- ------- ------ ------ ------- -----------
Income before taxes 19,859 2,171 424 758 (1,405) 21,807
Income taxes 7,649 670 170 220 e 8,709
----------- ------- ------ ------ ------- -----------
Net income $ 12,210 $ 1,501 $ 254 $ 758 $(1,625) $ 13,098
=========== ======= ====== ====== ======= ===========
Net income per common share -
Class A nonvoting $ 0.55 $ 0.59
=========== ===========
Weighted average shares 21,837,040 21,837,040
=========== ===========
</TABLE>
W. H. BRADY CO.
NOTES TO CONSOLIDATED PRO FORMA CONDENSED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
The accompanying consolidated condensed pro forma statements of income for the
year ended July 31, 1995 and the six months ended January 31, 1996 have been
prepared as if the transactions were consummated as of August 1, 1994. The
results of operations of Tech Press and Hirol are included in Brady results
from the effective dates of the respective acquisitions.
a. Elimination of intercompany sales and cost of sales between VSI, Tech
Press and Brady.
b. Reflect additional estimated depreciation and amortization expense
relating to the preliminary estimated allocations to the carrying amount
of property, plant and equipment and other intangibles over periods of 5
to 7 years.
c. Estimated amortization of goodwill over periods of 20 and 40 years.
d. Reduction of interest income relating to the cash used to purchase VSI,
Tech Press and Hirol.
e. To reflect the tax effect relating to the pro forma adjustments and
income taxes related to Hirol (a S Corporation).
f. The historical results of VSI include a charge to earnings of $1,647,000
in fiscal 1995. VSI terminated 42 full-time employees in August 1995
pursuant to a plan of termination in place as of July 31, 1995, and
recorded a related charge of $247,000 in general and administrative
expenses. A charge of $1,145,000 was recorded in cost of sales to
increase inventory valuation reserves, and $255,000 was recorded in
marketing and sales expenses to reflect a decrease in the value of certain
assets which support a product introduced for sale during fiscal 1995.
g. VSI will take a charge against earnings during the quarter ended April
30, 1996 aggregating approximately $2,900,000 as a result of expenses
incurred in connection with the purchase by Brady.
(c) Exhibits.
See Exhibit Index on the last page of this Current Report of
Form 8-K, which is incorporated herein by reference.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly authorized this report to be signed on its behalf by
the undersigned hereunto duly authorized.
W.H. BRADY CO.
April 18, 1996 /s/ Donald P. DeLuca
- ------------------------ ---------------------------------
Date by: Donald P. DeLuca
Senior Vice President and
Treasurer
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
2 Agreement and Plan of Merger, dated as of February 27, 1996, among the Company,
VSI Acquisition Co., BUSA, and Brady and Stock Option Agreement. (Exhibit (c)(1)
to Schedule 14D-1)*
23 Consent of Coopers & Lybrand L.L.P.
99.1 Schedule 14D-1 filed by Brady on February 29, 1996.*
99.2 Offer to Purchase, dated February 29, 1996. (Exhibit (a)(1) to Schedule 14D-1)*
99.3 Letter of Transmittal, dated February 29, 1996. (Exhibit (a)(2) to Schedule 14D-1)*
99.4 Text of Press Release, dated February 27, 1996. (Exhibit (a)(7) to Schedule 14D-1)*
99.5 Summary Advertisement, dated February 29, 1996. (Exhibit (a)(8) to Schedule 14D-1)*
99.6 Text of Press Release, dated March 29, 1996 (Exhibit (a)(10) to Amendment No. 2 to
Schedule 14D-1).*
99.7 Financial statements of VSI set forth in the Annual Report on Form 10-K of VSI for
the year ended July 31, 1995.**
99.8 Financial statements of VSI set forth in the Quarterly Report on Form 10-Q of VSI for
the quarter ended January 31, 1996.***
</TABLE>
* The referenced Schedule 14D-1 was filed on February 29, 1996.
** The referenced Form 10-K was filed on October 26, 1995.
*** The referenced Form 10-Q was filed on March 15, 1996.
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EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Form 8-K Current Report of
W.H. Brady Co. dated April 18, 1996, of our report dated September 1, 1995, on
our audits of the consolidated financial statements of Varitronic Systems, Inc.
as of July 31, 1995 and 1994, and for the years ended July 31, 1995, 1994, and
1993, which report is incorporated by reference in the Annual Report on Form
10-K of Varitronic System, Inc. for the year ended July 31, 1995.
/s/ Coopers & Lybrand L.L.P.
--------------------------------------------
Minneapolis, Minnesota
April 18, 1996
