<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____________to___________
Commission File Number 0-12730
W.H. BRADY CO.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0178960
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6555 WEST GOOD HOPE ROAD, MILWAUKEE, WISCONSIN 53223
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(414) 358-6600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of December 1, 1996, there were outstanding 20,135,553 shares of
Class A Common Stock and 1,769,314 shares of Class B Common Stock. The Class B
Common Stock, all of which is held by an affiliate of the Registrant, is the
only voting stock.
<PAGE> 2
FORM 10-Q
W.H. BRADY CO.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. Financial Information
Item 1. Financial Statements:
Unaudited Condensed Consolidated Balance Sheets 3
Unaudited Condensed Consolidated Statements
of Income and Earnings Retained in the Business 4
Unaudited Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
</TABLE>
<PAGE> 3
W.H. BRADY CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS October 31, 1996 July 31, 1996
------ ---------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 53,164 $ 49,281
Accounts receivable, less allowance for losses ($2,007
and $1,992, respectively 56,490 53,679
Inventories 45,329 40,697
Prepaid expenses and other current assets 10,780 12,454
------------- ----------
Total current assets 165,763 156,111
Other assets:
Intangibles - net 34,021 34,212
Other 5,924 5,863
------------- ----------
39,945 40,075
Property, plant and equipment:
Cost:
Land 5,230 4,735
Buildings and improvements 38,245 34,484
Machinery and equipment 79,230 78,680
Construction in progress 2,781 4,383
------------- ----------
125,486 122,282
Less accumulated depreciation 59,372 56,633
------------- ----------
Net property, plant and equipment 66,114 65,649
------------- ----------
Total $ 271,822 $ 261,835
============= ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 16,812 $ 13,922
Wages and amounts withheld from employees 13,815 14,144
Taxes, other than income taxes 2,311 1,790
Accrued income taxes 7,551 5,419
Other current liabilities 8,191 10,620
Current maturities on long-term debt 496 528
------------- ----------
Total current liabilities 49,176 46,423
Long-term debt, less current maturities 3,522 1,809
Other liabilities 25,640 24,340
------------- ----------
Total liabilities 78,338 72,572
Stockholders' investment:
Preferred stock 2,855 2,855
Class A nonvoting common stock - Issued and outstanding 201 201
20,133,751 and 20,094,100 shares, respectively
Class B voting common stock - issued and outstanding 1,769,314
shares 18 18
Additional paid-in capital 8,809 8,415
Earnings retained in the business 177,168 173,491
Cumulative translation adjustments 4,433 4,283
------------- ----------
Total stockholders' investment 193,484 189,263
------------- ----------
Total $ 271,822 $ 261,835
============= ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
W.H. BRADY CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
EARNINGS RETAINED IN THE BUSINESS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Ended
October 31
1996 1995
---------- ---------
<S> <C> <C>
Net sales $ 97,221 $ 79,223
Operating expenses:
Cost of products sold 44,805 36,088
Research and development 3,537 2,673
Selling, general and administrative 38,284 32,620
--------- ---------
Total operating expenses 86,626 71,381
Operating income 10,595 7,842
Investment and other income - net 271 2,568
Interest expense (99) (51)
--------- ---------
Income before income taxes 10,767 10,359
Income taxes 4,237 4,024
--------- ---------
Net income 6,530 6,335
Earnings retained in business at beginning of period 173,491 154,286
Less dividends:
Preferred stock (65) (65)
Common stock (2,788) (2,006)
--------- ---------
Earnings retained in the business at
end of period $ 177,168 $ 158,550
========= =========
Net income per common share:
Net Income - Class A Nonvoting $ 0.30 $ 0.29
========= =========
Net Income - Class B Voting $ 0.27 $ 0.26
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
W. H. BRADY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Ended
October 31
-----------------------------
1996 1995
----------- ------------
<S> <C> <C>
Operating Activities:
Net Income $ 6,530 $ 6,335
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Depreciation & Amortization 3,505 2,156
(Gain) on Sale of Property, Plant & Equipment (3) (1,763)
Provision for Losses on Accounts Receivable 121 177
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Accounts Receivable (2,632) (1,587)
(Increase) Decrease in Inventory (4,435) (2,579)
(Increase) Decrease in Prepaid Expense 1,564 (172)
Increase (Decrease) in Accounts Payable and Other Liabilities 917 4,303
Increase (Decrease) in Income Taxes 2,017 2,613
------------ --------------
Net Cash Provided by Operating Activities 7,584 9,483
Investing Activities:
Purchases of Property, Plant and Equipment (1,909) (1,410)
Proceeds from Sale of Property, Plant and Equipment - Net 90 83
Other Investments 297 0
Net Cash (Used in) Provided by Investing Activities ------------ --------------
(1,522) (1,327)
Financing Activities:
Payment of Dividends (2,853) (2,071)
Proceeds from Issuance of Common Stock 383 10
Principal Payments on Long-Term Debt (670) (141)
Proceeds from Issuance of Long-Term Debt 920 0
------------ --------------
Net Cash (Used in) Financing Activities (2,220) (2,202)
Effect of Exchange Rate Changes on Cash 41 (133)
------------ --------------
Net Increase in Cash and Cash Equivalents 3,883 5,821
Cash and Cash Equivalents at Beginning of Year 49,281 89,067
------------ --------------
Cash and Cash Equivalents at End of Period $ 53,164 $ 94,888
============ ==============
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year For:
Interest $ 89 $ 377
Income Taxes 2,709 1,188
Receivable Relating to Sale of German Building 0 3,152
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
5
<PAGE> 6
W.H. BRADY CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended October 31, 1996
NOTE A - Basis of Presentation
The condensed consolidated financial statements included herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Company, the
foregoing statements contain all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the financial position of the
Company as of October 3l, 1996 and July 3l, 1996, and its results of
operations and its cash flows for the three months ended October 31, 1996 and
l995. The consolidated balance sheet at July 31, l996, has been taken from the
audited financial statements of that date and condensed.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report.
It is not practical to segregate the amounts of raw material, work in
process or finished goods at interim balance sheet dates.
NOTE B - Capital Stock and Share Data
On November 17, 1995, at a Special Meeting of Shareholders, the
Company's shareholders approved a proposal to amend the Company's Restated
Articles of Incorporation to increase the number of authorized shares of Class
A Common Stock from 10,000,000 shares to 100,000,000 shares. Also on November
17, 1995, the shareholders approved, and the Board of Directors declared, a
common stock dividend of two shares of Class A Common Stock on each outstanding
share of Class A Common Stock and Class B Common Stock. The common stock
dividend was paid on December 15, 1995, to shareholders of record at the close
of business on December 1, 1995. Accordingly, amounts per share and number of
shares included in the condensed consolidated financial statements have been
adjusted retroactively for the first quarter of fiscal 1996 to reflect the
common stock dividend.
NOTE C - Net Earnings Per Common Share
Net earnings per common share were computed by dividing net earnings
(after deducting the applicable preferred stock and preferential Class A common
stock dividends) by the weighted average number of Class A and Class B common
shares outstanding of 21,878,864 for the three months ended October 31, 1996
and 21,830,474 (adjusted for the stock dividend discussed in Note B) for the
same period in 1995. The preferential dividend on the Class A common stock of
$0.0333 per share declared on September 17, 1996 has been added to the net
earnings per Class A common share for the three months ended October 31, 1996.
The net earnings per Class A common share for the three months ended October
31, 1995 includes $0.0333 per share (adjusted for the stock dividend discussed
in Note B) relating to preferential dividends declared in that period.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
For the three months ended October 31, 1996, revenues of $97,221,000 were
22.7% higher than the same quarter of the previous year. Sales of the
Company's international operations increased 15.0%. This increase was a
result of the acquisition of Techpress II Limited (8.7%) and real growth
through continued market penetration in Europe and the Far East (8.1%)
offsetting the negative effect of fluctuations in the exchange rates used to
translate results into U.S. currency (1.8%). Sales of the Company's U.S.
operations increased 28.5%, with 22.2% of the increase as a result of the
acquisitions of Varitronic Systems Inc. and The Hirol Company.
The cost of products sold increased from 45.6% to 46.1% of sales. This
increase reflects continued changes in product mix toward systems which have a
higher level of costs and increased amortization expense and higher cost levels
in the Company's recently acquired operations. Selling, general and
administrative expenses as a percentage of sales decreased from 41.2% to
39.4%. This decrease is a result of spreading fixed costs over a larger sales
base and less spending on investments in sales and marketing activities than in
last year's first quarter. Research and development expenses increased 32.3%
compared to the prior year because of the acquisitions.
Operating income was $10,595,000 in the current year, compared to
$7,842,000 in the prior year because of the factors cited above.
Investment and other income last year included $1,750,000 ($950,000 after
tax, or $0.04 per share) representing the gain on sale of a building in
Germany. In addition, the fiscal 1997 first quarter investment income was
$442,000 lower than last year, primarily because of lower cash balances as a
result of acquisitions in the last year.
Income before income taxes increased 3.9% over the same period last year.
Excluding the $950,000 after tax gain from the sale of a building in Germany in
last year's first quarter, income before income taxes increased 14.4% from the
same period last year.
Net income increased 3.1% to $6,530,000, compared to $6,335,000 for the
same quarter of the previous year. Excluding the after tax gain of $950,000
from the sale of a building in Germany in the first quarter of fiscal 1996, net
income in the fiscal 1997 first quarter increased 21.3%.
Financial Condition
The Company's liquidity remains strong. The current ratio as of October
31, 1996, was 3.4 to 1. Cash and cash equivalents were $53,164,000 at October
31, 1996, compared to $49,281,000 at July 31, 1996. Working capital increased
$6,899,000 during the quarter and equaled $116,587,000 as of October 31, 1996.
The Company has maintained significant cash balances due in large part to
its strong operating cash flow, which totaled $7,584,000 for the three months
ended October 31, 1996, compared to $9,483,000 in the first quarter last year.
The decrease in operating cash flow resulted primarily from the gain on the
sale of a German building in the first quarter last year. Capital expenditures
were $1,909,000 in the three months ended October 31, 1996, compared to
$1,410,000 in last year's first quarter. Financing activities were
essentially flat with last year, with $920,000 in borrowing by the Company's
new Korean joint venture offsetting a $782,000 increase in dividends.
7
<PAGE> 8
Long-term debt as a percentage of long-term debt plus stockholders'
investment was 1.8% at October 31, 1996, compared to 0.9% at July 31, 1996, as
a result of borrowing by the Company's new Korean joint venture.
The Company believes that its cash and cash equivalents and the cash flow
it generates from operating activities are adequate to meet the Company's
current investing and financing needs.
PART II
ITEM 4. Submission of Matters to a Vote of Security Holders.
On November 15, 1996, at the Company's Annual Meeting, the Class B Common
Stock shareholders unanimously reelected the following directors: Richard A.
Bemis, Robert C. Buchanan, Frank W. Harris, Katherine M. Hudson, Peter J.
Lettenberger and Gary R. Nei. Only the holders of the Company's Class B Common
Stock were eligible to vote in the election for Directors.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
The Company was not required to file and did not file a report
on Form 8-K during the quarter ended October 31, 1996.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURES
W.H. BRADY CO.
Date: December 10, 1996 /s/ K. M. Hudson
-------------------- ----------------------------------------
K. M. Hudson
President
Date: December 10, 1996 /s/ F. M. Jaehnert
-------------------- ----------------------------------------
F. M. Jaehnert
Vice President & Chief Financial Officer
(Principal Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 53,164
<SECURITIES> 0
<RECEIVABLES> 58,497
<ALLOWANCES> 2,007
<INVENTORY> 45,329
<CURRENT-ASSETS> 165,763
<PP&E> 125,486
<DEPRECIATION> 59,372
<TOTAL-ASSETS> 271,822
<CURRENT-LIABILITIES> 49,176
<BONDS> 3,522
2,855
0
<COMMON> 219
<OTHER-SE> 190,410
<TOTAL-LIABILITY-AND-EQUITY> 271,822
<SALES> 97,221
<TOTAL-REVENUES> 97,221
<CGS> 44,805
<TOTAL-COSTS> 44,805
<OTHER-EXPENSES> 41,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 10,767
<INCOME-TAX> 4,237
<INCOME-CONTINUING> 6,530
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,530
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
