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Previous: VIEW TECH INC, 8-K, 1997-12-05 |
Next: TEXOIL INC /NV/, SC 13D/A, 1997-12-05 |
<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, 1997
----------------
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, 1997, there were outstanding 20,682,019 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> <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 9
</TABLE>
<PAGE> 3
W. H. BRADY CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS October 31, 1997 July 31, 1997
---------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 58,896 $ 65,329
Accounts receivable, less allowance for losses ($2,512 and $2,241 respectively) 70,155 65,450
Inventories 45,071 44,605
Prepaid expenses and other current assets 11,852 12,585
-------- --------
Total current assets 185,974 187,969
Other assets:
Intangibles - net 36,787 36,015
Other 5,401 5,236
Property, plant and equipment:
Cost:
Land 5,123 5,162
Buildings and improvements 39,143 39,159
Machinery and equipment 79,954 79,497
Construction in progress 6,223 2,560
-------- --------
130,443 126,378
Less accumulated depreciation 66,344 63,936
-------- --------
Net property, plant and equipment 64,099 62,442
-------- --------
Total $292,261 $291,662
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
----------------------------------------
Current liabilities:
Accounts payable $ 18,351 $ 17,656
Wages and amounts withheld from employees 12,765 16,925
Taxes, other than income taxes 2,377 1,960
Accrued income taxes 7,664 8,453
Other current liabilities 6,603 11,687
Current maturities on long-term debt 405 564
-------- --------
Total current liabilities 48,165 57,245
Long-term debt, less current maturities 4,025 3,890
Other liabilities 26,794 23,980
-------- --------
Total liabilities 78,984 85,115
Stockholders' investment:
Preferred stock 2,855 2,855
Class A nonvoting common stock - Issued and outstanding 20,309,253 203 202
and 20,171,853 shares, respectively
Class B voting common stock - issued and outstanding 1,769,314 shares 18 18
Additional paid-in capital 13,484 9,573
Earnings retained in the business 198,495 193,602
Unearned portion of restricted stock (3,719) 0
Cumulative translation adjustments 1,941 297
-------- --------
Total stockholders' investment 213,277 206,547
-------- --------
Total $292,261 $291,662
======== ========
</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
1997 1996
------------ -----------
<S> <C> <C>
Net sales $ 115,302 $ 97,221
Operating expenses:
Cost of products sold 52,585 44,805
Research and development 4,806 3,537
Selling, general and administrative 44,778 38,284
------------ -----------
Total operating expenses 102,169 86,626
Operating income 13,133 10,595
Other income and (expense):
Investment and other income - net 515 271
Interest expense (79) (99)
------------ -----------
Income before income taxes 13,569 10,767
Income taxes 5,359 4,237
------------ -----------
Net income 8,210 6,530
Earnings retained in business at beginning of period 193,602 173,491
Less dividends:
Preferred stock (65) (65)
Common stock (3,252) (2,788)
------------ -----------
Earnings retained in business at end of period $ 198,495 177,168
============ ===========
Net Income Per Common Share:
Net Income - Class A Nonvoting $ 0.37 $ 0.30
============ ===========
Net Income - Class B Voting $ 0.34 $ 0.27
============ ===========
</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
1997 1996
---------- ----------
<S> <C> <C>
Operating Activities:
Net Income $ 8,210 $ 6,530
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation & Amortization 3,411 3,505
Loss (Gain) on Sale of Property, Plant & Equipment 88 (3)
Provision for Losses on Accounts Receivable 426 121
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Accounts Receivable (4,749) (2,632)
(Increase) Decrease in Inventory (109) (4,435)
(Increase) Decrease in Prepaid Expense (134) 1,564
Increase (Decrease) in Accounts Payable and Other Liabilities (5,668) 917
Increase (Decrease) in Income Taxes (923) 2,017
---------- ----------
Net Cash Provided by Operating Activities 552 7,584
Investing Activities:
Purchases of Property, Plant and Equipment (4,702) (1,909)
Proceeds from Sale of Property, Plant and Equipment - Net 78 90
Other Investments 0 297
---------- ----------
Net Cash (Used in) Investing Activities (4,624) (1,522)
Financing Activities:
Payment of Dividends (3,317) (2,853)
Proceeds from Issuance of Common Stock 194 383
Principal Payments on Long-Term Debt (141) (670)
Proceeds from Issuance of Long-Term Debt 263 920
---------- ----------
Net Cash (Used in) Financing Activities (3,001) (2,220)
Effect of Exchange Rate Changes on Cash 640 41
---------- ----------
Net (Decrease) Increase in Cash and Cash Equivalents (6,433) 3,883
Cash and Cash Equivalents at Beginning of Year 65,329 49,281
---------- ----------
Cash and Cash Equivalents at End of Period $ 58,896 $ 53,164
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year For:
Interest $ 176 $ 89
Income Taxes 7,050 2,709
See Notes to Condensed Consolidated Financial Statement
</TABLE>
5
<PAGE> 6
W.H. BRADY CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended October 31, 1997
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 31, 1997, and July 3l, 1997, and its results of
operations and its cash flows for the three months ended October 31, 1997, and
l996. The consolidated balance sheet at July 31, l997, has been taken from the
audited consolidated financial statements of that date and condensed.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report.
It is not practical to segregate the amounts of raw material, work in
process or finished goods at the respective interim balance sheet dates.
NOTE B - Net Income Per Common Share
Net income per common share were computed by dividing net income (after
deducting the applicable preferred stock and preferential Class A Common Stock
dividends) by the weighted average number of shares of Class A and Class B
Common Stock outstanding of 22,074,575 for the three months ended October 31,
1997, and 21,878,864 for the same period in 1996. The preferential dividend on
the Class A Common Stock of $0.0333 per share declared on September 16, 1997,
has been added to the net income per Class A Common Stock for the three months
ended October 31, 1997. The net income per share of Class A Common Stock for
the three months ended October 31, 1996, includes $0.0333 per share 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, 1997, revenues of $115,302,000
were 18.6% higher than the same quarter of the previous year. Sales of the
Company's international operations increased 23.1%. Real growth through
continued market penetration in Europe and the Far East increased international
sales 29.1%. The acquisition of Signals S.A. increased international sales
4.2%. These increases were partially offset by the negative effect of
fluctuations in the exchange rates used to translate financial results into U.S.
currency, which reduced international sales growth by 10.2%. Sales of the
Company's U.S. operations increased 15.6%, due primarily to growth in the sales
of the Company's core products.
The cost of products sold decreased from 46.1% to 45.6% as a percentage
of sales during the first quarters of 1996 and 1997. The decrease resulted from
changes in product mix and reduced costs from manufacturing efficiencies.
Selling, general and administrative expenses as a percentage of sales decreased
from 39.4% to 38.8% as the Company's continuing cost control efforts more than
offset the Company's ongoing investment in building its global information
technology infrastructure. The Company's commitment to new product development
resulted in an expenditure of 35.9% more dollars for research and development
than in the prior year.
Operating income increased 24.0% to $13,133,000, compared to $10,595,000
in the prior year because of the factors cited above.
Income before income taxes increased 26.0% over the same period last
year. The effective tax rate was 39.5% this year compared to 39.4% in the prior
year.
Net income increased 25.7% to $8,210,000, compared to $6,530,000 for the
same quarter of the previous year.
Financial Condition
The Company's liquidity remains strong. The current ratio as of October
31, 1997, was 3.9 to 1. Cash and cash equivalents were $58,896,000 at October
31, 1997, compared to $65,329,000 at July 31, 1997. Working capital increased
$7,085,000 during the quarter and equaled $137,809,000 as of October 31, 1997.
The Company continues to maintain significant cash balances, although
about 9.8% lower than at July 31, 1997. Cash flow totaled $552,000 for the
three months ended October 31, 1997, compared to $7,584,000 for the same period
last year as the decrease in current liabilities in the first quarter of this
fiscal year more than offset the increase in net income resulting in the lower
operating cash flow. Capital expenditures were $4,702,000 in the three months
ended October 31, 1997, compared to $1,909,000 in last year's first quarter.
The increase in capital expenditures resulted primarily from progress payments
made on the Company's new coating line. Financing activities, primarily the
payment of dividends to the Company's stockholders, consumed $3,001,000 of cash
in the first three months of fiscal 1998, compared to $2,220,000 for the same
period last year.
Long-term debt as a percentage of long-term debt plus stockholders'
investment was 1.9% at October 31, 1997, compared to 1.8% at July 31, 1997.
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.
7
<PAGE> 8
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a of Vote of Security Holders
On November 21, 1997, 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, 1997.
8
<PAGE> 9
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 5, 1997 /s/ K. M. Hudson
-------------------
K. M. Hudson
President
Date: December 5, 1997 /s/ F. Jaehnert
-------------------
F. M. Jaehnert
Vice President & Chief Financial Officer
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 58,896
<SECURITIES> 0
<RECEIVABLES> 72,667
<ALLOWANCES> 2,512
<INVENTORY> 45,071
<CURRENT-ASSETS> 185,974
<PP&E> 130,443
<DEPRECIATION> 66,344
<TOTAL-ASSETS> 292,261
<CURRENT-LIABILITIES> 48,165
<BONDS> 4,025
2,855
0
<COMMON> 221
<OTHER-SE> 210,201
<TOTAL-LIABILITY-AND-EQUITY> 292,261
<SALES> 115,302
<TOTAL-REVENUES> 115,302
<CGS> 52,585
<TOTAL-COSTS> 52,585
<OTHER-EXPENSES> 49,584
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79
<INCOME-PRETAX> 13,569
<INCOME-TAX> 5,359
<INCOME-CONTINUING> 8,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,210
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
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